•where we’re making strategic investments in domestic growth.
We will also continue to evaluate additional geographies for strategic investments.
Leveraging our marketplace playbook across our “House of Brands”
We have four values-aligned e-commerce marketplaces offering non-commoditized items in our “House of Brands:” Etsy, Reverb, Depop, and Elo7. Each of these marketplaces stands for creativity, community, and “special” and shares common commitments to operate in a way that makes a positive impact on the world. Our goal is that all four marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.
We believe our marketplaces all share key elements central to success, including:
•analytical frameworks, product experiment and measurement approaches, and operating rhythms that prioritize resource allocation towards the most impactful outcomes,
•sophisticated search and discovery technology,
•compelling on-site customer experiences,
•efficient payment platforms,
•value-added seller services, such as advertising platforms and effective shipping options,
•strong brand and performance marketing capabilities, and
•a commitment to investments that protect the marketplace.
Since acquiring each business, we have invested in leveraging high-performing talent across Etsy and the other “House of Brands” marketplaces to accelerate value creation and idea pollination across our four marketplaces. We continue to invest in cross-functional, cross-marketplace initiatives that accelerate the application of best practices in domains relevant to all our businesses, some of which have been listed above. Some specific examples of cross-marketplace collaboration include application of proven techniques for making search more efficient, fulfillment and trust initiatives, optimization of performance marketing attribution models, and experience with brand research and awareness campaigns.
Etsy’s overall capital allocation strategy is focused in three areas: core investments in organic growth, which includes investments in our “House of Brands;” selectively pursuing acquisitions of businesses or technologies that complement our marketplaces or align with our overall growth strategy; and mitigating dilution to our stockholders through stock repurchase programs that have and may continue to be authorized by our Board of Directors.
How We Make Money
We see our business model as a virtuous circle - we connect sellers and buyers, enable their transactions, receive fees for our services, and then reinvest in customer experiences to further grow Etsy and our sellers’ revenue. We generate revenue primarily from marketplace activities, including transaction, listing, and payments processing fees, and fees for optional seller services, which include on-site advertising and shipping labels. For more information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Components of Our Results of Operations—Revenue.”
On April 11, 2022, we increased the Etsy marketplace seller transaction fee. As part of our long standing principle to provide a “fair exchange of value” for the fee Etsy earns on marketplace transactions, we reinvested most of the incremental revenue generated from the transaction fee increase into the following: (a) expanding our engineering headcount, allocating a meaningful portion to Product Development initiatives targeted to improve customer experiences; (b) continuing to increase our Marketing spending; (c) launching the Etsy Purchase Protection program; and (d) increasing investments in Trust & Safety and Member Support. You can read more about our investments in the Primary Business Drivers section below.
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Marketplace Revenue |
(Required fees) |
•Listing Fee •Transaction Fee •Payments Processing Fee •Offsite Ads Transaction Fee |
|
Services Revenue |
(Optional value-added services) |
•On-site Advertising •Shipping Labels •Other |
|
Our 2021 seller survey found“House of Brands” Marketplaces
Buyers come to the Etsy marketplace for meaningful, one-of-a-kind items handcrafted and curated with passion and expertise by our creative entrepreneurs. We are focused on attracting potential buyers to Etsy for everyday items that 55% of Etsy sellers are multi-channel sellershave meaning and those “special” purchase occasions that on average, Etsy is their primary source of sales. In 2019,happen throughout the second largest channel was craft fairsyear. These include items that reflect an individual’s unique style; gifting that demonstrates thought and live selling events, but during the COVID-19 pandemic, many sellers focused their efforts in online channels, with Etsy garnering the majority share.
According to our 2021 seller survey:
•81% identify as women;
•69% consider their Etsy shop to be a business;
•97% run their shops from their homes;
•82% aspire to grow their sales in the future;care; and
•65% started their Etsy shop as a way to supplement income.
Our 2021 seller survey found celebrations that 30% of Etsy sellers were pursuing their creative business as their sole occupation.
express creativity and fun. | | | | | | | | | | | | | | | | | |
Etsy SellersStyle (me) | | Gifting (you) | | Celebration (us) | |
Etsy Buyerspurchase occasions can happen frequently throughout the year - when a buyer is decorating a home, selecting an outfit for a special event, planning a celebration for a special moment, or buying a gift for someone else. In fact, according to a 2022 Etsy buyer survey:
TheWe believe the Etsy marketplace supportsis characterized by several unique qualities, including:
•A brand that stands for “Intentional Shopping:” In a world of increasing automation and commoditization, Etsy.com is a marketplace where creativity lives and thrives because it’s powered by people. We help our community of approximately 81 million buyers, who value self-expression, unique items, and buying directly from creative artisans and entrepreneurs. In a 2020 survey of Etsy buyers, 88%sellers turn their ideas into successful businesses. Our platform connects them with millions of buyers agreedlooking for an alternative—something special that expresses their taste and values.
•Unique products:Etsy has items that you can’t find anywhere else. Etsy buyers can enjoyboasts a large assortment of handmade, customized, personalized, shopping experience and build relationships through direct interactions with Etsy sellers. Etsy buyers can also purchase customized items, vintage, merchandise, and craft suppliessupply products from Etsy sellers. By shoppingall over the world. As of December 31, 2022, there were more than 100 million items listed on the Etsy marketplace, and approximately 26% of our 2022 GMS was from custom or made-to-order merchandise.
•Global reach: In 2022, 45% of Etsy sellers were located outside the United States, and 45% of our GMS was generated between an Etsy seller, Etsy buyer, or both, located outside of the United States. Our platform makes it easy for Etsy buyers are supporting creative artisans and entrepreneurssellers to interact across borders even if they do not speak the same language and wish to transact in different currencies. We use innovative machine translation technology to translate listings, reviews, Etsy Ads, and conversations between buyers and sellers. We invest in localization, particularly within our core non-U.S. markets, to create a more localized experience such as browse features and shipping filters, which has resulted in more sellers selling to buyers within their local communitiesown country. In 2022, approximately 70% and around80% of GMS in the world.United Kingdom and Germany, respectively, was from domestic sales.
•Organic traffic base: The vast majorityunique nature of visits comeour sellers’ inventory and power of our brand have enabled us to organically build a loyal, global base of Etsy buyers on the Etsy marketplace fromplatform. In 2022, 80% of our GMS was generated through organic channels, including a large portion from buyers visiting Etsy directly as well as from non-paid channels such as search, social, email, and push notifications.
We are focused on driving more new•Connection between Etsy buyers to the platform and encouraging existingsellers: As of December 31, 2022, 89.4 million buyers to purchase more often. New buyers are considered unique buyers that have never made a purchaseand 5.4 million sellers were active on the Etsy marketplace. During 2020, we had over 38 million new Etsy buyers, up 102% compared to last year. GMS from new buyers was up 94% year-over-year and represented approximately 16% of overall Etsy.com GMS.
GMS from existing Etsy buyers grew 101% year-over-year in 2020 and represented approximately 84% of overall Etsy.com GMS, in line with last year. We’ve made significant strides in reactivating buyers, generating purchases from buyers who hadn’t made a purchase in a year or more. We generated over 22 million reactivated buyers in 2020, growing 77% compared toemphasize that the prior year. Of the 60.7 million new and reactivated buyers in 2020, approximately 17% made four or more purchases across two or more categories, demonstrating encouraging signsitems listed for frequency.
Repeat Etsy buyers represent shoppers who made purchases on two or more days in the previous 12 months. We believe repeat purchases demonstrate the loyalty of Etsy buyers. In 2020,sale on the Etsy marketplace approximately 48% of our activeare brought to life by real people and that buyers were repeat buyers, an increase comparedcan connect directly with sellers in order to last year. We are particularly focused on converting our repeat buyers into habitual buyers,ask questions and personalize or Etsy buyers who have spent $200 or more and made purchases on six or more days in the previous 12 months. As of December 31, 2020, habitual buyers grewcustomize items to 6.5 million, an increase of 157% compared to 2019. The growth in habitual buyers has accelerated for three consecutive quarters and is faster than overall active buyer growth, indicating our efforts to convert buyers into more loyal shoppers on the Etsy marketplace are seeing signs of success.their specifications.
We’ve attracted nearly 151 million total•Connected experience across all devices: We want to engage Etsy buyers wherever they are and provide an enjoyable and accessible shopping experience regardless of the format. Our mobile website and our Etsy mobile app for Etsy buyers (“Buy on Etsy”) include search and discovery, curation, personalization, augmented reality, and social shopping features. For the year ended December 31, 2022, approximately 66% of Etsy.com GMS was generated on a mobile device. Through product investments that drive buyers to our app, we’ve been able to increase app downloads by 33% in 2022, which is beneficial to our conversion rate, as our mobile app has the highest conversion rate among devices. For the full year, our Etsy App represented the largest single GMS contributor by device.
•Buyer intent; people come to the Etsy marketplace to browse and be inspired: Our platform is designed to provide a personalized search and discovery experience to Etsy buyers, curating search results and listings based on transaction and browsing history. We are continuing to build more sophisticated algorithms that allow us to deliver more personalized results to our buyers, with the goal of helping our buyers find both the items they want, and inspiration for their next purchase.
High Level Performance Recap:
Beginning in 2020 and continuing through 2021, the COVID-19 pandemic and other global macroeconomic factors drove a significant shift to online purchasing in many retail categories. During this period, the Etsy marketplace experienced significant growth - more than doubling our GMS from 2019 through 2021. We believe this growth can be attributed to the diversity of our merchandise, the differentiation of our brand and shopping experience as explained above, and our capital light business model, among other factors.
As the COVID-19 pandemic eased beginning in February 2022, consumer mobility significantly increased which resulted in many more choices for individuals of where to spend their time and money, as well as greater competition for share of wallet as a result of other macroeconomic factors such as increased inflation and geopolitical events. Despite these very strong reopening headwinds in 2022, the Etsy marketplace maintained the vast majority of gains achieved during the pandemic (with 2022 GMS equal to 96% of 2021 GMS and up 148% from 2019). On a constant currency basis, Etsy’s GMS declined 1% year-over-year in 2022.
We believe the primary reason for maintaining our pandemic gains was Etsy’s significant investments in improving the customer experience and deepening our engagement with buyers. Throughout 2022, we employed multiple strategies, some of which are outlined in the Product Development and Marketing sections below, to make shopping on Etsy more efficient, inspirational, and trustworthy. We believe another factor contributing to this performance is the diversity of the merchandise on the platform (unique buyers who have ever purchased on Etsy) since our launchEtsy marketplace, as categories that were weaker during the pandemic (such as apparel or events related items) offset weakness in 2005.
categories such as home and living and craft supplies, which grew significantly during that time. | | | | | | | | |
Active Buyers by Purchase TypeThe Reverb Marketplace | | |
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Reverb, headquartered in Chicago, is a two-sided marketplace launched in 2013 on the principle that buying and selling musical instruments should be easy. Reverb connects buyers and sellers of new, used, and vintage music gear from all over the world, uniting music makers with the gear that inspires them. As of December 31, 2022, our Reverb marketplace had 811 thousand active buyers and 229 thousand active sellers. Reverb’s buyers and sellers range from beginners looking for their first instruments to professional musicians expanding their gear collections, local music stores that use Reverb to do more business online, and the largest music retailers in the world that use Reverb to reach an even larger audience. In 2022, over 64% of Reverb’s active sellers also bought on Reverb, and those that bought and sold gear spent close to three times more than those that bought gear on Reverb but did not sell on Reverb.
Reverb’s unique characteristics include the depth and breadth of its sellers’ inventory, its range of sellers (including retailers, manufacturers, and individual sellers distributed across the globe), one of the largest musical instrument databases with historical pricing data in the world, and a large and passionate community of musicians and music gear lovers. In 2022, Reverb invested in optimizing conversion rate, delivering a more customized experience, and driving international growth.
High Level Performance Recap:
In 2022, Reverb’s GMS declined 0.6% from 2021 and increased approximately 1% on a constant currency basis during the same period as reopening headwinds and other macroeconomic factors, such as increased inflation and geopolitical events weighed on consumer discretionary spending. Despite these strong headwinds, Reverb, similar to Etsy, maintained the vast majority of its 2020 and 2021 GMS gains. Based upon insights from music industry trade publications and our internal estimates, we believe that Reverb continued to meaningfully outpace the growth of the musical instruments industry on a three-year basis, yet Reverb still represents less than 4% of the total available market for musical instruments. Reverb’s 2022 investments included improvements to the buyer and seller experiences, including enhanced search capabilities, additional payment and shipping options, greater emphasis on affordability, and more robust customer support. In marketing, Reverb tested new advertising channels and launched a new Google integration to optimize performance marketing efficiency and better target prospective buyers with higher potential lifetime value.
Depop, headquartered in London, is dedicated to building the world’s most diverse and progressive home of fashion. Since its founding in 2011, Depop has evolved to become a community-powered fashion marketplace to buy and sell unique fashion, with approximately 30 million registered users. Depop had approximately 3.3 million active buyers and 1.8 million active sellers at December 31, 2022. Approximately 55% of Depop sellers who made a sale in 2022 also made at least one purchase in 2022 which we believe shows the strong engagement of Depop’s user base. Approximately 92% of Depop’s GMS is in the apparel category.
Depop is a place for anyone to discover and celebrate their style on their own terms and to feel good about their fashion choices by extending the lives of millions of garments. We believe Depop has a meaningful growth opportunity given its healthy user engagement metrics, strong resale market position with the “Generation Z” (“Gen Z”) consumer demographic, and strong brand awareness in its core markets (United Kingdom and United States). As of December 31, 2022, the majority of Depop’s users were Gen Z (the demographic cohort succeeding Millennials and known as “digital natives” as they are the first social generation to have grown up with access to the internet and portable digital technology from a young age). According to a 2022 ThredUp Annual Resale Report, which looked at trailing twelve-month data, over 60% of Gen Z and Millennial shoppers will look for an item secondhand before purchasing it new, and over 80% of first time thrifters plan to spend the same amount or more on secondhand in the next five years. ThredUp also expects the global secondhand apparel market to grow approximately three times faster than the broader global apparel market through 2026.
High Level Performance Recap:
In 2022, the resale market outpaced the wider online fashion industry despite challenging macroeconomic conditions including reopening headwinds, inflationary pressures, consumer discretionary spending trends, foreign exchange rate volatility, and ongoing geopolitical events. Depop experienced intensified competition and inflationary pressures impacting performance in monthly active users, visit frequency, conversion and growth. Etsy Seller & Buyer Retentionbelieves Depop is a highly-relevant and authentic re-commerce brand that is still early in its growth lifecycle and plans to continue to invest accordingly. In September 2022, Etsy appointed Kruti Patel Goyal, Etsy’s former Chief Product Officer, to the role of Depop Chief Executive Officer. New leadership has focused on building momentum in the business, identifying the fewest, most impactful things to re-accelerate growth and improve operational efficiency in service of the Depop community. Throughout the year, Depop improved the buyer experience by increasing product velocity and infrastructure, enhancing search capabilities, building new performance marketing channels with PLA, and launching Make an Offer, Depop Payments, and Boosted Listings.
Elo7, known as the Etsy marketplace, our“Etsy of Brazil,” was founded in 2008 and is headquartered in São Paulo, Brazil. Elo7 specializes in custom and made-to-order merchandise, connecting approximately 53 thousand active sellers and active buyers typically remain so for multiple years. For example, 42.5% of active sellers and 41.5% of1.6 million active buyers as of December 31, 2017 continued2022. Approximately 64% of Elo7’s GMS is from repeat buyers.
Elo7's marketplace includes items in over 40 retail categories, with a significant amount of GMS from "special event and life moment" categories. In 2022, Elo7’s top categories were parties and events, party favors, home decor, baby and kids, and weddings. Elo7 is ranked as a top 10 e-commerce site in Brazil in terms of traffic in web and android (according to be activeConversion E-commerce Report in Brazil, December 2022), providing us with a strong local brand in the largest Latin American e-commerce region.
High Level Performance Recap:
In 2022, the COVID-19 pandemic eased in Brazil, leading to a resumption of consumer mobility and therefore a return to in-person celebrations and events. Given Elo7’s exposure to these categories, as outlined above, the business began to see improved GMS performance throughout 2022. Key areas of investment for Elo7 during the year included conversion rate improvements from investments in search, giving sellers tools to help them grow, including access to more options for fast and active buyers through their fourth year onaffordable shipping. Elo7 also began testing an online marketing campaign aimed at driving brand awareness as it builds a broader marketing strategy. Similar to Etsy, we believe that Elo7 can expand its “consideration set” in the platform, and 36.2%mind of active sellers and 37.9% of active buyers as of December 31, 2016 continuedBrazilian consumers, becoming a destination they turn to be active sellers and active buyers through their fourth year on the platform. In addition, as of December 31, 2020, 18.4% of active sellers have been selling on Etsymore frequently for more than four years. Likewise, as of December 31, 2020, 20.2% of active buyers have been Etsy buyers for more than four years.life’s special moments.
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| | | | | Year 1 | | Year 2 | | Year 3 | | Year 4 | | | | | | | | Year 1 | | Year 2 | | Year 3 | | Year 4 | |
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| AVG GMS | | 2013 | | $1,260 | | $3,110 | | $4,190 | | $4,620 | | | | AVG GMS | | 2013 | | $96 | | $161 | | $168 | | $174 | |
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| PER SELLER | | 2014 | | $1,465 | | $3,325 | | $4,228 | | $4,615 | | | | PER BUYER | | 2014 | | $99 | | $157 | | $164 | | $169 | |
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| | | 2015 | | $1,558 | | $3,296 | | $4,062 | | $4,939 | | | | | | 2015 | | $101 | | $158 | | $163 | | $180 | |
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| | | 2016 | | $1,660 | | $3,198 | | $4,278 | | $5,004 | | | | | | 2016 | | $101 | | $157 | | $174 | | $187 | |
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| | | 2017 | | $1,641 | | $2,875 | | $4,090 | | $6,538 | | | | | | 2017 | | $92 | | $173 | | $186 | | $241 | |
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Cohorts of 2017, 2016, 2015, 2014, and 2013 Active Sellers and Active Buyers |
*2020 GMS per buyer by cohort from 2015 - 2019 excluding mask GMS
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Historical Cohorts: 2020 GMS per Buyer |
Primary Business Drivers
Our Technology Infrastructure
Our engineering team has built a sophisticated platform that enables millions of sellers and buyers to smoothly transact across borders, languages, and devices. This team writes, deploys, and operates the software and services that enable us to run our business, including the web and mobile products we deploy externally and internally, and maintains our cloud environment and local office networks, and more. Etsy also makes significant investments in areas such as foundational infrastructure, our payments platform, cyber security, internal information technology, data enablement, and system architecture.
We collect and analyze large volumes of data to enhance the performance of our platform, to produce personalized recommendations,personalize search and discovery, improve our search experience, and test features on our website.
Our use of machine learning algorithms on the Etsy marketplace creates an engaging shopping experience and helps Etsy sellers and Etsy buyers connect across our platform. We apply proprietary machine learning, artificial intelligence, and human curation to personalize the search and discovery processes, enabling shoppersexperiences and enable buyers to more easily browse, filter, and buy that perfect item, even when they may not have something specific in mind. Machine translation and machine learning also play an important role in making it easy for Etsy sellers and Etsy buyers to connect even if they don’t speak the same language. We translate listings within our Etsy marketplace, which we believe significantly increases the inventoryitems available to non-English speaking Etsy buyers and gives Etsy sellers access to a truly global audience.
In addition, our technology infrastructure allows us to scale our efforts across the platform. In February 2020 we completed our principalSince the Etsy marketplace’s migration to Google Cloud, which we believe will resultcompleted in 2020, we’ve increased engineering efficiency, shifting the focus from maintaining on-premise systems to product engineering work that is more strategic. As the COVID-19 pandemic shifted consumer shopping habits to more online commerce, traffic volume increased dramatically, and theThis cloud migration has enabled us to dynamically flex our infrastructure. In addition to its flexibleinfrastructure capacity, we also believe the cloud will enhance our overall infrastructure bywhile providing faster processing speed, improved page load time, and more nimble technology on an as needed basis.basis depending on traffic volume. In 2022, we invested in our technology platform to improve engineering development efficiencies and increase our product development velocity. Our other marketplaces Reverb, Depop, and Elo7 also operate their marketplaces in the cloud and make similar technical development investments with Amazon Web Services (“AWS”).
Product Development Etsy’s product development and engineering organization is built around the core belief that we can create connections between our sellers and buyers that are personal and fundamentally different from those in other places you can shop or sell. We believe we have a novel approach to product development, which we call our Product Development Culture, an evolving set of key principles, mindsets, and habits that guide how our teams work, experiment, and interact as we develop great experiences for our customers and business. Our teams are organized around a collection of initiatives that support a common strategy aligned with our “Right to Win,” with cross-functional teams focused on a single key performance indicator (“KPI”) and set of objectives and key results, all meant to solve key customer friction points. Product and engineering groups work across all areas that matter to our buyers and sellers - the core buyer and seller experience, search and ads, payments, fulfillment, member support, and more. Our approach to solving customer challenges includes deep research, A/B testing, exploratory analysis, product management, design, engineering, and product marketing (go-to-market strategies).
We continue to advance our “Right to Win” strategy, our playbook designed to ensure Etsy is the first stop for consumers who want to shop their tastes and values, as well as differentiating our value proposition in a competitive environment. In 2022, we targeted our investments to making Etsy feel more “made for you” by improving the efficiency and inspiration of our Search & Discovery, making Etsy more reliable as a Trusted Brand, and providing our sellers with increased agency and scalability tools to help grow their businesses.
The chart below highlights just a few of our key product development achievements in 2022:
Etsy also shares aspects of its product development culture and strategies with our other subsidiaries. We are early in this effort and believe that over time increased focus on experimentation, search and discovery, and fulfillment will improve the customer experience across all of our marketplaces.
Marketing We believe that our approach to investments in marketing are somewhat different from some other players in e-commerce, and we continue to evolve and refine these activities as a core component of our business. We’ve evolved our marketing strategy to reinforce our core brand promise in the minds of Etsy buyers, and we’ve strengthened our capabilities by employing a full-funnel marketing approach, optimizing our investments in each area of the funnel. Our two primary types of marketing investments, performance and brand - where we spent approximately $433 million and $145 million, respectively on a consolidated basis in 2022 - are discussed below:
Performance marketing. In 2022, the percentage of GMS attributed to performance marketing (paid GMS) was 20% so the vast majority of our GMS comes to us organically through awareness of our brand. Our investments in performance marketing, which we define as paid media spend related to the digital acquisition and re-engagement of buyers, adjusts according to demand and scale based on incremental return. We do not set fixed budgets for our marketing team; our investment philosophy for performance marketing is to invest until the marginal return on investment (“ROI”) on the next dollar spent is below our target minimum ROI. Increases in buyer lifetime value (“LTV”), driven by visits, conversion rate, incremental revenue, and frequency, shift the return curve, enabling us to spend more in marketing. The vast majority of return comes in-period, although some does fall into subsequent quarters. Our performance marketing spend naturally adjusts with demand, which we believe has worked well for us through changing demand and pricing for third-party marketing channels.
In May 2020, we launched our innovative advertising program for Etsy marketplace sellers called Offsite Ads. In this offering, Etsy pays the upfront costs to promote Etsy sellers’ listings on multiple internet platforms, and sellers only pay an additional transaction fee when they make a sale. When a shopper clicks on an offsite ad featuring a seller’s listing and purchases from the seller’s shop within 30 days of that click, the seller pays Etsy a transaction fee on that order. We believe our Offsite Ads program is a win-win for Etsy and our sellers because sellers only pay a fee when they make a sale and the additional fee expands Etsy’s LTV, as outlined above, enabling us to spend deeper to drive more visits to our marketplace. In 2022, revenue from the Etsy marketplace’s Offsite Ads program offset approximately 32% of our consolidated performance marketing spend.
Brand marketing. Since 2018, Etsy has leaned more heavily into “upper funnel” brand marketing strategies through TV, digital video, and paid social, to create a flywheel designed to elevate the effectiveness of our other marketing channels. Etsy continuously surveys buyers on ‘brand funnel’ metrics such as awareness and loyalty, and, in 2022, we refreshed the questions asked in these surveys to better track the results of our investments. U.S. Etsy buyer surveys indicate that, since the fourth quarter of 2018, prompted awareness is up more than 10%, purchase intent grew over 100%, and visit intent increased over 70%. We are also seeing great movement in our brand funnel metrics in the United Kingdom and Germany. Since the fourth quarter of 2020, our prompted awareness in the United Kingdom is up over 15% and purchase intent is up over 10%. During the same period in Germany, prompted awareness increased nearly 100% and purchase intent grew nearly 90%. Given these healthy performance metrics, as well as our validation of performance through multiple third-party methodologies, we anticipate that upper funnel brand marketing strategies will continue to be a growing part of our marketing investment mix over time.
Other marketing activities. Our marketing strategy also includes sophisticated Customer Relationship Management (CRM) tools that enable us to segment and target our buyers for engagement on and off Etsy, “mid funnel” advertising such as on social media channels, and corporate marketing partnerships to target specific buyer demographics. For example, during 2020 we processed twicesaw a 92% increase in video views on our social channels in 2022. We also build our brand globally through earned media that features Etsy as much data per search querya trend-setter and global destination for conscious shopping that supports small business.
We believe our CRM and app push notifications are efficient tools to drive engagement with our active and lapsed buyers. In 2022, we leveraged these capabilities to promote seller “Thank You” coupon email reminders, offers for buyers’ recently favorited items, select flash sales on our app, abandoned cart reminders, as we did in 2019.well as redesigned post-purchase “convos” to drive buyer re-engagement and frequency. We also added email opt-in at checkout for international buyers, provided an automated app download offer, and further improved update banners that bring buyers back.
CommitmentWe expanded social marketing activities with our “Creator Collab” program that encourages co-created content and product to Integritydrive traffic to Etsy by allowing creators to monetize certain social media content through our affiliate marketing channels. As part of this program, Etsy and Transparencyour sellers partner with celebrities and influencers who are passionate about Etsy to reach new buyers and drive engagement with existing buyers.
Members ofOur subsidiaries are less mature businesses than Etsy.com and have therefore not yet reached the necessary size to cost-effectively scale either performance or brand marketing. We see further opportunity following early collaborations to share expertise through projects and personnel across our community rely on usbrands. We believe increased collaboration has the potential to maintain trusted marketplaces. drive future growth.
Trust & Safety The trustworthiness of our marketplaces and the connections among people in our community are cornerstones of our business. Our policies are designed to encourage transparency among our members by clearly outlining the rights and responsibilities of sellers and buyers participating on our platform. Transparency within our community reflects and helps to support our own trustworthiness. For example, we have an Impact strategy on which we provide our progress in this Annual Report.
On the Etsy marketplace,Etsy.com we strive to give the Etsy buyer comfort that she is purchasing goods from a shop that adheres to certain principles,standards, which starts with our policies. Fundamentally, we require that goods listed on Etsy be handmade (whether by the seller alone or with the help of a production partner), vintage, or craft supplies. Etsy buyersis an unjuried marketplace, meaning sellers run their own shops, create, sell, and ship their own products, and are responsible for complying with our robust Seller Policy. Items on Etsy do not have a high degreebarcodes or SKUs, and Etsy does not ever touch or possess the items for sale on our marketplace. The unique nature of insight into Etsy sellers’ business practices. Our policies ask Etsy sellers to be transparent about themselves, their businesses, andproduct inventory, combined with the goods they sell.
We are focused on enhancing customer service for our sellers and buyers,constantly evolving nature of policy interpretation, necessitates expert, human involvement in content moderation, which we believe bolsterscombine with the trustworthinesspower of our marketplaces. For example, in 2020, we continued to evolve our offerings with Zendesk to improve our customer experience. We expanded 24/7 live chatcutting-edge tools and phone support for both our buyers and sellers.technology. Our commitment to integrity and transparency came into particular focus in 2020. When the COVID-19 pandemic triggered the sale of masks and other COVID-19-related products, our Policy and Trust and Safety teams agilely calibrated our policy interpretation and enforcement approaches to align with constantly evolving official guidance. When Etsy called for sellers to make masks to meet soaring buyer demand, our Trust and Safety team worked to provide sellers with educational resources highlighting what is permitted to be sold on the Etsy platform and best practices for listing masks in accordance with our policies. In response to the social justice protests and civil unrest that began in the spring of 2020 and continued through a divisive, highly polarized U.S. election cycle, our Policy and Trust and Safety teams closely followed unfolding events and their impact on our marketplaces. These teams re-evaluatedcontinuously re-evaluate content on EtsyEtsy.com in the context of emerging trends to determine whether such content violatedviolates our TermsHouse Rules or terms of Use,use, including our Prohibited Items policy andpolicy. Etsy.com has a zero tolerance approach for items that promote, support, or glorify hate or violence or that perpetuate the spread of harmful misinformation.
Beyond prohibited content detection and removal, we have grounded our content moderation program and product roadmap in ensuring that buyers can trust their experience and have the information they need to make informed purchase decisions, and that sellers can understand what is required of them, including whether their listing is permitted under our policies. We remain committed to ensuring that any member can easily alert Etsy about potential violations of our policies. We have dedicated teamsalso taken steps to ensure that Etsy sellers are positioned for success by making our policies easy to understand, refining our violation notification process, and sophisticated toolsproviding resources to help enforce our policies. Our Integrity team uses a combination of machine learning, automated systems, and community-generated flags to review items listed onsellers when they have compliance questions.
As the Etsy marketplace has experienced significant growth over the last few years, we have increased our investments and Etsy shops that may violateresources dedicated to trust and safety. This includes scaling our policies. Our Trustteams and Safety team helps to prevent and detect fraud through human review and automatedinvesting in new tools and algorithms. We also recognize that sometimes transactions don’t go as planned. When that happens,advanced technologies to enable these teams to more effectively and efficiently do their jobs. This included growing our online Case System providescontent moderation team, expanding our handmade and counterfeit team dedicated to fighting counterfeits and violations of our Handmade Policy, and creating a waydedicated trust and safety machine learning engineering team. Another example of a Trust & Safety enhancement is our new Reporting Portal, introduced in 2022, which has enabled thousands of intellectual property and other proprietary rights holders to report issues.
In 2022, we expanded enforcement of our Handmade Policy to continue to protect the integrity of our marketplace and increased our proactive review of listings for Etsy sellerspotential handmade violations. In order to protect our brand and buyers to communicate with each other to resolve disputes. We also establish trust by emphasizing the person behind every transaction. We deepen connections between Etsy sellers and buyers through our direct communication tools, seller storiessellers’ collection of unique items, we will continue building on our websiteproactive moderation capabilities while providing sellers with new tools to accurately describe their items and apps, and, when possible, in-person events, highlighting personal relationships as a key part of the Etsy experience.
We publish an annual transparency report,Transparency Report, which details our policy enforcement for the year on Intellectual Property, Prohibited Items, and Requests for Member Information policies. We’veWe have shared this report on our corporate website annually since 2015 and believe that publicly reporting on our enforcement efforts builds trust in our marketplace and community.
Our subsidiaries – Depop, Reverb, and Elo7 – also care about running trustworthy marketplaces, and maintain robust community guidelines and prohibited items policies. In 2022, there was significant sharing of best-practices and information on these important items across our “House of Brands.” As one example of improvements within our other marketplaces, Depop stepped up fraud detection and prevention activities through the implementation of a new third-party tool and expanded its fraud prevention team. You can read more about our other marketplaces’ respective policies and procedures by visiting each of their marketplace websites.
Member Support As the Etsy marketplace has scaled, so have our investments in member support. While the majority of issues are resolved directly between our customers, we jump in and work to help resolve problems quickly when needed. As the primary touch point for our vibrant community of buyers and sellers, our Member Services team serves as both the voice of the Etsy brand and an important advocate for our community. When an issue arises, or a user has a question, we want to ensure they get support quickly and easily.
In 2022 we expanded our Member Services team to improve our case management process and continued to enhance our self-service and seller education tools to quickly resolve issues without our intervention. Here are some specific examples of 2022 enhancements:
•We expanded our Member Services team and trained hundreds of agents in Etsy Purchase Protection workflows ahead of the August 2022 launch, allowing us to meaningfully reduce the time to resolve case complaints despite the increase in submissions. Etsy Purchase Protection protects sellers and buyers on qualifying orders up to $250 when an item does not match the description, arrives damaged, or never arrives.
•We improved and expanded our live chat support, which is an increasingly preferred option for many Etsy users. For example, we launched Shop Manager Chat, a higher level of support provided to top sellers.
Our subsidiaries also require similar member support activities, and we believe our experience can be leveraged across our subsidiaries to help drive their future growth and customer satisfaction.
Seller Investments In addition to our Offsite Ads advertising program and our paid services which include Etsy Ads, our on-site advertising platform for sellers, and our shipping labels product, we provide a wide range of insights, tools, programs, and educational resources to give Etsy marketplace sellers the support they need to manage and grow their businesses. Here are some examples:
•Star Seller program: We expanded on our successful Star Seller program, which celebrates and rewards sellers who provide excellent customer service with badging and increased prominence. The Star Seller program continued to gain traction, with a 75% increase year-over-year in sellers with a badge as of December 31, 2022. Star Sellers also earned approximately 15% more GMS than their non-Star Seller counterparts in 2022 due to factors such as higher conversion rate, traffic, average order value, and orders per converting buyer.
•Seller Services and Tools:
◦We offer a variety of free tools to Etsy sellers, including our Shop Manager dashboard, which serves as a centralized hub for Etsy sellers to track orders, manage inventory, view metrics and statistics, and have conversations with their customers across all of their Etsy shops. This dashboard is a single, easy-to-use interface that streamlines sellers’ bills and payments accounts.
◦We fully launched a new Etsy Seller App to all sellers, which includes features such as the ability to more easily manage inventory and check order status, receive notifications about repeat customers, add photos and listing videos, and purchase and print shipping labels. We continue to add features based on our seller feedback.
◦As part of our Etsy Purchase Protection program, as described above, Etsy refunds buyers and allows sellers to keep their earnings on qualifying orders if a buyer never receives the package, or the item arrives damaged, providing our sellers with more support in the event that something goes wrong.
◦We expanded our Help Center and improved navigation functionality, making it easier for sellers to access articles and content to better manage their accounts, find answers to their questions, and self-service minor issues that may arise. We also added 24/7 chat to support sellers.
•Education:We provide extensive educational resources to teach Etsy sellers how to start, manage, and scale their businesses on our platform, including:
◦Blog posts, video tutorials, the Etsy Seller Handbook (available on Etsy.com), Etsy.com online forums, and insights from our support teams. Leveraging seller feedback, we redesigned the Etsy Seller Handbook homepage, introducing a new top navigation tool to highlight key resources and popular content.
◦In September 2022, we held Etsy Up: Holiday Edition, our first-ever global holiday kickoff event for sellers around the world. The interactive online experience included insider access to trends, tools, and actionable takeaways to help grow our sellers’ shops. This virtual event drew 80,000 sellers, making it the largest ever seller gathering in our history.
◦We added a personalized Offsite Ads performance snapshot email that details key metrics and messaging. This report provides our sellers with a clear view of the value of our Offsite Ads program.
◦Etsy sellers also connect through self-organized Etsy Teams to build personal relationships with other Etsy sellers, collaborate, educate, and support each other as they build their independent creative businesses.
Our subsidiaries also offer many tools and services for their seller communities, including tips for success, pricing insights, community events, and shipping carrier relationships and support.
The Etsy Marketplace: Our Passionate and Engaged Community
Over the past few years, Etsy’s investments in our growth strategy and business drivers, as well as external factors that drove dramatic changes to the way people engage with e-commerce marketplaces in general and with the Etsy marketplace in particular, have led to significant changes in engagement and retention of our seller and buyer communities. This section outlines characteristics of the Etsy marketplace seller and buyer cohorts, which we believe is a useful barometer to track our performance over time.
Our Strategy
Etsy
OurAs illustrated below, our strategy is focused on growingaround:
•Building a sustainable competitive advantage - our “Right to Win;”
•Growing the Etsy marketplace in our seven core geographiesgeographies; and executing upon
•Leveraging our marketplace playbook across our “House of Brands.”
Building a sustainable competitive advantage - our “Right to Win”Our “Right to Win” is centered on four key initiatives toelements that we believe make EtsyEtsy.com a better place to shop and sell:sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build trust in the Etsy marketplace. We focus our investments in search and discovery, trust and reliability, marketing capabilities, and seller tools and services. Investing in and successfully delivering onbelieve that when executed effectively, these initiatives has resulted in significant improvements to and growthelements can create a multiplier effect that will drive future growth.
Our sellers’ collection of our marketplace.
In order to deliver sustainable long-term growth, we are building upon this strategy to incorporate additional elements that we believe, over time, will make Etsy a best-in-class marketplace. Our investments in product, marketing, and talent will be focused on capitalizing on what we believe are our core competitive advantages, or what we think of as our “Right to Win.”
unique items:The foundation of Etsy’s Right to WinEtsy.com’s competitive advantage is our sellers’ collection of unique items, which we believe, when combined with best-in-class search and discovery, human connections, and a trusted brand, will enable us to continue to stand out among other e-commerce platforms and marketplaces. Ultimately, the goal of our long-term strategy is to attract new buyers, increase buyer frequency, encourage buyers to spend more per order, fuel success for our sellers, and drive growth. During the COVID-19 pandemic in 2020, we saw the effectiveness of our Right to Win, as our buyers came to Etsy for our sellers’ unique inventory of essentials and everyday items.
The Etsy marketplace has a significant number of habitual buyers (Etsy buyers who have purchased $200 or more on Etsy and have made purchases on six or more purchase days in the last 12 months), and we believe we have the ability to attract many more buyers like them and convert them into habitual buyers. We believe we can deepen engagement with our existing buyers by inspiring purchases in additional categories and occasions. We also plan to continue supporting our sellers by creating and enhancing seller tools and services designed to help sellers scale and grow their business and drive buyer demand.
Further expanding on these two primary components of our long-term strategy we will:
1. Focus on the Etsy marketplace in our seven core geographies:
The first component and foundation of our growth strategy is our focus on the Etsy marketplace in our seven core geographies (United States, United Kingdom, Germany, Canada, Australia, France, and India). Our core geographies are locations that meet any of the following criteria:
•represent our most attractive buyer GMS opportunities,
•where we currently have or believe we can create a vibrant two-sided marketplace, or
•where we’re making strategic investments in domestic growth.
We are continuing to expand our global reach. A barometer of our local market vibrancy is the performance of our international domestic trade routes, measured by GMS generated between a non-U.S. buyer and a non-U.S. seller both in the same country.
Etsy.com GMS from this trade route grew approximately 182% in 2020 compared to 2019, making it the fastest growing category of international GMS. We see significant opportunity to deliver a more localized shopping experience to non-U.S. buyers in the future. This opportunity may include making investments in the elevation of local products and sellers in search, improving non-English search, and providing more localized marketing and campaigns.
We have buyers and sellers in nearly every country around the world, and while we focus on our seven core markets, we will also continue to evaluate additional geographies for strategic investments. Continued international expansion may require significant financial investment, especially in markets where we have limited operating experience, including in areas such as seller and buyer acquisition marketing, enhancing our machine translation across new languages, and forming relationships with third-party service providers.
Our growth strategy also includes investments for inorganic growth, including our 2018 strategic referral agreement with DaWanda in Germany and the 2019 acquisition of Reverb. We may continue to acquire additional marketplaces or businesses that are a strategic fit for the business and brand.
2. Build a sustainable competitive advantage:
As described above, our Right to Win is centered on these four key elements:
Our Sellers’ Collection of Unique Items: The foundation of Etsy’s competitive advantage is our sellers’ collectionmillions of unique items. Sellers choose to list their collections of unique items on our marketplace because they believe that we are the best place for them to start and grow a creative business and that we have created a community that attracts, supports, and retains some of the world’s most talented makers. The Etsy marketplace features approximately 85 million items listed across multiple retail categories and boasts a large assortment of unique, handmade, vintage, and craft supply products from all over the world. In a 2020 survey of Etsy buyers, 88% agreed that Etsy has items that you can’t find anywhere else - that something “special in a sea of sameness.” We believe the Etsy marketplace is the only place where you can find this depth and breadth of one-of-a-kind items, including millions that can be customized and personalized. The unique nature of theseour sellers’ items requires that we invest in the other three elements of our long-term strategy: search and discovery, human connections, and our trusted brand in order to deliver a best-in-class marketplace experience.
Best-in-class search and discovery:discovery: We are focused on continuing to develop a search and discovery experience that unlocks the value of the unique items inthat can be found on the Etsy marketplace. With millions ofover a hundred million items listed on EtsyEtsy.com that don’t map to a catalog or a stock keeping unit (“SKU”), our challenge is delivering world-class search and discovery technology that surfaces the right unique product to the right buyer at the right time in order to drive sales and buyer satisfaction. We are utilizinguse a combination of artificial intelligence, and machine learning, and human curation to help personalize the search experience and enable Etsy buyers to more easily browse, filter, and find the itemitems they desire.
In 2020, We’re investing in multiple areas focused on understanding buyer tastes and preferences as we significantly enhanced the searchstrive to anticipate and discovery experience on the Etsy marketplace. As a result of migrating our search efforts to Google Cloud, we made foundational upgrades to our search ranking algorithms, which continues to enable us to provide more relevant search results to buyers on the Etsy platform. We continue to make progress closing the semantic gap, and during 2020, we processed two times more data per search query compared to last year. All of our efforts have enabled us to launch personalized search, where two buyers who enter the same search query may receive different results based oninspire their characteristics. As we continue to iterate on our search initiatives, our algorithms will learn and deliver a more personalized shopping experience, which we anticipate will deepen buyer engagement and drive greater visit and purchase frequency.next purchase.
The power of human connections:connections: Our mission to “Keep Commerce Human” is a vital part of our strategy. We continue to emphasize the role that humans play in every aspect of our business. What makes the Etsy marketplace special isn’t just the unique items in our marketplace;marketplace, it’s also the stories of how those items were brought to life by the hands of real people. Our Etsy buyer experience highlights the story behind each item and also allows Etsy buyers to work with Etsy sellers to personalize or customize items to their exact specifications. In fact, data shows that when an Etsy buyer reaches out to an Etsy seller with a question, they are significantly more likely to purchase an item from that seller, and conversion rate goes up as response time gets shorter. We believe that fostering and elevating the quality of these human connections will continue to enable us to drive buyer engagement, loyalty, and purchase frequency, and to continue to differentiate Etsythus differentiating Etsy.com from other e-commerce platforms.
In 2020, we deepened the human connections in our marketplace by launching listing videos, which help sellers showcase their products to buyers in ways they previously could not with photos, while bringing their products to life. As of the end of 2020, approximately 3.2 million sellers’ videos were uploaded. Our goal is to bring human connections to life through improvements in member support, seller forums management, our brand and marketing campaigns, and other ways that we promote the Etsy marketplace. Lastly, we deepen loyalty by creating opportunities for Etsy buyers to experience Etsy across categories and occasions.
places you can shop.
Our trusted brand:brand: We will continue to focus on being a reliable brand that inspires trust in our customers acrossalong the buyer journey — when theybuyers search, purchase, anticipate, and receive their special items, and all the steps in between. Since Etsy sellers have relatively unknown brands and unbranded items, we aim to ensure that the Etsy brand is recognized and valued for providing an excellent end-to-end experience. There are two key elements to being a trusted brand: standing for something that customersbuyers understand and rely on, and delivering a purchasing experience that feels safeefficient and supportive.safe. Our goal is to bolster trust in the Etsy brand, Etsy sellers, the items available on Etsy, and in the overall Etsy experience. In 2020, we leveraged reviewsWe also need to be reliable for our sellers, offering a suite of compelling services to help sellers comply with marketplace policies and have peace of mind transacting on Etsy.
Growing the Etsy marketplace in our seven core geographies:
We are focused on growing the Etsy marketplace in our seven core geographies (as illustrated above). While we have sellers and buyers make more informed purchase decisions on items they are searching for. By incorporating machine learningaround the world, we are now able to prioritizedefine our core geographies as locations that meet any of the following criteria:
•represent our most helpful reviews which are those thatattractive GMS opportunities,
•where we currently have substantial text, images, and are similar to the target listing. or believe we can create a vibrant two-sided marketplace, or
•where we’re making strategic investments in domestic growth.
We will also continue to evaluate additional geographies for strategic investments.
Leveraging our marketplace playbook across our “House of Brands”
We have four values-aligned e-commerce marketplaces offering non-commoditized items in our “House of Brands:” Etsy, Reverb, Depop, and Elo7. Each of these marketplaces stands for creativity, community, and “special” and shares common commitments to operate in a way that makes a positive impact on the world. Our goal is that all four marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.
We believe our marketplaces all share key elements central to success, including:
•analytical frameworks, product experiment and measurement approaches, and operating rhythms that prioritize resource allocation towards the most impactful outcomes,
•sophisticated search and discovery technology,
•compelling on-site customer experiences,
•efficient payment platforms,
•value-added seller services, such as advertising platforms and effective shipping options,
•strong brand and performance marketing capabilities, and
•a commitment to investments that protect the marketplace.
Since acquiring each business, we have invested in leveraging high-performing talent across Etsy and the other “House of Brands” marketplaces to accelerate value creation and idea pollination across our four marketplaces. We continue to invest in cross-functional, cross-marketplace initiatives that accelerate the application of best practices in domains relevant to all our businesses, some of which have been listed above. Some specific examples of cross-marketplace collaboration include application of proven techniques for making search more efficient, fulfillment and trust initiatives, optimization of performance marketing attribution models, and experience with brand research and awareness campaigns.
Etsy’s overall capital allocation strategy is focused in three areas: core investments in organic growth, which includes investments in our “House of Brands;” selectively pursuing acquisitions of businesses or technologies that complement our marketplaces or align with our overall growth strategy; and mitigating dilution to our stockholders through stock repurchase programs that have and may continue to be authorized by our Board of Directors.
How We Make Money
We see our business model as a virtuous circle - we connect sellers and buyers, enable their transactions, receive fees for our services, and then reinvest in customer experiences to further grow Etsy and our sellers’ revenue. We generate revenue primarily from marketplace activities, including transaction, listing, and payments processing fees, and fees for optional seller services, which include on-site advertising and shipping labels. For more information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Components of Our Results of Operations—Revenue.”
On April 11, 2022, we increased the Etsy marketplace seller transaction fee. As part of our long standing principle to provide a “fair exchange of value” for the fee Etsy earns on marketplace transactions, we reinvested most of the incremental revenue generated from the transaction fee increase into the following: (a) expanding our engineering headcount, allocating a meaningful portion to Product Development initiatives targeted to improve customer experiences; (b) continuing to increase our Marketing spending; (c) launching the Etsy Purchase Protection program; and (d) increasing investments in Trust & Safety and Member Support. You can read more about our investments in the Primary Business Drivers section below.
| | |
Marketplace Revenue |
(Required fees) |
•Listing Fee •Transaction Fee •Payments Processing Fee •Offsite Ads Transaction Fee |
|
Services Revenue |
(Optional value-added services) |
•On-site Advertising •Shipping Labels •Other |
|
Our “House of Brands” Marketplaces
Buyers come to the Etsy marketplace for meaningful, one-of-a-kind items handcrafted and curated with passion and expertise by our creative entrepreneurs. We are focused on attracting potential buyers to Etsy for everyday items that have meaning and those “special” purchase occasions that happen throughout the year. These include items that reflect an individual’s unique style; gifting that demonstrates thought and care; and celebrations that express creativity and fun.
| | | | | | | | | | | | | | | | | |
Style (me) | | Gifting (you) | | Celebration (us) | |
Etsy purchase occasions can happen frequently throughout the year - when a buyer is decorating a home, selecting an outfit for a special event, planning a celebration for a special moment, or buying a gift for someone else. In fact, according to a 2022 Etsy buyer survey:
We believe the Etsy marketplace is characterized by several unique qualities, including:
•A brand that stands for “Intentional Shopping:” In a world of increasing automation and commoditization, Etsy.com is a marketplace where creativity lives and thrives because it’s powered by people. We help our community of sellers turn their ideas into successful businesses. Our platform connects them with millions of buyers looking for an alternative—something special that expresses their taste and values.
•Unique products: Etsy boasts a large assortment of handmade, customized, personalized, vintage, and craft supply products from all over the world. As of December 31, 2022, there were more than 100 million items listed on the Etsy marketplace, and approximately 26% of our 2022 GMS was from custom or made-to-order merchandise.
•Global reach: In 2022, 45% of Etsy sellers were located outside the United States, and 45% of our GMS was generated between an Etsy seller, Etsy buyer, or both, located outside of the United States. Our platform makes it easy for Etsy buyers and sellers to interact across borders even if they do not speak the same language and wish to transact in different currencies. We use innovative machine translation technology to translate listings, reviews, Etsy Ads, and conversations between buyers and sellers. We invest in localization, particularly within our core non-U.S. markets, to create a more localized experience such as browse features and shipping filters, which has resulted in more sellers selling to buyers within their own country. In 2022, approximately 70% and 80% of GMS in the United Kingdom and Germany, respectively, was from domestic sales.
•Organic traffic base: The unique nature of our sellers’ inventory and power of our brand have enabled us to organically build a loyal, global base of Etsy buyers on the platform. In 2022, 80% of our GMS was generated through organic channels, including a large portion from buyers visiting Etsy directly as well as from non-paid channels such as search, social, email, and push notifications.
•Connection between Etsy buyers and sellers: As of December 31, 2022, 89.4 million buyers and 5.4 million sellers were active on the Etsy marketplace. We emphasize that the items listed for sale on the Etsy marketplace are brought to life by real people and that buyers can connect directly with sellers in order to ask questions and personalize or customize items to their specifications.
•Connected experience across all devices: We want to engage Etsy buyers wherever they are and provide an enjoyable and accessible shopping experience regardless of the format. Our mobile website and our Etsy mobile app for Etsy buyers (“Buy on Etsy”) include search and discovery, curation, personalization, augmented reality, and social shopping features. For the year ended December 31, 2022, approximately 66% of Etsy.com GMS was generated on a mobile device. Through product investments that drive buyers to our app, we’ve been able to increase app downloads by 33% in 2022, which is beneficial to our conversion rate, as our mobile app has the highest conversion rate among devices. For the full year, our Etsy App represented the largest single GMS contributor by device.
•Buyer intent; people come to the Etsy marketplace to browse and be inspired: Our platform is designed to provide a personalized search and discovery experience to Etsy buyers, curating search results and listings based on transaction and browsing history. We are continuing to build more sophisticated algorithms that allow us to deliver more personalized results to our buyers, with the goal of helping our buyers find both the items they want, and inspiration for their next purchase.
High Level Performance Recap:
Beginning in 2020 and continuing through 2021, the COVID-19 pandemic and other global macroeconomic factors drove a significant shift to online purchasing in many retail categories. During this period, the Etsy marketplace experienced significant growth - more than doubling our GMS from 2019 through 2021. We believe this growth can be attributed to the diversity of our merchandise, the differentiation of our brand and shopping experience as explained above, and our capital light business model, among other factors.
As the COVID-19 pandemic eased beginning in February 2022, consumer mobility significantly increased which resulted in many more choices for individuals of where to spend their time and money, as well as greater competition for share of wallet as a result of other macroeconomic factors such as increased inflation and geopolitical events. Despite these very strong reopening headwinds in 2022, the Etsy marketplace maintained the vast majority of gains achieved during the pandemic (with 2022 GMS equal to 96% of 2021 GMS and up 148% from 2019). On a constant currency basis, Etsy’s GMS declined 1% year-over-year in 2022.
We believe the primary reason for maintaining our pandemic gains was Etsy’s significant investments in improving the customer experience and deepening our engagement with buyers. Throughout 2022, we employed multiple strategies, some of which are outlined in the Product Development and Marketing sections below, to make shopping on Etsy more efficient, inspirational, and trustworthy. We believe another factor contributing to this performance is the diversity of the merchandise on the Etsy marketplace, as categories that were weaker during the pandemic (such as apparel or events related items) offset weakness in categories such as home and living and craft supplies, which grew significantly during that time.
Reverb, headquartered in Chicago, is a two-sided marketplace launched in 2013 on the principle that buying and selling musical instruments should be easy. Reverb connects buyers and sellers of new, used, and vintage music gear from all over the world, uniting music makers with the gear that inspires them. As of December 31, 2022, our Reverb marketplace had 811 thousand active buyers and 229 thousand active sellers. Reverb’s buyers and sellers range from beginners looking for their first instruments to professional musicians expanding their gear collections, local music stores that use Reverb to do more business online, and the largest music retailers in the world that use Reverb to reach an even larger audience. In 2022, over 64% of Reverb’s active sellers also bought on Reverb, and those that bought and sold gear spent close to three times more than those that bought gear on Reverb but did not sell on Reverb.
Reverb’s unique characteristics include the depth and breadth of its sellers’ inventory, its range of sellers (including retailers, manufacturers, and individual sellers distributed across the globe), one of the largest musical instrument databases with historical pricing data in the world, and a large and passionate community of musicians and music gear lovers. In 2022, Reverb invested in optimizing conversion rate, delivering a more customized experience, and driving international growth.
High Level Performance Recap:
In 2022, Reverb’s GMS declined 0.6% from 2021 and increased approximately 1% on a constant currency basis during the same period as reopening headwinds and other macroeconomic factors, such as increased inflation and geopolitical events weighed on consumer discretionary spending. Despite these strong headwinds, Reverb, similar to Etsy, maintained the vast majority of its 2020 and 2021 GMS gains. Based upon insights from music industry trade publications and our internal estimates, we believe that Reverb continued to meaningfully outpace the growth of the musical instruments industry on a three-year basis, yet Reverb still represents less than 4% of the total available market for musical instruments. Reverb’s 2022 investments included improvements to the buyer and seller experiences, including enhanced search capabilities, additional payment and shipping options, greater emphasis on affordability, and more robust customer support. In marketing, Reverb tested new advertising channels and launched a new Google integration to optimize performance marketing efficiency and better target prospective buyers with higher potential lifetime value.
Depop, headquartered in London, is dedicated to building the world’s most diverse and progressive home of fashion. Since its founding in 2011, Depop has evolved to become a community-powered fashion marketplace to buy and sell unique fashion, with approximately 30 million registered users. Depop had approximately 3.3 million active buyers and 1.8 million active sellers at December 31, 2022. Approximately 55% of Depop sellers who made a sale in 2022 also made at least one purchase in 2022 which we believe shows the strong engagement of Depop’s user base. Approximately 92% of Depop’s GMS is in the apparel category.
Depop is a place for anyone to discover and celebrate their style on their own terms and to feel good about their fashion choices by extending the lives of millions of garments. We believe Depop has a meaningful growth opportunity given its healthy user engagement metrics, strong resale market position with the “Generation Z” (“Gen Z”) consumer demographic, and strong brand awareness in its core markets (United Kingdom and United States). As of December 31, 2022, the majority of Depop’s users were Gen Z (the demographic cohort succeeding Millennials and known as “digital natives” as they are the first social generation to have grown up with access to the internet and portable digital technology from a young age). According to a 2022 ThredUp Annual Resale Report, which looked at trailing twelve-month data, over 60% of Gen Z and Millennial shoppers will look for an item secondhand before purchasing it new, and over 80% of first time thrifters plan to spend the same amount or more on secondhand in the next five years. ThredUp also expects the global secondhand apparel market to grow approximately three times faster than the broader global apparel market through 2026.
High Level Performance Recap:
In 2022, the resale market outpaced the wider online fashion industry despite challenging macroeconomic conditions including reopening headwinds, inflationary pressures, consumer discretionary spending trends, foreign exchange rate volatility, and ongoing geopolitical events. Depop experienced intensified competition and inflationary pressures impacting performance in monthly active users, visit frequency, conversion and growth. Etsy believes Depop is a highly-relevant and authentic re-commerce brand that is still early in its growth lifecycle and plans to continue to invest accordingly. In September 2022, Etsy appointed Kruti Patel Goyal, Etsy’s former Chief Product Officer, to the role of Depop Chief Executive Officer. New leadership has focused on building momentum in the business, identifying the fewest, most impactful things to re-accelerate growth and improve operational efficiency in service of the Depop community. Throughout the year, Depop improved the buyer experience by increasing product velocity and infrastructure, enhancing search capabilities, building new performance marketing channels with PLA, and launching Make an Offer, Depop Payments, and Boosted Listings.
Elo7, known as the “Etsy of Brazil,” was founded in 2008 and is headquartered in São Paulo, Brazil. Elo7 specializes in custom and made-to-order merchandise, connecting approximately 53 thousand active sellers and 1.6 million active buyers as of December 31, 2022. Approximately 64% of Elo7’s GMS is from repeat buyers.
Elo7's marketplace includes items in over 40 retail categories, with a significant amount of GMS from "special event and life moment" categories. In 2022, Elo7’s top categories were parties and events, party favors, home decor, baby and kids, and weddings. Elo7 is ranked as a top 10 e-commerce site in Brazil in terms of traffic in web and android (according to Conversion E-commerce Report in Brazil, December 2022), providing us with a strong local brand in the largest Latin American e-commerce region.
High Level Performance Recap:
In 2022, the COVID-19 pandemic eased in Brazil, leading to a resumption of consumer mobility and therefore a return to in-person celebrations and events. Given Elo7’s exposure to these categories, as outlined above, the business began to see improved GMS performance throughout 2022. Key areas of investment for Elo7 during the year included conversion rate improvements from investments in search, giving sellers tools to help them grow, including access to more options for fast and affordable shipping. Elo7 also began testing an online marketing campaign aimed at driving brand awareness as it builds a broader marketing strategy. Similar to Etsy, we believe that Elo7 can expand its “consideration set” in the mind of Brazilian consumers, becoming a destination they turn to more frequently for more of life’s special moments.
Primary Business Drivers
We leverage technology to connect people around the world through commerce. Among other things, we invest in our service offeringstechnology and choice ofinfrastructure, product development, marketing, trust and safety, member support channelsand seller tools and education as we strive to continuously improve our marketplaces for our buyers and sellers. Offering a choiceWhile the discussion below focuses on the primary drivers of channels continues to resonate well with the community as evidenced by a greater shareEtsy marketplace, there are similar business drivers at each of our marketplaces.
Technology Infrastructure Our engineering team has built a sophisticated platform that enables millions of sellers and buyers opting to connect withsmoothly transact across borders, languages, and devices. This team writes, deploys, and operates the software and services that enable us to run our business, including the web and mobile products we deploy externally and internally, and maintains our cloud environment and local office networks, and more. Etsy by phonealso makes significant investments in areas such as foundational infrastructure, our payments platform, cyber security, internal information technology, data enablement, and chat; 73%system architecture.
We collect and analyze large volumes of buyer contacts indata to enhance the fourth quarterperformance of 2020 were managed by phoneour platform, personalize search and chat with the balance handled in email, as compared to 64%discovery, improve our search experience, and 26% managed by phone and chat in the fourth quartertest features on our website. Our use of 2019 and 2018, respectively. In addition, we continue to focus on the post purchase experience, including free shipping and transparent delivery and returns. As of December 31, 2020, 66% of itemsmachine learning algorithms on the Etsy marketplace offered free shipping to U.S. buyers, 73% of U.S. listing views were eligible to ship for free, and 46% of global orders were delivered with free shipping. We made significant improvements in shipping transparency; as of December 31, 2020 approximately 34% of U.S. listing views hadcreates an expected delivery date.
We plan to continue to optimize the Etsy buyerengaging shopping experience to make it less fragmented, and to minimize friction. This will involve making sure thathelps Etsy sellers and Etsy buyers can find whatconnect across our platform. We apply proprietary machine learning, artificial intelligence, and human curation to personalize the search and discovery experiences and enable buyers to more easily browse, filter, and buy that perfect item, even when they want, can easily keep exploringmay not have something specific in mind. Machine translation and machine learning also play an important role in making it easy for inspiration,Etsy sellers and haveEtsy buyers to connect even if they don’t speak the right informationsame language. We translate listings within our Etsy marketplace, which we believe significantly increases the items available to makenon-English speaking Etsy buyers and gives Etsy sellers access to a purchase decision at every step along the way. We see significant room for additional improvements to our landing pages, our ability to surface recommendations, and continued improvements to reduce friction in the purchase funnel.truly global audience.
In addition, our technology infrastructure allows us to scale our efforts across the platform. Since the Etsy marketplace’s migration to Google Cloud, completed in 2020, we’ve increased engineering efficiency, shifting the focus from maintaining on-premise systems to product engineering work that is more strategic. This cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume. In 2022, we invested in our technology platform to improve engineering development efficiencies and increase our product development velocity. Our other marketplaces Reverb, Depop, and Elo7 also operate their marketplaces in the cloud and make similar technical development investments with Amazon Web Services (“AWS”).
Product Development Etsy’s product development and engineering organization is built around the core belief that we can create connections between our sellers and buyers that are personal and fundamentally different from those in other places you can shop or sell. We believe we have a novel approach to product development, which we call our Product Development Culture, an evolving set of key principles, mindsets, and habits that guide how our teams work, experiment, and interact as we develop great experiences for our customers and business. Our teams are organized around a collection of initiatives that support a common strategy aligned with our “Right to Win,” with cross-functional teams focused on a single key performance indicator (“KPI”) and set of objectives and key results, all meant to solve key customer friction points. Product and engineering groups work across all areas that matter to our buyers and sellers - the core buyer and seller experience, search and ads, payments, fulfillment, member support, and more. Our approach to solving customer challenges includes deep research, A/B testing, exploratory analysis, product management, design, engineering, and product marketing (go-to-market strategies).
We continue to advance our “Right to Win” strategy, our playbook designed to ensure Etsy is the first stop for consumers who want to shop their tastes and values, as well as differentiating our value proposition in a competitive environment. In 2022, we targeted our investments to making Etsy feel more “made for you” by improving the efficiency and inspiration of our Search & Discovery, making Etsy more reliable as a Trusted Brand, and providing our sellers with increased agency and scalability tools to help grow their businesses.
The chart below highlights just a few of our key product development achievements in 2022:
Etsy also shares aspects of its product development culture and strategies with our other subsidiaries. We are early in this effort and believe that over time increased focus on experimentation, search and discovery, and fulfillment will improve the customer experience across all of our marketplaces.
Marketing We believe that our approach to investments in marketing are somewhat different from some other players in e-commerce, and we continue to evolve and refine these activities as a core component of our business. We’ve evolved our marketing strategy and investments to reinforce our core brand promise in the minds of Etsy buyers. We believe thatbuyers, and we’ve strengthened our capabilities by employing a full-funnel marketing approach, optimizing our investments in each area of the funnel. Our two primary types of marketing investments, performance and brand - where we can continuespent approximately $433 million and $145 million, respectively on a consolidated basis in 2022 - are discussed below:
Performance marketing. In 2022, the percentage of GMS attributed to broadenperformance marketing (paid GMS) was 20% so the vast majority of our channel mix in the marketing funnel from predominately investingGMS comes to us organically through awareness of our brand. Our investments in performance marketing, which we expectdefine as paid media spend related to continuethe digital acquisition and re-engagement of buyers, adjusts according to drivedemand and scale based on incremental return. We do not set fixed budgets for our marketing team; our investment philosophy for performance marketing is to invest until the marginal return on investment (“ROI”) on the next dollar spent is below our target minimum ROI. Increases in buyer growth through channels such as product listings ads on Google or search enginelifetime value (“LTV”), driven by visits, conversion rate, incremental revenue, and frequency, shift the return curve, enabling us to spend more in marketing. The vast majority of return comes in-period, although some does fall into subsequent quarters. Our performance marketing spend naturally adjusts naturally with demand, sowhich we believe has worked well for us through changing demand and pricing for third-party marketing channels.
In May 2020, we launched our innovative advertising program for Etsy marketplace sellers called Offsite Ads. In this offering, Etsy pays the upfront costs to promote Etsy sellers’ listings on multiple internet platforms, and sellers only pay an additional transaction fee when they make a sale. When a shopper clicks on an offsite ad featuring a seller’s listing and purchases from the seller’s shop within 30 days of that click, the seller pays Etsy a transaction fee on that order. We believe our Offsite Ads program is a win-win for Etsy and our sellers because sellers only pay a fee when they make a sale and the additional fee expands Etsy’s LTV, as consumer habits evolveoutlined above, enabling us to spend deeper to drive more visits to our marketplace. In 2022, revenue from the Etsy marketplace’s Offsite Ads program offset approximately 32% of our consolidated performance marketing spend.
Brand marketing. Since 2018, Etsy has leaned more heavily into “upper funnel” brand marketing strategies through TV, digital video, and paid social, to create a flywheel designed to elevate the effectiveness of our other marketing channels. Etsy continuously surveys buyers on ‘brand funnel’ metrics such as awareness and loyalty, and, in 2022, we refreshed the questions asked in these surveys to better track the results of our investments. U.S. Etsy buyer surveys indicate that, since the fourth quarter of 2018, prompted awareness is up more commerce shifts from offlinethan 10%, purchase intent grew over 100%, and visit intent increased over 70%. We are also seeing great movement in our brand funnel metrics in the United Kingdom and Germany. Since the fourth quarter of 2020, our prompted awareness in the United Kingdom is up over 15% and purchase intent is up over 10%. During the same period in Germany, prompted awareness increased nearly 100% and purchase intent grew nearly 90%. Given these healthy performance metrics, as well as our validation of performance through multiple third-party methodologies, we anticipate that upper funnel brand marketing strategies will continue to online,be a growing part of our marketing investment mix over time.
Other marketing activities. Our marketing strategy also includes sophisticated Customer Relationship Management (CRM) tools that enable us to segment and target our buyers for engagement on and off Etsy, stands“mid funnel” advertising such as on social media channels, and corporate marketing partnerships to benefit by spending more and driving more buyers to the site.target specific buyer demographics. For example, we saw a 92% increase in video views on our social channels in 2022. We also expectbuild our brand globally through earned media that features Etsy as a trend-setter and global destination for conscious shopping that supports small business.
We believe our CRM and app push notifications are efficient tools to continue spendingdrive engagement with our active and lapsed buyers. In 2022, we leveraged these capabilities to promote seller “Thank You” coupon email reminders, offers for buyers’ recently favorited items, select flash sales on upper funnel strategies like TVour app, abandoned cart reminders, as well as redesigned post-purchase “convos” to build topdrive buyer re-engagement and frequency. We also added email opt-in at checkout for international buyers, provided an automated app download offer, and further improved update banners that bring buyers back.
We expanded social marketing activities with our “Creator Collab” program that encourages co-created content and product to drive traffic to Etsy by allowing creators to monetize certain social media content through our affiliate marketing channels. As part of mind awareness, introduce Etsy for more of our buyers’ purchase occasions, and better engage new and existing buyers everywhere they are - on Etsy and off. In addition, we’re expanding into new marketing channels such as podcasts and influencer collections to engage with those celebrities and influencers who are passionate about Etsy. Through “Collections,” which are limited edition, exclusively curated items,this program, Etsy and our sellers partner with celebrities and influencers who are passionate about Etsy to reach new buyers and drive engagement with existing buyers.
Our subsidiaries are less mature businesses than Etsy.com and have therefore not yet reached the necessary size to cost-effectively scale either performance or brand marketing. We see further opportunity following early collaborations to share expertise through projects and personnel across our brands. We believe increased collaboration has the potential to drive engagement, reach, impressions,future growth.
Trust & Safety The trustworthiness of our marketplaces and visits.the connections among people in our community are cornerstones of our business. Our policies are designed to encourage transparency among our members by clearly outlining the rights and responsibilities of sellers and buyers participating on our platform.
On Etsy.com we strive to give the Etsy buyer comfort that she is purchasing goods from a shop that adheres to certain standards, which starts with our policies. Fundamentally, we require that goods listed on Etsy be handmade (whether by the seller alone or with the help of a production partner), vintage, or craft supplies. Etsy is an unjuried marketplace, meaning sellers run their own shops, create, sell, and ship their own products, and are responsible for complying with our robust Seller Policy. Items on Etsy do not have barcodes or SKUs, and Etsy does not ever touch or possess the items for sale on our marketplace. The unique nature of Etsy sellers’ product inventory, combined with the constantly evolving nature of policy interpretation, necessitates expert, human involvement in content moderation, which we combine with the power of cutting-edge tools and technology. Our teams continuously re-evaluate content on Etsy.com in the context of emerging trends to determine whether such content violates our House Rules or terms of use, including our Prohibited Items policy. Etsy.com has a zero tolerance approach for items that promote, support, or glorify hate or violence or that perpetuate the spread of harmful misinformation.
Beyond prohibited content detection and removal, we have grounded our content moderation program and product roadmap in ensuring that buyers can trust their experience and have the information they need to make informed purchase decisions, and that sellers can understand what is required of them, including whether their listing is permitted under our policies. We believeremain committed to ensuring that any member can easily alert Etsy about potential violations of our marketing strategy coupledpolicies. We have also taken steps to ensure that Etsy sellers are positioned for success by making our policies easy to understand, refining our violation notification process, and providing resources to help sellers when they have compliance questions.
As the Etsy marketplace has experienced significant growth over the last few years, we have increased our investments and resources dedicated to trust and safety. This includes scaling our teams and investing in new tools and advanced technologies to enable these teams to more effectively and efficiently do their jobs. This included growing our content moderation team, expanding our handmade and counterfeit team dedicated to fighting counterfeits and violations of our Handmade Policy, and creating a dedicated trust and safety machine learning engineering team. Another example of a Trust & Safety enhancement is our new Reporting Portal, introduced in 2022, which has enabled thousands of intellectual property and other proprietary rights holders to report issues.
In 2022, we expanded enforcement of our Handmade Policy to continue to protect the integrity of our marketplace and increased our proactive review of listings for potential handmade violations. In order to protect our brand and our sellers’ collection of unique items, we will continue building on our proactive moderation capabilities while providing sellers with a better user experience on-site will foster improved engagement with Etsy buyers.new tools to accurately describe their items and stay policy-adherent.
Reverb
There are a number of similarities between the levers of growthWe publish an annual Transparency Report, which details our policy enforcement for the Etsyyear on Intellectual Property, Prohibited Items, and Reverb marketplaces, including improving searchRequests for Member Information policies. We have shared this report on our corporate website annually since 2015 and discovery, making selling and buying easier, and building a global brand and user community. We believe that publicly reporting on our enforcement efforts builds trust in our marketplace and community.
Our subsidiaries – Depop, Reverb, and Elo7 – also care about running trustworthy marketplaces, and maintain robust community guidelines and prohibited items policies. In 2022, there was significant sharing of best-practices and information on these important items across our “House of Brands.” As one example of improvements within our other marketplaces, Depop stepped up fraud detection and prevention activities through the implementation of a new third-party tool and expanded its fraud prevention team. You can read more about our other marketplaces’ respective policies and procedures by visiting each of their marketplace websites.
Member Support As the Etsy marketplace has scaled, so have our investments in member support. While the majority of issues are resolved directly between our customers, we are just getting startedjump in improvingand work to help resolve problems quickly when needed. As the virtuous cycle of growthprimary touch point for our marketplaces.
2020 was also a transformational year for Reverb and itsvibrant community of buyers and sellers. Assellers, our Member Services team serves as both the COVID-19 pandemic shifted consumer habitsvoice of the Etsy brand and an important advocate for our community. When an issue arises, or a user has a question, we want to shopping online,ensure they get support quickly and sheltereasily.
In 2022 we expanded our Member Services team to improve our case management process and continued to enhance our self-service and seller education tools to quickly resolve issues without our intervention. Here are some specific examples of 2022 enhancements:
•We expanded our Member Services team and trained hundreds of agents in place restrictions increased interest in creating music, Reverb experienced anEtsy Purchase Protection workflows ahead of the August 2022 launch, allowing us to meaningfully reduce the time to resolve case complaints despite the increase in submissions. Etsy Purchase Protection protects sellers and buyers on qualifying orders up to $250 when an item does not match the description, arrives damaged, or never arrives.
•We improved and expanded our live chat support, which is an increasingly preferred option for many Etsy users. For example, we launched Shop Manager Chat, a higher level of support provided to top sellers.
Our subsidiaries also require similar member support activities, and we believe our experience can be leveraged across our subsidiaries to help drive their future growth and customer satisfaction.
Seller Investments In addition to our Offsite Ads advertising program and our paid services which include Etsy Ads, our on-site advertising platform for sellers, and our shipping labels product, we provide a wide range of insights, tools, programs, and educational resources to give Etsy marketplace sellers the support they need to manage and grow their businesses. Here are some examples:
•Star Seller program: We expanded on our successful Star Seller program, which celebrates and rewards sellers who provide excellent customer service with badging and increased prominence. The Star Seller program continued to gain traction, with a 75% increase year-over-year in sellers with a badge as of December 31, 2022. Star Sellers also earned approximately 15% more GMS than their non-Star Seller counterparts in 2022 due to factors such as higher conversion rate, traffic, average order value, and orders per converting buyer.
•Seller Services and Tools:
◦We offer a variety of free tools to Etsy sellers, including our Shop Manager dashboard, which serves as a centralized hub for Etsy sellers to track orders, manage inventory, view metrics and statistics, and have conversations with their customers across all of their Etsy shops. This dashboard is a single, easy-to-use interface that streamlines sellers’ bills and payments accounts.
◦We fully launched a new Etsy Seller App to all sellers, which includes features such as the ability to more easily manage inventory and check order status, receive notifications about repeat customers, add photos and listing videos, and purchase and print shipping labels. We continue to add features based on our seller feedback.
◦As part of our Etsy Purchase Protection program, as described above, Etsy refunds buyers many of whom were novice musicians. We are leveraging this momentum by fostering investmentsand allows sellers to keep their earnings on qualifying orders if a buyer never receives the package, or the item arrives damaged, providing our sellers with more support in the marketplaceevent that something goes wrong.
◦We expanded our Help Center and improved navigation functionality, making it easier for sellers to drive sustained growth over time, includingaccess articles and content to better manage their accounts, find answers to their questions, and self-service minor issues that may arise. We also added 24/7 chat to support sellers.
•Education:We provide extensive educational resources to teach Etsy sellers how to start, manage, and scale their businesses on our platform, including:
◦Blog posts, video tutorials, the Etsy Seller Handbook (available on Etsy.com), Etsy.com online forums, and insights from our support teams. Leveraging seller feedback, we redesigned the Etsy Seller Handbook homepage, introducing a new top navigation tool to highlight key resources and popular content.
◦In September 2022, we held Etsy Up: Holiday Edition, our first-ever global holiday kickoff event for sellers around the world. The interactive online experience included insider access to trends, tools, and actionable takeaways to help grow our sellers’ shops. This virtual event drew 80,000 sellers, making it the largest ever seller gathering in talent, marketing,our history.
◦We added a personalized Offsite Ads performance snapshot email that details key metrics and enhancing sellermessaging. This report provides our sellers with a clear view of the value of our Offsite Ads program.
◦Etsy sellers also connect through self-organized Etsy Teams to build personal relationships with other Etsy sellers, collaborate, educate, and support each other as they build their independent creative businesses.
Our subsidiaries also offer many tools and services to build on our core strengths.for their seller communities, including tips for success, pricing insights, community events, and shipping carrier relationships and support.
The Etsy Marketplace: Our Passionate and Engaged Community
Over the past few years, Etsy’s investments in our growth strategy and business drivers, as well as external factors that drove dramatic changes to the way people engage with e-commerce marketplaces in general and with the Etsy marketplace in particular, have led to significant changes in engagement and retention of our seller and buyer communities. This section outlines characteristics of the Etsy marketplace seller and buyer cohorts, which we believe is a useful barometer to track our performance over time.
Etsy Sellers
We believe that our 5.4 million active sellers are the backbone of Etsy’s business and that what matters most to them is our community of approximately 89 million buyers. We serve creative artisans and entrepreneurs around the world who choose to pursue their passions, offering them excellent value compared with other channels they may have to sell their products, and a cohesive suite of powerful tools and services to help them run their business and drive sales. Etsy sellers range from hobbyists to professional merchants and have a broad range of personal and professional goals.
In 2022, active sellers, those who sold an item or incurred a bill charge in the last 12 months, grew 2% compared to 2021 and 114% compared to 2019. Our number of active sellers grew at a 27% compound annual growth rate (CAGR) since 2018. Our sellers’ success can be measured by trailing twelve-month GMS per active seller, which decreased approximately 6% year-over-year to $2,169 in 2022, yet grew when compared to the pre-pandemic period, up 16% from 2019.
About Etsy Sellers
Etsy is an on-ramp to entrepreneurship and economic empowerment for many people who might not have otherwise started a business. Here are some highlights of our November 2022 seller census1:
Seller’s creative businesses help build resilience for sellers and their families.•For 34%, their creative business (on and off Etsy) is their sole occupation.
•Their creative business provides an important source of supplemental income contributing 12% of household income, on average.
•5 in 10 have financial dependents, including 29% who have children under 18 at home.
•44% use income from their creative business to cover household expenses like bills, rent, and food.
1Global Methodology: Etsy sellers with an active shop in all of our core markets with the exception of Australia (United States, United Kingdom, Germany, France, Canada and India) were randomly selected to take part in a 25 minute online survey between November 9, 2022 and November 23, 2022. The survey and data analysis of the results were conducted by Ipsos, a leading Research and Public Opinion firm, in partnership with Etsy. Historically Etsy provided country specific data in its seller census. Given general similarity in our seller community survey results across countries we are no longer providing this level of detail. The total global sample size was 8,118 sellers. Results were weighted to represent Etsy’s global footprint and seller population parameters. The margin of error for the global survey is +/- 1.5%, but may vary per question.
Etsy businesses support local communities and the broader economy.
•The vast majority (90%) source supplies domestically.
•36% of sellers export their goods outside their home country.
Creative entrepreneurs continue turning to Etsy for financial stability.
•61% of all sellers cite financial challenges as prompting them to start their creative businesses. Of those, 69% said that financial challenge was the rising cost of living or inflation.
•1 in 4 sellers say their business has helped them offset the rising cost of living, and 36% of sellers in business for more than a year say their Etsy income is more important now than a year ago.
Etsy sellers help us understand broader economic trends.
•They are emblematic of the changing nature of work: 57% work independently2, and only 32% have full-time employment.
KEY DEMOGRAPHICS OF ETSY SELLERS IN THE UNITED STATES AND UNITED KINGDOM (our top two markets)
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DEMOGRAPHICS | UNITED STATES | UNITED KINGDOM |
Gender (% identify as women) | 82 | % | 77 | % |
Mean Age (years) | 39.8 | 38.8 |
Education (% college or more) | 48 | % | 59 | % |
Median Household Income | $62,000 | £35,000 |
Rural | 27 | % | 24 | % |
LGBTQIA+3 | 16 | % | 16 | % |
Sellers who self-identified as two or more of the below categories have been included in both totals. For both U.S. and U.K., some sellers declined to respond. As such, the totals do not sum to 100%. |
White | 76 | % | 86 | % |
Hispanic or Latinx | 14 | % | n/a |
Asian or Pacific Islander (U.S.) - Asian / Asian British (U.K.) | 5 | % | 4 | % |
Black or African American (U.S.) - Black / African / Caribbean / Black British (U.K.) | 8 | % | 2 | % |
Native American | 3 | % | n/a |
Mixed / multiple ethnic groups | n/a | 3 | % |
Other race/ethnicity | 5 | % | 1 | % |
2 We use “work independently” to mean those who do not work in traditional full time employment, and includes people who selected: ‘self-employed’, ‘employed part time’, or ‘temporary or contract employee’ as their main working status, as well as those for whom their creative business is their sole occupation.
3 This includes all those who selected: Gay, Lesbian, Bisexual or Asexual as well as those who chose to enter their own text to describe themselves. All respondents also had the option to select Straight/Heterosexual or decline to answer.
Etsy New Seller GMS Retention
NEW SELLER GMS RETENTION (%)
NEW SELLER GMS RETENTION ($)
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| | | | | | Year 1 | | Year 2 | | Year 3 | | Year 4 |
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| | | | 2017 New Sellers | | $481M | | $639M | | $832M | | $1.2B |
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| | | | 2018 New Sellers | | $553M | | $872M | | $1.4B | | $1.2B |
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| | | | 2019 New Sellers | | $832M | | $1.5B | | $1.4B | | |
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| | | | 2020 New Sellers | | $2.9B | | $2.6B | | | | |
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| | | | 2021 New Sellers | | $1.9B | | | | | | |
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† Note Etsy new seller GMS retention in “Year 1” in the above table represents 100%.
The above tables show two different views of the same data. Each new seller cohort includes the aggregate GMS from all sellers that created and were billed for their first listing on Etsy.com in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows retention in dollars. The GMS for each seller is calculated from the date of their first listing fee such that “Year 1” represents the GMS received by all sellers in the cohort within 365 days of their first listing fee. As a result, we do not yet have a full “Year 2” data set for the 2021 new seller cohort, as sellers who incurred their first listing fee later in 2021 have not yet had two years to age. These tables show that all seller cohorts initially inflected positively in terms of GMS value sold on the Etsy marketplace during the pandemic, and that seller cohorts are retaining much of the gains achieved despite the significant macroeconomic and reopening headwinds Etsy and other e-commerce marketplaces faced in 2022. That said, as pandemic periods roll out of future periods we could see further degradation of cohort retention.
Etsy Buyers
The Etsy marketplace supports a community of approximately 89 million buyers, who are looking to buy unique items directly from creative artisans and entrepreneurs. Etsy buyers can enjoy a personalized shopping experience and build relationships through direct interactions with Etsy sellers. They can also purchase customized items, vintage merchandise, and craft supplies from Etsy sellers. By shopping on the Etsy marketplace, Etsy buyers are supporting creative artisans and entrepreneurs in their local communities and around the world. We are focused on driving more new buyers to the platform and driving engagement so they purchase more often.
The COVID-19 pandemic and other global macroeconomic factors were catalysts for significant change in how buyers engage with Etsy.com. Here we provide detail supporting our belief that we have been able to retain much of the positive impact we’ve seen from the dramatic adoption of e-commerce in 2020 and 2021. In 2022, the number of active buyers declined only slightly from 2021 as pandemic periods rolled out of the figure and our business was impacted by reopening and other headwinds. Our number of active buyers - those buyers who have made a purchase within the trailing twelve months - has grown at a 23% compound annual growth rate (CAGR) since 2018, as shown in this chart.
Active Buyers
GMS Per Active Buyer
New Buyers
GMS per Active Buyer: We believe that one of the most useful ways to track the success of our efforts to drive buyer retention, frequency, and purchases is to look at GMS per active buyer on a trailing twelve-month basis. While our GMS per active buyer declined slightly from 2021 as strong COVID-19 pandemic related periods rolled out of the trailing twelve-month figure, this metric is at levels far above 2019, as illustrated in the chart to the left. We believe that we have meaningful opportunities to re-accelerate GMS per active buyer over time as we move past the strong COVID-19 pandemic related comparisons and continue to focus on increasing buyer frequency and growing our average order value, which we believe is a relatively untapped lever.
New Buyers: We believe that we have a significant opportunity to attract those who have never shopped on Etsy.com before. Since a buyer is separately identified by a unique e-mail address, a buyer is considered new if they use a unique e-mail address that has never been used for a purchase on the Etsy marketplace. During 2022, we had over 29 million new Etsy.com buyers, down 16% compared to 2021. While new buyers declined year-over-year, new buyer acquisition was up 55% from 2019 and remained meaningfully elevated when compared to pre-pandemic periods as shown in the chart below. GMS from new Etsy.com buyers was down 15% year-over-year and represented approximately 11% of overall Etsy.com GMS in 2022.
Etsy New Buyer GMS Retention
New Buyer Cohort GMS Retention (%)
New Buyer Cohort GMS Retention ($)
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| | | | | | Year 1 | | Year 2 | | Year 3 | | Year 4 |
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| | | | 2017 New Buyers | | $1.1B | | $413M | | $555M | | $868M |
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| | | | 2018 New Buyers | | $1.3B | | $603M | | $930M | | $911M |
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| | | | 2019 New Buyers | | $1.6B | | $978M | | $949M | | |
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| | | | 2020 New Buyers | | $3.6B | | $1.6B | | | | |
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| | | | 2021 New Buyers | | $3.2B | | | | | | |
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† Note Etsy new buyer GMS retention in “Year 1” in the above table represents 100%.
These views of buyer retention focus on the retained GMS, which we believe is the best way to evaluate Etsy buyer behavior over a multi-year period. The above tables show the same data in two different views. Each new buyer cohort includes the aggregate GMS from all buyers who made their first purchase on Etsy in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows it in dollars. Each buyer’s GMS is calculated from the date of their first purchase such that “Year 1” represents the GMS of all purchases by buyers in the cohort within 365 days of their first purchase. As a result, we do not yet have a full “Year 2” data set for the 2021 new buyer cohort, as buyers who bought later in 2021 have not had two years to age. These tables highlight that our 2020 new buyer cohort is so far exhibiting stronger GMS retention than our 2017 new buyer cohort, and we are retaining the vast majority of the gains achieved in value of GMS despite the significant macroeconomic and reopening headwinds Etsy and other e-commerce marketplaces faced in 2022. That said, as pandemic periods roll out of future periods we could see further degradation of cohort retention.
Reactivated Buyers
Average Purchase Days per Repeat Buyer
Reactivated buyers: Because buyers often “lapse” in their Etsy.com purchases (not making a purchase in a year or more), the activities outlined above in our strategy, product and marketing sections are intended to reduce the number of buyers that lapse and also to re-engage lapsed buyers to get them to come back. The dramatic increase in active buyers during the pandemic also resulted in more lapsed buyers in recent periods than in pre-pandemic periods, providing Etsy with opportunity to reactivate a much larger pool of recently lapsed buyers. As a result of focus on this opportunity, we reactivated our highest ever number of lapsed buyers - 24 million in 2022, an increase of 24% from 2021, and up 87% from 2019.
Our Mission, Guiding Principles,
Repeat Buyers: Repeat Etsy buyers represent shoppers who made purchases on two or more days in the previous 12 months. We believe repeat purchases demonstrate the loyalty of Etsy buyers. In 2022, on the Etsy marketplace, approximately 48% of our active buyers were repeat buyers, largely in line with the approximately 49% in 2021. While in 2022 the average number of purchase days per year that repeat buyers purchased decreased slightly from 2021 as we encountered reopening headwinds, this metric has trended higher over the past few years (from 4.6 times per year in 2019 to 5.1 times per year in 2022). We believe that we have significant opportunity to continue to drive frequency, a challenging metric to move, by improving the buyer journey through our ongoing investments in inspiration, efficiency, and Peoplereliability.
MissionActive Buyers by Purchase Type
Summary of Active Buyers by Purchase Type: This chart represents a summary of active buyer behavior according to the number of days they purchase and the amount they spend on Etsy during a twelve-month period. We have been particularly focused on converting our repeat buyers into habitual buyers, or Etsy buyers who have spent $200 or more and made purchases on six or more days in the previous 12 months. Habitual buyers were 8% of our active buyers yet represented approximately 44% of our 2022 GMS. While we saw a 9% decline in habitual buyers in 2022 given the headwinds outlined above, we believe we have significant opportunities to re-accelerate growth in this buyer type as we continue to invest in our “Right to Win” strategy.
Our mission to “Keep Commerce Human” is rooted in our belief that, although automation and commoditization are parts of modern life, human creativity cannot be automated and human connection cannot be commoditized. Opportunity
Industry Framework
We believe that the nature of commerce is continuing to evolve: over the past few years more people chose to purchase goods online and many consumers looked for special items as an alternative to mass produced goods. The COVID-19 pandemic drastically shifted behavior for buyers around the globe, which led to a surge in e-commerce and accelerated digital transformation in 2020 and 2021. In February of 2022, the world began to take material strides in increasing mobility and nearly returned to pre-pandemic levels by May 2022, which provided consumers with many more choices for where to spend their time and money. Looking forward, we believe that the lines between online and offline shopping are demanding moreblurring for many consumers, and that Etsy has the opportunity to gain share within the context of the businesses they supportbroader retail marketplace. We expect that our future success hinges on our ability to execute on the growth strategies outlined above, bringing more buyers to the marketplace, driving frequency of purchasing and the amount of spend on Etsy.
Etsy Marketplace Opportunity
In a market opportunity analysis completed in 2021, we estimated that the online market size across all relevant retail categories for the Etsy marketplace within our seven core geographic markets represented a $466 billion market opportunity, and an approximately $2.0 trillion market opportunity when offline was included. Included in this analysis of “relevant retail categories” was apparel and footwear, beauty and personal care, home and living, craft supplies, paper and party, art and collectibles, personal accessories and eyewear, pet care, and toys and games. Our 2022 Etsy marketplace GMS only represented approximately 2.5% of that online only portion.
We continue to focus on our goal of growing at a faster rate than e-commerce, on average and over time, and on gaining share through further penetration of certain categories and driving frequency of purchases on Etsy from existing and new buyers. We believe that the total number of days per year buyers purchase on Etsy continues to lag the total purchase days per year patterns for some of our key competitors. We believe Etsy has significant opportunities to capture more buyers around the world, with room to grow with our core female buyers, increasing opportunity to make Etsy relevant for people who identify as men, and further penetration in our most mature markets as well as in our lesser penetrated regions. Since our analysis is focused on our core geographies and retail categories, additional upside to this opportunity could come from further geographic and/or category expansion for Etsy.com.
“House of Brands” Opportunity
Since 2019, Etsy has taken several important strategic actions that deepen or enhance our total market opportunity. These include: our purchases of Reverb (musical instruments), Depop (expanding our apparel category opportunity into the resale sector), and Elo7 (which brings Etsy into the Brazilian e-commerce market). Third-party data on each brands’ market opportunity is provided on pages 6-7 above.
Competition
For all of our marketplaces, sellers may choose to list their goods for sale with online retailers or sell their goods through local consignment and vintage stores and other venues and marketplaces, including through commerce channels on social networks like Facebook and Instagram. They may also sell wholesale directly to traditional retailers, including large national retailers, who discover their goods in our marketplaces or otherwise. We also compete with companies that build win-win solutionssell software and services to small businesses, enabling sellers to sell from their own website or otherwise run their business independently of our platforms. We are able to compete for sellers based on our brand awareness, the global scale of our marketplaces and the breadth of our online presence, our meaningful investments in marketing that benefit our sellers and their growth, the number and engagement of our buyers, our seller tools and services, our seller education resources, our policies and fees, our mobile apps, the strength of our community, and our values.
We also compete with retailers of all shapes and sizes for the attention of our buyers. A buyer has the choice of shopping with any online or offline retailer, whether large marketplaces, national retail chains, local consignment and vintage stores, resale marketplaces, or other venues or marketplaces. We are able to compete for buyers based on the unique goods that sellers list in our marketplaces, our brand awareness, the person-to-person commerce experience, customer service, our reputation for trustworthiness, the positive impact buyers can make by shopping from the creative entrepreneurs on our platform, our mobile apps, the availability of fair and free shipping offered by sellers, ease of payment, and the availability and reliability of our platform.
Intellectual Property
Protection of our technology and intellectual property is an important component of our success. We rely on intellectual property laws, including patent, trade secret, copyright, and trademark laws, in the United States and abroad. We also use confidentiality procedures, defensive licensing and acquisitions, non-disclosure agreements, invention assignment agreements, and other contractual rights to protect us and our intellectual property.
We file patents and register domain names, trademarks, copyrights, and service marks in the United States and abroad. We rely upon unregistered copyrights and common law protection for certain trademarks. We also use internal and external brand protection mechanisms that are goodintended to protect our brands from misuse by third parties.
Government Regulation
As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently changing. Compliance is costly and can require changes to our business practices and significant amounts of management time and focus. In addition, in both the United States and abroad, laws and regulations relating to the liability of online marketplaces for people,activities of their sellers and other third parties are being tested by a number of proceedings.
Laws may be interpreted and enforced in different ways in various locations around the planet,world, posing a significant challenge to our global business. For example, federal and profit willstate laws in the United States, E.U. directives, and other national laws govern the processing of payments and consumer protection; other laws define and regulate unfair and deceptive trade practices. Still other laws dictate when and how sales or other taxes must be best positionedcollected. Laws of defamation apply online and vary by country.
We are also subject to succeed. federal, state, and foreign laws and regulations regarding privacy and protection of consumer information. Our privacy policies describe our practices concerning the use, storage, transmission and disclosure of personal information, including buyer and seller data. Any failure by us to comply with our policies or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business.
Many jurisdictions in which we operate have enacted laws and regulations requiring notification to users when there is a security breach of personal data, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. This growing focus on data privacy and regulation of e-commerce worldwide could impose additional compliance burdens and costs on us or on sellers and could subject us to significant operational costs for internal compliance and risk to our business. Further, any failure by us to adequately protect the privacy and data of our sellers and buyers could result in a loss of confidence in our marketplaces, which could adversely affect our business.
In addition, some of these requirements may introduce friction into the buying and selling experience on our platforms and may impact the scope and effectiveness of our marketing efforts, which could negatively impact our business and future outlook. Additionally, because we operate internationally, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. Non-compliance with any applicable laws and regulations could result in penalties or significant legal liability. See Part I, Item IA, “Risk Factors—Regulatory, Compliance, and Legal Risks.”
Seasonality
Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year. Our cost of revenue and marketing expenses also generally follow this trend, with the highest costs incurred in the fourth quarter of each fiscal year. We expect this seasonality to continue in future years.
ESG Reporting: Our Impact Goals, Strategy & Progress
We have developed an Impact strategy and goals that reflect the positive impact we want to have on the world while advancing and complementing our business strategy, and we are pleased to provide this update on our progress.
Our Approach to ESG Reporting:
We apply similar focus, discipline, and accountability to our environmental, social, and governance (“ESG”) reporting metrics as we do our financial metrics, and we believe that together they make us stronger and more resilient. We expect to continue to use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress. We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board (“SASB”) sector standards for our industry and Task Force on Climate-Related Financial Disclosures (“TCFD”) frameworks.
Our “House of Brands” and ESG Reporting Boundary:
We expect to continue to evolve our Impact strategy and ESG reporting in the future as we grow and further incorporate our recently acquired marketplaces into our Impact strategy and as our Impact work continues to mature. Our discussion of Impact strategy and highlights and ESG data includes the operations of our Etsy.com, Reverb, and Depop marketplaces but does not include the operations of Elo7, which was acquired in 2021, except where designated in the below chart. It is our intention to further integrate our Elo7 marketplace in our ESG reporting in the future. Any reference to Etsy, Inc. in this section, such as for the age and gender metrics provided on pages 33-34, includes our full “House of Brands,” including Elo7.
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| ESG Reporting Table of Contents | | | “House of Brands” Boundary | |
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| Our ESG Framework How our Impact work is structured | | 22 | | | | | | | | | | |
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| Creating Economic Impact through Entrepreneurship The Overarching Impact of our Brands | | 22 | | | | | | | | | | |
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| How We Drive Impact The levers we use to drive impact work | | 23 | | | | | | | | | | |
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| Environmental Goals & Highlights | | 24 | | | | | | | | | * | |
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| Social Goals & Highlights | | 27 | | | | | | | | | | |
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| Workforce Metrics Employee Diversity data | | 33 | | | | | | | | | | |
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| Governance Highlights | | 35 | | | | | | | | | | |
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| SASB Consumer Goods Sector E-Commerce industry standard reporting | | 36 | | | | | * | | * | | * | |
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| TCFD Climate - Governance, Strategy, Risk Management, Metrics and Targets | | 40 | | | | | | | | | | |
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= included in section and specified goals * = further clarification on section inclusion within designated section
Our ESG Framework:
In 2021, Etsy transitioned to the more commonly used environmental, social, and governance nomenclature for reporting on our Impact work. We believe this change makes it easier for our various stakeholders to track and interpret our progress and better aligns our reporting with emerging global standards.
Creating Economic Impact Through Entrepreneurship
We are committed to growing sustainably by aligning our mission guiding principles, and business strategy. Thisstrategy to help create economic impact through entrepreneurship and, therefore, create value for all our stakeholders. In 2022, Etsy.com sellers contributed almost $13.5 billion to the U.S. economy* by harnessing their creativity and bringing unique products to market. Etsy.com sellers created the equivalent of nearly 3.4 million jobs in the independent worker economy*, enough jobs to employ all of the city of Chicago (population 2.7 million) and more, and generated approximately $3.6 billion in income*.
* To calculate these results, Etsy.com commissioned its fifth economic impact study with ECONorthwest, an independent economic consulting firm, to explore the ways Etsy.com sellers in the United States contribute to the national economic landscape.
How We Drive Impact
Underpinning our Impact strategy is whata set of levers we employ to drive toward our Impact goals while advancing and complementing our business strategy.
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| In 2022, Etsy Inc.’s Advocacy team worked with sellers and policymakers around the world to ensure a voice for small business owners in public policy. We continued to advocate for public policies aligned with the needs of creative entrepreneurs including supporting: •reform efforts to provide the U.S. postal service with the funds needed to provide accessible affordable shipping options for sellers; •enhanced access to affordable child care and caregiving leave for micro businesses; •sellers’ privacy rights by advocating for strong privacy protections in consumer protection bills; and •the rights of small business owners by advocating against new rules that would impose heavy burdens on small and microbusinesses. | | Impact Investing. In 2022 we set up a $30 million Impact investment fund that is being held at a large Black-led Minority Deposit institution in the United States. The investment will support our Impact strategy and is expected to be put to work in 2023. |
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| | Philanthropy. In 2022, Etsy, Reverb, and Depop invested over $4.6 million in philanthropic donations to organizations driving equitable access to opportunity as well as disaster relief and direct support for local community based organizations. |
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| | Contributing to our Communities. Collectively, we enabled Etsy.com, Reverb, and Depop employees to donate over 4,300 hours of paid volunteer time off in their communities through Etsy’s Impact Hours program. We cancelled the balances owed to Etsy by all sellers in Ukraine in the first quarter of 2022, which included listing fees, transaction fees, advertising fees, and more. This extended to Ukraine-based sellers in our relevant marketplaces, including Etsy.com and Reverb. This represented a contribution of approximately $4.6 million towards our community. Natural disasters can be devastating to our sellers. In 2022, we updated our Disaster Response Framework to guide how and when we proactively support sellers in times of crisis. |
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| | Purchasing Power. We aim to drive positive impact in our supply chain by investing in strong relationships with our suppliers. We engage on priority impact areas, such as supplier diversity, greenhouse gas emissions, fair wages, and employee benefits programs, at crucial touch points throughout the supplier lifecycle. We conduct regular reviews, audits, and conversations to confirm suppliers are upholding agreed upon practices and to identify further areas where we can engage with suppliers. We have a Supplier Code of Conduct designed to ensure that our suppliers are committed to our standards. |
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| Environmental | |
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| Building resilience for the long term |
Net Zero
Achieve Net Zero through targets aligned with the science of climate change while continuing to run a carbon neutral company.
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2022 & 2023 Goals |
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Etsy, Inc.: By year end 2030, we aim to achieve a 50% reduction in absolute Scope 1+2 greenhouse gas emissions and a 52% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
By year end 2040, we aim to achieve a 90% reduction in absolute Scope 1+2 greenhouse gas emissions and 97% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
Continue to offset 100% of measured Scope 1, 2, and 3 greenhouse gas emissions annually. |
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We believe our Net Zero goal strengthens our position as a trusted brand and contributes to our long-term strategy and makes us distinct from mass retailers. Our mission guidesmore resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our daily decisions, setscorporate boundaries, contributing to the pathoverall health of people and planet.
In 2022, Etsy, Inc. became one of the first few hundred companies globally to have our Net Zero goal approved by the Science-Based Targets Initiative (SBTi) under their new Net-Zero Standard. Guided by our new targets, in 2022, we reduced our absolute Scope 1 and 2 Net emissions by 12% while our Scope 3 emissions decreased by 22% on an intensity basis (tCO2e / $mm of gross profit) compared with our 2020 Net Zero baseline for our long-term success, and reinforces our commitment to make a positive social, economic, and ecological impact.
Guiding Principles
Our guiding principles describe how we, individually and as a team, show up at work. They define who we strive to be, inform our business decisions, inform the qualities we look to recognize, and enable us to achieve our mission. Our guiding principles are:
We commit to our craft. both targetsOur work has the power to change lives. That’s why we strive to continuously learn and excel at what we do.
We minimize waste. †Time, resources, and energy are precious, so we focus only on what will have the greatest impact.
We embrace differences. Diverse teams are stronger, and inclusive cultures are more resilient. When we seek out different perspectives, we make better decisions and build better products.
We dig deeper. The best solutions to meaningful challenges are rarely easy or obvious. We stay curious, balance our intuition with insights, and decide with confidence.
We lead with optimism.. We believemade the following progress towards our Net Zero goal in 2022:
Transportation:
Emissions from the shipping of items sold in our mission,marketplaces is by far the largest source of our Scope 3 emissions. In 2022, emissions from transportation accounted for approximately 64% of our Scope 3 emissions. This represents a 17% intensity reduction relative to 2021 and 27% intensity reduction relative to our 2020 baseline.
We drive reduction in transportation emissions primarily through advocacy, carrier engagement, and product (marketplace) design. In 2022, we believesupported the climate provisions in each other.the Inflation Reduction Act at the national level, and advocated for the Advanced Clean Trucks and Advanced Clean Fleets legislation at the state level.
Packaging:
In 2022, emissions related to our sellers’ packaging made up 11% of our total Scope 3 footprint. This represents a 20% intensity reduction relative to 2021.
Purchased Goods & Services:
Our 2022 corporate procurement emissions were 120,325 tCO2e or 23% of our Scope 3 emissions. Through direct supplier engagement and strict supplier selection criteria, we were able to reduce corporate procurement emissions 6% on an intensity basis relative to 2021. Through our supplier vetting program, we collected impact data from 77.7% of Etsy.com’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 55% of Etsy.com’s spend went to companies that have set an emissions reduction goal. We seeplan to further leverage our negotiating power in our supply chain to drive Net Zero aligned reductions in 2023.
† Scope 1 emissions include direct emissions such as natural gas and refrigerants used at our facilities. Scope 2 emissions include indirect emissions from the worldgeneration of electricity, steam, heating, and cooling that we may purchase for our facilities. Scope 3 emissions include all other indirect emissions that occur in our value chain such as itbusiness travel, employee commuting, and the goods and services we purchase.
Scope 3: Progress Against Science-Based Net Zero Target
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| nActual Emissions Intensity | — | Yearly Target | — | 2040 Goal |
Scope of our Net Zero Goal: This includes emissions across all four brands within Etsy, Inc. and is set ambitious goals,against a 2020 baseline. Our 2020 and inspire one another2021 reported emissions include third-party assured Etsy.com and Reverb data, internally reviewed Depop data, and estimates for Elo7. Depop and Elo7 generate approximately 6% of these emissions. Our 2022 data includes third-party assured data for Etsy.com, Depop, and Reverb with generosityestimated Elo7 data representing approximately 0.5% of spirit. Together,our total emissions. For additional details about how we reimagine what’s possible.measure emissions, please see our GHG inventory and related notes on page 39, which includes our 2020 and 2021 emissions for Etsy.com and Reverb, and our 2022 emissions for Etsy.com, Reverb, and Depop. Our consolidated “House of Brands” Scope 3 emissions intensity for the trailing three years are illustrated in the ‘Progress Against Net Zero’ adjacent chart.
PeopleCarbon Neutral Business
We are focused on meeting our long-term SBTi- approved Net Zero goal. However, while we work toward long-term reductions in line with our goal, we are taking immediate action to address our environmental impact through our commitment to carbon neutrality. We consider our Net Zero efforts to be separate, but complementary to our carbon neutral work and expect to phase down our investments in offsets as we meet our Net Zero targets.
Since 2019, we have offset 100% of Etsy.com and Reverb’s Scope 1, 2 and 3 emissions. For 2022, we offset 100% of Etsy.com, Reverb and Depop’s Scope 1, 2 and 3 emissions by investing in 532,009 verified emissions reductions (VERs) that protect forests, sponsor wind and solar farms, and help develop greener methods for producing auto parts.
Sustainable Operations
Maintain best-in-class sustainable operations.
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2022 & 2023 Goals |
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Source 100% of electricity from renewable sources for all Etsy, Inc. brands.
Achieve a 25% reduction in the intensity of our energy use in offices (kWh/sq. ft.) and for computing (kWh/visit) for Etsy.com by year end 2025.
Maintain “Zero Waste” across global operations for Etsy.com. Run “Zero Waste” operations at Reverb and Depop by year end 2025. |
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Maintaining best-in-class sustainable operations allows us to focus on long-term cost reduction, minimizing waste, and creating a healthier office environment for our employees. In 2022, we continued to make good progress against our goals.
Energy Use
In 2022, our total operational energy footprint was 19,688 MWh, of which 52% was from electricity. This includes energy usage from our office facilities for Etsy.com, Reverb, and Depop, remote worker energy usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 2022 to be 6,379 MWh, or 32% of our total energy use.
Renewable Electricity
Since 2020, we have sourced renewable energy for 100% of the electricity used to power Etsy.com and Reverb's offices and employees working from home, as well as Etsy.com's computing load in Google Cloud. For 2022, we also sourced renewable energy for 100% of the electricity used to power Depop's offices and employees working from home.
This was achieved through a virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Through our 15-year VPPA, which we signed in 2018, we procure solar energy in the PJM Interconnection market that covers greater than 100% of Etsy, Inc.’s U.S. electricity needs.
Energy Efficiency
Our 2022 energy use for Etsy.com offices was 4,001 MWh. In offices where we maintain operational control, we achieved a 35% reduction in energy intensity (kWh/sq. ft.) relative to our 2016 baseline. At our Brooklyn headquarters, our efforts led to a New York City Building Energy Grade of an A.
For Etsy.com computing energy use, our energy usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
“Zero Waste”
In 2022, Etsy.com received a “Zero Waste” certification of our operations through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the fifth year in a row for diverting over 90% of waste from landfill at our Brooklyn and Dublin offices. We continue to work toward our “Zero Waste” by 2025 goal for Reverb and Depop.
Marketplace Sustainability
Establish our marketplaces as destinations for sustainably minded shoppers and conscious living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity.
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2022 Goals | | 2023 Goals |
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Etsy.com: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living.
Define a key performance indicator and establish a baseline on circularity. | | Etsy.com: Monitor and report the percent of active listings that have sustainability attributes, and the percent of sellers who have added a sustainability attribute to at least one listing.
Depop: Leverage our marketing and product capabilities to facilitate access to circular fashion and inspire more people to shop circular.
Reverb: For every new item sold, we'll aim to sell at least one used item, and we'll aim to support circularity by increasing orders of used items by 25% by 2025. |
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We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to the values that are most important to them. We’re bringing sustainability to life for buyers and sellers in several ways:
Item Sustainability
In 2022, Etsy.com piloted new optional sustainability listing attributes that allow sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste. On December 31, 2022, 4.7% of sellers had added a sustainability attribute to 1 or more listings, and 1.2% of active listings had at least one sustainability attribute.
As part of the launch, we also provided guidance to sellers on best practices for indicating each attribute. We are undertaking an internal review of a sample of listings to identify opportunities to enhance education. We are also engaging an external sustainability firm to review the efficacy of the program and determine if any remediation measures are needed in advance of launching any buyer-facing initiatives.
Packaging
As part of our efforts to meet our Net Zero goal, we are helping sellers reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2022, we expanded our partnership with EcoEnclose to include both
Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option.
Circularity
In 2022, we set a new strategy to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Across our marketplaces, our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship.
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| Ensuring equitable access to opportunity |
Prioritizing People
As of December 31, 2022, we had approximately 2,790 total employees worldwide, inclusive of Reverb, Depop, and Elo7 which had approximately 270 employees, 390employees, and 220 employees, respectively.
Diversity, equity and inclusion (“DEI”) are core to Etsy‘s culture. As Etsy has grown, we have leaned on our value of “embracing differences.” We’ve continued our commitment to creating safe-space communities through our Employee Resource Groups (“ERGs”), made improvements to increase employee accessibility and disability inclusion, and refreshed our competency matrices and our performance enablement programs to enable equity.
This year we took to heart that diverse teams thrive with inclusive leadership, benefits, and policies. We believe that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and reinforce our values. We’re committed to building a workplace where people of all backgrounds and walks of life can thrive. Additionally, the sustainability of our working environment and employee well-being also remained a key priority.
As a result, we’ve continued to support our hybrid working mode, as we believe a hybrid approach to work is the best fit for our business, culture, and team. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s generous paid time off policies. Etsy’s employees also took advantage of regular Focus Days, full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days to our employees as part of our overall approach to well-being.
We continued our focus on employee engagement in 2022, which is linked with high performance, retention, innovation, and growth. Our employees have chosen to work at Etsy because they believe in our action-oriented, values-based, and purpose-driven work culture. Nurturing a culture of diversity and inclusivity has always been a part of Etsy’s DNA. We welcome peopleIn 2022, we conducted an engagement survey of all backgroundsEtsy.com and walksReverb global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response. 77% of life into our community as employees. They work hard to bring innovative ideasEtsy.com respondents and energy every day to strengthen the experience for our sellers and buyers. We believe that embracing diverse perspectives makes us stronger, more resilient and enables us to be the best we can be.
In March 2020, Etsy employees moved to a remote work environment due to the COVID-19 pandemic. Despite this shift in work environment, we were able to maintain high experiment velocity and minimal business disruption. The shift to fully remote work was not without personal stress on many75% of our employees, but Etsy stepped up to support our team and contractors. We initiated company-wide “rest and recharge” days off, expanded paid family leave, and provided additional resources to help our teams weather the impact of the pandemic. Our company-wide initiatives were among many efforts to provide a safe and sustainable working environment.
As of December 31, 2020, we had 1,414 employees worldwide, including Reverb which had 205 employees.
For further information on our approach to Human Capital see “Our Impact Strategy and Progress” below.respondents reported favorable employee engagement.
Our Impact Strategy and Progress
We are committed to growing sustainably by aligning our mission, guiding principles, and business strategy.
We have developed an Impact strategy that reflects the positive economic, social, and ecological impact we want to have on the world while advancing and complementing our business strategy, and we are pleased to provide this update on our progress. Since announcing our Impact strategy in 2017, we have continued to evolve and update many of our goals to be more specific, measurable, and time bound, all while continuing to expand the transparency of our reporting on these activities. We apply the same focus, discipline, and accountability to our Impact metrics as we do our financial metrics, and together, they make us stronger and more resilient. We expect to continue to evolve our Impact strategy and disclosures in the future as we grow and our Impact work matures. In addition, we have made improvements to our Investor website to make it easier for investors to find details on our Impact strategy and progress, including our three primary Impact pillars, as well as more details on human capital management, data privacy and security, and other important ESG disclosure areas.
We acquired Reverb in August 2019 and updated our 2020 Impact goals to be inclusive of Reverb. Except where specifically noted, our Impact data includes the operations of our Reverb subsidiary.
2020 Impact Highlights
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Economic Impact | | Social Impact | | Ecological Impact |
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Make creative entrepreneurship a path to economic security and personal empowerment. | | Enable equitable access to the opportunities that we create. | | Build long-term resilience by eliminating our carbon impacts and fostering responsible resource use. |
We have met our goal to double Etsy sellers’ U.S. economic output by 2023. U.S. Etsy sellers contributed $13 billion to the U.S. economy in 2020, up 142% from our 2018 baseline, created 2.6 million jobs, enough to employ the entire city of Houston, Texas while generating nearly $4 billion in income to U.S. households. | | Etsy continued to attract and retain world-class talent in 2020, with a keen focus on diversity and gender balance. In 2020, Etsy (excluding Reverb) more than doubled the percentage of our leadership level employee population who identify as an underrepresented minority (Black, Latinx, or Native American; collectively, “URM”). URM hires constituted 20% of U.S. hires in 2020, and our U.S. URM employee population has increased from 8.5% in 2018 to 12.5% in 2020. | | We met our 2020 goal to source 100% of our electricity from renewable energy. This includes electricity used to power our global offices, remote electricity used by employees working from home in the United States as a result of COVID-19, and our computing load in colocated data centers and Google Cloud. We also met our goal to run a carbon neutral business for 2020 by investing in over 400,000 verified emissions reductions that protect forests, sponsor wind and solar farms, and help develop greener methods for producing auto parts. |
2020 was an unprecedented year due to the global pandemic and broad social issues impacting our team and the communities we serve. With our Impact strategy as a north star, we were agile and stepped up our efforts well beyond the scope of the original goals we had outlined for 2020, all while working in a completely remote environment. Our additional 2020 Impact work included the following:
•Direct Support for Sellers: Expanded seller education to help them manage their shops through this challenging time, implemented seller fee reductions, expanded our marketing strategies to further support and feature underrepresented minority sellers in our marketplace, and launched advocacy campaigns in the United States, United Kingdom, and Europe, to win government support and economic relief for small businesses, the self-employed, and sole proprietors, such as Etsy sellers.
•Philanthropy: Made personal protective equipment (“PPE”) donations and grants to community organizations and programs that enable creative entrepreneurship, advance racial justice, and help those most impacted by the pandemic, encouraged our employees to participate in charitable organizations through paid volunteer time off and other activities.
•ExpandedEmployee Diversity, Equity, and Inclusion Investments: We further expanded our already robust Diversity, Equity,
Build diverse and Inclusion (“DEI”) program while pivoting hiring, engagement, mentorship, and our Employee Resource Group (“ERG”) program to a remote environment. Our main goal is to create safe spaces for Etsy employees, strengthen social connections and professional networks, build Etsy’s collective cultural intelligence and increase equitable opportunity. We continue to expand our ERG communities in 2021 which now includes those focused on remote employees, mental health, and a group for Jewish employees called Jetsy. In 2020 our ERGs included:
We have started off 2021 by making some important new commitments related to our ecological impact, including:
•Science Based Goals: In January 2021, we set long-term carbon reduction goalsinclusive work forces that are aligned with science, doing our fair share to prevent the worst effectsbroadly representative of climate change. Our new Net Zero by 2030 goal includes a 50% absolute reduction in our Scope 1 and 2 greenhouse gas emissions and a 13.5% absolute reduction in our Scope 3 greenhouse gas emissions.
•New TCFD Framework: Based upon feedback from the investment community, we have added the Task Force on Climate-Related Financial Disclosures (“TCFD”) framework, in addition to using The Sustainability Accounting Standards Board’s (“SASBs”) framework, to our Impact reporting. You can find this disclosure on pages 32-35 herein.
Looking forward, we have more exciting business strategy-aligned Impact work in the pipeline. Below are details of our economic and social pillars, including longer term diversity goals for Etsy and Reverb, and additional goals related to marketplace and supply chain sustainability and diversity.
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Economic Impact | | |
2022 Goals | | 2023 Goals |
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2020 Goals | 2020 Progress | 2021 Goals |
Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023. For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
CreateApproximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026.
Enhance and grow economic opportunitiesexpand accessibility efforts by defining a KPI and establishing a baseline for creative entrepreneurs.accessibility in the employee experience at Etsy.com, Reverb, and Depop. | | Target:Etsy.com Double: Approximately double the percentage of U.S. Etsy sellers’ economic outputemployees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
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For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027.
Expanding our Economic Impact•Mexico target: 13%
Target Met:•Ireland target: 16%
In 2020,2023, Etsy met and exceeded its 2018 goal of doubling sellers’ economic impact by 2023.* In 2020, Etsy sellers:
- Contributed $13 billionis committed to the U.S. economy, a 142% increase from our baseline of $5.37 billion in 2018;
- Created 2.6 million jobs in the independent worker economy, enough jobs to employ the entire city of Houston, Texas;**
- Generated nearly $4 billion in income for sellers; and
- Produced $6.8 billion in additional economic value by harnessing their creativity and bringing unique products to market.
* To calculate these results, Etsy commissioned its third economic impact study with ECONorthwest,scoring an independent economic consulting firm, to explore the ways Etsy sellers in the United States contribute to the national economic landscape.
** Houston, Texas has a population of 2.3 million.
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Create and grow economic opportunities for creative entrepreneurs.80 or higher on Disability: IN's Disability Equality Index.
Target:
Set a new targetReverb: Reach gender parity at Reverb by year end 2026 (increasing women and establish a baseline for delivering economic empowermentmarginalized genders to our sellers.
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Foster economic and personal empowerment among our stakeholders.
Target: Invest in social programs that:
- promote economic opportunities for creative entrepreneurs and
- provide musical education to people in need (Reverb).
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Philanthropy
In 2020, we invested over $2.6 million in charitable gifts, which supported community organizations and programs:
- to enable creative entrepreneurship,
- to advance racial justice,
- to help those most impactedat least 50% by the pandemic (including with personal protection equipment and grants), and
- to provide natural disaster relief to Etsy sellers.
We also expanded our employee matching program from $500 to $750 matched annually and, through Reverb Gives, supported musical education initiatives globally.
Community Engagement
Collectively, Etsy employees donated over 2,000 hours of volunteer time in their communities through Etsy’s Impact Hours program, which gives all employees up to 40 hours per year to volunteerend 2026).
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Foster economicApproximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026. (Note: Reverb’s definition of BIPOC includes Black, Latinx, Native American, Asian and personal empowerment among our stakeholders.two or more races)
Target:Depop: Achieve 35% of underrepresented ethnicities in global headcount by year end 2028 (baseline December 31, 2022: 30%) (Note: Depop defines underrepresented ethnicities as Asian, Black, Mixed and staff identifying as ‘Other,’ including Latinx in the United States. To establish which ethnicities are underrepresented at Depop, we considered census, workforce and benchmarking data as well as our aim to be a progressive workplace.)
Invest
Achieve 27% of underrepresented gender identities in social programs that:engineering & data by year end 2028 (baseline December 31, 2022: 20%) - promote economic opportunities for creative entrepreneurs and
- provide musical education to people in need (Reverb).
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Employee DEI
We made progress on the goal we set in 2018 to double the percentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at Etsy.com by year end 2023. In 2022, Black, Latinx and Native American people constituted 23.9% of U.S. Etsy.com hires. As a result, at December 31, 2022, Black, Latinx, and Native American people made up 15.3% of Etsy.com's U.S. workforce, up from 8.6% in 2018 and 12.9% in 2021.
In 2022, Black, Indigenous, and People of Color (“BIPOC”) constituted 27.7% of Reverb’s U.S. hires. At December 31, 2022, Reverb’s U.S. workforce included 18.9% BIPOC representation, compared to 18.9% on December 31, 2021.
In 2022, Depop welcomed the integration within Etsy’s “House of Brands” as an opportunity to build on prior efforts, and introduce refreshed employee DEI Goals which continue Depop’s commitment to diversity while taking into account the wider economic context in which the business now operates, and more conservative hiring expected in 2023.
Gender Diversity
Etsy proudly maintains approximate gender parity in the overall employee population, among Leadership and at the Board of Directors level. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the U.S., the percentage of women and marginalized gender software engineers at Etsy.com is 37.9%. Globally across all functions, at Etsy.com, the representation of women and marginalized gender employees was 51% at year end 2022.
We have identified an opportunity and set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. As of December 31, 2022, in Mexico, we have achieved 14.4% representation of women and marginalized gender employees, and, in Ireland, we have achieved 16.2% representation of women and marginalized gender employees.
At Reverb, the representation of women and marginalized gender employees grew from 33.9% at December 31, 2021 to 36.4% at December 31, 2022.
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Economic Impact (continued) |
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2020 Goals | 2020 Progress | 2021 Goals |
Advocate for public policies that advance our commitments to economic empowerment, equity, and ecological sustainability.
Target: Advance public policies that increase economic security and reduce administrative burdens for creative entrepreneurs.
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Advocating for Creative Entrepreneurs
In 2020, we continued our advocacy for public policies that enable creative entrepreneurs to start and grow their businesses, including COVID-19 relief for the self-employed and sole proprietors, support for the United States Postal Service, portable benefits, and sensible platform regulation. We also supported public policies to reduce carbon emissions in the transportation and logistics sector, as well as economic justice policies to support microbusinesses operated by women, indigenous community members, and people of color.
Activating the Power of Etsy Sellers
Over 88,000 Etsy sellers advocated on the above issues in Washington, D.C., California, Brussels, France, and the United Kingdom and generated over 333,000 messages to lawmakers on behalf of our community.
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Advocate for public policies that advance our commitments to economic empowerment, equity, and ecological sustainability.
Target:
Advance public policies that increase economic security and reduce administrative burdens for creative entrepreneurs.
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At Depop, the representation of women and marginalized gender employees was 46% of their global workforce at year end 2022. Although Depop’s total workforce is broadly balanced between men and women/other gender identities, we’ve identified that the engineering and data teams present an opportunity for improving gender diversity.
Depop has expanded the scope of their previously committed target for increasing the number of women in engineering and data positions to include women and other marginalized genders (referred to as underrepresented gender identities or,”URGs”).
Attracting and Retaining Diverse Talent at the Leadership Level
TableEtsy is committed to building a workplace where all people, regardless of Contentsrace, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or veteran status, can come, stay and thrive.
In 2022, Etsy formalized the Executive Diversity Council, bringing together senior stakeholders in order to support current and future DEI efforts and embed inclusive practices throughout Etsy.com, and holding leaders accountable for results. Members of this council are the Executive Team, who are responsible for Etsy’s principal business units, and Etsy’s DEI leaders. Etsy’s Executive Diversity Council is working to support strategic initiatives, partnerships, advocacy, and programs that contribute to Etsy’s DEI mission and Etsy’s employee experience, and whose results can be measured against an established DEI scorecard. | | | | | | | | |
Social Impact |
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2020 Goals | 2020 Progress | 2021 Goals |
As of December 31, 2022, Black, Latinx, and Native American people comprised 9.8% of Etsy and Reverb’s combined leadership-level workforce. Our recruiting efforts include auditing each job description for inclusive language, proactively offering disability accommodations, sourcing from wide talent pools, strict adherence to a structured interview process, diversity training for all interviewers, applying the Mansfield rule (requiring that at least two qualified candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department) for all job openings to ensure candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department)). To retain our employees, we’re investing in refreshed management training through Etsy’s “Managing in the Moment” program, inclusion training for all employees, creating multiple avenues for connection and feedback between our Employee Resource Groups and our executive leaders; and we are seriously committed to building trust and transparency with employees. For example, career development conversations generally take place quarterly at Etsy and managers receive special training to facilitate annual review conversations and to mitigate potential biases in the process.
Focus on Inclusion At Etsy.com, we’ve continued our mentorship programs and our employee resource group (“ERG”) program. Our goal is to create a positive and inclusive workplace culture where employees from all backgrounds, ages, and abilities have access to programs that foster a sense of community, contribute to professional development, and amplify diverse voices within the organization. In 2022, Etsy.com grew our ERG program to ten communities by adding a resource group dedicated to Accessibility & Disability, created a series of roundtables where the ERGs held dialogs with executive leaders, and hosted a robust program of ERG-produced events focused on advocacy and equity. Etsy also continues to ensure our ERGs have a voice in Etsy.com’s benefits offerings and responses to global concerns. In addition to our expanded ERG and mentorship offerings, in 2022 we launched identity-based peer cohorts, called ‘dens’ internally, for Black, Latinx, Native American and Asian identifying employees. In order to bolster equity and inclusion across Etsy’s “House of Brands,” in 2022, Reverb hired a dedicated DEI leader, launched a DEI Leadership Council responsible for promoting collaboration, transparency, and accountability for achieving our DEI roadmap goals, and launched its first internal DEI mentorship program and ERG program. Our dedication to robust DEI training In addition to our annual anti-discrimination and anti-harassment trainings, Etsy.com and Reverb continued partnering with Praxis Labs to conclude a virtual reality based DEI course for all employees. This seven month long, self-paced learning journey was supported by monthly discussion sessions facilitated by the DEI team. Etsy.com and Reverb expect to continue to partner with third-party DEI consultants in 2023 as we continue to push our teams to "walk the talk" of our DEI commitments, and go beyond standard anti-discrimination trainings. In addition, we’ll be embedding inclusion education into employee lifecycle moments, including new hire orientation and manager training. Our DEI development goals include advancing individual’s ability to build empathy, identify inequity and, most importantly, take action. Depop is committed to launching inclusion training in 2023 for all employees, including managers. Build diverse and inclusive workforces that are broadly representative of their communities.
Targets:
- Approximately double the percentage of Black and Latinx employees at Etsy by 2023.
- Set a baseline and goals for Reverb’s performance and pay practices, hiring rubric, and diversity, equity, and inclusion strategy.
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Expanding our Diversity, Equity, and Inclusion (“DEI”) Efforts
We continued to expand our robust Diversity, Equity, and Inclusion program while pivoting all of our hiring, engagement, mentorship, sponsorship, and Employee Resource Group (“ERG”) program activities to a remote environment. We drew strength from our programmatic commitments and demonstrated progress during worldwide protests against police violence and racial inequality in May, June, and July 2020.
Attracting Diverse Talent with a Focus on Leadership Representation
In 2020, we deepened our work to recruit underrepresented minority (“URM”) candidates, and we amplified our employer brand awareness efforts. As a result, this year Black, Latinx, and Native American people now comprise 8.6% of Etsy and Reverb’s combined leadership-level workforce, up from 4.5% in 2019.
Progress on our DEI Goals
We made progress on the goal we set in 2018 to double the percentage of Black, Latinx, and Native American employees at Etsy by 2023. In 2020, Black, Latinx, and Native American people constituted 20.0% of U.S. Etsy hires. As a result, Black, Latinx, and Native American people now make up 12.5% of Etsy’s (excluding Reverb) U.S. workforce, up from 8.6% in 2018 and 11% in 2019.
Our 2020 DEI goal for Reverb was to study that business and set baseline DEI goals for Reverb, which we did. This is to approximately double the percentage of U.S. employees who identify as Black, Indigenous, or a Person of Color (collectively, “BIPOC”), and to reach gender parity.
Employee Engagement and Retention
We launched the second cohort of our Mentorship Circle Program, an Engineering Sponsorship program for women and underrepresented minority engineers, launched a Company-wide DEI learning platform called Blue Ocean Brain, held community-wide vigils for Black Lives Matter, created grief circles and extra mental health benefits for struggling employees, held anti-racism workshops for parents, created flexible schedules and paid time off options for employees who had expanded caregiving responsibilities due to the pandemic, and donated $1 million to support Black-led organizations that support racial justice, voting rights, and criminal justice reform.
Pay EquityEnergy Use
In 2022, our total operational energy footprint was 19,688 MWh, of which 52% was from electricity. This includes energy usage from our office facilities for Etsy.com, Reverb, and Depop, remote worker energy usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 2022 to be 6,379 MWh, or 32% of our total energy use. Renewable Electricity Since 2020, we have sourced renewable energy for 100% of the electricity used to power Etsy.com and Reverb's offices and employees working from home, as well as Etsy.com's computing load in Google Cloud. For 2022, we also sourced renewable energy for 100% of the electricity used to power Depop's offices and employees working from home.
This was achieved through a virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Through our 15-year VPPA, which we signed in 2018, we procure solar energy in the PJM Interconnection market that covers greater than 100% of Etsy, Inc.’s U.S. electricity needs. Energy Efficiency Our 2022 energy use for Etsy.com offices was 4,001 MWh. In offices where we maintain operational control, we achieved a 35% reduction in energy intensity (kWh/sq. ft.) relative to our 2016 baseline. At our Brooklyn headquarters, our efforts led to a New York City Building Energy Grade of an A. For Etsy.com computing energy use, our energy usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume. “Zero Waste” In 2022, Etsy.com received a “Zero Waste” certification of our operations through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the fifth year in a row for diverting over 90% of waste from landfill at our Brooklyn and Dublin offices. We continue to work toward our “Zero Waste” by 2025 goal for Reverb and Depop. Marketplace Sustainability Establish our marketplaces as destinations for sustainably minded shoppers and conscious living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity. | | | | | | | | | | | | 2022 Goals | | 2023 Goals | | | | | | | Etsy.com: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living.
Define a key performance indicator and establish a baseline on circularity. | | Etsy.com: Monitor and report the percent of active listings that have sustainability attributes, and the percent of sellers who have added a sustainability attribute to at least one listing.
Depop: Leverage our marketing and product capabilities to facilitate access to circular fashion and inspire more people to shop circular.
Reverb: For every new item sold, we'll aim to sell at least one used item, and we'll aim to support circularity by increasing orders of used items by 25% by 2025. | | | |
We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to the values that are most important to them. We’re bringing sustainability to life for buyers and sellers in several ways: Item Sustainability In 2022, Etsy.com piloted new optional sustainability listing attributes that allow sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste. On December 31, 2022, 4.7% of sellers had added a sustainability attribute to 1 or more listings, and 1.2% of active listings had at least one sustainability attribute. As part of the launch, we also provided guidance to sellers on best practices for indicating each attribute. We are undertaking an internal review of a sample of listings to identify opportunities to enhance education. We are also engaging an external sustainability firm to review the efficacy of the program and determine if any remediation measures are needed in advance of launching any buyer-facing initiatives. Packaging As part of our efforts to meet our Net Zero goal, we are helping sellers reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2022, we expanded our partnership with EcoEnclose to include both
Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option. Circularity In 2022, we set a new strategy to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Across our marketplaces, our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship.
| | | | | | | | | | Social | | | | Ensuring equitable access to opportunity |
Prioritizing People As of December 31, 2022, we had approximately 2,790 total employees worldwide, inclusive of Reverb, Depop, and Elo7 which had approximately 270 employees, 390employees, and 220 employees, respectively. Diversity, equity and inclusion (“DEI”) are core to Etsy‘s culture. As Etsy has grown, we have leaned on our value of “embracing differences.” We’ve continued our commitment to creating safe-space communities through our Employee Resource Groups (“ERGs”), made improvements to increase employee accessibility and disability inclusion, and refreshed our competency matrices and our performance enablement programs to enable equity. This year we took to heart that diverse teams thrive with inclusive leadership, benefits, and policies. We believe that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and reinforce our values. We’re committed to building a workplace where people of all backgrounds and walks of life can thrive. Additionally, the sustainability of our working environment and employee well-being also remained a key priority. As a result, we’ve continued to support our hybrid working mode, as we believe a hybrid approach to work is the best fit for our business, culture, and team. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s generous paid time off policies. Etsy’s employees also took advantage of regular Focus Days, full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days to our employees as part of our overall approach to well-being. We continued our focus on employee engagement in 2022, which is linked with high performance, retention, innovation, and growth. Our employees have chosen to invest in fair pay practices, and saw positive resultswork at Etsy because they believe in our 2020 Pay Equity analysis, which wasaction-oriented, values-based, and purpose-driven work culture. In 2022, we conducted byan engagement survey of all Etsy.com and Reverb global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a third-party consulting firm. The analysis found no unexplained pay gaps adverse to women or employees from other marginalized genders, or non-white employees. This was consistent with the findingsresponse. 77% of our 2018 analysis.Etsy.com respondents and 75% of Reverb respondents reported favorable employee engagement. | 27
Employee Diversity, Equity, and Inclusion Build diverse and inclusive workforceswork forces that are broadly representative of their communities.
Targets:
- Approximately double the percentage of U.S. employees at Etsy who identify as Black, Latinx, or Native American by 2023.
Reverb:
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by 2026 (from 16.5% to at least 33% by 2026).
- Reach gender parity at Reverb by 2026 (increasing women and marginalized genders from 29.3% to at least 50% by 2026).
Table of Contents | | | 2022 Goals | | 2023 Goals | | | | | | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
| | | | | | | | | Social Impact (continued)For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027.•Mexico target: 13% •Ireland target: 16% Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026.
Enhance and expand accessibility efforts by defining a KPI and establishing a baseline for accessibility in the employee experience at Etsy.com, Reverb, and Depop. | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% In 2023, Etsy is committed to scoring an 80 or higher on Disability: IN's Disability Equality Index.
Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026. (Note: Reverb’s definition of BIPOC includes Black, Latinx, Native American, Asian and two or more races)
Depop: Achieve 35% of underrepresented ethnicities in global headcount by year end 2028 (baseline December 31, 2022: 30%) (Note: Depop defines underrepresented ethnicities as Asian, Black, Mixed and staff identifying as ‘Other,’ including Latinx in the United States. To establish which ethnicities are underrepresented at Depop, we considered census, workforce and benchmarking data as well as our aim to be a progressive workplace.)
Achieve 27% of underrepresented gender identities in engineering & data by year end 2028 (baseline December 31, 2022: 20%) | | | | |
Employee DEI We made progress on the goal we set in 2018 to double the percentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at Etsy.com by year end 2023. In 2022, Black, Latinx and Native American people constituted 23.9% of U.S. Etsy.com hires. As a result, at December 31, 2022, Black, Latinx, and Native American people made up 15.3% of Etsy.com's U.S. workforce, up from 8.6% in 2018 and 12.9% in 2021. In 2022, Black, Indigenous, and People of Color (“BIPOC”) constituted 27.7% of Reverb’s U.S. hires. At December 31, 2022, Reverb’s U.S. workforce included 18.9% BIPOC representation, compared to 18.9% on December 31, 2021. In 2022, Depop welcomed the integration within Etsy’s “House of Brands” as an opportunity to build on prior efforts, and introduce refreshed employee DEI Goals which continue Depop’s commitment to diversity while taking into account the wider economic context in which the business now operates, and more conservative hiring expected in 2023. Gender Diversity 2020 GoalsEtsy proudly maintains approximate gender parity in the overall employee population, among Leadership and at the Board of Directors level. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the U.S., the percentage of women and marginalized gender software engineers at Etsy.com is 37.
| 2020 Progress9%. | Globally across all functions, at Etsy.com, the representation of women and marginalized gender employees was 51% at year end 2022. We have identified an opportunity and set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. As of December 31, 2022, in Mexico, we have achieved 14.4% representation of women and marginalized gender employees, and, in Ireland, we have achieved 16.2% representation of women and marginalized gender employees. At Reverb, the representation of women and marginalized gender employees grew from 33.9% at December 31, 2021 Goals | to 36.4% at December 31, 2022.
Build a diverse, equitable, and sustainable supply chain to support our operations and bring value to our company and our vendors.28
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Supply Chain Responsibility
Through our supplier vetting program, we collected impact data from 59% of Etsy’s suppliers, representing 84% of Etsy’s supplier spend in 2020, and we continued to track our supply chain impact across key indicators. Of suppliers who have provided information through our impact survey, we found that:
- 81% of Etsy’s spend went to companies that have set a greenhouse gas emissions reduction goal; and
- 43% of Etsy’s small and medium-sized suppliers (sole proprietors up to 250 employees) are owned by women, minorities, or veterans.
We will continue to enhance data collection protocols to increase coverage across more of our full supply chain.
Supplier Diversity
In line with Etsy’s commitment to enable equitable access to economic opportunities, we are taking meaningful steps to ensure we have diverse representation across our supply chain. Etsy’s plans to increase the percentage of women-, minority-, and veteran-owned businesses in our supply chain were disrupted in 2020 by the closure of our offices and cancellation of in-person business activities, which in turn disrupted many of our supplier purchases. This led to a decrease in the percentage of women-, minority-, and veteran-owned small- and medium-sized suppliers that we engaged relative to our 2019 baseline. To address the negative impact COVID-19 had on our small- and medium-sized enterprise suppliers, we created a COVID-19 economic relief fund for our suppliers and distributed $100,000 in grant funding to these suppliers, with prioritization going to women-, minority-, and veteran-owned businesses. We also provided small business suppliers with information on how to access COVID-19-related relief funding and support. As we resume in-person business activity, we will continue our work to ensure that by 2022 at least 50% of Etsy’s small- and medium-sized enterprise suppliers are owned by women, minorities, or veterans. We believe there is a pathway to achieve our target, but it is largely dependent on our ability to resume in-person activities, including in-office events, employee programs, and in-person marketing activities.
Outsourcing Vendor Labor Practices
In 2020, we automated the data collection and assessment of employment practices for Etsy suppliers that provide full-time contractors to support Etsy. We consolidated findings related to their wage, paid leave, and benefits practices and conducted research to inform a future employment practice standard.
Sustainable Supply Chain
In an effort to understand and influence the sustainability of our supply chain, we added purchased goods and services to our greenhouse gas inventory this year. In 2020, emissions from our corporate supply chain were 42,646 tCO2e, or 10.5% of our total footprint. We plan to leverage our negotiating power in our supply chain agreements to contribute to our new Net Zero by 2030 goal.
Influencing Suppliers to Improve their Social, Environmental, and Economic Practices
As our purchasing power grows, our ability to influence our suppliers to address pressing social, economic, and environmental challenges also grows. We have always tried to use this leverage to make meaningful progress across our key impact areas. In 2020, we focused on influencing vendors to improve practices, including: (1) wage, benefits, and paid leave standards for their employees; (2) environmentally responsible methods for producing goods and services; and, (3) policies that promote more inclusive workforces.
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Build a diverse, equitable, and sustainable supply chain to support our operations and bring value to our company and our vendors.
Targets:
- Ensure at least 50% of Etsy’s small- and medium-sized enterprise suppliers are owned by women, minorities, or veterans by 2022.
- Achieve a 13.5% absolute reduction in our carbon footprint from purchased goods and services by 2030.
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Social Impact (continued) |
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2020 Goals | 2020 Progress | 2021 Goals |
At Depop, the representation of women and marginalized gender employees was 46% of their global workforce at year end 2022. Although Depop’s total workforce is broadly balanced between men and women/other gender identities, we’ve identified that the engineering and data teams present an opportunity for improving gender diversity.
Ensure our marketplaces are diverse, welcoming,Depop has expanded the scope of their previously committed target for increasing the number of women in engineering and inclusive placesdata positions to sellinclude women and shop.other marginalized genders (referred to as underrepresented gender identities or,”URGs”).
Target: By 2021, defineAttracting and Retaining Diverse Talent at the Leadership Level
Etsy is committed to building a key performance indicatorworkplace where all people, regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or veteran status, can come, stay and establish a baseline for marketplace diversity and inclusivity. |
Inclusive Marketingthrive.
In 2020, we worked2022, Etsy formalized the Executive Diversity Council, bringing together senior stakeholders in order to ensuresupport current and future DEI efforts and embed inclusive practices throughout Etsy.com, and holding leaders accountable for results. Members of this council are the Executive Team, who are responsible for Etsy’s principal business units, and Etsy’s DEI leaders. Etsy’s Executive Diversity Council is working to support strategic initiatives, partnerships, advocacy, and programs that the images we proactively createdcontribute to Etsy’s DEI mission and shared in our marketplace were representativeEtsy’s employee experience, and whose results can be measured against an established DEI scorecard. As of the communities in which we live by committing to a policy to include at least 30% representation of black or brown skin tones in marketing assets. In the fourth quarter of 2020, 59% of the images with a human element developed by our creative team had black or brown skin tone representation. Our award-winning Gift Like You Mean It ad campaign, which aired across the United States during the holiday season, showcased our commitment to diversity and inclusion by featuringDecember 31, 2022, Black, Latinx, and LGBTQ community members and storylines, as well asNative American people with disabilities.
Highlighting Diversity as a Core Componentcomprised 9.8% of our Brand
We embedded diversity into our everyday work to highlight that it is a core component of who Etsy is as a brand and company. We featured and celebrated Black and Latinx owned shops during a time when supporting small businesses was more important than ever before, and we created a Black-owned Business Etsy Community where sellers can opt-in, build community, and support one another.
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Ensure our marketplaces are diverse, welcoming, and inclusive places to sell and shop.
Target:
In 2021, define a key performance indicator and establish a baseline for marketplace impact.
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Ecological Impact |
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2020 Goals | 2020 Progress | 2021 Goals |
Achieve best-in-class sustainable operations by sourcing 100% renewable electricity, reducing the intensity of our energy use, and running zero waste operations.
Targets:
- Source 100% of Etsy’s electricity from renewable sources by 2020.
- Achieve a 25% reduction in the intensity of Etsy’s energy use by 2025.
- Maintain a 90% waste diversion rate across global operations.
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Renewable Electricity
Target met:
We met our goal to source 100% of our electricity from renewable energy by 2020. This was up from 76% in 2019. This includes electricity used to power Etsy and Reverb’s global offices, remote electricity usedcombined leadership-level workforce. Our recruiting efforts include auditing each job description for inclusive language, proactively offering disability accommodations, sourcing from wide talent pools, strict adherence to a structured interview process, diversity training for all interviewers, applying the Mansfield rule (requiring that at least two qualified candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department) for all job openings to ensure candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department)). To retain our employees, working from homewe’re investing in refreshed management training through Etsy’s “Managing in the United StatesMoment” program, inclusion training for all employees, creating multiple avenues for connection and feedback between our Employee Resource Groups and our executive leaders; and we are seriously committed to building trust and transparency with employees. For example, career development conversations generally take place quarterly at Etsy and managers receive special training to facilitate annual review conversations and to mitigate potential biases in the process.
Focus on Inclusion At Etsy.com, we’ve continued our mentorship programs and our employee resource group (“ERG”) program. Our goal is to create a positive and inclusive workplace culture where employees from all backgrounds, ages, and abilities have access to programs that foster a sense of community, contribute to professional development, and amplify diverse voices within the organization. In 2022, Etsy.com grew our ERG program to ten communities by adding a resource group dedicated to Accessibility & Disability, created a series of roundtables where the ERGs held dialogs with executive leaders, and hosted a robust program of ERG-produced events focused on advocacy and equity. Etsy also continues to ensure our ERGs have a voice in Etsy.com’s benefits offerings and responses to global concerns. In addition to our expanded ERG and mentorship offerings, in 2022 we launched identity-based peer cohorts, called ‘dens’ internally, for Black, Latinx, Native American and Asian identifying employees. In order to bolster equity and inclusion across Etsy’s “House of Brands,” in 2022, Reverb hired a dedicated DEI leader, launched a DEI Leadership Council responsible for promoting collaboration, transparency, and accountability for achieving our DEI roadmap goals, and launched its first internal DEI mentorship program and ERG program. Our dedication to robust DEI training In addition to our annual anti-discrimination and anti-harassment trainings, Etsy.com and Reverb continued partnering with Praxis Labs to conclude a virtual reality based DEI course for all employees. This seven month long, self-paced learning journey was supported by monthly discussion sessions facilitated by the DEI team. Etsy.com and Reverb expect to continue to partner with third-party DEI consultants in 2023 as a resultwe continue to push our teams to "walk the talk" of COVID-19,our DEI commitments, and Etsy.com’s computing loadgo beyond standard anti-discrimination trainings. In addition, we’ll be embedding inclusion education into employee lifecycle moments, including new hire orientation and manager training. Our DEI development goals include advancing individual’s ability to build empathy, identify inequity and, most importantly, take action. Depop is committed to launching inclusion training in colocated data centers and Google Cloud.2023 for all employees, including managers.
Energy Use In 2020,2022, our total operational energy footprint was 13,13819,688 MWh, of which 61%52% was from electricity. BecauseThis includes energy usage from our offices were closedoffice facilities for much of the year due to COVID-19, we included estimations ofEtsy.com, Reverb, and Depop, remote worker energy useusage for employees working from home totaling 4,482 MWh. Our colocated data centers accountedEtsy.com, Reverb, and Depop, and our Google Cloud computing for 1,506 MWh, andEtsy.com. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 20202022 to be 4,169 MWh. In total our energy use for computing was 43%6,379 MWh, or 32% of our total energy useuse.
Renewable Electricity Since 2020, we have sourced renewable energy for 100% of the electricity used to power Etsy.com and Reverb's offices and employees working from home, as well as Etsy.com's computing load in 2020.Google Cloud. For 2022, we also sourced renewable energy for 100% of the electricity used to power Depop's offices and employees working from home. To address data availability challenges associated with allocating energy consumption from the cloud, Etsy developed an estimation methodology to account for our Google Cloud computing footprint, which has been reviewed by industry experts. Quantification
This was achieved through a virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Through our 15-year VPPA, which we signed in 2018, we procure solar energy in the PJM Interconnection market that covers greater than 100% of Etsy, Inc.’s U.S. electricity needs. Energy Efficiency Our 2020 office2022 energy footprintuse for Etsy.com offices was 2,9814,001 MWh. In offices where Etsy maintainswe maintain operational control, we achieved a 48%35% reduction in energy intensity (kWh per square foot) across(kWh/sq. ft.) relative to our global operations based on a 2016 baseline. WhileAt our efficiency work has driven significant progress since 2016, the magnitudeBrooklyn headquarters, our efforts led to a New York City Building Energy Grade of this reduction was due to COVID-19 office closures.an A. For Etsy.com computing energy use, we achieved a 23% reduction in totalour energy use between 2018usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and 2020, despite substantial growth in our business over the same time period.more nimble technology on an as needed basis depending on traffic volume.
Diversion from Landfill“Zero Waste”
In 2020, Etsy achieved zero waste2022, Etsy.com received a “Zero Waste” certification of our operations through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the thirdfifth year in a row byfor diverting over 90% of waste from landfill. In 2020, we diverted 93% of waste generated from officelandfill at our Brooklyn and data center operations from landfill.
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Achieve best-in-class sustainable operations by sourcing 100% renewable electricity, reducing the intensity of our energy use, and running zero waste operations.
Targets:
- Continue to source 100% of electricity from renewable sources.
- Achieve a 25% reduction in the intensity of our energy use by 2025.
- Maintain zero waste across global operations for Etsy.
- Run zero waste operations at Reverb by 2025.
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Ecological Impact (continued) |
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2020 Goals | 2020 Progress | 2021 Goals |
Run a carbon neutral business.
Target: Offset 100% of measured Scope 1, 2, and 3 emissions.
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Running a Carbon Neutral Business
Target Met:
We have run a carbon neutral business since we launched carbon-offset shipping in 2019. For 2020, we invested in 404,737 verified emissions reductions (“VERs”), protecting forests, sponsoring wind and solar farms, and developing greener methods for producing auto parts. Being carbon neutral allows us to take immediate action to balance our footprint while we work toward long-term reductions in our value chain as a part of our new Net Zero by 2030 goal.
Expanding Accountability for our Carbon Footprint
Each year we evaluate our corporate greenhouse gas boundary to ensure that we are taking responsibility for the climate change impacts of our business. Our approach is to be as comprehensive and transparent as possible. That’s why we have expanded our inventory to account for the greenhouse gas impacts from: (1) the packaging our sellers use to ship products to buyers, (2) the energy use of our platforms on consumer devices, and (3) our supply chain. Our full greenhouse gas inventory can be seen below in our SASB disclosure.
Advocating for Climate-Friendly E-commerce
We take action in support of policy solutions that will help to drive carbon reduction in the long term. In 2020, we prioritized advocating for ambitious regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on electrification infrastructure and heavy- and medium-duty vehicles that play an important role in e-commerce logistics.Dublin offices. We continue to collaborate with peers, vendors,work toward our “Zero Waste” by 2025 goal for Reverb and NGOs on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector.Depop.
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Achieve Net Zero by 2030 and run a carbon neutral business now.
Targets:
- 50% absolute reduction in Scope 1+2 greenhouse gas emissions by 2030.
- 13.5% absolute reduction in Scope 3 greenhouse gas emissions by 2030.
- Offset 100% of measured Scope 1, 2, and 3 greenhouse gas emissions annually.
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Marketplace Sustainability
Establish our marketplaces as destinations for sustainably-mindedsustainably minded shoppers and conscious living.living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity. Target: By 2021, define a key performance indicator and establish a baseline for marketplace sustainability. | | | | | | | | | | | | 2022 Goals | | 2023 Goals | | | | | | | Etsy.com: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living.
Define a key performance indicator and establish a baseline on circularity. | | Etsy.com: Monitor and report the percent of active listings that have sustainability attributes, and the percent of sellers who have added a sustainability attribute to at least one listing.
Depop: Leverage our marketing and product capabilities to facilitate access to circular fashion and inspire more people to shop circular.
Reverb: For every new item sold, we'll aim to sell at least one used item, and we'll aim to support circularity by increasing orders of used items by 25% by 2025. | | | |
We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to the values that are most important to them. We’re bringing sustainability to life for buyers and sellers in several ways: Item Sustainability In 2022, Etsy.com piloted new optional sustainability listing attributes that allow sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste. On December 31, 2022, 4.7% of sellers had added a sustainability attribute to 1 or more listings, and 1.2% of active listings had at least one sustainability attribute. As part of the launch, we also provided guidance to sellers on best practices for indicating each attribute. We are undertaking an internal review of a sample of listings to identify opportunities to enhance education. We are also engaging an external sustainability firm to review the efficacy of the program and determine if any remediation measures are needed in advance of launching any buyer-facing initiatives. Packaging As part of our efforts to meet our Net Zero goal, we are helping sellers reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2022, we expanded our partnership with EcoEnclose to include both
Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a Local Seller Signalreused packaging sticker option. Circularity In 2022, we set a new strategy to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Across our marketplaces, our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship.
| | | | | | | | | | Social | | | | Ensuring equitable access to opportunity |
Prioritizing People As of December 31, 2022, we had approximately 2,790 total employees worldwide, inclusive of Reverb, Depop, and Elo7 which had approximately 270 employees, 390employees, and 220 employees, respectively. Diversity, equity and inclusion (“DEI”) are core to Etsy‘s culture. As Etsy has grown, we have leaned on our value of “embracing differences.” We’ve continued our commitment to creating safe-space communities through our Employee Resource Groups (“ERGs”), made improvements to increase employee accessibility and disability inclusion, and refreshed our competency matrices and our performance enablement programs to enable equity. This year we took to heart that diverse teams thrive with inclusive leadership, benefits, and policies. We believe that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and reinforce our values. We’re committed to building a workplace where people of all backgrounds and walks of life can thrive. Additionally, the sustainability of our working environment and employee well-being also remained a key priority. As a result, we’ve continued to support our hybrid working mode, as we believe a hybrid approach to work is the best fit for our business, culture, and team. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s generous paid time off policies. Etsy’s employees also took advantage of regular Focus Days, full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days to our employees as part of our overall approach to well-being. We addedcontinued our focus on employee engagement in 2022, which is linked with high performance, retention, innovation, and growth. Our employees have chosen to work at Etsy because they believe in our action-oriented, values-based, and purpose-driven work culture. In 2022, we conducted an engagement survey of all Etsy.com and Reverb global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a “local seller” signalresponse. 77% of Etsy.com respondents and 75% of Reverb respondents reported favorable employee engagement.
Employee Diversity, Equity, and Inclusion Build diverse and inclusive work forces that are broadly representative of their communities. | | | | | | | | | | | | 2022 Goals | | 2023 Goals | | | | | | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023. For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026.
Enhance and expand accessibility efforts by defining a KPI and establishing a baseline for accessibility in the employee experience at Etsy.com, Reverb, and Depop. | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% In 2023, Etsy is committed to scoring an 80 or higher on Disability: IN's Disability Equality Index.
Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026. (Note: Reverb’s definition of BIPOC includes Black, Latinx, Native American, Asian and two or more races)
Depop: Achieve 35% of underrepresented ethnicities in global headcount by year end 2028 (baseline December 31, 2022: 30%) (Note: Depop defines underrepresented ethnicities as Asian, Black, Mixed and staff identifying as ‘Other,’ including Latinx in the United States. To establish which ethnicities are underrepresented at Depop, we considered census, workforce and benchmarking data as well as our aim to be a progressive workplace.)
Achieve 27% of underrepresented gender identities in engineering & data by year end 2028 (baseline December 31, 2022: 20%) | | | |
Employee DEI We made progress on the goal we set in 2018 to listing pages whendouble the buyer ispercentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at Etsy.com by year end 2023. In 2022, Black, Latinx and Native American people constituted 23.9% of U.S. Etsy.com hires. As a result, at December 31, 2022, Black, Latinx, and Native American people made up 15.3% of Etsy.com's U.S. workforce, up from 8.6% in 2018 and 12.9% in 2021. In 2022, Black, Indigenous, and People of Color (“BIPOC”) constituted 27.7% of Reverb’s U.S. hires. At December 31, 2022, Reverb’s U.S. workforce included 18.9% BIPOC representation, compared to 18.9% on December 31, 2021. In 2022, Depop welcomed the integration within Etsy’s “House of Brands” as an opportunity to build on prior efforts, and introduce refreshed employee DEI Goals which continue Depop’s commitment to diversity while taking into account the wider economic context in which the business now operates, and more conservative hiring expected in 2023. Gender Diversity Etsy proudly maintains approximate gender parity in the same ship-from regionoverall employee population, among Leadership and at the Board of Directors level. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the item. Local purchasesU.S., the percentage of women and marginalized gender software engineers at Etsy.com is 37.9%. Globally across all functions, at Etsy.com, the representation of women and marginalized gender employees was 51% at year end 2022. We have identified an opportunity and set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. As of December 31, 2022, in Mexico, we have achieved 14.4% representation of women and marginalized gender employees, and, in Ireland, we have achieved 16.2% representation of women and marginalized gender employees. At Reverb, the representation of women and marginalized gender employees grew from 33.9% at December 31, 2021 to 36.4% at December 31, 2022.
At Depop, the representation of women and marginalized gender employees was 46% of their global workforce at year end 2022. Although Depop’s total workforce is broadly balanced between men and women/other gender identities, we’ve identified that the engineering and data teams present an opportunity for improving gender diversity. Depop has expanded the scope of their previously committed target for increasing the number of women in engineering and data positions to include women and other marginalized genders (referred to as underrepresented gender identities or,”URGs”). Attracting and Retaining Diverse Talent at the Leadership Level Etsy is committed to building a workplace where all people, regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or veteran status, can come, stay and thrive. In 2022, Etsy formalized the Executive Diversity Council, bringing together senior stakeholders in order to support current and future DEI efforts and embed inclusive practices throughout Etsy.com, and holding leaders accountable for results. Members of this council are the Executive Team, who are responsible for Etsy’s principal business units, and Etsy’s DEI leaders. Etsy’s Executive Diversity Council is working to support strategic initiatives, partnerships, advocacy, and programs that contribute to Etsy’s DEI mission and Etsy’s employee experience, and whose results can be measured against an established DEI scorecard. As of December 31, 2022, Black, Latinx, and Native American people comprised 9.8% of Etsy and Reverb’s combined leadership-level workforce. Our recruiting efforts include auditing each job description for inclusive language, proactively offering disability accommodations, sourcing from wide talent pools, strict adherence to a structured interview process, diversity training for all interviewers, applying the Mansfield rule (requiring that at least two qualified candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department) for all job openings to ensure candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department)). To retain our employees, we’re investing in refreshed management training through Etsy’s “Managing in the Moment” program, inclusion training for all employees, creating multiple avenues for connection and feedback between our Employee Resource Groups and our executive leaders; and we are seriously committed to building trust and transparency with employees. For example, career development conversations generally take place quarterly at Etsy and managers receive special training to facilitate annual review conversations and to mitigate potential biases in the process. Focus on Inclusion At Etsy.com, we’ve continued our mentorship programs and our employee resource group (“ERG”) program. Our goal is to create a positive and inclusive workplace culture where employees from all backgrounds, ages, and abilities have access to programs that foster a sense of community, contribute to professional development, and amplify diverse voices within the organization. In 2022, Etsy.com grew our ERG program to ten communities by adding a resource group dedicated to Accessibility & Disability, created a series of roundtables where the ERGs held dialogs with executive leaders, and hosted a robust program of ERG-produced events focused on advocacy and equity. Etsy also continues to ensure our ERGs have a voice in Etsy.com’s benefits offerings and responses to global concerns. In addition to our expanded ERG and mentorship offerings, in 2022 we launched identity-based peer cohorts, called ‘dens’ internally, for Black, Latinx, Native American and Asian identifying employees. In order to bolster equity and inclusion across Etsy’s “House of Brands,” in 2022, Reverb hired a dedicated DEI leader, launched a DEI Leadership Council responsible for promoting collaboration, transparency, and accountability for achieving our DEI roadmap goals, and launched its first internal DEI mentorship program and ERG program. Our dedication to robust DEI training In addition to our annual anti-discrimination and anti-harassment trainings, Etsy.com and Reverb continued partnering with Praxis Labs to conclude a virtual reality based DEI course for all employees. This seven month long, self-paced learning journey was supported by monthly discussion sessions facilitated by the DEI team. Etsy.com and Reverb expect to continue to partner with third-party DEI consultants in 2023 as we continue to push our teams to "walk the talk" of our DEI commitments, and go beyond standard anti-discrimination trainings. In addition, we’ll be embedding inclusion education into employee lifecycle moments, including new hire orientation and manager training. Our DEI development goals include advancing individual’s ability to build empathy, identify inequity and, most importantly, take action. Depop is committed to launching inclusion training in 2023 for all employees, including managers. Pay Equity Etsy takes proactive measures at each step of the employee journey in order to ensure fair pay practices. At the recruiting stage, we determine compensation packages within our existing frameworks by comparing outgoing offers to internal roles with comparable experience. During compensation reviews, we use guideposts when determining the size of merit and promotion increases and bonuses based on performance outcomes. Additionally, all compensation recommendations are reviewed by the appropriate Human Resources Business Partner and Executive team to ensure equity. Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires.
As part of our commitment to fair pay practices, we completed our 2022 Pay Equity analysis, conducted by a third-party consulting firm. The purpose of this analysis is to look at pay across jobs and levels to ensure our practices are fair and consistent and that compensation is not influenced by gender, or race/ethnicity. The analysis found no unexplained pay gaps adverse to women or employees from other marginalized genders, or non-white employees. Additionally, there were no unexplained pay gaps based on intersectionality (i.e., based on the combination of race and gender/ethnicity). We plan to continue to comprehensively audit pay equity biennially with an external consultant, and conduct internal reviews several times a year in conjunction with events such as rating and promotion decisions and market adjustments. Equity in Promotions Etsy’s People Managers have the opportunity to recognize a direct report’s significant contributions and readiness for the next level by nominating them for a promotion. We offer two promotion cycles per year, one in the fall and one in the spring. Each of these cycles includes a calibration step where senior leaders in the relevant internal organization meet to review all promotion nominations in that organization to ensure fairness in decision-making practices. To help ensure fairness and to mitigate bias in assessing promotion readiness, we provide Managers with tools and training to reflect on their own implicit biases, and we solicit nominations through a structured nomination form that has been audited to incorporate DEI best practices. In addition to our rigorous promotion nomination practices, we perform detailed pre- and post-calibration analyses to assess equity in each promotion cycle. Equity in Performance Ratings We reward and recognize employees for their performance at Etsy with an overall performance rating that is decided once per year in the Annual Review process and informs pay and talent decisions, including salary increases, bonuses, and promotion decisions. We work hard to ensure the performance review process is as consistent and fair as possible. A number of components play key roles in minimizing bias including clearly established and accessible behavioral competencies that outline performance expectations for each role and level, performance ratings that weight impact (50%) and competencies (50%) equally, and calibration that is conducted annually following submission of a significant roleSelf-Review and Manager Review. In calibration, senior leaders in the applicable internal organization meet to review all rating decisions to ensure fairness in how ratings are applied to individuals in similar levels and roles. We review data pre- and post-calibration to assess equity in performance rating decisions. We plan to continue conducting this analysis annually. Accessibility Ensuring our employees are supported by policies, tools, and benefits that fit their needs remains a top priority. We take a generous approach to providing employees with accommodations and leaves of absence when needed, and we work hard to reduce stigma related to discussing matters of disability and mental health. In 2022, Etsy.com launched the Accessibility & Disability ERG to foster community and provide a safe space for disabled and/or neurodivergent employees. In addition, we created an accommodations resource guide and trained our recruiters, as part of our efforts to ensure our interviewing process is as accessible as possible. We also are developing disability inclusion training, to be launched in 2023. In 2022, Etsy.com partnered with Disability:IN and participated in their Disability Equality Index, a comprehensive benchmarking tool that helps companies achieve disability inclusion and equity. Using Etsy’s Disability Equality Index results, we built and began implementing a comprehensive disability inclusion roadmap. Supplier Diversity, Equity, and Inclusion Create an equitable and sustainable supply chain that supports our “House of Brands” while reducing our carbon footprint, supporting diverse businesses and bringing new economic opportunities to our suppliers and their employees. | | | | | | | | | | | | 2022 Goals | | 2023 Goals | | | | | | | Etsy.com: Ensure at least 50% of Etsy’s small and medium-sized enterprise suppliers* are owned by women, underrepresented racial communities, or veterans by year end 2022.
* Based on suppliers providing impact data through our supplier vetting program. | | Etsy.com, Reverb, Depop: Achieve $120 million in cumulative diverse* supplier spend by year end 2025.
* A diverse supplier is defined as woman-owned, disability-owned and LGBTQ-owned globally; as well as underrepresented racial communities- (Black, Asian-Indian, Asian-Pacific, Hispanic/Latinx, Indigenous) and veteran-owned in the United States. | | | |
Supplier Diversity In line with Etsy’s commitment to enable equitable access to economic opportunities, we set a short-term supplier diversity goal in 2019 to have 50% of our small and medium enterprise suppliers be women, URC*, or veteran owned by year end 2022. In the final year of our work towards this target, we collected impact data through our supplier vetting program from shipping. Buyers appreciated being able77.7% of Etsy’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 44.1% of Etsy’s small- and medium-sized suppliers are owned by women, URCs*, or veterans, down from achieving our target of 50.1% in 2021. We hoped to shop locally too;sustain and build on this progress in 2022; however, in response to Etsy’s rapid growth in scale, we saw two trends emerge that contributed to us missing the target. 1.In order to meet the demands of our larger scale, our business teams sought out efficiencies within their supply chains. Several business units planned and executed consolidation strategies across key spend categories (primarily professional services and in-office food). We focused our supplier diversity efforts on these planned areas of consolidation and encouraged the use of diverse small businesses wherever possible. We also engaged directly with our Tier 1 suppliers to support an expansion of data collection efforts to Tier 2 suppliers in our food program, where our purchasing power could have a conversionmore direct impact. Despite these efforts, the broader consolidation strategies in professional services contributed to the net reduction in supplier diversity. 2.At the same time, we also experienced accelerated growth in our overall small- and medium-sized supplier pool. While we are proud to have continued to grow our support of small- and medium-sized suppliers as our business scaled, we saw our overall small- and medium-sized supplier rate increase upongrow faster than our growth rate of diverse small- and medium-sized suppliers. *URC for supplier diversity is defined in the Supplier DEI 2023 Goals chart above. Launching a “House of Brands” Supplier Diversity Program and New Short-term Goal Since 2019, Etsy has scaled our corporate supply chain operations to support four brands and we’ve learned that our supplier management and impact strategies have to evolve alongside our business. We began the crucial work of improving our end-to-end supplier management infrastructure in 2022 – adding people and centralizing processes; evolving our policies and processes to enable scale and efficiency; and introducing new technology. In 2023, we plan to continue these efforts and lay the local signal.foundation to launch Etsy’s first ever “House of Brands” Supplier Diversity Program. In the coming years, we expect this program will allow us to add Depop to our supplier Impact vetting process (joining Etsy.com and Reverb suppliers), release a public-facing supplier diversity policy and invest in technology to support automated reporting and dashboards. As part of this program, we are introducing a new short-term target to achieve $120 million of cumulative spend with diverse suppliers from January 1, 2022 through the end of 2025, across Etsy.com, Reverb and Depop. As of the end of 2022, we had $27 million in diverse supplier spend toward our new target. Employment Practice Priorities Etsy utilizes a number of vendors, contractors, and consultants, collectively our vendor partners, in the ordinary course of its business. These vendor partners are typically engaged to (a) enable Etsy to access otherwise unavailable expertise; (b) to fill short term staffing requirements (for example, temporary leave replacements); or (c) support our operations, including to deliver 24-hour multilingual customer support and trust and safety support coverage. In 2022, we continued the meaningful work to educate our vendor partners who employ contractors on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices. Where we identify gaps, we open dialogues with our vendors, using these guidelines as a north star: •Ensuring our contractors receive a progressive living wage, adjusted for market conditions, based on location. •Using our leverage with vendor partners to achieve a progressive and flexible paid leave policy for all full-time contractors, including vacation time, sick time, and gender-neutral parental leave. •Ensuring all full-time contractors have access to quality medical care for themselves and their dependents.
A Holistic Approach to Marketplace Impact
As we undertook work on this goal in 2020, we realized that the positive impact our marketplace can drive should not be evaluated through a single-issue lens. Instead the potential to leverage our marketplace for meaningful impact is best realized at the intersection of our three strategic Impact pillars - economic, social, ecological. That’s why in 2021 we will continue the work we started this year to develop a more holistic approach to marketplace impact that is integrated across our teams.
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Establish our marketplaces as destinations for sustainably-minded shoppers and conscious living.31
Target:
In 2021, define a key performance indicatorCreative Community Diversity, Equity, and establish a baseline for marketplace impact.Inclusion
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Our mission is to “Keep Commerce Human.” Our DEI goals are integral to who we are as a company: namely, a marketplace and a workplace that are made stronger by the unique and special qualities of our communities.
We are committed to transparent reporting on workforce diversity. All metrics below are as of December 31 of the stated year. Overall metrics include all employees globally. Leadership is defined as Director level and above. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Tech employees are defined as those employees who work on Product, Engineering, Analytics and HR Information and Financial Systems Administration teams. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions. Gender and age metrics represent our global employee base, while race and ethnicity metrics represent U.S. employees only. 2019 and 2020 metrics include both Etsy and Reverb employees, while metrics from 2018 do not include Reverb employees.
Our Board of Directors also affirmed its dedication to diversity in 2020, committing to actively seek out diverse director candidates to include in the pool from which Board nominees are chosen. Etsy will provide additional disclosures on Board diversity in our Proxy Statement for our 2021 Annual Meeting of Stockholders.
Build Marketplaces that are Diverse, Welcoming and Inclusive Places to Sell and Shop, and Drive Equity within Creative Communities.
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2022 Goals | | 2023 Goals |
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Marketplace DEI Etsy.com:Build a welcoming marketplace that is diverse, inclusive, and broadly representative of the communities it serves. Include at least 45% Black and Brown skin tones in marketing assets in the United States and highlight historically marginalized groups. Social Innovation Leverage our marketplaces’ platforms to drive equitable access to creative pursuits and economic opportunity. Etsy.com: Expand pathways to creative entrepreneurship for economically disenfranchised communities by increasing access to digital business resources, capital, and customers. Reverb: Create a more inclusive music industry by expanding access to musical instruments and music education. Depop: Provide educational resources and mentorship opportunities to help entrepreneurs, creatives, or small businesses from underrepresented groups grow their businesses sustainably. | | Etsy, Inc.: In 2023, set a 5-year public target for how many economically disenfranchised, creative businesses we will strengthen through our investments in social impact and innovation. Etsy.com: Aim to include at least 45% Black and Brown skin tones in marketing assets on Etsy-owned and Etsy-managed channels in the United States. In 2023, set a 5-year public target for the promotion of underrepresented seller shops through merchandised experiences that broadly aligns with representation in our communities. Depop: Aim to invest in programs or initiatives that drive equity for underrepresented communities on Depop.
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In 2022, we consolidated our Marketplace DEI and Social Innovation goals under a single Creative Community DEI goal. We recognize that our efforts to create a welcoming and diverse marketplace for our buyers and sellers while supporting economically disenfranchised creative entrepreneurs must work in concert to drive our ultimate aim of equitable access to creative pursuits and economic opportunity.
Marketplace DEI
In 2022, we worked to ensure that the images we proactively created and shared in our Etsy.com marketplace were broadly representative of the communities in which we live. In 2022, 47.9% of the people in marketing assets on Etsy.com-owned and Etsy.com-managed channels in the United States had black or brown skin tone representation or were identified as people of color.
Social Innovation
This year represented another major expansion of Etsy’s investments to increase pathways to creative entrepreneurship, especially for those from economically disenfranchised communities. Etsy understands the critical role creative entrepreneurship can play in building economic independence and freedom for communities and has long been committed to utilizing our marketplace to help anyone with a creative idea build a business online.
This commitment was supported by Etsy.com’s Uplift Initiative, a diverse set of programs focused on supporting creative entrepreneurs facing challenges such as lack of access to an internet connection or limited digital skills and capital to grow their businesses. Our Uplift Fund continued to support organizations helping creative entrepreneurs. In 2022, the fund received over 6.4 million contributions from U.S. buyers on the Etsy marketplace who elected to round-up their order price and donate their change. From these donations, the Uplift Fund distributed approximately $2.5 million in grants to organizations driving resources to creative entrepreneurs. The Uplift Makers program onboarded two new cohorts, enabling a growing number of heritage artisan communities to build pathways to economic independence by bringing their products online. Over $340,000 in sales was generated in 2022 by Uplift Maker shops.
And we supported our communities across the “House of Brands:” Reverb continues to drive resources to under-resourced communities globally through Reverb Gives and has provided access to musical equipment through over $250,000 in credits. Depop facilitated a new edition of the Now/Next program with six Black Sellers, each receiving a grant of $2,000. The program was focused on developing and curating a curriculum aimed at delivering tangible support for Black Sellers, providing them with the inspiration, knowledge, tools and access to accelerate their success on Depop.
Workforce Metrics
Our mission is to “Keep Commerce Human.” Our DEI goals are integral to who we are as a company: namely, marketplaces and workplaces that are made stronger by the unique and special qualities of our communities.
We are committed to transparent reporting on workforce diversity. All metrics below are as of December 31 of the stated year. Overall metrics include all employees globally. Leadership is defined as Director level and above. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions. Gender and age metrics represent our global employee base, while race and ethnicity metrics represent U.S. employees only. 2020 and 2021 metrics include Etsy.com and Reverb, while 2022 metrics include Etsy.com, Reverb, and Depop for Gender, Race and Ethnicity, and Age, and Elo7 for Age and Gender metrics only.
Our Board of Directors also affirmed its dedication to diversity in 2020, committing to actively seek out diverse director candidates to include in the pool from which nominees are chosen. In 2022, our Board of Directors strengthened its commitment to diversity by specifically requiring that any initial list of candidates considered by the Nominating and Corporate Governance Committee for nomination to our Board of Directors include at least two qualified candidates with diversity of race, ethnicity or gender. Etsy expects to provide additional disclosures on Board of Directors diversity in our Proxy Statement for our 2023 Annual Meeting of Stockholders. Etsy provided our 2021 consolidated equal employment opportunity (EEO-1) report on our Investor Relations website.
Gender Metrics - Global
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Board of Directors | Overall | Leadership | Tech | Engineering | Other Business Roles |
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nFemale | nMale | nAdditional Genders | nNot Declared |
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
† Etsy commissioned an external third party to perform attest procedures with respect to our diversity metrics as of December 31, 2020. Full details and data methodology are available at investors.etsy.com.
‡ Metrics for which historical data has also been subject to previous attest procedures.
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RACE & ETHNICITY METRICS - U.S. ONLY
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| Board | Overall | Leadership | Tech | Engineering | Other Business Roles |
2020 | 2021 | 2022 | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† |
American Indian or Alaska Native | —% | —% | —% | 0.2% | 0.1% | 0.2% | 0.7% | —% | —% | 0.1% | 0.2% | 0.2% | —% | 0.3% | 0.2% | 0.2% | —% | 0.1% |
Asian | —% | —% | —% | 17.5% | 18.9% | 18.7% | 14.4% | 15.6% | 14.1% | 25.6% | 24.7% | 24.0% | 22.6% | 24.2% | 24.5% | 8% | 9.8% | 10.2% |
Black/ African American | 12.5% | 22% | 22% | 5.9% | 6.1% | 7.1% | 5.8% | 6.1% | 6.2% | 5% | 5.4% | 5.6% | 5.5% | 5.6% | 4.8% | 7.2% | 7.2% | 9.5% |
Hispanic | —% | —% | —% | 6.1% | 6.3% | 7.3% | 2.2% | 3.3% | 4% | 4.6% | 5% | 5.7% | 5.5% | 5.6% | 5.9% | 8% | 8.5% | 9.9% |
Two or More Races | —% | —% | —% | 3.4% | 3.7% | 3.5% | 3.6% | 2.2% | 2.2% | 4.2% | 3.9% | 3.6% | 4.4% | 4.4% | 3.9% | 2.5% | 3.1% | 3.2% |
White | 87.5% | 78% | 78% | 63.0% | 61.2% | 60.2% | 71.9% | 70% | 71.8% | 56.4% | 57% | 58.1% | 57.5% | 55.6% | 57.3% | 70.6% | 67.8% | 63.8% |
Not Declared | —% | —% | —% | 3.8% | 3.7% | 3% | 1.4% | 2.8% | 1.8% | 4% | 3.8% | 2.8% | 4.6% | 4.4% | 3.4% | 3.3% | 3.6% | 3.3% |
AGE METRICS - GLOBAL*
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| n24 years and younger | n30-34 years | n40-49 years |
| n25-29 years | n35-39 years | n50+ years |
*Age Not Declared was .2% in 2020 and 2021, and .1% in 2022.
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
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Race & Ethnicity Metrics - U.S. Only
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| Board | Overall | Leadership | Tech | Engineering | Other Business Roles |
| 2020 | 2018‡ | 2019‡ | 2020† | 2018‡ | 2019‡ | 2020† | 2018‡ | 2019‡ | 2020† | 2018‡ | 2019‡ | 2020† | 2018‡ | 2019‡ | 2020† |
American Indian or Alaska Native | —% | 0.1% | 0.1% | 0.2% | —% | —% | 0.7% | —% | —% | 0.1% | —% | —% | —% | 0.3% | 0.2% | 0.2% |
Asian | —% | 16.5% | 15.3% | 17.5% | 19.3% | 15.5% | 14.4% | 22.6% | 21.1% | 25.6% | 21.9% | 20% | 22.6% | 8.5% | 7.7% | 8% |
Black/African American | 12.5% | 3.7% | 5.2% | 5.9% | 3.4% | 2.7% | 5.8% | 2.6% | 4.6% | 5% | 3.2% | 5.1% | 5.5% | 5.5% | 5.9% | 7.2% |
Hispanic | —% | 4.8% | 5.2% | 6.1% | —% | 1.8% | 2.2% | 4.7% | 4.7% | 4.6% | 5.1% | 5.5% | 5.5% | 5.2% | 5.7% | 8% |
Two or More Races | —% | 2.8% | 3.1% | 3.4% | 2.3% | 2.7% | 3.6% | 3% | 3.6% | 4.2% | 3.2% | 4.1% | 4.4% | 2.7% | 2.4% | 2.5% |
White | 87.5% | 67.0% | 64.6% | 63.0% | 75% | 72.7% | 71.9% | 60.8% | 58.8% | 56.4% | 60.8% | 58.4% | 57.5% | 74.8% | 72.1% | 70.6% |
Not Declared | —% | 5.1% | 6.5% | 3.8% | —% | 4.6% | 1.4% | 6.3% | 7.2% | 4% | 5.8% | 6.9% | 4.6% | 3% | 6% | 3.3% |
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| Governance | |
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| Fostering a culture of ethics and accountability |
Responsible Marketplace Practices
The trustworthiness of our marketplaces and the connections among our buyer and seller communities are the cornerstones of Etsy’s business. For more information, please see Part 1, Item 1, “Business—Primary Business Drivers—Trust & Safety” of this Annual Report.
Thoughtful Corporate Governance
Our corporate governance practices include an independent Board Chair, a fully independent Board of Directors (except for our CEO), independent Committee members, sophisticated and fully engaged directors with different areas of relative expertise and additional dimensions of diversity, and a balanced distribution of director tenure. For a more complete description of our corporate governance practices, please refer to our Proxy Statement for the 2023 Annual Meeting of Stockholders (“Proxy Statement”) to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. More information on our governance policies and guidelines is available at the Investor Relations section of our website.
In 2022, we continued to evolve our corporate governance practices, amending our bylaws to provide that a stockholder, or a group of up to 20 stockholders, owning at least three percent of the voting power of Etsy's outstanding capital stock continuously for at least three years, may nominate and include director nominees in Etsy’s annual meeting proxy materials (commonly referred to as a “proxy access bylaw”), subject to certain limitations and requirements specified in the Bylaws.
We also strengthened our commitment to diversity on our Board of Directors, updating our Policies and Procedures for Director Candidates to require any initial list of director candidates considered by the Nominating and Corporate Governance Committee to include at least two qualified candidates with diversity of race, ethnicity or gender.
Integrated ESG Reporting
We strive to continue to innovate and evolve our ESG disclosures to hold ourselves accountable and transparently engage with all of our stakeholders. Since 2018, we’ve shared our ESG metrics alongside our financial results in our Integrated Annual Report. This practice is intended to ensure that we’re transparent about and accountable for progress against our environmental and social goals. In 2022, we expanded the scope of our integrated ESG reporting to include Depop more broadly and to include Elo7 in our Gender and Age metrics for the first time. We are also taking steps to improve our analysis and disclosure of human rights concerns, including publishing our Modern Slavery Statement and engaging with a human rights consultant to develop a roadmap to further improve our internal policies and processes to identify and address potential human rights risks.
Risk Oversight and Management
One of the key functions of our Board of Directors is to provide informed oversight of our risk management processes. While management is responsible for day-to-day management of the material risks we face, our Board of Directors is responsible for risk oversight. Since 2019, Etsy has had a Risk Steering Committee, which consists of a cross-functional management team that meets regularly to review and discuss the significant risks facing Etsy. Periodic reports on material risk are provided to the full Board of Directors. The Risk Steering Committee also periodically considers areas of new or evolving risks and works to understand risk analyses and establish appropriate mitigation plans. For more information on risk oversight generally, please see “Board Oversight of Risk” in Etsy’s Proxy Statement. For information on how we manage our climate related risks, please refer to our complete TCFD response beginning on page 40 of this Annual Report.
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Age Metrics - Global
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| 2018‡ | 2019‡ | 2020† |
24 years and younger | 5.3% | 4.3% | 3.3% |
25-29 years | 27.9% | 27.6% | 25.3% |
30-34 years | 32.2% | 34.9% | 33.8% |
35-39 years | 20.8% | 19.5% | 21.4% |
40-49 years | 11.1% | 11.0% | 12.9% |
50+ years | 2.7% | 2.7% | 3.3% |
† Etsy commissioned an external third party to perform attest procedures with respect to our diversity metrics as of December 31, 2020. Full details and data methodology are available at investors.etsy.com.
‡ Metrics for which historical data has also been subject to previous attest procedures.
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SASB Disclosure
The Sustainability Accounting Standards Board’s (“SASB”) mission is to develop sustainability metrics for public corporations to disclose material, decision-useful information to investors. Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy.com, Depop, Reverb, or Elo7, information in this section applies to Etsy, Inc. and all of its subsidiaries.
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-000.A | Entity-defined measure of user activity | Active buyers - Etsy, Inc. (thousands) | 81,898 | | 96,336 | | 95,076 | |
| Active sellers - Etsy, Inc. (thousands) | 4,365 | | 7,522 | | 7,470 | |
CG-EC-000.B | Data processing capacity |
•In February 2020, we completed our full migration to Google Cloud for Etsy.com. Reverb and Depop use Amazon Web Services (AWS) for their cloud computing needs. •Our Etsy.com cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
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| Percentage outsourced | | 100 | % | 100 | % | 100 | % |
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Hardware Infrastructure Energy & Water Management |
CG-EC-130a.1 | Total energy consumed, MWh (Etsy.com) | 5,675 | | 5,362 | | 6,379 | |
| Percentage renewable energy (Etsy.com) | 100 | % | 100 | % | 100 | % |
| Percentage grid electricity (Etsy.com) | 100 | % | 100 | % | 100 | % |
CG-EC-130a.3 | Discussion of the integration of environmental considerations into strategic planning for data center needs. •For 2022 we continued to meet our goal to source 100% renewable electricity for our operations which includes our office facilities for Etsy.com, Reverb, and Depop, remote worker electricity usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com, and we have a 2025 goal to reduce the intensity of our energy use by 25% from a 2016 baseline. These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity, for Etsy.com. Their highly efficient data centers have helped us save significant overhead energy. We achieved a 69% reduction in energy use (kWh per site visit) from computing between 2016 and 2022, despite substantial growth in our business over the same period. •We actively monitor and manage energy consumption from our computing infrastructure for Etsy.com. In 2022, we estimate that our energy consumption in Google Cloud was 6,379 MWh, based on a methodology developed by Etsy and reviewed by industry experts (our “Cloud Jewels methodology”). Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint. Our 2022 hardware infrastructure energy footprint does not include Reverb, Depop, or Elo7 as we are not currently able to calculate energy usage from AWS, but we do include the emissions from Reverb and Depop’s hardware infrastructure in our Scope 3 Purchased Goods and Services calculations. •In 2018, Etsy entered into a virtual power purchase agreement for solar energy in Virginia. This project is providing us with renewable attributes to apply to our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet.
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SASB Disclosure
The Sustainability Accounting Standards Board’s (SASB) mission is to develop sustainability metrics for public corporations to disclose material, decision-useful information to investors. Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business.
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SASB Metrics |
SASB Code | Metric | 2018 | 2019 | 2020 |
CG-EC-000.A | Entity-defined measure of user activity | Active buyers (thousands) | 39,447 | 46,351 | 81,898 |
| Active sellers (thousands) | 2,115 | 2,699 | 4,365 |
CG-EC-000.B |
Data processing capacity |
•In December 2017, Etsy announced our Google Cloud Partnership, an initiative to transition Etsy.com infrastructure to Google Cloud Platform (“GCP”). •In February 2020, we completed our full migration to GCP. •We believe this transition will result in increased engineering efficiency, and enhance our overall infrastructure by providing faster processing speed, improved page load time, and more nimble fulfillment to capacity on an as needed basis.
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| Percentage outsourced | | 100% | 100% | 100% |
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Hardware Infrastructure Energy & Water Management |
CG-EC-130a.1 | Total energy consumed, MWh | 7,330 | 6,376 | 5,675 |
| Percentage renewable energy | 65% | 89% | 100% |
| Percentage grid electricity | 100% | 100% | 100% |
CG-EC-130a.3 |
Discussion of the integration of environmental considerations into strategic planning for data center needs. •In 2020 we met our goal to source 100% renewable electricity for our operations, and we have a 2025 goal to reduce the intensity of our energy use by 25%. These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity. Their highly efficient data centers are expected to help us save significant overhead energy. Moreover, moving to flexible cloud-based infrastructure has enabled us to reduce energy consumption. We achieved a 23% reduction in total energy use from computing between 2018 and 2020, despite substantial growth in our business over the same time period. •We actively monitor and manage energy consumption from our computing infrastructure. In 2020, our collocated data centers consumed 1,506 MWh and we estimate that our energy consumption in Google Cloud was 4,169 MWh, based on a methodology developed by Etsy and reviewed by industry experts. Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint. Our 2020 hardware infrastructure footprint does not include Reverb, but we plan to include Reverb’s energy used from computing in our 2021 analysis. •In 2018, Etsy entered into a virtual power purchase agreement for solar energy in Virginia. This project is providing us with renewable attributes to apply to our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet.
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Data Privacy and Advertising Standards |
CG-EC-220a.2 |
Description of the policies and practices relating to behavioral advertising and user privacy. •We care deeply about privacy and we’re committed to being upfront about our privacy practices, including how we treat personal information. Etsy’s Privacy Policy provides a detailed explanation of our privacy practices. Etsy’s transparency report also includes details of our Privacy Principles. •Among other things, our Privacy Policy covers the user information that Etsy collects or receives, the choices and control that a user has in relation to this data including based on type and sensitivity by region and worldwide, the purpose for which Etsy uses such information (including first and third party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third party partners, disclosures about third party partner privacy policy and options, and user controls for sharing and controlling such information with third parties.
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Table of Contents | | | | | | | | | | | | | | | | | |
Data Privacy and Advertising Standards |
CG-EC-220a.2 | Description of the policies and practices relating to behavioral advertising and user privacy. •We care deeply about privacy and are committed to being upfront about our privacy practices, including how we treat personal information. Etsy’s Privacy Policy provides a detailed explanation of our privacy practices. Etsy’s Transparency Report also includes details of our Privacy Principles. •Among other things, our Privacy Policy covers the user information that Etsy collects or receives, the choices and control that a user has in relation to this data including based on type and sensitivity by region and worldwide, the purpose for which Etsy uses such information (including first and third-party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third-party partners, disclosures about third-party partner privacy policy and options, and user controls for sharing and controlling such information with third-parties.
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Data Security |
CG-EC-230a.1 | Description of approach to identifying and addressing data security risks. •Data security is overseen by our Chief Information Security Officer (“CISO”) who reports to our Chief Technology Officer (“CTO”). •We strive to protect sensitive information through various means, such as technical safeguards, procedural requirements and policies, an intensive program of monitoring on both our web platform and within our corporate network, continuous testing of aspects of our security posture internally and with outside vendors, a robust incident response program, and regular training for employees. •In 2021, we expanded the role of our Audit Committee in the oversight of Etsy’s technology and information security policies and practices, and the internal controls relating to information security, and the steps taken by management to identify, monitor, and control these exposures, to provide for more focused oversight of rapidly evolving information security risks and mitigation strategies. •Our Board also periodically participates in tabletop exercises conducted by senior management as part of risk management and disaster-related planning to validate, test, and assess the effectiveness and adequacy of certain roles and decision-making processes in the event of a cyber-incident. •Further information can be found in our Data Privacy & Security policy on our Investor Relations site.
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Employee Recruitment, Inclusion and Performance |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.1 | Employee engagement as a percentage (Etsy.com) | 81 | % | 75 | % | 77 | % |
| Employee engagement as a percentage (Reverb) | 75 | % | 75 | % | 75 | % |
| Employee engagement as a percentage (Depop) | | | 72 | % |
| Employee engagement as a percentage and discussion of methodology. •In May 2022, we conducted an engagement survey of all global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response, and 77% of Etsy respondents and 75% of Reverb respondents reported favorable employee engagement. The survey was conducted through the Culture Amp platform and consisted of 64 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, and two free-text questions to which employees were asked to write out a response for Etsy.com. At Reverb, the Culture Amp survey consisted of 65 rating questions and two free-text questions. •During September and October 2022, Depop conducted its quarterly engagement survey through Peakon. 82% of employees submitted a response, with a resulting engagement score of 7.2. This is the average score given by respondents to 4 key engagement questions, all of which are rated on a scale of 1-10. This score has been converted into a percentage based on the overall engagement score. |
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.3 | Gender and racial/ethnic group representation for leadership, technical staff and other business functions | See Workforce Metrics section for details starting on page 33. |
Discussion of diversity and inclusion strategy and performance | See Social section for details starting on page 27. |
CG-EC-330a.4 | Percentage of technical employees who are H-1B visa holders | 5.1 | % | 5.6 | % | 3.8 | % |
Product Packaging and Distribution |
CG-EC-410a.1 | Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO2e | 303,218 | † | 363,361 | † | 339,395 | † |
Total greenhouse gas (GHG) footprint of packaging in metric tons CO2e | 53,489 | † | 63,645 | † | 57,911 | † |
CG-EC-410a.2 | Discussion of strategies to reduce the environmental impact of product delivery. •The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint. As a peer-to-peer marketplace, Etsy does not directly control seller shipping or the associated logistics networks; however, we are committed to addressing carbon emissions from shipping and packaging. •In 2022, we offset 100% of emissions generated from shipping and packaging on the Etsy.com (since 2019), Reverb (since 2019), and Depop marketplaces (starting in 2022) through investments in verified emissions reductions. This allows us to take immediate action while we work toward our Net Zero goal. •In addition, we take action in support of policy solutions that will help to drive carbon reduction from product delivery in the long-term. In 2022, we again prioritized advocating for national and regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on heavy- and medium-duty vehicles that play an important role in e-commerce logistics. •In 2022, we expanded our partnership with EcoEnclose to now include both Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option. •We continue to collaborate with peers, vendors, and NGOs on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector. *th
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Greenhouse Gas (“GHG”) Emissions Summary (tCO2e) | Etsy.com + Reverb | Etsy.com + Reverb | Etsy.com, Reverb, Depop |
GHG Emissions by Scope | 2020 | 2021 | 2022 |
Scope 1 | 294 | † | 350 | † | 371 | † |
Scope 2 - Market | 4 | † | 0† | 0† |
Scope 2 - Location | 914 | † | 420 | † | 542 | † |
Scope 3 | 438,731 | | 548,900 | | 531,638 | |
Scope 3 Emissions Intensity (tCO2e/ million $ gross profit) | | | 293 | |
Scope 3 GHG Emissions by Activity Source | | | |
Category 1: Purchased Goods & Services | | | |
Purchased Goods & Services (excluding Computing) | 76,451 | † | 97,302 | † | 106,434 | † |
Cloud Computing - Google Cloud (Etsy Only) | | 13,623 | † | 12,054 | † |
Other Computing | 488 | † | 466 | † | 1,836 | † |
Category 3: Fuel & Energy Related Activities | | | |
Fuel & Energy Related Activities Not Included in Scope 1 or Scope 2 | | 2,711 | | 3,429 | |
Category 5: Waste Generated in Operations | | | |
Waste | 3 | | 3 | | 5 | |
Water | 9 | | 4 | | 4 | |
Category 6: Business Travel | | | |
Air Travel | 153 | † | 67 | † | 1,067 | † |
Other Business Travel | 10 | | 9 | | 163 | |
Category 7: Employee Commuting | | | |
Commuting | 111 | | 83 | | 1,042 | |
Remote Workers | 672 | | 1,066 | | 1,401 | |
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Category 8: Upstream Leased Assets | | | |
Cloud Computing - Google Cloud (Etsy Only) | 0† | | |
Category 9: Downstream Transportation & Distribution | | | |
Shipping | 303,218 | † | 363,361 | † | 339,395 | † |
Packaging | 53,489 | † | 63,645 | † | 57,911 | † |
Category 11: Use of Sold Products | | | |
End User Energy Use | 4,127 | † | 6,560 | † | 6,897 | † |
For 2020 and 2021, emissions generated from our co-located data centers are included in Scope 2 emissions; we did not have operations in any colocated data centers in 2022. In 2020, we expanded our inventory to account for the Scope 3 GHG emissions from: (1) the packaging our sellers use to ship products to buyers, (2) the use of our platforms on consumers’ personal devices, and (3) our corporate supply chain. As part of our continued commitment to maintain accountability for our GHG emissions, in 2021, we further expanded the scope of our measured and reported GHG emissions inventory and refined the methodologies used to calculate our Scope 3 GHG emissions: (1) in Scope 3 - Category 3, we captured GHG emissions from fuel and energy related activities not already included in Scope 1 and 2, (2) we updated the supplier spend data, emission factors, and categorizations included in our Scope 3 - Category 1 emissions calculations, resulting in higher emissions year-over-year. (3) we reclassified emissions generated from Google Cloud computing from Scope 3 - Category 8 to Scope 3 - Category 1. As part of the recategorization of cloud computing, we now include an estimate of our supplier’s Scope 3 emissions, resulting in higher emissions. (4) We no longer differentiate between Scope 3 - Market and Scope 3 - Location-based emissions and instead provide current and historical data for what we had formerly considered Scope 3 - Market-based emissions, and (5) we apply renewable energy certificates to our employees’ working from home electricity usage in Category 7. In 2022, we included emissions from Depop in our above calculations. For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year over year. For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy.com only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions. Using Etsy’s Cloud Jewels methodology we estimated our Google Cloud Platform’s Scope 2 energy usage and with Google’s agreement, retired REC’s on behalf of this energy usage, thus reducing our supplier emissions from Google Cloud. As a result of the above changes in scope, methodology, and our continued efforts at further accountability, some categories of emissions data are not comparable from year to year. For additional details regarding the scope and data methodologies used to calculate our GHG emissions data can be found on our Investor Relations website. |
†Etsy commissioned an external third-party to perform attest procedures with respect to our carbon and energy metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
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SASB Metrics |
SASB Code | Metric | 2018 | 2019 | 2020 |
Data Security |
CG-EC-230a.1 |
Description of approach to identifying and addressing data security risks. •Data security is overseen by our Chief Information Security Officer (“CISO”) who reports to our Chief Technology Officer (“CTO”). •We strive to protect sensitive information through various means, such as technical safeguards, procedural requirements and policies, an intensive program of monitoring on both our web platform and within our corporate network, continuous testing of aspects of our security posture internally and with outside vendors, a robust incident response program, and regular training for employees.
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Employee Recruitment, Inclusion and Performance |
CG-EC-330a.1 | Employee engagement as a percentage (Etsy) | 70% | 76% | 81% |
| Employee engagement as a percentage (Reverb) | | | 75% |
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Employee engagement as a percentage and discussion of methodology. •In September 2020, Etsy conducted an engagement survey of all global employees. Of all employees surveyed across Etsy and Reverb, 92% submitted a response, and 81% of Etsy respondents and 75% of Reverb respondents reported favorable employee engagement. The survey was conducted through the Culture Amp platform and consisted of 57 questions - 53 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, two free-text questions to which employees were asked to write out a response, and two demographic questions. •The responses were analyzed against the results from a similar survey conducted in 2019, as well as Culture Amp’s 2020 New Tech - 500+ Benchmark, which consists of survey results from approximately 650 companies that are primarily internet-based or focused on creating new technologies, and that have between 500 and 5,000 employees.
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CG-EC-330a.3 | Gender and racial/ethnic group representation for leadership, technical staff and other business functions | See Impact Strategy section for detailed metrics. |
Discussion of diversity and inclusion strategy and performance | See Impact Strategy - Social Impact for details. |
CG-EC-330a.4 | Percentage of technical employees who are H-1B visa holders | 2.5% | 3.5% | 5.1% |
Product Packaging and Distribution |
CG-EC-410a.1 | Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO2e | 135,459‡ | 154,078‡ | 303,218† |
Total greenhouse gas (GHG) footprint of packaging in metric tons CO2e | | | 53,489† |
CG-EC-410a.2 |
Discussion of strategies to reduce the environmental impact of product delivery. •The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint. As a peer-to-peer marketplace, Etsy does not directly control seller shipping or the associated logistics networks; however, we are committed to addressing carbon emissions from shipping. •In 2019, we announced immediate action to balance our footprint by offsetting 100% of our emissions generated from Etsy.com shipping through investment in verified emissions reductions. In April 2020, we announced 100% carbon-offset shipping for Reverb.com. •We added a “local seller” signal to listing pages when the buyer is in the same ship-from region as the item. Local purchases can play a significant role in reducing our carbon footprint from shipping. •In addition, we take action in support of policy solutions that will help to drive carbon reduction from product delivery in the long term. In 2020, we prioritized advocating for ambitious regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on electrification infrastructure and heavy- and medium-duty vehicles that play an important role in e-commerce logistics. •We continue to collaborate with peers, vendors, and NGOs on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector.
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Greenhouse Gas (“GHG”) Emissions Summary (tCO2e) | 2018 | 2019 | 2020 |
GHG Emissions by Scope | | | |
Scope 1 | 372‡ | 371‡ | 294† |
Scope 2 - Market | 1,213‡ | 652‡ | 4† |
Scope 2 - Location | 2,923‡ | 1,859‡ | 914† |
Scope 3 - Market | 137,042 | 155,967 | 404,439 |
Scope 3 - Location | 137,042 | 155,967 | 407,021 |
Scope 3 GHG Emissions by Activity Source | | | |
Category 1: Purchased Goods & Services | | | |
Purchased Goods & Services | | | 42,646† |
Category 5: Waste Generated in Operations | | | |
Waste | 6 | 13 | 3 |
Water | 3 | 6 | 9 |
Category 6: Business Travel | | | |
Air Travel | 943‡ | 1,217‡ | 153† |
Other Business Travel | | | 10 |
Category 7: Employee Commuting | | | |
Commuting | 544 | 510 | 111 |
Remote Workers - Market | | | 672 |
Remote Workers - Location | 87 | 114 | 1,136 |
Category 8: Upstream Leased Assets | | | |
Cloud Computing - Market (Etsy only) | | 29‡ | 0† |
Cloud Computing - Location (Etsy only) | | | 2,355† |
Category 9: Downstream Transportation & Distribution | | | |
Shipping | 135,459‡ | 154,078‡ | 303,218† |
Packaging | | | 53,489† |
Category 11: Use of Sold Products | | | |
End User Energy Use - Market | | | 4,127† |
End User Energy Use - Location | | | 3,890† |
Our 2020 greenhouse gas emissions include both Etsy and Reverb, unless otherwise stated. Our 2019 greenhouse gas emissions include both Etsy and Reverb, except for Shipping and Cloud Computing. Reverb’s footprint has been accounted for from the date of acquisition in 2019 forward. Our 2018 greenhouse gas emissions include only Etsy. Etsy has included emissions generated from our colocated data centers as Scope 2 emissions, consistent with prior years. Emissions generated from cloud computing are classified as Scope 3 - Category 8 emissions. In 2020, we expanded our inventory to account for the Scope 3 greenhouse gas emissions from: (1) The packaging our sellers use to ship products to buyers, (2) the use of our platforms on consumers’ personal devices, and (3) our corporate supply chain. |
† Etsy commissioned an external third party to perform attest procedures with respect to our carbon and energy metrics for the period from January 1, 2020 to December 31, 2020. Full details and data methodology are available at investors.etsy.com.
‡ Metrics for which historical data has also been subject to previous attest procedures.
The Task ForceIntellectual Property
Protection of our technology and intellectual property is an important component of our success. We rely on Climate-Related Financial Disclosuresintellectual property laws, including patent, trade secret, copyright, and trademark laws, in the United States and abroad. We also use confidentiality procedures, defensive licensing and acquisitions, non-disclosure agreements, invention assignment agreements, and other contractual rights to protect us and our intellectual property.
The Financial StabilityWe file patents and register domain names, trademarks, copyrights, and service marks in the United States and abroad. We rely upon unregistered copyrights and common law protection for certain trademarks. We also use internal and external brand protection mechanisms that are intended to protect our brands from misuse by third parties.
Government Regulation
As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently changing. Compliance is costly and can require changes to our business practices and significant amounts of management time and focus. In addition, in both the United States and abroad, laws and regulations relating to the liability of online marketplaces for activities of their sellers and other third parties are being tested by a number of proceedings.
Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, federal and state laws in the United States, E.U. directives, and other national laws govern the processing of payments and consumer protection; other laws define and regulate unfair and deceptive trade practices. Still other laws dictate when and how sales or other taxes must be collected. Laws of defamation apply online and vary by country.
We are also subject to federal, state, and foreign laws and regulations regarding privacy and protection of consumer information. Our privacy policies describe our practices concerning the use, storage, transmission and disclosure of personal information, including buyer and seller data. Any failure by us to comply with our policies or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business.
Many jurisdictions in which we operate have enacted laws and regulations requiring notification to users when there is a security breach of personal data, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. This growing focus on data privacy and regulation of e-commerce worldwide could impose additional compliance burdens and costs on us or on sellers and could subject us to significant operational costs for internal compliance and risk to our business. Further, any failure by us to adequately protect the privacy and data of our sellers and buyers could result in a loss of confidence in our marketplaces, which could adversely affect our business.
In addition, some of these requirements may introduce friction into the buying and selling experience on our platforms and may impact the scope and effectiveness of our marketing efforts, which could negatively impact our business and future outlook. Additionally, because we operate internationally, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. Non-compliance with any applicable laws and regulations could result in penalties or significant legal liability. See Part I, Item IA, “Risk Factors—Regulatory, Compliance, and Legal Risks.”
Seasonality
Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year. Our cost of revenue and marketing expenses also generally follow this trend, with the highest costs incurred in the fourth quarter of each fiscal year. We expect this seasonality to continue in future years.
ESG Reporting: Our Impact Goals, Strategy & Progress
We have developed an Impact strategy and goals that reflect the positive impact we want to have on the world while advancing and complementing our business strategy, and we are pleased to provide this update on our progress.
Our Approach to ESG Reporting:
We apply similar focus, discipline, and accountability to our environmental, social, and governance (“ESG”) reporting metrics as we do our financial metrics, and we believe that together they make us stronger and more resilient. We expect to continue to use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress. We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board established the(“SASB”) sector standards for our industry and Task Force on Climate-Related Financial Disclosures (“TCFD”), which is committed frameworks.
Our “House of Brands” and ESG Reporting Boundary:
We expect to market transparencycontinue to evolve our Impact strategy and stability, to develop recommendations for more effective climate-related disclosures. Beginning this year, Etsy is providing enhanced climate-related disclosures using the TCFD framework. The following table summarizes specific information that addresses the disclosures recommendedESG reporting in the TCFD, including the publicly available source where each disclosure is referenced. Etsy plans to leverage the TCFD framework and recommendationsfuture as we continuegrow and further incorporate our focusrecently acquired marketplaces into our Impact strategy and as our Impact work continues to mature. Our discussion of Impact strategy and highlights and ESG data includes the operations of our Etsy.com, Reverb, and Depop marketplaces but does not include the operations of Elo7, which was acquired in 2021, except where designated in the below chart. It is our intention to further integrate our Elo7 marketplace in our ESG reporting in the future. Any reference to Etsy, Inc. in this section, such as for the age and gender metrics provided on climate-related disclosures and management.pages 33-34, includes our full “House of Brands,” including Elo7.
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Core Elements | TCFD Disclosure Recommendation | Disclosure | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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| ESG Reporting Table of Contents | | | “House of Brands” Boundary | |
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| Our ESG Framework GovernanceHow our Impact work is structured
| | 22 | | | a) Describe the board’s oversight of climate-related risks and opportunities
| | | | Etsy’s Board is responsible for reviewing and approving Etsy’s Annual Operating Plan, which includes both climate-related strategy, goals and targets, and associated budgets required to meet those goals. | | | |
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| Creating Economic Impact through Entrepreneurship The Nominating and Corporate Governance CommitteeOverarching Impact of the Board, within its charter, has responsibility for the periodic review of progress against the company's economic, social and ecological impact goals, which includes climate-related issues.our Brands | | 22 | | | | | | | | | | |
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| How We Drive Impact The Audit Committee of the Board oversees Etsy’s 10-K disclosure, which includes our climate-related andlevers we use to drive impact disclosures.work | | 23 | | | | | | | | | | |
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Environmental
b) Describe management’s role in assessing and managing climate-related risks and opportunitiesGoals & Highlights
| | 24 | | | | | Etsy’s annual Impact goals are set by our Executive Team at the corporate level, aligned with its three Pillars of economic, social | | | | * | |
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| Social Goals & Highlights | | 27 | | | | | | | | | | |
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| Workforce Metrics Employee Diversity data | | 33 | | | | | | | | | | |
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| Governance Highlights | | 35 | | | | | | | | | | |
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| SASB Consumer Goods Sector E-Commerce industry standard reporting | | 36 | | | | | * | | * | | * | |
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| TCFD Climate - Governance, Strategy, Risk Management, Metrics and ecological activities. Within these pillars, the Executive Team sets specific and measurable goals.Targets Etsy also has a Risk Steering Committee, a cross functional team that meets at least quarterly and is responsible for the management and oversight of key financial, operational, legal and strategic risks facing Etsy, including any risks that are climate-related.
Etsy’s Impact Committee meets monthly to set and drive company-wide impact strategy, including our climate-related goals. It ensures organization-wide internal and external accountability for climate-related goals. The Impact Committee also assesses climate-related issues and develops management plans to address these issues accordingly. The Impact Committee includes cross-functional membership from major business functions at Etsy, including legal, workplace, strategic sourcing, sustainability, advocacy, product analytics, marketing, public relations, and investor relations.
Etsy’s Impact Committee provides periodic updates to the Risk Steering Committee and the Etsy board.
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= included in section and specified goals * = further clarification on section inclusion within designated section
Our ESG Framework:
In 2021, Etsy transitioned to the more commonly used environmental, social, and governance nomenclature for reporting on our Impact work. We believe this change makes it easier for our various stakeholders to track and interpret our progress and better aligns our reporting with emerging global standards.
Creating Economic Impact Through Entrepreneurship
We are committed to growing sustainably by aligning our mission and business strategy to help create economic impact through entrepreneurship and, therefore, create value for all our stakeholders. In 2022, Etsy.com sellers contributed almost $13.5 billion to the U.S. economy* by harnessing their creativity and bringing unique products to market. Etsy.com sellers created the equivalent of nearly 3.4 million jobs in the independent worker economy*, enough jobs to employ all of the city of Chicago (population 2.7 million) and more, and generated approximately $3.6 billion in income*.
* To calculate these results, Etsy.com commissioned its fifth economic impact study with ECONorthwest, an independent economic consulting firm, to explore the ways Etsy.com sellers in the United States contribute to the national economic landscape.
How We Drive Impact
Underpinning our Impact strategy is a set of levers we employ to drive toward our Impact goals while advancing and complementing our business strategy.
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| In 2022, Etsy Inc.’s Advocacy team worked with sellers and policymakers around the world to ensure a voice for small business owners in public policy. We continued to advocate for public policies aligned with the needs of creative entrepreneurs including supporting: •reform efforts to provide the U.S. postal service with the funds needed to provide accessible affordable shipping options for sellers; •enhanced access to affordable child care and caregiving leave for micro businesses; •sellers’ privacy rights by advocating for strong privacy protections in consumer protection bills; and •the rights of small business owners by advocating against new rules that would impose heavy burdens on small and microbusinesses. | | Impact Investing. In 2022 we set up a $30 million Impact investment fund that is being held at a large Black-led Minority Deposit institution in the United States. The investment will support our Impact strategy and is expected to be put to work in 2023. |
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| | Philanthropy. In 2022, Etsy, Reverb, and Depop invested over $4.6 million in philanthropic donations to organizations driving equitable access to opportunity as well as disaster relief and direct support for local community based organizations. |
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| | Contributing to our Communities. Collectively, we enabled Etsy.com, Reverb, and Depop employees to donate over 4,300 hours of paid volunteer time off in their communities through Etsy’s Impact Hours program. We cancelled the balances owed to Etsy by all sellers in Ukraine in the first quarter of 2022, which included listing fees, transaction fees, advertising fees, and more. This extended to Ukraine-based sellers in our relevant marketplaces, including Etsy.com and Reverb. This represented a contribution of approximately $4.6 million towards our community. Natural disasters can be devastating to our sellers. In 2022, we updated our Disaster Response Framework to guide how and when we proactively support sellers in times of crisis. |
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| | Purchasing Power. We aim to drive positive impact in our supply chain by investing in strong relationships with our suppliers. We engage on priority impact areas, such as supplier diversity, greenhouse gas emissions, fair wages, and employee benefits programs, at crucial touch points throughout the supplier lifecycle. We conduct regular reviews, audits, and conversations to confirm suppliers are upholding agreed upon practices and to identify further areas where we can engage with suppliers. We have a Supplier Code of Conduct designed to ensure that our suppliers are committed to our standards. |
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| Core ElementsEnvironmental | |
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| Building resilience for the long term |
Net Zero
Achieve Net Zero through targets aligned with the science of climate change while continuing to run a carbon neutral company.
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TCFD Disclosure Recommendation2022 & 2023 Goals |
Disclosure | | |
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Etsy, Inc.: By year end 2030, we aim to achieve a 50% reduction in absolute Scope 1+2 greenhouse gas emissions and a 52% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
Strategy
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a) Describe the climate-related risksBy year end 2040, we aim to achieve a 90% reduction in absolute Scope 1+2 greenhouse gas emissions and opportunities the organization has identified over the short, medium, and long term97% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
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Etsy’s SustainabilityContinue to offset 100% of measured Scope 1, 2, and Legal/Advocacy teams help to assess regulatory issues associated with current or emerging climate-related3 greenhouse gas emissions annually.
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We believe our Net Zero goal strengthens our position as a trusted brand and contributes to our long-term strategy and makes us more resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our corporate boundaries, contributing to the overall health of people and planet.
In 2022, Etsy, Inc. became one of the first few hundred companies globally to have our Net Zero goal approved by the Science-Based Targets Initiative (SBTi) under their new Net-Zero Standard. Guided by our new targets, in 2022, we reduced our absolute Scope 1 and 2 Net emissions by 12% while our Scope 3 emissions decreased by 22% on an intensity basis (tCO2e / $mm of gross profit) compared with our 2020 Net Zero baseline for both targets†. We made the following progress towards our Net Zero goal in 2022:
Transportation:
Emissions from the shipping of items sold in our marketplaces is by far the largest source of our Scope 3 emissions. In 2022, emissions from transportation accounted for approximately 64% of our Scope 3 emissions. This represents a 17% intensity reduction relative to 2021 and 27% intensity reduction relative to our 2020 baseline.
We drive reduction in transportation emissions primarily through advocacy, carrier engagement, and product (marketplace) design. In 2022, we supported the climate provisions in the Inflation Reduction Act at the national level, and advocated for the Advanced Clean Trucks and Advanced Clean Fleets legislation at the state level.
Packaging:
In 2022, emissions related to our sellers’ packaging made up 11% of our total Scope 3 footprint. This represents a 20% intensity reduction relative to 2021.
Purchased Goods & Services:
Our 2022 corporate procurement emissions were 120,325 tCO2e or 23% of our Scope 3 emissions. Through direct supplier engagement and strict supplier selection criteria, we were able to reduce corporate procurement emissions 6% on an intensity basis relative to 2021. Through our supplier vetting program, we collected impact data from 77.7% of Etsy.com’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 55% of Etsy.com’s spend went to companies that have set an emissions reduction goal. We plan to further leverage our negotiating power in our supply chain to drive Net Zero aligned reductions in 2023.
† Scope 1 emissions include direct emissions such as natural gas and refrigerants used at our facilities. Scope 2 emissions include indirect emissions from the generation of electricity, steam, heating, and cooling that we may purchase for our facilities. Scope 3 emissions include all other indirect emissions that occur in our value chain such as business travel, employee commuting, and the goods and services we purchase.
Scope 3: Progress Against Science-Based Net Zero Target
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| nActual Emissions Intensity | — | Yearly Target | — | 2040 Goal |
Scope of our Net Zero Goal: This includes emissions across all four brands within Etsy, Inc. and is set against a 2020 baseline. Our 2020 and 2021 reported emissions include third-party assured Etsy.com and Reverb data, internally reviewed Depop data, and estimates for Elo7. Depop and Elo7 generate approximately 6% of these emissions. Our 2022 data includes third-party assured data for Etsy.com, Depop, and Reverb with estimated Elo7 data representing approximately 0.5% of our total emissions. For additional details about how we measure emissions, please see our GHG inventory and related notes on page 39, which includes our 2020 and 2021 emissions for Etsy.com and Reverb, and our 2022 emissions for Etsy.com, Reverb, and Depop. Our consolidated “House of Brands” Scope 3 emissions intensity for the trailing three years are illustrated in the ‘Progress Against Net Zero’ adjacent chart.
Carbon Neutral Business
We are focused on meeting our long-term SBTi- approved Net Zero goal. However, while we work toward long-term reductions in line with our goal, we are taking immediate action to address our environmental impact through our commitment to carbon neutrality. We consider our Net Zero efforts to be separate, but complementary to our carbon neutral work and expect to phase down our investments in offsets as we meet our Net Zero targets.
Since 2019, we have offset 100% of Etsy.com and Reverb’s Scope 1, 2 and 3 emissions. For 2022, we offset 100% of Etsy.com, Reverb and Depop’s Scope 1, 2 and 3 emissions by investing in 532,009 verified emissions reductions (VERs) that protect forests, sponsor wind and solar farms, and help develop greener methods for producing auto parts.
Sustainable Operations
Maintain best-in-class sustainable operations.
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2022 & 2023 Goals |
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Source 100% of electricity from renewable sources for all Etsy, Inc. brands.
Achieve a 25% reduction in the intensity of our energy use in offices (kWh/sq. ft.) and for computing (kWh/visit) for Etsy.com by year end 2025.
Maintain “Zero Waste” across global operations for Etsy.com. Run “Zero Waste” operations at Reverb and Depop by year end 2025. |
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Maintaining best-in-class sustainable operations allows us to focus on long-term cost reduction, minimizing waste, and creating a healthier office environment for our employees. In 2022, we continued to make good progress against our goals.
Energy Use
In 2022, our total operational energy footprint was 19,688 MWh, of which 52% was from electricity. This includes energy usage from our office facilities for Etsy.com, Reverb, and Depop, remote worker energy usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 2022 to be 6,379 MWh, or 32% of our total energy use.
Renewable Electricity
Since 2020, we have sourced renewable energy for 100% of the electricity used to power Etsy.com and Reverb's offices and employees working from home, as well as Etsy.com's computing load in Google Cloud. For 2022, we also sourced renewable energy for 100% of the electricity used to power Depop's offices and employees working from home.
This was achieved through a virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Through our 15-year VPPA, which we signed in 2018, we procure solar energy in the PJM Interconnection market that covers greater than 100% of Etsy, Inc.’s U.S. electricity needs.
Energy Efficiency
Our 2022 energy use for Etsy.com offices was 4,001 MWh. In offices where we maintain operational control, we achieved a 35% reduction in energy intensity (kWh/sq. ft.) relative to our 2016 baseline. At our Brooklyn headquarters, our efforts led to a New York City Building Energy Grade of an A.
For Etsy.com computing energy use, our energy usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
“Zero Waste”
In 2022, Etsy.com received a “Zero Waste” certification of our operations through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the fifth year in a row for diverting over 90% of waste from landfill at our Brooklyn and Dublin offices. We continue to work toward our “Zero Waste” by 2025 goal for Reverb and Depop.
Marketplace Sustainability
Establish our marketplaces as destinations for sustainably minded shoppers and conscious living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity.
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2022 Goals | | 2023 Goals |
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Etsy.com: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living.
Define a key performance indicator and establish a baseline on circularity. | | Etsy.com: Monitor and report the percent of active listings that have sustainability attributes, and the potential impactspercent of sellers who have added a sustainability attribute to at least one listing.
Depop: Leverage our marketing and product capabilities to facilitate access to circular fashion and inspire more people to shop circular.
Reverb: For every new item sold, we'll aim to sell at least one used item, and we'll aim to support circularity by increasing orders of used items by 25% by 2025. |
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We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to the values that are most important to them. We’re bringing sustainability to life for buyers and sellers in several ways:
Item Sustainability
In 2022, Etsy.com piloted new optional sustainability listing attributes that allow sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste. On December 31, 2022, 4.7% of sellers had added a sustainability attribute to 1 or more listings, and 1.2% of active listings had at least one sustainability attribute.
As part of the launch, we also provided guidance to sellers on best practices for indicating each attribute. We are undertaking an internal review of a sample of listings to identify opportunities to enhance education. We are also engaging an external sustainability firm to review the efficacy of the program and determine if any remediation measures are needed in advance of launching any buyer-facing initiatives.
Packaging
As part of our efforts to meet our Net Zero goal, we are helping sellers reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2022, we expanded our partnership with EcoEnclose to include both
Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option.
Circularity
In 2022, we set a new strategy to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Across our marketplaces, our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship.
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| Ensuring equitable access to opportunity |
Prioritizing People
As of December 31, 2022, we had approximately 2,790 total employees worldwide, inclusive of Reverb, Depop, and Elo7 which had approximately 270 employees, 390employees, and 220 employees, respectively.
Diversity, equity and inclusion (“DEI”) are core to Etsy‘s culture. As Etsy has grown, we have leaned on our value of “embracing differences.” We’ve continued our commitment to creating safe-space communities through our Employee Resource Groups (“ERGs”), made improvements to increase employee accessibility and disability inclusion, and refreshed our competency matrices and our performance enablement programs to enable equity.
This year we took to heart that diverse teams thrive with inclusive leadership, benefits, and policies. We believe that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and reinforce our values. We’re committed to building a workplace where people of all backgrounds and walks of life can thrive. Additionally, the sustainability of our working environment and employee well-being also remained a key priority.
As a result, we’ve continued to support our hybrid working mode, as we believe a hybrid approach to work is the best fit for our business, culture, and team. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s generous paid time off policies. Etsy’s employees also took advantage of regular Focus Days, full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days to our employees as part of our overall approach to well-being.
We continued our focus on employee engagement in 2022, which is linked with high performance, retention, innovation, and growth. Our employees have chosen to work at Etsy because they believe in our action-oriented, values-based, and purpose-driven work culture. In 2022, we conducted an engagement survey of all Etsy.com and Reverb global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response. 77% of Etsy.com respondents and 75% of Reverb respondents reported favorable employee engagement.
Employee Diversity, Equity, and Inclusion
Build diverse and inclusive work forces that are broadly representative of their communities.
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2022 Goals | | 2023 Goals |
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Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023. For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026.
Enhance and expand accessibility efforts by defining a KPI and establishing a baseline for accessibility in the employee experience at Etsy.com, Reverb, and Depop. | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% In 2023, Etsy is committed to scoring an 80 or higher on Etsy's abilityDisability: IN's Disability Equality Index.
Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to meet our shortat least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026. (Note: Reverb’s definition of BIPOC includes Black, Latinx, Native American, Asian and long-term goals. These teams,two or more races)
Depop: Achieve 35% of underrepresented ethnicities in global headcount by year end 2028 (baseline December 31, 2022: 30%) (Note: Depop defines underrepresented ethnicities as Asian, Black, Mixed and staff identifying as ‘Other,’ including Latinx in the United States. To establish which ethnicities are underrepresented at Depop, we considered census, workforce and benchmarking data as well as the Impact Committeeour aim to be a progressive workplace.)
Achieve 27% of underrepresented gender identities in engineering & data by year end 2028 (baseline December 31, 2022: 20%) |
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Employee DEI
We made progress on the goal we set in 2018 to double the percentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at Etsy.com by year end 2023. In 2022, Black, Latinx and Native American people constituted 23.9% of U.S. Etsy.com hires. As a result, at December 31, 2022, Black, Latinx, and Native American people made up 15.3% of Etsy.com's U.S. workforce, up from 8.6% in 2018 and 12.9% in 2021.
In 2022, Black, Indigenous, and People of Color (“BIPOC”) constituted 27.7% of Reverb’s U.S. hires. At December 31, 2022, Reverb’s U.S. workforce included 18.9% BIPOC representation, compared to 18.9% on December 31, 2021.
In 2022, Depop welcomed the integration within Etsy’s “House of Brands” as an opportunity to build on prior efforts, and introduce refreshed employee DEI Goals which continue Depop’s commitment to diversity while taking into account the wider economic context in which the business now operates, and more conservative hiring expected in 2023.
Gender Diversity
Etsy proudly maintains approximate gender parity in the overall employee population, among Leadership and at the Board of Directors level. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the U.S., the percentage of women and marginalized gender software engineers at Etsy.com is 37.9%. Globally across all functions, at Etsy.com, the representation of women and marginalized gender employees was 51% at year end 2022.
We have identified an opportunity and set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. As of December 31, 2022, in Mexico, we have achieved 14.4% representation of women and marginalized gender employees, and, in Ireland, we have achieved 16.2% representation of women and marginalized gender employees.
At Reverb, the representation of women and marginalized gender employees grew from 33.9% at December 31, 2021 to 36.4% at December 31, 2022.
At Depop, the representation of women and marginalized gender employees was 46% of their global workforce at year end 2022. Although Depop’s total workforce is broadly balanced between men and women/other gender identities, we’ve identified that the engineering and data teams present an opportunity for improving gender diversity.
Depop has expanded the scope of their previously committed target for increasing the number of women in engineering and data positions to include women and other marginalized genders (referred to as underrepresented gender identities or,”URGs”).
Attracting and Retaining Diverse Talent at the Leadership Level
Etsy is committed to building a workplace where all people, regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or veteran status, can come, stay and thrive.
In 2022, Etsy formalized the Executive Diversity Council, bringing together senior stakeholders in order to support current and future DEI efforts and embed inclusive practices throughout Etsy.com, and holding leaders accountable for results. Members of this council are the Executive Team, who are responsible for Etsy’s principal business units, and Etsy’s DEI leaders. Etsy’s Executive Diversity Council is working to support strategic initiatives, partnerships, advocacy, and programs that contribute to Etsy’s DEI mission and Etsy’s employee experience, and whose results can be measured against an established DEI scorecard.
As of December 31, 2022, Black, Latinx, and Native American people comprised 9.8% of Etsy and Reverb’s combined leadership-level workforce. Our recruiting efforts include auditing each job description for inclusive language, proactively offering disability accommodations, sourcing from wide talent pools, strict adherence to a structured interview process, diversity training for all interviewers, applying the Mansfield rule (requiring that at least two qualified candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department) for all job openings to ensure candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department)). To retain our employees, we’re investing in refreshed management training through Etsy’s “Managing in the Moment” program, inclusion training for all employees, creating multiple avenues for connection and feedback between our Employee Resource Groups and our executive leaders; and we are seriously committed to building trust and transparency with employees. For example, career development conversations generally take place quarterly at Etsy and managers receive special training to facilitate annual review conversations and to mitigate potential biases in the process.
Focus on Inclusion
At Etsy.com, we’ve continued our mentorship programs and our employee resource group (“ERG”) program. Our goal is to create a positive and inclusive workplace culture where employees from all backgrounds, ages, and abilities have access to programs that foster a sense of community, contribute to professional development, and amplify diverse voices within the organization. In 2022, Etsy.com grew our ERG program to ten communities by adding a resource group dedicated to Accessibility & Disability, created a series of roundtables where the ERGs held dialogs with executive leaders, and hosted a robust program of ERG-produced events focused on advocacy and equity. Etsy also continues to ensure our ERGs have a voice in Etsy.com’s benefits offerings and responses to global concerns.
In addition to our expanded ERG and mentorship offerings, in 2022 we launched identity-based peer cohorts, called ‘dens’ internally, for Black, Latinx, Native American and Asian identifying employees.
In order to bolster equity and inclusion across Etsy’s “House of Brands,” in 2022, Reverb hired a dedicated DEI leader, launched a DEI Leadership Council responsible for promoting collaboration, transparency, and accountability for achieving our DEI roadmap goals, and launched its first internal DEI mentorship program and ERG program.
Our dedication to robust DEI training
In addition to our annual anti-discrimination and anti-harassment trainings, Etsy.com and Reverb continued partnering with Praxis Labs to conclude a virtual reality based DEI course for all employees. This seven month long, self-paced learning journey was supported by monthly discussion sessions facilitated by the DEI team.
Etsy.com and Reverb expect to continue to partner with third-party DEI consultants in 2023 as we continue to push our teams to "walk the talk" of our DEI commitments, and go beyond standard anti-discrimination trainings. In addition, we’ll be embedding inclusion education into employee lifecycle moments, including new hire orientation and manager training. Our DEI development goals include advancing individual’s ability to build empathy, identify inequity and, most importantly, take action.
Depop is committed to launching inclusion training in 2023 for all employees, including managers.
Pay Equity
Etsy takes proactive measures at each step of the employee journey in order to ensure fair pay practices. At the recruiting stage, we determine compensation packages within our existing frameworks by comparing outgoing offers to internal roles with comparable experience. During compensation reviews, we use guideposts when determining the size of merit and promotion increases and bonuses based on performance outcomes. Additionally, all compensation recommendations are reviewed by the appropriate Human Resources Business Partner and Executive team to ensure equity. Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires.
As part of our commitment to fair pay practices, we completed our 2022 Pay Equity analysis, conducted by a third-party consulting firm. The purpose of this analysis is to look at pay across jobs and levels to ensure our practices are fair and consistent and that compensation is not influenced by gender, or race/ethnicity.
The analysis found no unexplained pay gaps adverse to women or employees from other marginalized genders, or non-white employees. Additionally, there were no unexplained pay gaps based on intersectionality (i.e., based on the combination of race and gender/ethnicity). We plan to continue to comprehensively audit pay equity biennially with an external consultant, and conduct internal reviews several times a year in conjunction with events such as rating and promotion decisions and market adjustments.
Equity in Promotions
Etsy’s People Managers have the opportunity to recognize a direct report’s significant contributions and readiness for the next level by nominating them for a promotion. We offer two promotion cycles per year, one in the fall and one in the spring. Each of these cycles includes a calibration step where senior leaders in the relevant internal organization meet to review all promotion nominations in that organization to ensure fairness in decision-making practices.
To help ensure fairness and to mitigate bias in assessing promotion readiness, we provide Managers with tools and training to reflect on their own implicit biases, and we solicit nominations through a structured nomination form that has been audited to incorporate DEI best practices.
In addition to our rigorous promotion nomination practices, we perform detailed pre- and post-calibration analyses to assess equity in each promotion cycle.
Equity in Performance Ratings
We reward and recognize employees for their performance at Etsy with an overall performance rating that is decided once per year in the Annual Review process and informs pay and talent decisions, including salary increases, bonuses, and promotion decisions.
We work hard to ensure the performance review process is as consistent and fair as possible. A number of components play key roles in minimizing bias including clearly established and accessible behavioral competencies that outline performance expectations for each role and level, performance ratings that weight impact (50%) and competencies (50%) equally, and calibration that is conducted annually following submission of a Self-Review and Manager Review. In calibration, senior leaders in the applicable internal organization meet to review all rating decisions to ensure fairness in how ratings are applied to individuals in similar levels and roles. We review data pre- and post-calibration to assess equity in performance rating decisions. We plan to continue conducting this analysis annually.
Accessibility
Ensuring our employees are supported by policies, tools, and benefits that fit their needs remains a top priority. We take a generous approach to providing employees with accommodations and leaves of absence when needed, and we work hard to reduce stigma related to discussing matters of disability and mental health.
In 2022, Etsy.com launched the Accessibility & Disability ERG to foster community and provide a safe space for disabled and/or neurodivergent employees. In addition, we created an accommodations resource guide and trained our recruiters, as part of our efforts to ensure our interviewing process is as accessible as possible. We also are developing disability inclusion training, to be launched in 2023.
In 2022, Etsy.com partnered with Disability:IN and participated in their Disability Equality Index, a comprehensive benchmarking tool that helps companies achieve disability inclusion and equity. Using Etsy’s Disability Equality Index results, we built and began implementing a comprehensive disability inclusion roadmap.
Supplier Diversity, Equity, and Inclusion
Create an equitable and sustainable supply chain that supports our “House of Brands” while reducing our carbon footprint, supporting diverse businesses and bringing new economic opportunities to our suppliers and their employees.
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2022 Goals | | 2023 Goals |
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Etsy.com: Ensure at least 50% of Etsy’s small and medium-sized enterprise suppliers* are owned by women, underrepresented racial communities, or veterans by year end 2022.
* Based on suppliers providing impact data through our Executive Team, also monitor ESG trends, market trends,supplier vetting program. | | Etsy.com, Reverb, Depop: Achieve $120 million in cumulative diverse* supplier spend by year end 2025.
* A diverse supplier is defined as woman-owned, disability-owned and other issues that might impact Etsy's brandLGBTQ-owned globally; as well as underrepresented racial communities- (Black, Asian-Indian, Asian-Pacific, Hispanic/Latinx, Indigenous) and reputation. Etsy considers ESG risks and opportunitiesveteran-owned in the short-term (0-1 years), medium-term (1-3 years)United States. |
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Supplier Diversity
In line with Etsy’s commitment to enable equitable access to economic opportunities, we set a short-term supplier diversity goal in 2019 to have 50% of our small and medium enterprise suppliers be women, URC*, or veteran owned by year end 2022.
In the final year of our work towards this target, we collected impact data through our supplier vetting program from 77.7% of Etsy’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 44.1% of Etsy’s small- and medium-sized suppliers are owned by women, URCs*, or veterans, down from achieving our target of 50.1% in 2021. We hoped to sustain and build on this progress in 2022; however, in response to Etsy’s rapid growth in scale, we saw two trends emerge that contributed to us missing the target.
1.In order to meet the demands of our larger scale, our business teams sought out efficiencies within their supply chains. Several business units planned and executed consolidation strategies across key spend categories (primarily professional services and in-office food). We focused our supplier diversity efforts on these planned areas of consolidation and encouraged the use of diverse small businesses wherever possible. We also engaged directly with our Tier 1 suppliers to support an expansion of data collection efforts to Tier 2 suppliers in our food program, where our purchasing power could have a more direct impact. Despite these efforts, the broader consolidation strategies in professional services contributed to the net reduction in supplier diversity.
2.At the same time, we also experienced accelerated growth in our overall small- and medium-sized supplier pool. While we are proud to have continued to grow our support of small- and medium-sized suppliers as our business scaled, we saw our overall small- and medium-sized supplier rate grow faster than our growth rate of diverse small- and medium-sized suppliers.
*URC for supplier diversity is defined in the Supplier DEI 2023 Goals chart above.
Launching a “House of Brands” Supplier Diversity Program and New Short-term Goal
Since 2019, Etsy has scaled our corporate supply chain operations to support four brands and we’ve learned that our supplier management and impact strategies have to evolve alongside our business. We began the crucial work of improving our end-to-end supplier management infrastructure in 2022 – adding people and centralizing processes; evolving our policies and processes to enable scale and efficiency; and introducing new technology. In 2023, we plan to continue these efforts and lay the foundation to launch Etsy’s first ever “House of Brands” Supplier Diversity Program. In the coming years, we expect this program will allow us to add Depop to our supplier Impact vetting process (joining Etsy.com and Reverb suppliers), release a public-facing supplier diversity policy and invest in technology to support automated reporting and dashboards. As part of this program, we are introducing a new short-term target to achieve $120 million of cumulative spend with diverse suppliers from January 1, 2022 through the end of 2025, across Etsy.com, Reverb and Depop. As of the end of 2022, we had $27 million in diverse supplier spend toward our new target.
Employment Practice Priorities
Etsy utilizes a number of vendors, contractors, and consultants, collectively our vendor partners, in the ordinary course of its business. These vendor partners are typically engaged to (a) enable Etsy to access otherwise unavailable expertise; (b) to fill short term staffing requirements (for example, temporary leave replacements); or (c) support our operations, including to deliver 24-hour multilingual customer support and trust and safety support coverage.
In 2022, we continued the meaningful work to educate our vendor partners who employ contractors on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices. Where we identify gaps, we open dialogues with our vendors, using these guidelines as a north star:
•Ensuring our contractors receive a progressive living wage, adjusted for market conditions, based on location.
•Using our leverage with vendor partners to achieve a progressive and flexible paid leave policy for all full-time contractors, including vacation time, sick time, and gender-neutral parental leave.
•Ensuring all full-time contractors have access to quality medical care for themselves and their dependents.
Creative Community Diversity, Equity, and Inclusion
Build Marketplaces that are Diverse, Welcoming and Inclusive Places to Sell and Shop, and Drive Equity within Creative Communities.
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2022 Goals | | 2023 Goals |
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Marketplace DEI Etsy.com:Build a welcoming marketplace that is diverse, inclusive, and long-term (3-5 years)broadly representative of the communities it serves. Include at least 45% Black and Brown skin tones in marketing assets in the United States and highlight historically marginalized groups. Social Innovation Leverage our marketplaces’ platforms to drive equitable access to creative pursuits and economic opportunity. Etsy.com: Expand pathways to creative entrepreneurship for economically disenfranchised communities by increasing access to digital business resources, capital, and customers. Reverb: Create a more inclusive music industry by expanding access to musical instruments and music education. Depop: Provide educational resources and mentorship opportunities to help entrepreneurs, creatives, or small businesses from underrepresented groups grow their businesses sustainably. | | Etsy, Inc.: In 2023, set a 5-year public target for how many economically disenfranchised, creative businesses we will strengthen through our investments in social impact and innovation. Etsy.com: Aim to include at least 45% Black and Brown skin tones in marketing assets on Etsy-owned and Etsy-managed channels in the United States. In 2023, set a 5-year public target for the promotion of underrepresented seller shops through merchandised experiences that broadly aligns with representation in our ESG risk analysis, Etsy considers both transitional and physical risks. Transitional risks include the assessment of current and emerging regulatory, technology, legal, market, and reputational risks. Physical risk assessment includes both acute and chronic risks. Etsy considers natural disasters and other weather and climate-related risks, which could impact operations, internetcommunities. Depop: Aim to invest in programs or mobile networks, or the operations of one or more of our third-party service providers. Etsy has identified climate-related opportunities in the short term (0-1 years)initiatives that may have financial or strategic impactsdrive equity for underrepresented communities on the business, including participation in renewable energy programs and adopting energy-efficiency measures, using lower-emission sources of energy, and being prepared for any climate-related shift in consumer preferences.Depop.
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b) Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning
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In 2022, we consolidated our Marketplace DEI and Social Innovation goals under a single Creative Community DEI goal. We recognize that our efforts to create a welcoming and diverse marketplace for our buyers and sellers while supporting economically disenfranchised creative entrepreneurs must work in concert to drive our ultimate aim of equitable access to creative pursuits and economic opportunity.
Marketplace DEI
In 2022, we worked to ensure that the images we proactively created and shared in our Etsy.com marketplace were broadly representative of the communities in which we live. In 2022, 47.9% of the people in marketing assets on Etsy.com-owned and Etsy.com-managed channels in the United States had black or brown skin tone representation or were identified as people of color.
Social Innovation
This year represented another major expansion of Etsy’s investments to increase pathways to creative entrepreneurship, especially for those from economically disenfranchised communities. Etsy understands the critical role creative entrepreneurship can play in building economic independence and freedom for communities and has long been committed to utilizing our marketplace to help anyone with a creative idea build a business online.
This commitment was supported by Etsy.com’s Uplift Initiative, a diverse set of programs focused on supporting creative entrepreneurs facing challenges such as lack of access to an internet connection or limited digital skills and capital to grow their businesses. Our Uplift Fund continued to support organizations helping creative entrepreneurs. In 2022, the fund received over 6.4 million contributions from U.S. buyers on the Etsy marketplace who elected to round-up their order price and donate their change. From these donations, the Uplift Fund distributed approximately $2.5 million in grants to organizations driving resources to creative entrepreneurs. The Uplift Makers program onboarded two new cohorts, enabling a growing number of heritage artisan communities to build pathways to economic independence by bringing their products online. Over $340,000 in sales was generated in 2022 by Uplift Maker shops.
And we supported our communities across the “House of Brands:” Reverb continues to drive resources to under-resourced communities globally through Reverb Gives and has provided access to musical equipment through over $250,000 in credits. Depop facilitated a new edition of the Now/Next program with six Black Sellers, each receiving a grant of $2,000. The program was focused on developing and curating a curriculum aimed at delivering tangible support for Black Sellers, providing them with the inspiration, knowledge, tools and access to accelerate their success on Depop.
Etsy evaluates climate-related risks and opportunities across the value chain including direct operations, upstream, and downstream. This evaluation is integrated into a multi-disciplinary company-wide risk management process. We conduct interviews and roundtable discussions with internal stakeholders across the business to gather perspectives on these factors and associated strategies. Assessment of size and scope, and risk management strategy is overseen by the Risk Steering Committee.
At this time, we have not identified near-term climate-related risks with the potential to have a substantive financial or strategic impact on our business. Etsy's buyer and seller base is distributed globally, and as a two-sided marketplace we are not directly responsible for production of goods sold or for holding inventory. We will continue to look at additional ways to incorporate assessment of these factors in our risk management processes.
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Workforce Metrics
Our mission is to “Keep Commerce Human.” Our DEI goals are integral to who we are as a company: namely, marketplaces and workplaces that are made stronger by the unique and special qualities of our communities.
We are committed to transparent reporting on workforce diversity. All metrics below are as of December 31 of the stated year. Overall metrics include all employees globally. Leadership is defined as Director level and above. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions. Gender and age metrics represent our global employee base, while race and ethnicity metrics represent U.S. employees only. 2020 and 2021 metrics include Etsy.com and Reverb, while 2022 metrics include Etsy.com, Reverb, and Depop for Gender, Race and Ethnicity, and Age, and Elo7 for Age and Gender metrics only.
Our Board of Directors also affirmed its dedication to diversity in 2020, committing to actively seek out diverse director candidates to include in the pool from which nominees are chosen. In 2022, our Board of Directors strengthened its commitment to diversity by specifically requiring that any initial list of candidates considered by the Nominating and Corporate Governance Committee for nomination to our Board of Directors include at least two qualified candidates with diversity of race, ethnicity or gender. Etsy expects to provide additional disclosures on Board of Directors diversity in our Proxy Statement for our 2023 Annual Meeting of Stockholders. Etsy provided our 2021 consolidated equal employment opportunity (EEO-1) report on our Investor Relations website.
Gender Metrics - Global
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Board of Directors | Overall | Leadership | Tech | Engineering | Other Business Roles |
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n
c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2 degree or lower scenarioFemale
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nMale
Etsy has set a long-term carbon reduction goal aligned with science to be Net Zero by 2030, which includes absolute reduction targets for Scope 1, 2, and 3. We are currently undertaking exploratory research to understand the best way to apply climate-related scenario analysis to inform business strategy. The Etsy Impact Committee and Sustainability team continue to coordinate with other teams to determine the appropriate scope of this analysis, involving a preliminary exploration of how climate change will impact Etsy and its community. We plan to use this research to inform relevant scenario selection for broader analysis, and evaluate impacts accordingly, including potential opportunities for our business.
We also take action in support of policy solutions that will help to drive carbon reduction in the long term. In 2020, we prioritized advocating for ambitious regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on policies to improve the electrification infrastructure and to reduce emissions for heavy- and medium-duty vehicles that play an important role in e-commerce logistics.
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nAdditional Genders
| nNot Declared |
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
RACE & ETHNICITY METRICS - U.S. ONLY
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| Board | Overall | Leadership | Tech | Engineering | Other Business Roles |
2020 | 2021 | 2022 | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† |
American Indian or Alaska Native | —% | —% | —% | 0.2% | 0.1% | 0.2% | 0.7% | —% | —% | 0.1% | 0.2% | 0.2% | —% | 0.3% | 0.2% | 0.2% | —% | 0.1% |
Asian | —% | —% | —% | 17.5% | 18.9% | 18.7% | 14.4% | 15.6% | 14.1% | 25.6% | 24.7% | 24.0% | 22.6% | 24.2% | 24.5% | 8% | 9.8% | 10.2% |
Black/ African American | 12.5% | 22% | 22% | 5.9% | 6.1% | 7.1% | 5.8% | 6.1% | 6.2% | 5% | 5.4% | 5.6% | 5.5% | 5.6% | 4.8% | 7.2% | 7.2% | 9.5% |
Hispanic | —% | —% | —% | 6.1% | 6.3% | 7.3% | 2.2% | 3.3% | 4% | 4.6% | 5% | 5.7% | 5.5% | 5.6% | 5.9% | 8% | 8.5% | 9.9% |
Two or More Races | —% | —% | —% | 3.4% | 3.7% | 3.5% | 3.6% | 2.2% | 2.2% | 4.2% | 3.9% | 3.6% | 4.4% | 4.4% | 3.9% | 2.5% | 3.1% | 3.2% |
White | 87.5% | 78% | 78% | 63.0% | 61.2% | 60.2% | 71.9% | 70% | 71.8% | 56.4% | 57% | 58.1% | 57.5% | 55.6% | 57.3% | 70.6% | 67.8% | 63.8% |
Not Declared | —% | —% | —% | 3.8% | 3.7% | 3% | 1.4% | 2.8% | 1.8% | 4% | 3.8% | 2.8% | 4.6% | 4.4% | 3.4% | 3.3% | 3.6% | 3.3% |
AGE METRICS - GLOBAL*
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| n24 years and younger | n30-34 years | n40-49 years |
| n25-29 years | n35-39 years | n50+ years |
*Age Not Declared was .2% in 2020 and 2021, and .1% in 2022.
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
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| Core ElementsGovernance | TCFD Disclosure Recommendation | Disclosure |
Risk Management
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a) Describe the organization’s processes for identifying and assessing climate-related risks
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The Etsy Sustainability team, along with others in relevant functions within the Company, evaluates climate-related risks and opportunities, analyzes them in the context of our business, develops recommendations as appropriate, and escalates them for oversight senior management. For example, the Sustainability team has conducted a geographic analysis in selected geographic segments of projected physical climate impacts on Etsy sellers and buyers.
The Sustainability team, in consultation with the Legal/Advocacy team, assesses regulatory issues associated with current or emerging climate-related legislation.
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b) Describe the organization’s processes for managing climate-related risks
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The Sustainability team, in addition to their role outlined in Section (a) above, develops management plans to address these issues accordingly.
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c) Describe how processes for identifying, assessing,Fostering a culture of ethics and managing climate-related risks are integrated into the organization’s overall risk management
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accountability
Etsy’s Impact Committee is a cross-functional group with representation from major business functions across the company, including: legal, workplace, strategic sourcing, sustainability, advocacy, product analytics, marketing, public relations, and investor relations. This ensures that climate-related issues are considered strategically and integrated throughout the business, as appropriate.
Since 2018, Etsy has used an integrated annual report structure, and has included ESG-related topics in our Annual Reports and Proxy Statements. These reporting structures ensure that climate-related issues are considered holistically from a risk and opportunity perspective by a cross-functional group and are appropriately elevated to senior management through defined channels.
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Responsible Marketplace Practices
The trustworthiness of our marketplaces and the connections among our buyer and seller communities are the cornerstones of Etsy’s business. For more information, please see Part 1, Item 1, “Business—Primary Business Drivers—Trust & Safety” of this Annual Report.
Thoughtful Corporate Governance
Our corporate governance practices include an independent Board Chair, a fully independent Board of Directors (except for our CEO), independent Committee members, sophisticated and fully engaged directors with different areas of relative expertise and additional dimensions of diversity, and a balanced distribution of director tenure. For a more complete description of our corporate governance practices, please refer to our Proxy Statement for the 2023 Annual Meeting of Stockholders (“Proxy Statement”) to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. More information on our governance policies and guidelines is available at the Investor Relations section of our website.
In 2022, we continued to evolve our corporate governance practices, amending our bylaws to provide that a stockholder, or a group of up to 20 stockholders, owning at least three percent of the voting power of Etsy's outstanding capital stock continuously for at least three years, may nominate and include director nominees in Etsy’s annual meeting proxy materials (commonly referred to as a “proxy access bylaw”), subject to certain limitations and requirements specified in the Bylaws.
We also strengthened our commitment to diversity on our Board of Directors, updating our Policies and Procedures for Director Candidates to require any initial list of director candidates considered by the Nominating and Corporate Governance Committee to include at least two qualified candidates with diversity of race, ethnicity or gender.
Integrated ESG Reporting
We strive to continue to innovate and evolve our ESG disclosures to hold ourselves accountable and transparently engage with all of our stakeholders. Since 2018, we’ve shared our ESG metrics alongside our financial results in our Integrated Annual Report. This practice is intended to ensure that we’re transparent about and accountable for progress against our environmental and social goals. In 2022, we expanded the scope of our integrated ESG reporting to include Depop more broadly and to include Elo7 in our Gender and Age metrics for the first time. We are also taking steps to improve our analysis and disclosure of human rights concerns, including publishing our Modern Slavery Statement and engaging with a human rights consultant to develop a roadmap to further improve our internal policies and processes to identify and address potential human rights risks.
Risk Oversight and Management
One of the key functions of our Board of Directors is to provide informed oversight of our risk management processes. While management is responsible for day-to-day management of the material risks we face, our Board of Directors is responsible for risk oversight. Since 2019, Etsy has had a Risk Steering Committee, which consists of a cross-functional management team that meets regularly to review and discuss the significant risks facing Etsy. Periodic reports on material risk are provided to the full Board of Directors. The Risk Steering Committee also periodically considers areas of new or evolving risks and works to understand risk analyses and establish appropriate mitigation plans. For more information on risk oversight generally, please see “Board Oversight of Risk” in Etsy’s Proxy Statement. For information on how we manage our climate related risks, please refer to our complete TCFD response beginning on page 40 of this Annual Report.
SASB Disclosure
The Sustainability Accounting Standards Board’s (“SASB”) mission is to develop sustainability metrics for public corporations to disclose material, decision-useful information to investors. Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy.com, Depop, Reverb, or Elo7, information in this section applies to Etsy, Inc. and all of its subsidiaries.
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-000.A | Entity-defined measure of user activity | Active buyers - Etsy, Inc. (thousands) | 81,898 | | 96,336 | | 95,076 | |
| Active sellers - Etsy, Inc. (thousands) | 4,365 | | 7,522 | | 7,470 | |
CG-EC-000.B | Data processing capacity |
•In February 2020, we completed our full migration to Google Cloud for Etsy.com. Reverb and Depop use Amazon Web Services (AWS) for their cloud computing needs. •Our Etsy.com cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
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| Percentage outsourced | | 100 | % | 100 | % | 100 | % |
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Hardware Infrastructure Energy & Water Management |
CG-EC-130a.1 | Total energy consumed, MWh (Etsy.com) | 5,675 | | 5,362 | | 6,379 | |
| Percentage renewable energy (Etsy.com) | 100 | % | 100 | % | 100 | % |
| Percentage grid electricity (Etsy.com) | 100 | % | 100 | % | 100 | % |
CG-EC-130a.3 | Discussion of the integration of environmental considerations into strategic planning for data center needs. •For 2022 we continued to meet our goal to source 100% renewable electricity for our operations which includes our office facilities for Etsy.com, Reverb, and Depop, remote worker electricity usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com, and we have a 2025 goal to reduce the intensity of our energy use by 25% from a 2016 baseline. These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity, for Etsy.com. Their highly efficient data centers have helped us save significant overhead energy. We achieved a 69% reduction in energy use (kWh per site visit) from computing between 2016 and 2022, despite substantial growth in our business over the same period. •We actively monitor and manage energy consumption from our computing infrastructure for Etsy.com. In 2022, we estimate that our energy consumption in Google Cloud was 6,379 MWh, based on a methodology developed by Etsy and reviewed by industry experts (our “Cloud Jewels methodology”). Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint. Our 2022 hardware infrastructure energy footprint does not include Reverb, Depop, or Elo7 as we are not currently able to calculate energy usage from AWS, but we do include the emissions from Reverb and Depop’s hardware infrastructure in our Scope 3 Purchased Goods and Services calculations. •In 2018, Etsy entered into a virtual power purchase agreement for solar energy in Virginia. This project is providing us with renewable attributes to apply to our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet.
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Core Elements | TCFD Disclosure Recommendation | DisclosureData Privacy and Advertising Standards |
CG-EC-220a.2
Metrics and Targets
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a) DiscloseDescription of the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process
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Etsy tracks climate-related metrics related to total energy consumed, percentage renewable, percentage grid electricity, total GHG footprint of scope 1, 2 and 3 emissions including product shipments, packaging, end user energy use, water, and outgoing waste material streams. For a historical view on our metrics, please view pages 29-31 of this Integrated Annual Report.
As a result of offsetting 100% of carbon emissions across all measured Scope 1, 2, and 3 categories, Etsy.com became a carbon neutral business and put an internal price on our emissions, creating a financial incentive to support decisions through the business that reduce greenhouse gas emissions, from driving operational efficiencies to integrating sustainability into our procurement process.
We continue to act in support of solutions that will help drive carbon reduction in the long term, including advocating at the federal and state level for comprehensive climate and carbon reduction policies and collaborating with peers on industry-wide effortspractices relating to drive efficiencybehavioral advertising and resilience in the shipping and logistics sector.
For all teams at Etsy, compensation is tied to the company’s financial performance, as well as individual employee contributions. While responsibility for delivering on our impact goals is distributed across the company, each goal owner is responsible for ensuring that the work associated with advancing their goal is incorporated into team members’ individual goals, which is in turn directly tied to compensation. The annual performance goals of our Executive Team are often directly tied to some of our Impact goals. They also serve as executive sponsors for specific goals to help ensure that teams stay on track and have the value of executive leadership and expertise as plans are executed.
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b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
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Please view pages 29-31 of this Integrated Annual Report for our Greenhouse Gas (“GHG”) Emissions Summary.
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c) Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets
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Our climate-related targets include:
•user privacyAchieve Net Zero by 2030 through a 50% absolute reduction in our Scope 1 and 2 greenhouse gas emissions and a 13.5% absolute reduction in our Scope 3 greenhouse gas emissions. This target is aligned with current climate science..
•ContinueWe care deeply about privacy and are committed to source 100%being upfront about our privacy practices, including how we treat personal information. Etsy’s Privacy Policy provides a detailed explanation of our privacy practices. Etsy’s electricity from renewable sources. This is an absolute-based target set from a 2016 base year.Transparency Report also includes details of our Privacy Principles. •AchieveAmong other things, our Privacy Policy covers the user information that Etsy collects or receives, the choices and control that a 25% reductionuser has in relation to this data including based on type and sensitivity by region and worldwide, the intensity of Etsy’s energy use by 2025. This is an intensity-based target set from a 2016 base year. •Maintain a 90% waste diversion rate across global operations. This is an intensity-based target set from a 2017 base year.purpose for which Etsy uses such information (including first and third-party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third-party partners, disclosures about third-party partner privacy policy and options, and user controls for sharing and controlling such information with third-parties.
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Data Security |
CG-EC-230a.1 | Description of approach to identifying and addressing data security risks. •Data security is overseen by our Chief Information Security Officer (“CISO”) who reports to our Chief Technology Officer (“CTO”). •We strive to protect sensitive information through various means, such as technical safeguards, procedural requirements and policies, an intensive program of monitoring on both our web platform and within our corporate network, continuous testing of aspects of our security posture internally and with outside vendors, a robust incident response program, and regular training for employees. •In 2021, we expanded the role of our Audit Committee in the oversight of Etsy’s technology and information security policies and practices, and the internal controls relating to information security, and the steps taken by management to identify, monitor, and control these exposures, to provide for more focused oversight of rapidly evolving information security risks and mitigation strategies. •Our Board also periodically participates in tabletop exercises conducted by senior management as part of risk management and disaster-related planning to validate, test, and assess the effectiveness and adequacy of certain roles and decision-making processes in the event of a cyber-incident. •Further information can be found in our Data Privacy & Security policy on our Investor Relations site.
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Employee Recruitment, Inclusion and Performance |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.1 | Employee engagement as a percentage (Etsy.com) | 81 | % | 75 | % | 77 | % |
| Employee engagement as a percentage (Reverb) | 75 | % | 75 | % | 75 | % |
| Employee engagement as a percentage (Depop) | | | 72 | % |
| Employee engagement as a percentage and discussion of methodology. •In May 2022, we conducted an engagement survey of all global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response, and 77% of Etsy respondents and 75% of Reverb respondents reported favorable employee engagement. The survey was conducted through the Culture Amp platform and consisted of 64 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, and two free-text questions to which employees were asked to write out a response for Etsy.com. At Reverb, the Culture Amp survey consisted of 65 rating questions and two free-text questions. •During September and October 2022, Depop conducted its quarterly engagement survey through Peakon. 82% of employees submitted a response, with a resulting engagement score of 7.2. This is the average score given by respondents to 4 key engagement questions, all of which are rated on a scale of 1-10. This score has been converted into a percentage based on the overall engagement score. |
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.3 | Gender and racial/ethnic group representation for leadership, technical staff and other business functions | See Workforce Metrics section for details starting on page 33. |
Discussion of diversity and inclusion strategy and performance | See Social section for details starting on page 27. |
CG-EC-330a.4 | Percentage of technical employees who are H-1B visa holders | 5.1 | % | 5.6 | % | 3.8 | % |
Product Packaging and Distribution |
CG-EC-410a.1 | Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO2e | 303,218 | † | 363,361 | † | 339,395 | † |
Total greenhouse gas (GHG) footprint of packaging in metric tons CO2e | 53,489 | † | 63,645 | † | 57,911 | † |
CG-EC-410a.2 | Discussion of strategies to reduce the environmental impact of product delivery. •The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint. As a peer-to-peer marketplace, Etsy does not directly control seller shipping or the associated logistics networks; however, we are committed to addressing carbon emissions from shipping and packaging. •In 2022, we offset 100% of emissions generated from shipping and packaging on the Etsy.com (since 2019), Reverb (since 2019), and Depop marketplaces (starting in 2022) through investments in verified emissions reductions. This allows us to take immediate action while we work toward our Net Zero goal. •In addition, we take action in support of policy solutions that will help to drive carbon reduction from product delivery in the long-term. In 2022, we again prioritized advocating for national and regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on heavy- and medium-duty vehicles that play an important role in e-commerce logistics. •In 2022, we expanded our partnership with EcoEnclose to now include both Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option. •We continue to collaborate with peers, vendors, and NGOs on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector. *th
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Greenhouse Gas (“GHG”) Emissions Summary (tCO2e) | Etsy.com + Reverb | Etsy.com + Reverb | Etsy.com, Reverb, Depop |
GHG Emissions by Scope | 2020 | 2021 | 2022 |
Scope 1 | 294 | † | 350 | † | 371 | † |
Scope 2 - Market | 4 | † | 0† | 0† |
Scope 2 - Location | 914 | † | 420 | † | 542 | † |
Scope 3 | 438,731 | | 548,900 | | 531,638 | |
Scope 3 Emissions Intensity (tCO2e/ million $ gross profit) | | | 293 | |
Scope 3 GHG Emissions by Activity Source | | | |
Category 1: Purchased Goods & Services | | | |
Purchased Goods & Services (excluding Computing) | 76,451 | † | 97,302 | † | 106,434 | † |
Cloud Computing - Google Cloud (Etsy Only) | | 13,623 | † | 12,054 | † |
Other Computing | 488 | † | 466 | † | 1,836 | † |
Category 3: Fuel & Energy Related Activities | | | |
Fuel & Energy Related Activities Not Included in Scope 1 or Scope 2 | | 2,711 | | 3,429 | |
Category 5: Waste Generated in Operations | | | |
Waste | 3 | | 3 | | 5 | |
Water | 9 | | 4 | | 4 | |
Category 6: Business Travel | | | |
Air Travel | 153 | † | 67 | † | 1,067 | † |
Other Business Travel | 10 | | 9 | | 163 | |
Category 7: Employee Commuting | | | |
Commuting | 111 | | 83 | | 1,042 | |
Remote Workers | 672 | | 1,066 | | 1,401 | |
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Category 8: Upstream Leased Assets | | | |
Cloud Computing - Google Cloud (Etsy Only) | 0† | | |
Category 9: Downstream Transportation & Distribution | | | |
Shipping | 303,218 | † | 363,361 | † | 339,395 | † |
Packaging | 53,489 | † | 63,645 | † | 57,911 | † |
Category 11: Use of Sold Products | | | |
End User Energy Use | 4,127 | † | 6,560 | † | 6,897 | † |
For 2020 and 2021, emissions generated from our co-located data centers are included in Scope 2 emissions; we did not have operations in any colocated data centers in 2022. In 2020, we expanded our inventory to account for the Scope 3 GHG emissions from: (1) the packaging our sellers use to ship products to buyers, (2) the use of our platforms on consumers’ personal devices, and (3) our corporate supply chain. As part of our continued commitment to maintain accountability for our GHG emissions, in 2021, we further expanded the scope of our measured and reported GHG emissions inventory and refined the methodologies used to calculate our Scope 3 GHG emissions: (1) in Scope 3 - Category 3, we captured GHG emissions from fuel and energy related activities not already included in Scope 1 and 2, (2) we updated the supplier spend data, emission factors, and categorizations included in our Scope 3 - Category 1 emissions calculations, resulting in higher emissions year-over-year. (3) we reclassified emissions generated from Google Cloud computing from Scope 3 - Category 8 to Scope 3 - Category 1. As part of the recategorization of cloud computing, we now include an estimate of our supplier’s Scope 3 emissions, resulting in higher emissions. (4) We no longer differentiate between Scope 3 - Market and Scope 3 - Location-based emissions and instead provide current and historical data for what we had formerly considered Scope 3 - Market-based emissions, and (5) we apply renewable energy certificates to our employees’ working from home electricity usage in Category 7. In 2022, we included emissions from Depop in our above calculations. For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year over year. For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy.com only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions. Using Etsy’s Cloud Jewels methodology we estimated our Google Cloud Platform’s Scope 2 energy usage and with Google’s agreement, retired REC’s on behalf of this energy usage, thus reducing our supplier emissions from Google Cloud. As a result of the above changes in scope, methodology, and our continued efforts at further accountability, some categories of emissions data are not comparable from year to year. For additional details regarding the scope and data methodologies used to calculate our GHG emissions data can be found on our Investor Relations website. |
†Etsy commissioned an external third-party to perform attest procedures with respect to our carbon and energy metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
Competition
Sellers can list their goods for sale with online retailers or sell their goods through local consignment and vintage stores and other venues and marketplaces, including through commerce channels on social networks like Facebook and Instagram. They may also sell wholesale directly to traditional retailers, including large national retailers, who discover their goods in our marketplaces or otherwise. We also compete with companies that sell software and services to small businesses, enabling sellers to sell from their own website or otherwise run their business independently of our platform. We are able to compete for sellers based on our brand awareness, the global scale of our marketplaces and the breadth of our online presence, the number and engagement of buyers, our seller tools and services, our seller education resources, our policies and fees, our mobile apps, the strength of our community, and our values.
We also compete with retailers for the attention of the buyer. A buyer has the choice of shopping with any online or offline retailer, whether large marketplaces or national retail chains or local consignment and vintage stores or other venues or marketplaces. We are able to compete for buyers based on the unique goods that sellers list in our marketplaces, our brand awareness, the person-to-person commerce experience, customer service, our reputation for trustworthiness, our mobile apps, the availability of fair and free shipping offered by sellers, ease of payment, and the availability and reliability of our platform.
Intellectual Property
Protection of our technology and intellectual property is an important component of our success. We rely on intellectual property laws, including patent, trade secret, copyright, and trademark laws, in the United States and abroad. We also use confidentiality procedures, defensive licensing and acquisitions, non-disclosure agreements, invention assignment agreements, and other contractual rights to protect us and our intellectual property.
We file patents and register domain names, trademarks, copyrights, and service marks in the United States and abroad. We rely upon unregistered copyrights and common law protection for certain trademarks. We also use internal and external brand protection mechanisms that are intended to protect our brands from misuse by third parties.
Government Regulation
As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, sometimes contradict other laws, and are frequently changing. Compliance is costly and can require changes to our business practices and significant amounts of management time and focus. In addition, in both the United States and abroad, laws and regulations relating to the liability of online marketplaces for activities of their sellers and other third parties are being tested by a number of proceedings.
Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, federal and state laws in the United States, E.U. directives, and other national laws govern the processing of payments and consumer protection, and the privacy of consumer information;protection; other laws define and regulate unfair and deceptive trade practices. Still other laws dictate when and how sales or other taxes must be collected. Laws of defamation apply online and vary by country. The
We are also subject to federal, state, and foreign laws and regulations regarding privacy and protection of consumer information. Our privacy policies describe our practices concerning the use, storage, transmission and disclosure of personal information, including buyer and seller data. Any failure by us to comply with our policies or privacy related laws and regulations could result in proceedings against us by governmental authorities or others, which could harm our business.
Many jurisdictions in which we operate have enacted laws and regulations requiring notification to users when there is a security breach of personal data, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. This growing focus on data privacy and regulation of e-commerce worldwide could impose additional compliance burdens and costs on us or on sellers and could subject us to significant operational costs for internal compliance and risk to our business. Further, any failure by us to adequately protect the privacy and data of our sellers and buyers could result in a loss of confidence in our marketplaces, which could adversely affect our business.
In addition, some of these requirements may introduce friction into the buying and selling experience on our platformplatforms and may impact the scope and effectiveness of our marketing efforts, which could negatively impact our business and future outlook. Additionally, because we operate internationally, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. Non-compliance with any applicable laws and regulations could result in penalties or significant legal liability. See Part I, Item IA, “Risk Factors—Regulatory, Compliance, and Legal Risks.”
Seasonality
Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year. Our cost of revenue and marketing expenses also generally follow this trend, with the highest costs incurred in the fourth quarter of each fiscal year. We expect this seasonality to continue in future years.
ESG Reporting: Our Impact Goals, Strategy & Progress
We have developed an Impact strategy and goals that reflect the positive impact we want to have on the world while advancing and complementing our business strategy, and we are pleased to provide this update on our progress.
Our Approach to ESG Reporting:
We apply similar focus, discipline, and accountability to our environmental, social, and governance (“ESG”) reporting metrics as we do our financial metrics, and we believe that together they make us stronger and more resilient. We expect to continue to use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress. We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board (“SASB”) sector standards for our industry and Task Force on Climate-Related Financial Disclosures (“TCFD”) frameworks.
Our “House of Brands” and ESG Reporting Boundary:
We expect to continue to evolve our Impact strategy and ESG reporting in the future as we grow and further incorporate our recently acquired marketplaces into our Impact strategy and as our Impact work continues to mature. Our discussion of Impact strategy and highlights and ESG data includes the operations of our Etsy.com, Reverb, and Depop marketplaces but does not include the operations of Elo7, which was acquired in 2021, except where designated in the below chart. It is our intention to further integrate our Elo7 marketplace in our ESG reporting in the future. Any reference to Etsy, Inc. in this section, such as for the age and gender metrics provided on pages 33-34, includes our full “House of Brands,” including Elo7.
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| ESG Reporting Table of Contents | | | “House of Brands” Boundary | |
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| Our ESG Framework How our Impact work is structured | | 22 | | | | | | | | | | |
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| Creating Economic Impact through Entrepreneurship The Overarching Impact of our Brands | | 22 | | | | | | | | | | |
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| How We Drive Impact The levers we use to drive impact work | | 23 | | | | | | | | | | |
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| Environmental Goals & Highlights | | 24 | | | | | | | | | * | |
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| Social Goals & Highlights | | 27 | | | | | | | | | | |
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| Workforce Metrics Employee Diversity data | | 33 | | | | | | | | | | |
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| Governance Highlights | | 35 | | | | | | | | | | |
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| SASB Consumer Goods Sector E-Commerce industry standard reporting | | 36 | | | | | * | | * | | * | |
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| TCFD Climate - Governance, Strategy, Risk Management, Metrics and Targets | | 40 | | | | | | | | | | |
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= included in section and specified goals * = further clarification on section inclusion within designated section
Our ESG Framework:
In 2021, Etsy transitioned to the more commonly used environmental, social, and governance nomenclature for reporting on our Impact work. We believe this change makes it easier for our various stakeholders to track and interpret our progress and better aligns our reporting with emerging global standards.
Creating Economic Impact Through Entrepreneurship
We are committed to growing sustainably by aligning our mission and business strategy to help create economic impact through entrepreneurship and, therefore, create value for all our stakeholders. In 2022, Etsy.com sellers contributed almost $13.5 billion to the U.S. economy* by harnessing their creativity and bringing unique products to market. Etsy.com sellers created the equivalent of nearly 3.4 million jobs in the independent worker economy*, enough jobs to employ all of the city of Chicago (population 2.7 million) and more, and generated approximately $3.6 billion in income*.
* To calculate these results, Etsy.com commissioned its fifth economic impact study with ECONorthwest, an independent economic consulting firm, to explore the ways Etsy.com sellers in the United States contribute to the national economic landscape.
How We Drive Impact
Underpinning our Impact strategy is a set of levers we employ to drive toward our Impact goals while advancing and complementing our business strategy.
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| In 2022, Etsy Inc.’s Advocacy team worked with sellers and policymakers around the world to ensure a voice for small business owners in public policy. We continued to advocate for public policies aligned with the needs of creative entrepreneurs including supporting: •reform efforts to provide the U.S. postal service with the funds needed to provide accessible affordable shipping options for sellers; •enhanced access to affordable child care and caregiving leave for micro businesses; •sellers’ privacy rights by advocating for strong privacy protections in consumer protection bills; and •the rights of small business owners by advocating against new rules that would impose heavy burdens on small and microbusinesses. | | Impact Investing. In 2022 we set up a $30 million Impact investment fund that is being held at a large Black-led Minority Deposit institution in the United States. The investment will support our Impact strategy and is expected to be put to work in 2023. |
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| | Philanthropy. In 2022, Etsy, Reverb, and Depop invested over $4.6 million in philanthropic donations to organizations driving equitable access to opportunity as well as disaster relief and direct support for local community based organizations. |
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| | Contributing to our Communities. Collectively, we enabled Etsy.com, Reverb, and Depop employees to donate over 4,300 hours of paid volunteer time off in their communities through Etsy’s Impact Hours program. We cancelled the balances owed to Etsy by all sellers in Ukraine in the first quarter of 2022, which included listing fees, transaction fees, advertising fees, and more. This extended to Ukraine-based sellers in our relevant marketplaces, including Etsy.com and Reverb. This represented a contribution of approximately $4.6 million towards our community. Natural disasters can be devastating to our sellers. In 2022, we updated our Disaster Response Framework to guide how and when we proactively support sellers in times of crisis. |
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| | Purchasing Power. We aim to drive positive impact in our supply chain by investing in strong relationships with our suppliers. We engage on priority impact areas, such as supplier diversity, greenhouse gas emissions, fair wages, and employee benefits programs, at crucial touch points throughout the supplier lifecycle. We conduct regular reviews, audits, and conversations to confirm suppliers are upholding agreed upon practices and to identify further areas where we can engage with suppliers. We have a Supplier Code of Conduct designed to ensure that our suppliers are committed to our standards. |
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| Environmental | |
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| Building resilience for the long term |
Net Zero
Achieve Net Zero through targets aligned with the science of climate change while continuing to run a carbon neutral company.
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2022 & 2023 Goals |
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Etsy, Inc.: By year end 2030, we aim to achieve a 50% reduction in absolute Scope 1+2 greenhouse gas emissions and a 52% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
By year end 2040, we aim to achieve a 90% reduction in absolute Scope 1+2 greenhouse gas emissions and 97% reduction in Scope 3 greenhouse gas emissions per dollar of gross profit from a 2020 base year.
Continue to offset 100% of measured Scope 1, 2, and 3 greenhouse gas emissions annually. |
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We believe our Net Zero goal strengthens our position as a trusted brand and contributes to our long-term strategy and makes us more resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our corporate boundaries, contributing to the overall health of people and planet.
In 2022, Etsy, Inc. became one of the first few hundred companies globally to have our Net Zero goal approved by the Science-Based Targets Initiative (SBTi) under their new Net-Zero Standard. Guided by our new targets, in 2022, we reduced our absolute Scope 1 and 2 Net emissions by 12% while our Scope 3 emissions decreased by 22% on an intensity basis (tCO2e / $mm of gross profit) compared with our 2020 Net Zero baseline for both targets†. We made the following progress towards our Net Zero goal in 2022:
Transportation:
Emissions from the shipping of items sold in our marketplaces is by far the largest source of our Scope 3 emissions. In 2022, emissions from transportation accounted for approximately 64% of our Scope 3 emissions. This represents a 17% intensity reduction relative to 2021 and 27% intensity reduction relative to our 2020 baseline.
We drive reduction in transportation emissions primarily through advocacy, carrier engagement, and product (marketplace) design. In 2022, we supported the climate provisions in the Inflation Reduction Act at the national level, and advocated for the Advanced Clean Trucks and Advanced Clean Fleets legislation at the state level.
Packaging:
In 2022, emissions related to our sellers’ packaging made up 11% of our total Scope 3 footprint. This represents a 20% intensity reduction relative to 2021.
Purchased Goods & Services:
Our 2022 corporate procurement emissions were 120,325 tCO2e or 23% of our Scope 3 emissions. Through direct supplier engagement and strict supplier selection criteria, we were able to reduce corporate procurement emissions 6% on an intensity basis relative to 2021. Through our supplier vetting program, we collected impact data from 77.7% of Etsy.com’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 55% of Etsy.com’s spend went to companies that have set an emissions reduction goal. We plan to further leverage our negotiating power in our supply chain to drive Net Zero aligned reductions in 2023.
† Scope 1 emissions include direct emissions such as natural gas and refrigerants used at our facilities. Scope 2 emissions include indirect emissions from the generation of electricity, steam, heating, and cooling that we may purchase for our facilities. Scope 3 emissions include all other indirect emissions that occur in our value chain such as business travel, employee commuting, and the goods and services we purchase.
Scope 3: Progress Against Science-Based Net Zero Target
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| nActual Emissions Intensity | — | Yearly Target | — | 2040 Goal |
Scope of our Net Zero Goal: This includes emissions across all four brands within Etsy, Inc. and is set against a 2020 baseline. Our 2020 and 2021 reported emissions include third-party assured Etsy.com and Reverb data, internally reviewed Depop data, and estimates for Elo7. Depop and Elo7 generate approximately 6% of these emissions. Our 2022 data includes third-party assured data for Etsy.com, Depop, and Reverb with estimated Elo7 data representing approximately 0.5% of our total emissions. For additional details about how we measure emissions, please see our GHG inventory and related notes on page 39, which includes our 2020 and 2021 emissions for Etsy.com and Reverb, and our 2022 emissions for Etsy.com, Reverb, and Depop. Our consolidated “House of Brands” Scope 3 emissions intensity for the trailing three years are illustrated in the ‘Progress Against Net Zero’ adjacent chart.
Carbon Neutral Business
We are focused on meeting our long-term SBTi- approved Net Zero goal. However, while we work toward long-term reductions in line with our goal, we are taking immediate action to address our environmental impact through our commitment to carbon neutrality. We consider our Net Zero efforts to be separate, but complementary to our carbon neutral work and expect to phase down our investments in offsets as we meet our Net Zero targets.
Since 2019, we have offset 100% of Etsy.com and Reverb’s Scope 1, 2 and 3 emissions. For 2022, we offset 100% of Etsy.com, Reverb and Depop’s Scope 1, 2 and 3 emissions by investing in 532,009 verified emissions reductions (VERs) that protect forests, sponsor wind and solar farms, and help develop greener methods for producing auto parts.
Sustainable Operations
Maintain best-in-class sustainable operations.
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2022 & 2023 Goals |
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Source 100% of electricity from renewable sources for all Etsy, Inc. brands.
Achieve a 25% reduction in the intensity of our energy use in offices (kWh/sq. ft.) and for computing (kWh/visit) for Etsy.com by year end 2025.
Maintain “Zero Waste” across global operations for Etsy.com. Run “Zero Waste” operations at Reverb and Depop by year end 2025. |
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Maintaining best-in-class sustainable operations allows us to focus on long-term cost reduction, minimizing waste, and creating a healthier office environment for our employees. In 2022, we continued to make good progress against our goals.
Energy Use
In 2022, our total operational energy footprint was 19,688 MWh, of which 52% was from electricity. This includes energy usage from our office facilities for Etsy.com, Reverb, and Depop, remote worker energy usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 2022 to be 6,379 MWh, or 32% of our total energy use.
Renewable Electricity
Since 2020, we have sourced renewable energy for 100% of the electricity used to power Etsy.com and Reverb's offices and employees working from home, as well as Etsy.com's computing load in Google Cloud. For 2022, we also sourced renewable energy for 100% of the electricity used to power Depop's offices and employees working from home.
This was achieved through a virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Through our 15-year VPPA, which we signed in 2018, we procure solar energy in the PJM Interconnection market that covers greater than 100% of Etsy, Inc.’s U.S. electricity needs.
Energy Efficiency
Our 2022 energy use for Etsy.com offices was 4,001 MWh. In offices where we maintain operational control, we achieved a 35% reduction in energy intensity (kWh/sq. ft.) relative to our 2016 baseline. At our Brooklyn headquarters, our efforts led to a New York City Building Energy Grade of an A.
For Etsy.com computing energy use, our energy usage per site visit (kWh/visit) decreased by 69% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
“Zero Waste”
In 2022, Etsy.com received a “Zero Waste” certification of our operations through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the fifth year in a row for diverting over 90% of waste from landfill at our Brooklyn and Dublin offices. We continue to work toward our “Zero Waste” by 2025 goal for Reverb and Depop.
Marketplace Sustainability
Establish our marketplaces as destinations for sustainably minded shoppers and conscious living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity.
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2022 Goals | | 2023 Goals |
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Etsy.com: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living.
Define a key performance indicator and establish a baseline on circularity. | | Etsy.com: Monitor and report the percent of active listings that have sustainability attributes, and the percent of sellers who have added a sustainability attribute to at least one listing.
Depop: Leverage our marketing and product capabilities to facilitate access to circular fashion and inspire more people to shop circular.
Reverb: For every new item sold, we'll aim to sell at least one used item, and we'll aim to support circularity by increasing orders of used items by 25% by 2025. |
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We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to the values that are most important to them. We’re bringing sustainability to life for buyers and sellers in several ways:
Item Sustainability
In 2022, Etsy.com piloted new optional sustainability listing attributes that allow sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste. On December 31, 2022, 4.7% of sellers had added a sustainability attribute to 1 or more listings, and 1.2% of active listings had at least one sustainability attribute.
As part of the launch, we also provided guidance to sellers on best practices for indicating each attribute. We are undertaking an internal review of a sample of listings to identify opportunities to enhance education. We are also engaging an external sustainability firm to review the efficacy of the program and determine if any remediation measures are needed in advance of launching any buyer-facing initiatives.
Packaging
As part of our efforts to meet our Net Zero goal, we are helping sellers reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2022, we expanded our partnership with EcoEnclose to include both
Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option.
Circularity
In 2022, we set a new strategy to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Across our marketplaces, our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship.
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| Ensuring equitable access to opportunity |
Prioritizing People
As of December 31, 2022, we had approximately 2,790 total employees worldwide, inclusive of Reverb, Depop, and Elo7 which had approximately 270 employees, 390employees, and 220 employees, respectively.
Diversity, equity and inclusion (“DEI”) are core to Etsy‘s culture. As Etsy has grown, we have leaned on our value of “embracing differences.” We’ve continued our commitment to creating safe-space communities through our Employee Resource Groups (“ERGs”), made improvements to increase employee accessibility and disability inclusion, and refreshed our competency matrices and our performance enablement programs to enable equity.
This year we took to heart that diverse teams thrive with inclusive leadership, benefits, and policies. We believe that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and reinforce our values. We’re committed to building a workplace where people of all backgrounds and walks of life can thrive. Additionally, the sustainability of our working environment and employee well-being also remained a key priority.
As a result, we’ve continued to support our hybrid working mode, as we believe a hybrid approach to work is the best fit for our business, culture, and team. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s generous paid time off policies. Etsy’s employees also took advantage of regular Focus Days, full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days to our employees as part of our overall approach to well-being.
We continued our focus on employee engagement in 2022, which is linked with high performance, retention, innovation, and growth. Our employees have chosen to work at Etsy because they believe in our action-oriented, values-based, and purpose-driven work culture. In 2022, we conducted an engagement survey of all Etsy.com and Reverb global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response. 77% of Etsy.com respondents and 75% of Reverb respondents reported favorable employee engagement.
Employee Diversity, Equity, and Inclusion
Build diverse and inclusive work forces that are broadly representative of their communities.
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2022 Goals | | 2023 Goals |
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Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023. For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026.
Enhance and expand accessibility efforts by defining a KPI and establishing a baseline for accessibility in the employee experience at Etsy.com, Reverb, and Depop. | | Etsy.com: Approximately double the percentage of U.S. employees at Etsy.com who identify as Black, Latinx, or Native American by year end 2023.
For Mexico and Ireland-based Software Engineering teams, achieve approximately two times country-level gender representation benchmark for women and marginalized genders by year end 2027. •Mexico target: 13% •Ireland target: 16% In 2023, Etsy is committed to scoring an 80 or higher on Disability: IN's Disability Equality Index.
Reverb: Reach gender parity at Reverb by year end 2026 (increasing women and marginalized genders to at least 50% by year end 2026).
Approximately double the percentage of U.S. employees at Reverb who identify as BIPOC by year end 2026. (Note: Reverb’s definition of BIPOC includes Black, Latinx, Native American, Asian and two or more races)
Depop: Achieve 35% of underrepresented ethnicities in global headcount by year end 2028 (baseline December 31, 2022: 30%) (Note: Depop defines underrepresented ethnicities as Asian, Black, Mixed and staff identifying as ‘Other,’ including Latinx in the United States. To establish which ethnicities are underrepresented at Depop, we considered census, workforce and benchmarking data as well as our aim to be a progressive workplace.)
Achieve 27% of underrepresented gender identities in engineering & data by year end 2028 (baseline December 31, 2022: 20%) |
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Employee DEI
We made progress on the goal we set in 2018 to double the percentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at Etsy.com by year end 2023. In 2022, Black, Latinx and Native American people constituted 23.9% of U.S. Etsy.com hires. As a result, at December 31, 2022, Black, Latinx, and Native American people made up 15.3% of Etsy.com's U.S. workforce, up from 8.6% in 2018 and 12.9% in 2021.
In 2022, Black, Indigenous, and People of Color (“BIPOC”) constituted 27.7% of Reverb’s U.S. hires. At December 31, 2022, Reverb’s U.S. workforce included 18.9% BIPOC representation, compared to 18.9% on December 31, 2021.
In 2022, Depop welcomed the integration within Etsy’s “House of Brands” as an opportunity to build on prior efforts, and introduce refreshed employee DEI Goals which continue Depop’s commitment to diversity while taking into account the wider economic context in which the business now operates, and more conservative hiring expected in 2023.
Gender Diversity
Etsy proudly maintains approximate gender parity in the overall employee population, among Leadership and at the Board of Directors level. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the U.S., the percentage of women and marginalized gender software engineers at Etsy.com is 37.9%. Globally across all functions, at Etsy.com, the representation of women and marginalized gender employees was 51% at year end 2022.
We have identified an opportunity and set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. As of December 31, 2022, in Mexico, we have achieved 14.4% representation of women and marginalized gender employees, and, in Ireland, we have achieved 16.2% representation of women and marginalized gender employees.
At Reverb, the representation of women and marginalized gender employees grew from 33.9% at December 31, 2021 to 36.4% at December 31, 2022.
At Depop, the representation of women and marginalized gender employees was 46% of their global workforce at year end 2022. Although Depop’s total workforce is broadly balanced between men and women/other gender identities, we’ve identified that the engineering and data teams present an opportunity for improving gender diversity.
Depop has expanded the scope of their previously committed target for increasing the number of women in engineering and data positions to include women and other marginalized genders (referred to as underrepresented gender identities or,”URGs”).
Attracting and Retaining Diverse Talent at the Leadership Level
Etsy is committed to building a workplace where all people, regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, gender identity or veteran status, can come, stay and thrive.
In 2022, Etsy formalized the Executive Diversity Council, bringing together senior stakeholders in order to support current and future DEI efforts and embed inclusive practices throughout Etsy.com, and holding leaders accountable for results. Members of this council are the Executive Team, who are responsible for Etsy’s principal business units, and Etsy’s DEI leaders. Etsy’s Executive Diversity Council is working to support strategic initiatives, partnerships, advocacy, and programs that contribute to Etsy’s DEI mission and Etsy’s employee experience, and whose results can be measured against an established DEI scorecard.
As of December 31, 2022, Black, Latinx, and Native American people comprised 9.8% of Etsy and Reverb’s combined leadership-level workforce. Our recruiting efforts include auditing each job description for inclusive language, proactively offering disability accommodations, sourcing from wide talent pools, strict adherence to a structured interview process, diversity training for all interviewers, applying the Mansfield rule (requiring that at least two qualified candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department) for all job openings to ensure candidates from underrepresented communities are included at the hiring manager screening or “onsite” stage (requirement varies by department)). To retain our employees, we’re investing in refreshed management training through Etsy’s “Managing in the Moment” program, inclusion training for all employees, creating multiple avenues for connection and feedback between our Employee Resource Groups and our executive leaders; and we are seriously committed to building trust and transparency with employees. For example, career development conversations generally take place quarterly at Etsy and managers receive special training to facilitate annual review conversations and to mitigate potential biases in the process.
Focus on Inclusion
At Etsy.com, we’ve continued our mentorship programs and our employee resource group (“ERG”) program. Our goal is to create a positive and inclusive workplace culture where employees from all backgrounds, ages, and abilities have access to programs that foster a sense of community, contribute to professional development, and amplify diverse voices within the organization. In 2022, Etsy.com grew our ERG program to ten communities by adding a resource group dedicated to Accessibility & Disability, created a series of roundtables where the ERGs held dialogs with executive leaders, and hosted a robust program of ERG-produced events focused on advocacy and equity. Etsy also continues to ensure our ERGs have a voice in Etsy.com’s benefits offerings and responses to global concerns.
In addition to our expanded ERG and mentorship offerings, in 2022 we launched identity-based peer cohorts, called ‘dens’ internally, for Black, Latinx, Native American and Asian identifying employees.
In order to bolster equity and inclusion across Etsy’s “House of Brands,” in 2022, Reverb hired a dedicated DEI leader, launched a DEI Leadership Council responsible for promoting collaboration, transparency, and accountability for achieving our DEI roadmap goals, and launched its first internal DEI mentorship program and ERG program.
Our dedication to robust DEI training
In addition to our annual anti-discrimination and anti-harassment trainings, Etsy.com and Reverb continued partnering with Praxis Labs to conclude a virtual reality based DEI course for all employees. This seven month long, self-paced learning journey was supported by monthly discussion sessions facilitated by the DEI team.
Etsy.com and Reverb expect to continue to partner with third-party DEI consultants in 2023 as we continue to push our teams to "walk the talk" of our DEI commitments, and go beyond standard anti-discrimination trainings. In addition, we’ll be embedding inclusion education into employee lifecycle moments, including new hire orientation and manager training. Our DEI development goals include advancing individual’s ability to build empathy, identify inequity and, most importantly, take action.
Depop is committed to launching inclusion training in 2023 for all employees, including managers.
Pay Equity
Etsy takes proactive measures at each step of the employee journey in order to ensure fair pay practices. At the recruiting stage, we determine compensation packages within our existing frameworks by comparing outgoing offers to internal roles with comparable experience. During compensation reviews, we use guideposts when determining the size of merit and promotion increases and bonuses based on performance outcomes. Additionally, all compensation recommendations are reviewed by the appropriate Human Resources Business Partner and Executive team to ensure equity. Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires.
As part of our commitment to fair pay practices, we completed our 2022 Pay Equity analysis, conducted by a third-party consulting firm. The purpose of this analysis is to look at pay across jobs and levels to ensure our practices are fair and consistent and that compensation is not influenced by gender, or race/ethnicity.
The analysis found no unexplained pay gaps adverse to women or employees from other marginalized genders, or non-white employees. Additionally, there were no unexplained pay gaps based on intersectionality (i.e., based on the combination of race and gender/ethnicity). We plan to continue to comprehensively audit pay equity biennially with an external consultant, and conduct internal reviews several times a year in conjunction with events such as rating and promotion decisions and market adjustments.
Equity in Promotions
Etsy’s People Managers have the opportunity to recognize a direct report’s significant contributions and readiness for the next level by nominating them for a promotion. We offer two promotion cycles per year, one in the fall and one in the spring. Each of these cycles includes a calibration step where senior leaders in the relevant internal organization meet to review all promotion nominations in that organization to ensure fairness in decision-making practices.
To help ensure fairness and to mitigate bias in assessing promotion readiness, we provide Managers with tools and training to reflect on their own implicit biases, and we solicit nominations through a structured nomination form that has been audited to incorporate DEI best practices.
In addition to our rigorous promotion nomination practices, we perform detailed pre- and post-calibration analyses to assess equity in each promotion cycle.
Equity in Performance Ratings
We reward and recognize employees for their performance at Etsy with an overall performance rating that is decided once per year in the Annual Review process and informs pay and talent decisions, including salary increases, bonuses, and promotion decisions.
We work hard to ensure the performance review process is as consistent and fair as possible. A number of components play key roles in minimizing bias including clearly established and accessible behavioral competencies that outline performance expectations for each role and level, performance ratings that weight impact (50%) and competencies (50%) equally, and calibration that is conducted annually following submission of a Self-Review and Manager Review. In calibration, senior leaders in the applicable internal organization meet to review all rating decisions to ensure fairness in how ratings are applied to individuals in similar levels and roles. We review data pre- and post-calibration to assess equity in performance rating decisions. We plan to continue conducting this analysis annually.
Accessibility
Ensuring our employees are supported by policies, tools, and benefits that fit their needs remains a top priority. We take a generous approach to providing employees with accommodations and leaves of absence when needed, and we work hard to reduce stigma related to discussing matters of disability and mental health.
In 2022, Etsy.com launched the Accessibility & Disability ERG to foster community and provide a safe space for disabled and/or neurodivergent employees. In addition, we created an accommodations resource guide and trained our recruiters, as part of our efforts to ensure our interviewing process is as accessible as possible. We also are developing disability inclusion training, to be launched in 2023.
In 2022, Etsy.com partnered with Disability:IN and participated in their Disability Equality Index, a comprehensive benchmarking tool that helps companies achieve disability inclusion and equity. Using Etsy’s Disability Equality Index results, we built and began implementing a comprehensive disability inclusion roadmap.
Supplier Diversity, Equity, and Inclusion
Create an equitable and sustainable supply chain that supports our “House of Brands” while reducing our carbon footprint, supporting diverse businesses and bringing new economic opportunities to our suppliers and their employees.
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2022 Goals | | 2023 Goals |
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Etsy.com: Ensure at least 50% of Etsy’s small and medium-sized enterprise suppliers* are owned by women, underrepresented racial communities, or veterans by year end 2022.
* Based on suppliers providing impact data through our supplier vetting program. | | Etsy.com, Reverb, Depop: Achieve $120 million in cumulative diverse* supplier spend by year end 2025.
* A diverse supplier is defined as woman-owned, disability-owned and LGBTQ-owned globally; as well as underrepresented racial communities- (Black, Asian-Indian, Asian-Pacific, Hispanic/Latinx, Indigenous) and veteran-owned in the United States. |
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Supplier Diversity
In line with Etsy’s commitment to enable equitable access to economic opportunities, we set a short-term supplier diversity goal in 2019 to have 50% of our small and medium enterprise suppliers be women, URC*, or veteran owned by year end 2022.
In the final year of our work towards this target, we collected impact data through our supplier vetting program from 77.7% of Etsy’s suppliers, representing 89.7% of Etsy’s supplier spend in 2022. Of suppliers who have provided information, we found that 44.1% of Etsy’s small- and medium-sized suppliers are owned by women, URCs*, or veterans, down from achieving our target of 50.1% in 2021. We hoped to sustain and build on this progress in 2022; however, in response to Etsy’s rapid growth in scale, we saw two trends emerge that contributed to us missing the target.
1.In order to meet the demands of our larger scale, our business teams sought out efficiencies within their supply chains. Several business units planned and executed consolidation strategies across key spend categories (primarily professional services and in-office food). We focused our supplier diversity efforts on these planned areas of consolidation and encouraged the use of diverse small businesses wherever possible. We also engaged directly with our Tier 1 suppliers to support an expansion of data collection efforts to Tier 2 suppliers in our food program, where our purchasing power could have a more direct impact. Despite these efforts, the broader consolidation strategies in professional services contributed to the net reduction in supplier diversity.
2.At the same time, we also experienced accelerated growth in our overall small- and medium-sized supplier pool. While we are proud to have continued to grow our support of small- and medium-sized suppliers as our business scaled, we saw our overall small- and medium-sized supplier rate grow faster than our growth rate of diverse small- and medium-sized suppliers.
*URC for supplier diversity is defined in the Supplier DEI 2023 Goals chart above.
Launching a “House of Brands” Supplier Diversity Program and New Short-term Goal
Since 2019, Etsy has scaled our corporate supply chain operations to support four brands and we’ve learned that our supplier management and impact strategies have to evolve alongside our business. We began the crucial work of improving our end-to-end supplier management infrastructure in 2022 – adding people and centralizing processes; evolving our policies and processes to enable scale and efficiency; and introducing new technology. In 2023, we plan to continue these efforts and lay the foundation to launch Etsy’s first ever “House of Brands” Supplier Diversity Program. In the coming years, we expect this program will allow us to add Depop to our supplier Impact vetting process (joining Etsy.com and Reverb suppliers), release a public-facing supplier diversity policy and invest in technology to support automated reporting and dashboards. As part of this program, we are introducing a new short-term target to achieve $120 million of cumulative spend with diverse suppliers from January 1, 2022 through the end of 2025, across Etsy.com, Reverb and Depop. As of the end of 2022, we had $27 million in diverse supplier spend toward our new target.
Employment Practice Priorities
Etsy utilizes a number of vendors, contractors, and consultants, collectively our vendor partners, in the ordinary course of its business. These vendor partners are typically engaged to (a) enable Etsy to access otherwise unavailable expertise; (b) to fill short term staffing requirements (for example, temporary leave replacements); or (c) support our operations, including to deliver 24-hour multilingual customer support and trust and safety support coverage.
In 2022, we continued the meaningful work to educate our vendor partners who employ contractors on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices. Where we identify gaps, we open dialogues with our vendors, using these guidelines as a north star:
•Ensuring our contractors receive a progressive living wage, adjusted for market conditions, based on location.
•Using our leverage with vendor partners to achieve a progressive and flexible paid leave policy for all full-time contractors, including vacation time, sick time, and gender-neutral parental leave.
•Ensuring all full-time contractors have access to quality medical care for themselves and their dependents.
Creative Community Diversity, Equity, and Inclusion
Build Marketplaces that are Diverse, Welcoming and Inclusive Places to Sell and Shop, and Drive Equity within Creative Communities.
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2022 Goals | | 2023 Goals |
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Marketplace DEI Etsy.com:Build a welcoming marketplace that is diverse, inclusive, and broadly representative of the communities it serves. Include at least 45% Black and Brown skin tones in marketing assets in the United States and highlight historically marginalized groups. Social Innovation Leverage our marketplaces’ platforms to drive equitable access to creative pursuits and economic opportunity. Etsy.com: Expand pathways to creative entrepreneurship for economically disenfranchised communities by increasing access to digital business resources, capital, and customers. Reverb: Create a more inclusive music industry by expanding access to musical instruments and music education. Depop: Provide educational resources and mentorship opportunities to help entrepreneurs, creatives, or small businesses from underrepresented groups grow their businesses sustainably. | | Etsy, Inc.: In 2023, set a 5-year public target for how many economically disenfranchised, creative businesses we will strengthen through our investments in social impact and innovation. Etsy.com: Aim to include at least 45% Black and Brown skin tones in marketing assets on Etsy-owned and Etsy-managed channels in the United States. In 2023, set a 5-year public target for the promotion of underrepresented seller shops through merchandised experiences that broadly aligns with representation in our communities. Depop: Aim to invest in programs or initiatives that drive equity for underrepresented communities on Depop.
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In 2022, we consolidated our Marketplace DEI and Social Innovation goals under a single Creative Community DEI goal. We recognize that our efforts to create a welcoming and diverse marketplace for our buyers and sellers while supporting economically disenfranchised creative entrepreneurs must work in concert to drive our ultimate aim of equitable access to creative pursuits and economic opportunity.
Marketplace DEI
In 2022, we worked to ensure that the images we proactively created and shared in our Etsy.com marketplace were broadly representative of the communities in which we live. In 2022, 47.9% of the people in marketing assets on Etsy.com-owned and Etsy.com-managed channels in the United States had black or brown skin tone representation or were identified as people of color.
Social Innovation
This year represented another major expansion of Etsy’s investments to increase pathways to creative entrepreneurship, especially for those from economically disenfranchised communities. Etsy understands the critical role creative entrepreneurship can play in building economic independence and freedom for communities and has long been committed to utilizing our marketplace to help anyone with a creative idea build a business online.
This commitment was supported by Etsy.com’s Uplift Initiative, a diverse set of programs focused on supporting creative entrepreneurs facing challenges such as lack of access to an internet connection or limited digital skills and capital to grow their businesses. Our Uplift Fund continued to support organizations helping creative entrepreneurs. In 2022, the fund received over 6.4 million contributions from U.S. buyers on the Etsy marketplace who elected to round-up their order price and donate their change. From these donations, the Uplift Fund distributed approximately $2.5 million in grants to organizations driving resources to creative entrepreneurs. The Uplift Makers program onboarded two new cohorts, enabling a growing number of heritage artisan communities to build pathways to economic independence by bringing their products online. Over $340,000 in sales was generated in 2022 by Uplift Maker shops.
And we supported our communities across the “House of Brands:” Reverb continues to drive resources to under-resourced communities globally through Reverb Gives and has provided access to musical equipment through over $250,000 in credits. Depop facilitated a new edition of the Now/Next program with six Black Sellers, each receiving a grant of $2,000. The program was focused on developing and curating a curriculum aimed at delivering tangible support for Black Sellers, providing them with the inspiration, knowledge, tools and access to accelerate their success on Depop.
Workforce Metrics
Our mission is to “Keep Commerce Human.” Our DEI goals are integral to who we are as a company: namely, marketplaces and workplaces that are made stronger by the unique and special qualities of our communities.
We are committed to transparent reporting on workforce diversity. All metrics below are as of December 31 of the stated year. Overall metrics include all employees globally. Leadership is defined as Director level and above. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions. Gender and age metrics represent our global employee base, while race and ethnicity metrics represent U.S. employees only. 2020 and 2021 metrics include Etsy.com and Reverb, while 2022 metrics include Etsy.com, Reverb, and Depop for Gender, Race and Ethnicity, and Age, and Elo7 for Age and Gender metrics only.
Our Board of Directors also affirmed its dedication to diversity in 2020, committing to actively seek out diverse director candidates to include in the pool from which nominees are chosen. In 2022, our Board of Directors strengthened its commitment to diversity by specifically requiring that any initial list of candidates considered by the Nominating and Corporate Governance Committee for nomination to our Board of Directors include at least two qualified candidates with diversity of race, ethnicity or gender. Etsy expects to provide additional disclosures on Board of Directors diversity in our Proxy Statement for our 2023 Annual Meeting of Stockholders. Etsy provided our 2021 consolidated equal employment opportunity (EEO-1) report on our Investor Relations website.
Gender Metrics - Global
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Board of Directors | Overall | Leadership | Tech | Engineering | Other Business Roles |
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nFemale | nMale | nAdditional Genders | nNot Declared |
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
RACE & ETHNICITY METRICS - U.S. ONLY
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| Board | Overall | Leadership | Tech | Engineering | Other Business Roles |
2020 | 2021 | 2022 | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† | 2020† | 2021† | 2022† |
American Indian or Alaska Native | —% | —% | —% | 0.2% | 0.1% | 0.2% | 0.7% | —% | —% | 0.1% | 0.2% | 0.2% | —% | 0.3% | 0.2% | 0.2% | —% | 0.1% |
Asian | —% | —% | —% | 17.5% | 18.9% | 18.7% | 14.4% | 15.6% | 14.1% | 25.6% | 24.7% | 24.0% | 22.6% | 24.2% | 24.5% | 8% | 9.8% | 10.2% |
Black/ African American | 12.5% | 22% | 22% | 5.9% | 6.1% | 7.1% | 5.8% | 6.1% | 6.2% | 5% | 5.4% | 5.6% | 5.5% | 5.6% | 4.8% | 7.2% | 7.2% | 9.5% |
Hispanic | —% | —% | —% | 6.1% | 6.3% | 7.3% | 2.2% | 3.3% | 4% | 4.6% | 5% | 5.7% | 5.5% | 5.6% | 5.9% | 8% | 8.5% | 9.9% |
Two or More Races | —% | —% | —% | 3.4% | 3.7% | 3.5% | 3.6% | 2.2% | 2.2% | 4.2% | 3.9% | 3.6% | 4.4% | 4.4% | 3.9% | 2.5% | 3.1% | 3.2% |
White | 87.5% | 78% | 78% | 63.0% | 61.2% | 60.2% | 71.9% | 70% | 71.8% | 56.4% | 57% | 58.1% | 57.5% | 55.6% | 57.3% | 70.6% | 67.8% | 63.8% |
Not Declared | —% | —% | —% | 3.8% | 3.7% | 3% | 1.4% | 2.8% | 1.8% | 4% | 3.8% | 2.8% | 4.6% | 4.4% | 3.4% | 3.3% | 3.6% | 3.3% |
AGE METRICS - GLOBAL*
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| n24 years and younger | n30-34 years | n40-49 years |
| n25-29 years | n35-39 years | n50+ years |
*Age Not Declared was .2% in 2020 and 2021, and .1% in 2022.
† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
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| Governance | |
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| Fostering a culture of ethics and accountability |
Responsible Marketplace Practices
The trustworthiness of our marketplaces and the connections among our buyer and seller communities are the cornerstones of Etsy’s business. For more information, please see Part 1, Item 1, “Business—Primary Business Drivers—Trust & Safety” of this Annual Report.
Thoughtful Corporate Governance
Our corporate governance practices include an independent Board Chair, a fully independent Board of Directors (except for our CEO), independent Committee members, sophisticated and fully engaged directors with different areas of relative expertise and additional dimensions of diversity, and a balanced distribution of director tenure. For a more complete description of our corporate governance practices, please refer to our Proxy Statement for the 2023 Annual Meeting of Stockholders (“Proxy Statement”) to be filed with the SEC within 120 days of the fiscal year ended December 31, 2022. More information on our governance policies and guidelines is available at the Investor Relations section of our website.
In 2022, we continued to evolve our corporate governance practices, amending our bylaws to provide that a stockholder, or a group of up to 20 stockholders, owning at least three percent of the voting power of Etsy's outstanding capital stock continuously for at least three years, may nominate and include director nominees in Etsy’s annual meeting proxy materials (commonly referred to as a “proxy access bylaw”), subject to certain limitations and requirements specified in the Bylaws.
We also strengthened our commitment to diversity on our Board of Directors, updating our Policies and Procedures for Director Candidates to require any initial list of director candidates considered by the Nominating and Corporate Governance Committee to include at least two qualified candidates with diversity of race, ethnicity or gender.
Integrated ESG Reporting
We strive to continue to innovate and evolve our ESG disclosures to hold ourselves accountable and transparently engage with all of our stakeholders. Since 2018, we’ve shared our ESG metrics alongside our financial results in our Integrated Annual Report. This practice is intended to ensure that we’re transparent about and accountable for progress against our environmental and social goals. In 2022, we expanded the scope of our integrated ESG reporting to include Depop more broadly and to include Elo7 in our Gender and Age metrics for the first time. We are also taking steps to improve our analysis and disclosure of human rights concerns, including publishing our Modern Slavery Statement and engaging with a human rights consultant to develop a roadmap to further improve our internal policies and processes to identify and address potential human rights risks.
Risk Oversight and Management
One of the key functions of our Board of Directors is to provide informed oversight of our risk management processes. While management is responsible for day-to-day management of the material risks we face, our Board of Directors is responsible for risk oversight. Since 2019, Etsy has had a Risk Steering Committee, which consists of a cross-functional management team that meets regularly to review and discuss the significant risks facing Etsy. Periodic reports on material risk are provided to the full Board of Directors. The Risk Steering Committee also periodically considers areas of new or evolving risks and works to understand risk analyses and establish appropriate mitigation plans. For more information on risk oversight generally, please see “Board Oversight of Risk” in Etsy’s Proxy Statement. For information on how we manage our climate related risks, please refer to our complete TCFD response beginning on page 40 of this Annual Report.
SASB Disclosure
The Sustainability Accounting Standards Board’s (“SASB”) mission is to develop sustainability metrics for public corporations to disclose material, decision-useful information to investors. Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy.com, Depop, Reverb, or Elo7, information in this section applies to Etsy, Inc. and all of its subsidiaries.
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-000.A | Entity-defined measure of user activity | Active buyers - Etsy, Inc. (thousands) | 81,898 | | 96,336 | | 95,076 | |
| Active sellers - Etsy, Inc. (thousands) | 4,365 | | 7,522 | | 7,470 | |
CG-EC-000.B | Data processing capacity |
•In February 2020, we completed our full migration to Google Cloud for Etsy.com. Reverb and Depop use Amazon Web Services (AWS) for their cloud computing needs. •Our Etsy.com cloud migration has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.
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| Percentage outsourced | | 100 | % | 100 | % | 100 | % |
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Hardware Infrastructure Energy & Water Management |
CG-EC-130a.1 | Total energy consumed, MWh (Etsy.com) | 5,675 | | 5,362 | | 6,379 | |
| Percentage renewable energy (Etsy.com) | 100 | % | 100 | % | 100 | % |
| Percentage grid electricity (Etsy.com) | 100 | % | 100 | % | 100 | % |
CG-EC-130a.3 | Discussion of the integration of environmental considerations into strategic planning for data center needs. •For 2022 we continued to meet our goal to source 100% renewable electricity for our operations which includes our office facilities for Etsy.com, Reverb, and Depop, remote worker electricity usage for Etsy.com, Reverb, and Depop, and our Google Cloud computing for Etsy.com, and we have a 2025 goal to reduce the intensity of our energy use by 25% from a 2016 baseline. These goals are included as key considerations as we plan for our computing needs, and have been a focus of our sustainability efforts. When transitioning to a cloud computing infrastructure, we selected Google Cloud, a partner that shares our commitment to 100% renewable electricity, for Etsy.com. Their highly efficient data centers have helped us save significant overhead energy. We achieved a 69% reduction in energy use (kWh per site visit) from computing between 2016 and 2022, despite substantial growth in our business over the same period. •We actively monitor and manage energy consumption from our computing infrastructure for Etsy.com. In 2022, we estimate that our energy consumption in Google Cloud was 6,379 MWh, based on a methodology developed by Etsy and reviewed by industry experts (our “Cloud Jewels methodology”). Quantification of our cloud energy consumption is allowing us to meaningfully explore and activate levers of change to drive further cost and energy efficiencies in our computing footprint. Our 2022 hardware infrastructure energy footprint does not include Reverb, Depop, or Elo7 as we are not currently able to calculate energy usage from AWS, but we do include the emissions from Reverb and Depop’s hardware infrastructure in our Scope 3 Purchased Goods and Services calculations. •In 2018, Etsy entered into a virtual power purchase agreement for solar energy in Virginia. This project is providing us with renewable attributes to apply to our operations and computing infrastructure, furthering our goals of creating a cleaner internet and reducing our impact on the planet.
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Data Privacy and Advertising Standards |
CG-EC-220a.2 | Description of the policies and practices relating to behavioral advertising and user privacy. •We care deeply about privacy and are committed to being upfront about our privacy practices, including how we treat personal information. Etsy’s Privacy Policy provides a detailed explanation of our privacy practices. Etsy’s Transparency Report also includes details of our Privacy Principles. •Among other things, our Privacy Policy covers the user information that Etsy collects or receives, the choices and control that a user has in relation to this data including based on type and sensitivity by region and worldwide, the purpose for which Etsy uses such information (including first and third-party advertising purposes), our policies relating to our usage and sharing within Etsy, its affiliates and third-party partners, disclosures about third-party partner privacy policy and options, and user controls for sharing and controlling such information with third-parties.
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Data Security |
CG-EC-230a.1 | Description of approach to identifying and addressing data security risks. •Data security is overseen by our Chief Information Security Officer (“CISO”) who reports to our Chief Technology Officer (“CTO”). •We strive to protect sensitive information through various means, such as technical safeguards, procedural requirements and policies, an intensive program of monitoring on both our web platform and within our corporate network, continuous testing of aspects of our security posture internally and with outside vendors, a robust incident response program, and regular training for employees. •In 2021, we expanded the role of our Audit Committee in the oversight of Etsy’s technology and information security policies and practices, and the internal controls relating to information security, and the steps taken by management to identify, monitor, and control these exposures, to provide for more focused oversight of rapidly evolving information security risks and mitigation strategies. •Our Board also periodically participates in tabletop exercises conducted by senior management as part of risk management and disaster-related planning to validate, test, and assess the effectiveness and adequacy of certain roles and decision-making processes in the event of a cyber-incident. •Further information can be found in our Data Privacy & Security policy on our Investor Relations site.
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Employee Recruitment, Inclusion and Performance |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.1 | Employee engagement as a percentage (Etsy.com) | 81 | % | 75 | % | 77 | % |
| Employee engagement as a percentage (Reverb) | 75 | % | 75 | % | 75 | % |
| Employee engagement as a percentage (Depop) | | | 72 | % |
| Employee engagement as a percentage and discussion of methodology. •In May 2022, we conducted an engagement survey of all global employees. Of all employees surveyed across Etsy.com and Reverb, 87% submitted a response, and 77% of Etsy respondents and 75% of Reverb respondents reported favorable employee engagement. The survey was conducted through the Culture Amp platform and consisted of 64 rating questions on which employees were asked to indicate their level of agreement with a statement based on a five-point scale from Strongly Agree to Strongly Disagree, and two free-text questions to which employees were asked to write out a response for Etsy.com. At Reverb, the Culture Amp survey consisted of 65 rating questions and two free-text questions. •During September and October 2022, Depop conducted its quarterly engagement survey through Peakon. 82% of employees submitted a response, with a resulting engagement score of 7.2. This is the average score given by respondents to 4 key engagement questions, all of which are rated on a scale of 1-10. This score has been converted into a percentage based on the overall engagement score. |
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SASB Metrics |
SASB Code | Metric | 2020 | 2021 | 2022 |
CG-EC-330a.3 | Gender and racial/ethnic group representation for leadership, technical staff and other business functions | See Workforce Metrics section for details starting on page 33. |
Discussion of diversity and inclusion strategy and performance | See Social section for details starting on page 27. |
CG-EC-330a.4 | Percentage of technical employees who are H-1B visa holders | 5.1 | % | 5.6 | % | 3.8 | % |
Product Packaging and Distribution |
CG-EC-410a.1 | Total greenhouse gas (“GHG”) footprint of product shipments in metric tons CO2e | 303,218 | † | 363,361 | † | 339,395 | † |
Total greenhouse gas (GHG) footprint of packaging in metric tons CO2e | 53,489 | † | 63,645 | † | 57,911 | † |
CG-EC-410a.2 | Discussion of strategies to reduce the environmental impact of product delivery. •The delivery of products sold on our marketplace represents the majority of Etsy’s carbon footprint. As a peer-to-peer marketplace, Etsy does not directly control seller shipping or the associated logistics networks; however, we are committed to addressing carbon emissions from shipping and packaging. •In 2022, we offset 100% of emissions generated from shipping and packaging on the Etsy.com (since 2019), Reverb (since 2019), and Depop marketplaces (starting in 2022) through investments in verified emissions reductions. This allows us to take immediate action while we work toward our Net Zero goal. •In addition, we take action in support of policy solutions that will help to drive carbon reduction from product delivery in the long-term. In 2022, we again prioritized advocating for national and regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on heavy- and medium-duty vehicles that play an important role in e-commerce logistics. •In 2022, we expanded our partnership with EcoEnclose to now include both Etsy.com and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from certified responsibly sourced and 100% recycled paper that buyers can also recycle easily at home. The program now also supports sellers who reuse existing packaging, through a reused packaging sticker option. •We continue to collaborate with peers, vendors, and NGOs on industry-wide efforts to drive efficiency and resilience in the shipping and logistics sector. *th
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Greenhouse Gas (“GHG”) Emissions Summary (tCO2e) | Etsy.com + Reverb | Etsy.com + Reverb | Etsy.com, Reverb, Depop |
GHG Emissions by Scope | 2020 | 2021 | 2022 |
Scope 1 | 294 | † | 350 | † | 371 | † |
Scope 2 - Market | 4 | † | 0† | 0† |
Scope 2 - Location | 914 | † | 420 | † | 542 | † |
Scope 3 | 438,731 | | 548,900 | | 531,638 | |
Scope 3 Emissions Intensity (tCO2e/ million $ gross profit) | | | 293 | |
Scope 3 GHG Emissions by Activity Source | | | |
Category 1: Purchased Goods & Services | | | |
Purchased Goods & Services (excluding Computing) | 76,451 | † | 97,302 | † | 106,434 | † |
Cloud Computing - Google Cloud (Etsy Only) | | 13,623 | † | 12,054 | † |
Other Computing | 488 | † | 466 | † | 1,836 | † |
Category 3: Fuel & Energy Related Activities | | | |
Fuel & Energy Related Activities Not Included in Scope 1 or Scope 2 | | 2,711 | | 3,429 | |
Category 5: Waste Generated in Operations | | | |
Waste | 3 | | 3 | | 5 | |
Water | 9 | | 4 | | 4 | |
Category 6: Business Travel | | | |
Air Travel | 153 | † | 67 | † | 1,067 | † |
Other Business Travel | 10 | | 9 | | 163 | |
Category 7: Employee Commuting | | | |
Commuting | 111 | | 83 | | 1,042 | |
Remote Workers | 672 | | 1,066 | | 1,401 | |
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Category 8: Upstream Leased Assets | | | |
Cloud Computing - Google Cloud (Etsy Only) | 0† | | |
Category 9: Downstream Transportation & Distribution | | | |
Shipping | 303,218 | † | 363,361 | † | 339,395 | † |
Packaging | 53,489 | † | 63,645 | † | 57,911 | † |
Category 11: Use of Sold Products | | | |
End User Energy Use | 4,127 | † | 6,560 | † | 6,897 | † |
For 2020 and 2021, emissions generated from our co-located data centers are included in Scope 2 emissions; we did not have operations in any colocated data centers in 2022. In 2020, we expanded our inventory to account for the Scope 3 GHG emissions from: (1) the packaging our sellers use to ship products to buyers, (2) the use of our platforms on consumers’ personal devices, and (3) our corporate supply chain. As part of our continued commitment to maintain accountability for our GHG emissions, in 2021, we further expanded the scope of our measured and reported GHG emissions inventory and refined the methodologies used to calculate our Scope 3 GHG emissions: (1) in Scope 3 - Category 3, we captured GHG emissions from fuel and energy related activities not already included in Scope 1 and 2, (2) we updated the supplier spend data, emission factors, and categorizations included in our Scope 3 - Category 1 emissions calculations, resulting in higher emissions year-over-year. (3) we reclassified emissions generated from Google Cloud computing from Scope 3 - Category 8 to Scope 3 - Category 1. As part of the recategorization of cloud computing, we now include an estimate of our supplier’s Scope 3 emissions, resulting in higher emissions. (4) We no longer differentiate between Scope 3 - Market and Scope 3 - Location-based emissions and instead provide current and historical data for what we had formerly considered Scope 3 - Market-based emissions, and (5) we apply renewable energy certificates to our employees’ working from home electricity usage in Category 7. In 2022, we included emissions from Depop in our above calculations. For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year over year. For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy.com only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions. Using Etsy’s Cloud Jewels methodology we estimated our Google Cloud Platform’s Scope 2 energy usage and with Google’s agreement, retired REC’s on behalf of this energy usage, thus reducing our supplier emissions from Google Cloud. As a result of the above changes in scope, methodology, and our continued efforts at further accountability, some categories of emissions data are not comparable from year to year. For additional details regarding the scope and data methodologies used to calculate our GHG emissions data can be found on our Investor Relations website. |
†Etsy commissioned an external third-party to perform attest procedures with respect to our carbon and energy metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.
The Task Force on Climate-Related Financial Disclosures
Etsy treats climate change and its related impacts seriously. As part of our deepening management of climate impacts, since 2020, we have reported enhanced climate-related disclosures for Etsy.com in line with the Task Force on Climate-Related Financial Disclosures (“TCFD”). The following section reflects our climate-specific reporting aligned with the TCFD. While we have identified and disclosed a number of relevant climate-related risks, we have determined that at this time none of these risks represent a material short-term risk to our business. For a discussion of certain risks we are exposed to in the normal course of our business activities, see Part I, Item 1A, “Risk Factors.”
TCFD provides a framework with four thematic areas — Governance, Strategy, Risk Management, and Metrics and Targets — and eleven recommended disclosures. The following disclosures provide information intended to address each recommendation, including references to other publicly available sources for related information. Information in this section is limited to Etsy.com.
Governance
Board of Directors oversight of climate-related risks & opportunities
Etsy’s full Board of Directors has overall responsibility for oversight of risk management at Etsy, including management of climate risk. The charter of the Nominating and Corporate Governance Committee (the “N&CGC”) of our Board of Directors provides that the N&CGC has responsibility for periodic review of our environmental and social Impact goals and our progress towards those goals. We typically report on our progress towards our Impact goals to the N&CGC or the full Board of Directors two times a year. The full Board of Directors also receives briefings, generally quarterly, on risk management-related topics, and the work of the Risk Steering Committee helps inform which risks are reported to the Board of Directors. (For a description of the Risk Steering Committee’s activities, see below.)
The full Board of Directors is responsible for reviewing significant acquisitions and other large scale capital expenditures. One of the criteria we use when evaluating acquisition opportunities is whether the transaction aligns with our mission, strategy, and values, including our Impact focus. In addition, the Audit Committee of the Board of Directors oversees the disclosure in our Annual Report, which includes Impact disclosures, and our auditor’s review of our Impact disclosures, and our Compensation Committee oversees our talent and employee development programs including our policies and strategies regarding diversity and inclusion. One member of our Board of Directors is experienced in sustainability accounting practices and is a Sustainability Accounting Standards Board (“SASB”) FSA Credential Holder. Information about Etsy, Inc.’s Board of Directors and its Committees, including their charters and membership, is available in the Governance section of our investor relations website.
Management’s role in assessing and managing climate-related risks and opportunities
Our Executive Team, including our CEO and CFO, review our environmental goals annually. Our CFO approves material capital expenditures, including those related to climate-related issues, such as renewable energy projects, and investments in verified emissions reductions.
Oversight of climate risk at Etsy.com is supported by the Risk Steering Committee, a cross-functional management team which includes our CEO and CFO. This Committee meets at least quarterly to review and discuss the significant risks facing Etsy.com and its deliberations inform the risk management-related topics elevated to the Board of Directors.
Etsy, Inc.’s Sustainability team, led by the Senior Director of Impact and Sustainability (the “I&S Sr. Director”), oversees Etsy’s sustainability strategy and implementation, which includes climate impacts. The I&S Sr. Director reports to the VP, Strategic Sourcing and Marketplace Initiatives, who reports to the Chief Operations Officer, who is the Executive Sponsor for Etsy’s Impact strategy. The I&S Sr. Director presents progress on environmental metrics each quarter to the Senior Leadership Team, including the CEO and CFO. The Impact Strategy Coordination Group, a cross-functional working group led by the I&S Sr. Director, coordinates ESG strategy and initiatives and meets bi-weekly. Etsy also has three cross-functional Impact Working Groups that all meet at least quarterly to manage the implementation of Impact projects and reporting.
Strategy
Climate-related risks and opportunities identified & impact on strategy
Etsy’s climate strategy is informed by periodic identification and prioritization of climate-related risks and opportunities. In 2022, we deepened our analysis of climate impacts identified as part of our 2021 climate scenario analysis while continuing to strengthen internal engagement. To understand the degree to which a climate risk or opportunity could impact Etsy, the Impact team works with both external climate consultants and internal stakeholders to assess our current exposure and sensitivity, review existing controls, and analyze projected trends. To date, we have not identified any climate-related risks which are reasonably expected to have a material short-term impact on financial or strategic business operations. We believe that this is largely due to Etsy.com’s marketplace model, the wide geographic distribution of our seller and buyer base, and our long-standing work to mitigate climate risks. However, due to the systemic nature of climate change and its intensifying global impacts, we are continuing to monitor and manage both climate-related risks and opportunities.
The following disclosures highlight the identified climate-related impacts, as well as the ways in which our ESG strategy seeks to mitigate risks and leverage opportunities. We define short-term impacts as those expected to occur within 0-2 years, medium-term impacts as those expected to occur within 2-5 years, and long-term impacts as those expected to occur after 5 or more years. Etsy’s ESG goal-setting process considers these climate-related impacts.
Identified Climate Opportunities & Management Response
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Class | Opportunity Description | Horizon | Management Response |
Energy Source | The availability of renewable energy mechanisms presents opportunities to reduce our exposure to fossil fuel price increases and reduce operating costs. | Short-Term | 100% Renewable Electricity Through our 15-year VPPA, international renewable energy credits, and on-site solar arrays, we powered 100% of the energy used in 2022 by our Etsy.com offices and remote workers, as well as by Etsy.com’s Google Cloud computing with renewable energy. Given the dramatic increase in energy costs in 2022, our U.S.-based VPPA generated more settlement credits than Etsy paid in electricity costs for its U.S. offices. We intend to continue to source 100% of electricity from renewable sources through a mix of onsite renewables, utility contracts, and our VPPA. |
Resource Efficiency | Reducing resource use across our facilities offers opportunities to reduce operating costs while strengthening employee engagement and thus improving retention. | Short-Term | Energy Efficiency We continue to be on track to meet our 25% reduction in the intensity of our energy use at Etsy.com offices and computing by 2025. This has reduced the impact of fuel price increases. Our energy efficiency goals also present opportunities for our Systems Architect, Sustainability to innovate new energy efficiency tools and processes and to enhance brand value through vendor partnerships. “Zero Waste” Etsy.com maintains “Zero Waste” certification at our two office locations for diverting over 90% of waste from landfill, which reduces operating costs and strengthens employee engagement. |
Resource Efficiency | Regulatory policies that promote lower-emission modes of transport support our goals of achieving of achieving net zero, which may improve our reputation, reduce costs from carbon offsets, and help drive revenue growth. | Medium-Term | Low-Emissions Transport A significant portion of our Scope 3 emissions come from shipping. We recognize that decarbonization of the transportation sector presents an opportunity for us to achieve ambitious emissions reduction goals and strengthen our reputation. Our Advocacy Team advocates for key national and regional policies that have the potential to accelerate the decarbonization of the transportation sector and drive significant market transformation. We are especially focused on policies in the United States that aim to improve electrification infrastructure and reduce emissions from heavy- and medium-duty vehicles that are important in e-commerce logistics. |
Reputation | Changing consumer preferences around sustainable shopping present opportunities for us to further differentiate as a values-driven commerce brand. | Medium-Term | Customer Engagement In 2022, we deepened our focus on establishing our marketplaces as destinations for sustainably-minded shoppers and conscious living, and we set new goals for item sustainability and circularity. See the Marketplace Sustainability section on page 26 for an overview of the steps we’re taking to enhance buyers’ ability to shop their values. |
Strengthening and communicating our Impact work – including emissions reduction initiatives – presents an opportunity to attract and retain talent and enhance investor relations. | Short-Term | Investors We continue to provide robust ESG disclosures for investors, which we believe well positions us to respond to expanded and standardized ESG reporting expectations. In 2022, we updated the ESG section of our investor relations webpage to improve access to and clarity of our disclosures. |
Identified Climate Risks & Management Response
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Category | Class | Risk Description | Horizon | Management Response |
Physical | Acute | Extreme weather events have the potential to: •impact sellers' ability to make and/or ship items to and displace buyers, which could temporarily decrease supply and/or demand for items sold on our marketplaces and disrupt transit times; •place our offices at risk, or negatively impact the operations of one or more of our third-party service providers. | Medium- and Long- Term | Seller Operations As natural disasters increase in intensity and frequency, we are finding that our sellers and buyers are correspondingly more frequently impacted. In response, since 2017, we have partnered with CERF+ to offer disaster relief grants for Etsy.com U.S.-based sellers who have seen their ability to produce and/or market their work adversely affected by a natural disaster. We have also formalized a Disaster Response framework, which defines when and how we respond to natural disasters and the support we provide sellers during these events. In 2023, we aim to deepen our support for sellers by providing natural disaster planning and response resources. Etsy’s Operations Our Workplace and Security Team develops and implements business continuity plans through our Health, Safety, and Security program that are intended to protect our employees in the event of physical disruptions at our offices. |
Transition | Policy and Legal/ Tech | New laws and regulations could increase direct operational costs to us in the short-term while stricter environmental regulations may place new burdens on our sellers raising their costs in the medium-term. | Short and Medium-Term | Regulations on Etsy Environmental disclosure regulations are increasing globally. We are preparing for these regulations by obtaining third-party assurance on our emissions data and maturing our TCFD disclosures. We plan to further align our climate analysis and reporting with the TCFD framework in anticipation of new ISSB, CSRD†, and SEC climate-related disclosure requirements. Where appropriate, we used our experience preparing TCFD and SASB disclosures for inclusion in our SEC-filed reports to share our views on how proposed disclosure requirements might be modified to enhance the usefulness of the resulting disclosures and remove challenges to implementation of proposed requirements. Regulations on Sellers Our Advocacy Team works to mitigate transition risks for sellers by advocating to advance public policies that increase economic security and reduce administrative burdens for creative entrepreneurs. |
Market | Increased commodity prices due to climate change may increase production costs for sellers and/ or increase our operational costs. | Long-Term | Commodity Markets Our analysis has indicated that the availability of commodities used by sellers, such as cotton, may face risks due to extreme weather. While we intend to analyze this risk in greater detail, because our marketplace features a broad assortment of items, we do not anticipate disproportionate short-term impacts on our business. We purchase carbon offsets to cover 100% of Etsy.com’s measured annual emissions as part of our carbon neutrality commitment. Our research shows that under lower emissions scenarios, the price of carbon offsets is expected to increase dramatically. We mitigate this risk through multi-year off-take agreements while focusing on emissions reduction in line with our Net Zero target. |
Reputation | Customer and investor expectations of the role of corporations in society may grow beyond our current Impact efforts. Failure to meet employee expectations on Impact could affect recruitment, retention, and engagement of top talent. | Medium-Term | Customer and Investor Perceptions We have already achieved or are on track to achieve many of our ambitious sustainability goals, including 100% renewable electricity and emissions reductions. We believe our continued efforts to reduce our environmental impact, improve ESG reporting, and engage our marketplace in sustainable shopping initiatives give us a competitive advantage. Employee Perceptions We track how employees view Etsy’s role in driving Impact and whether they believe Etsy is meeting expectations. Through our aforementioned efforts, we aim to ensure the gap between expectations and reality remains narrow. |
† ISSB is the International Sustainability Standards Board and CSRD is the European Union Corporate Sustainability Reporting Directive
Resilience of strategy across different climate-related scenarios
Over the past few years, we have worked with two external vendors to assess current climate-related impacts and understand how they might change under different temperature pathways over time. In 2021, we conducted a qualitative scenario analysis in key markets across both our physical operations and marketplaces. As part of this process, exposure pathways were mapped to prioritized climate-related issues based on Etsy.com’s business model, data availability, and internal stakeholder input. We used a range of representative concentration pathway (“RCP”) scenarios, with the lowest emissions scenario being RCP2.6 and the highest emission scenario being RCP8.5, as well as models and reports from the Intergovernmental Panel on Climate Change (“IPCC”). Available climate scenario inputs and results were then collated and overlaid with Etsy.com’s seller and buyer information in key geographies, allowing the analysis to pinpoint areas of concern.
Through this analysis we found that all key geographies are expected to face some degree of climate risk under different scenarios. However, because Etsy.com’s buyer and seller base is distributed globally, we do not expect physical climate risks in any one geography to disproportionately impact the business under any scenario in the short-term. In addition, we believe our strategy, articulated above, will help us reduce transition risks associated with a 2 degree or lower scenario. We aim to continue improving our data collection and analysis on these topics to improve our understanding of long-term climate-related risks, quantify opportunities and, if necessary, update our strategic planning.
Risk Management
Processes for identifying and assessing climate-related risks
Our climate risk identification and assessment process is integrated into our company-wide risk management. Our Sustainability Team, including the I&S Sr. Director and the Sustainability Manager, engages with key business functions to identify and evaluate climate risks that could have a substantive financial or strategic impact on the organization at least annually. The Sustainability Team and internal subject matter experts analyze risks in the context of our business, develop recommendations as appropriate, and escalate them for oversight by senior management through Etsy, Inc.’s Risk Steering Committee (see Governance in this section above for more detail). For example, the Sustainability Team collaborates with the Advocacy Team to review climate policy proposals at the U.S. federal and state level and in key non-U.S. jurisdictions that might impact Etsy, the Analytics Team to monitor natural disaster impacts on buyers and sellers, and the Sourcing Team to review climate-related risks within our supplier base.
Processes for managing climate-related risks
The Sustainability Team works cross-functionally to develop management plans to address potential climate-related impacts. They develop and propose updates to environmental goals on an annual basis, including goals designed to mitigate climate risks, which are reviewed and approved by our Executive Team. For example, our goal to source 100% renewable electricity for office operations and computing load, which was achieved for 2020 through 2022, reduces our exposure to carbon pricing and increased fossil fuel costs. The Sustainability Team developed the goal, proposed short-term targets and strategies to measure and reach those targets, and solicited approval from the Executive Team, who ensured resources were provisioned and lines of accountability were appropriately set.
Processes for integrating climate-related risks into the overall risk management
At Etsy.com, climate-related risks are managed as part of ESG risk and are seen as both underlying drivers of other types of risks as well as standalone risks. These risks, as well as their drivers, are monitored by the Sustainability Team. The I&S Sr. Director provides a written status update on potential ESG risks to Etsy’s Risk Steering Committee typically quarterly. The work of the Risk Steering Committee helps inform which risks are reported to the Board of Directors.
Metrics and Targets
Metrics used to assess climate-related risks and opportunities in line with strategy and risk management process
We monitor metrics related to our public environmental targets including total energy consumed, renewable energy percent, grid electricity percent, Scope 1, 2, and 3 GHG emissions including product shipments, packaging, end-user energy use, water, and outgoing waste material streams. For a historical view of our metrics, please view pages 36-39 of this Annual Report.
Internally, we track a number of additional climate-related metrics. For example, since 2019, Etsy.com has been a carbon neutral business, offsetting 100% of our unabated carbon emissions across all measured Scope 1, 2, and 3 categories each year, which effectively acts as an internal price on our emissions. To this end, we track the annual carbon offset costs, offset cost savings from specific emissions reduction activities, and price projections for the voluntary carbon market. Related to natural disasters, we track GMS impacts from FEMA designated natural disasters as well as the percentage of our sellers and buyers in regions exposed to extreme weather events.
For all of our employees, compensation is tied to our financial performance, as well as individual contributions. While responsibility for delivering on our Impact goals is distributed across the Company, each goal owner is responsible for incorporating work associated with advancing their goal into team members’ individual goals, which are considered when making compensation decisions. Members of our Executive Team also serve as executive sponsors for specific Impact goals to help ensure teams stay on track and have the value of executive leadership as plans are executed.
Scope 1, Scope 2, and Scope 3 greenhouse gas (“GHG”) emissions, and the related risks
Please view pages 24-25 and 36-39 of this Annual Report for our GHG Emissions Summary.
Targets used to manage climate-related risks and opportunities and performance against targets
Etsy has five climate-related targets: science-based emissions reduction, carbon neutrality, renewable energy, total energy use, and waste. Details of these targets including actions taken to achieve them and performance against each can be found on pages 25-27 of this Annual Report.
Available Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, proxy statements, and other information with the Securities and Exchange Commission (the “SEC”).SEC. These reports are available free of charge on our website at investors.etsy.com as soon as reasonably practicable after we have filed or furnished them to the SEC. The
We also share certain workforce metrics, such as our most recent consolidated EEO-1 report, information derived from our annual seller census, our annual Transparency Report, and our external facing policies, including our governance policies and guidelines, privacy policy and marketplace rules on our websiteinvestor relations website. Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and investorsany references to our websites in this Annual Report are intended to be inactive textual references only. You should not rely on such information in deciding whether to invest in our common stock. Copies of our SEC reports and other documents are also available, without charge, by sending a letter to Investor Relations, Etsy, Inc., 117 Adams Street, Brooklyn, NY 11201, by sending an email to ir@etsy.com, or by calling (347) 382-7582.
Our SEC reports are also available on the SEC’s website at www.sec.gov free of charge as soon as reasonably practicable after we have filed or furnished them to the SEC.
Item 1A. Risk Factors.
Item 1A. Risk Factors.
Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, our Consolidated Financial Statements and related notes, and the other information in this Annual Report on Form 10-K.Report. If any of these risks actually occur, our business, financial condition, results of operations, and prospects could be adversely affected. As a result, the price of our securities could decline and you could lose part or all of your investment. In addition, factors other than those discussed below or in other of our reports filed with or furnished to the SEC also could adversely affect our business, financial condition or results of operations. We cannot assure you that the risk factors described below or elsewhere in our reports address all potential risks that we may face. These risk factors also serve to describe factors which may cause our results to differ materially from those described in forward-looking statements included herein or in other documents or statements that make reference to this Annual Report. See “Note Regarding Forward-lookingForward-Looking Statements.”
Operational Risks Related to Our Business
We have experienced rapid growth in our business during 2020 and we2021, and there may not be sustained demand for our services or the products sold in our marketplaces. We also may not have the infrastructure human resources, or operational resources or otherwise be able to sustain continued growth atsupport our recent pace.growth.
We haveDuring 2020 and 2021, we experienced rapid growth in our business, in the number of buyers and sellers, and purchase frequency. Our revenue growth may not be sustainablesustainable. While our revenue growth continued in 2022, our GMS declined for the year ended December 31, 2022 as compared to the year ended December 31, 2021. Additionally, our business may continue to be impacted by macroeconomic factors beyond our control such as inflation, rising interest rates, potential recessionary factors, foreign exchange rate volatility, COVID-19 pandemic related factors, changing consumer shopping preferences, increased consumer spending on travel and our rateother discretionary items, global geopolitical uncertainties, supply-chain disruptions, and employment levels, among other things, as well as risk of growth may decrease. further declines in active buyers.
Even if our revenue continues to grow, we may not be able to maintain profitability in the future. In addition, ourOur costs have and may continue to increase as we continue to invest in the development of our marketplaces, including our services and technological enhancements, and as we increase our marketing efforts, expand our operations, and hire additional employees. Further, the growth of our business places significant demands on our management team and pressure to expand our operational, compliance, payments, and financial infrastructure. For example, we may need to continue to develop and improve our operational, financial, compliance, payments, and management controls and enhance our reporting systems and procedures to support our currentrecent and future growth.
If we do not manage our growth effectively, the increases in our cash operating expenses could outpace any increases in our revenue and our business could be harmed. In addition, our revenue may decline and our revenue growth rate may decelerate for a number of reasons, including as a result of geopolitical events, global macroeconomic uncertainty, the abatement of the COVID-19 pandemic, and other factors described elsewhere in these Risk Factors. For further information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenue.” You should not rely on prior periods as an indication of our future performance.
The trustworthiness of our marketplaces and the connections within our communities are important to our success. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.
Creating trusted brands is one of the key elements of our strategy. We are focused on ensuring that our marketplaces embody our mission and values, and that we deliver trust and reliability throughout the buyer and seller experiences. Our rapid growthreputation and brands depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience. We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:
•a failure to operate our business in a way that is consistent with our guiding principles and mission;
•an inability to gain the trust of prospective buyers;
•disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions, or other incidents that impact the reliability of our platforms;
•lack of awareness of, or adherence to, our policies by our communities or confusion about how they are applied;
•a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the repeated widespread listing of prohibited items in our marketplaces;
•changes to our policies or fees that members of our communities perceive as inconsistent with their best interests or our mission, or that are not clearly articulated;
•complaints or negative publicity about us, our platforms, or our policies and guidelines, even if factually incorrect or based on isolated incidents;
•inadequacies in our House Rules, policies, and other terms of use;
•frequent product launches, updates, and experiments that could deteriorate member trust and/or engagement; or
•inadequate or unsatisfactory customer service experiences, failure to adequately respond to feedback from our communities, or inability of our sellers to fulfill their orders in accordance with our policies, their own shop-specific policies, or buyer expectations.
Our increased size has made and may continue to make us a more attractive target to bad actors and fraudsters targeting our marketplaces and our community,communities, civil litigants, and those seeking to enforce often questionable intellectual property rights and/or alleged contractual rights. Our increased visibility has led and may alsocontinue to lead to attempts to misrepresent or mischaracterize us or our marketplaces, such as on social media, or via individual or coordinated campaigns. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms and systems can react. We may not be successful in defending against these types of claims which, if successful, could damage our brandbrands and our business. Even if we are successful in defending against these types of claims, we may be required to spend significant resources in those efforts which may distract our management and otherwise negatively impact our results of operationsoperations. In addition, the recent increased scrutiny and regulation of marketplace platforms, even though principally focused on other larger platforms, has and may continue to create burdens on both Etsy and its communities of buyers and sellers. This may lead to increased risks that shift more quickly than our policies, enforcement mechanisms, and systems can react.
We continue to evolve our marketplaces and invest to improve our customer experience. If our efforts are unsuccessful, or if our customer service platforms or our trust and safety program fail to meet legal requirements or buyers’ and sellers’ expectations, we may need to invest significant additional resources. If we are unable to maintain trusted brands and marketplaces, our ability to attract and retain buyers and sellers could be harmed.
Our business, financial performance, and growth depends on our ability to attract and retain active and engaged communities of buyers and sellers.
Our financial performance, specifically our GMS, revenue, and Adjusted EBITDA, has been and will continue to be significantly determined by our success in attracting and retaining active buyers and active sellers and increasing their engagement. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not managefind our growth effectively,platforms appealing, for example, because of a negative experience, lack of competitive shipping costs, delayed shipping times, inadequate customer service, lack of buyer-friendly features, declining interest in the increasesgoods offered by our sellers, or other factors, they may make fewer purchases and they may not refer others to us. Likewise, if existing sellers are dissatisfied with their experience on our platforms, or feel they have more attractive alternatives, they may stop listing items in our operating expensesmarketplaces and using our services and may stop referring others to us, which could outpace any increasesnegatively impact our financial performance.
In addition, our GMS and revenue are concentrated in our most active buyers and sellers. The early part of the pandemic fueled an unprecedented increase in the growth of active buyers, and the number of active buyers remains significantly above pre-pandemic levels although in recent quarters we have seen the number of active buyers on the Etsy marketplace decline on a year-over-year basis as peak periods have rolled out of the trailing twelve-month figure. If we lose a significant number of buyers or sellers due to the pressure on or shifts in consumer discretionary spending, increased seller fees, or otherwise, our financial performance and growth could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we lose, we may not be able to do so at comparable levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave our marketplaces. If we are unable to attract and retain buyers and sellers our business, financial performance, and growth could be harmed.
Additionally, the demand for the goods listed in our marketplaces is dependent on consumer preferences, which can and do change quickly and may differ across generations, genders, and cultures. If demand for the goods that our sellers offer declines, or if demand for goods falls and is not replaced by demand in new or different categories, we may not be able to attract and retain buyers and our business could be harmed. Further, a shift in trends away from unique or vintage goods, socially-conscious consumerism, second-hand fashion, or specialty items such as musical instruments, could also make it more difficult to attract new buyers and sellers. Under any of these circumstances, we may have difficulty attracting new buyers and sellers without incurring additional expense.
We rely on our sellers to provide a fulfilling experience to our buyers.
A small portion of buyers complain to us about their experience on our platforms. As a pure marketplace, our sellers manage their shops, most policies, products and product descriptions, shipping and returns. As a result, we do not have the ability to control important aspects of buyers’ experiences on our platforms. For example, buyers may report that they have not received
the items that they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. While we have introduced new ways to protect buyers, negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation.
Similarly, we rely on sellers to be responsive to buyers and to fulfill orders to buyers. Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chain, transportation disruptions, customs delays, natural disasters, inclement weather, terrorism, public health crises, or political unrest. Additionally, popular or trending sellers may experience an influx of orders that may be beyond their ability to fulfill in a timely manner. While we have procedures designed to mitigate spikes in orders, we cannot guarantee those procedures will be effective. If buyers have a negative purchase experience, whether due to service interruptions or other reasons, or if sellers are unable to timely fulfill their orders to buyers, our reputation could be damaged.
A perception that our levels of responsiveness and support for our sellers and buyers are inadequate could damage our reputation, and reduce our sellers’ willingness to sell and buyers’ willingness to shop on our marketplaces. In addition,some situations, we may choose to reimburse our revenuebuyers for their purchases to help avoid harm to our reputation. For example, we offer Etsy Purchase Protection, a program that refunds buyers when a qualifying order is not received or arrives damaged. While for qualifying orders under Etsy Purchase Protection we cover the reimbursement and not the seller, we also take steps such as requiring reserves, including to cover certain reimbursements that do not relate to qualified orders, from some sellers based on indications they may declinenot be able to fulfill orders and other factors. Despite our efforts, we may not be able to recover the funds we expend for reimbursements unrelated to qualified orders and our revenue growth ratecost to refund qualifying orders may decelerateexceed our expectations which could impact our financial performance. When we do recover funds used to reimburse buyers from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platforms. Although we are focused on enhancing customer service, our efforts may be unsuccessful and our sellers and buyers may be disappointed in their experience and not return.
As our marketplaces grow, our controls over fraud and policy violations are important to maintaining user trust, but they may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platforms. We take action against sellers who we are aware may have violated our policies. However, our actions may be insufficient, may not be timely, and may not be effective in creating a good purchase experience for our buyers or avoiding negative publicity. While we regularly update our processes for handling complaints and detecting policy violations, these processes are by their nature imperfect in a number of reasons, including the abatement of COVID-19 pandemicdynamic marketplace, and other factors described elsewhere in these Risk Factors. For further information about the rate of revenueinclude risk to us, our sellers, and GMS growth, see “Management’s Discussionour buyers from both under-enforcement and Analysis of Financial Condition and Results of Operations—Results of Operations—Revenue.” You should not rely on growth rates of prior periods as an indication of our future performance.over-enforcement.
The unprecedented COVID-19 pandemic is unprecedented and has impacted, and may continue to impact, our GMS key metrics, and results of operations in numerous ways that remain volatile and unpredictable.unpredictable ways.
The impact ofUncertainty caused by the ongoing COVID-19 pandemic is severehas impacted and widespread,may continue to impact the global economy and while the rollout of vaccines has begun, the timing of vaccinations and lifting of shelter in place requirements and movement restrictions is unknown.e-commerce spending. The COVID-19 pandemic and related government and private sector responsive actions have affected the broader economies and financial markets triggering an economic downturn, which hasand have at points adversely affected, and could again adversely affect, demand for products sold in our marketplaces. ItDespite the widespread availability of COVID-19 vaccines, due to the continuing and evolving nature of COVID-19, the potential for periods of increases in case numbers and the emergence and spread of virus variants in communities in which we and our customers operate, it is impossible to predict all the effects and the ultimate impact of the COVID-19 pandemic, as the situation continues to evolve. The COVID-19 pandemic has disrupted the global supply chain and the preventative and protective measures currently in place, or which may be instituted or re-instituted in the future, such as quarantines, closures and movement restrictions, may interfere with the ability of our sellers to deliver products to our buyers. If delivery services are delayed or shut down, our GMS and revenue could be negatively impacted. As pandemic-related restrictions on movement ease, competition may intensify as buyers return to traditional brick and mortar retail stores. Additionally, our sales may decline if pent-up demand for other discretionary spending replaces demand for online shopping.COVID-19.
As a result of the COVID-19 pandemic, our employees continue to work remotely, and it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working for employees, vendors or contractors may also result in increased consumer privacy, IT security, and fraud concerns. Further, as certain businesses return to on-site operations, we may experience disruptions if our employees or third-party service providers’ employees become ill despite the availability of vaccines, and are unable to perform their duties. This may impact our operations, internet, or mobile networks, or the operations of one or more of our third-party service providers.
Our results of operations may be materially affected by adverse conditions in the capital markets and the economy generally, both in the United States and internationally. Uncertainty in the economy could adversely impact consumer purchases of discretionary items across all of our product categories, and demand for products available in our marketplaces may be reduced. Our results of operations have also been positively impacted by several trends related to the COVID-19 pandemic, including the shift from offline to online shopping, fast moving dynamics in the e-commerce space, retail business closures and re-openings, stimulus checks, and emerging categories such“stay at home” practices or mandates. Competition has intensified as face masks. However, we expect demand for certain items, like handmade masks,buyers returned to diminish significantly with the rollout of the vaccine, and as medical grade masks become widely available.traditional brick-and-mortar retail stores. It is also difficult to predict how our business might be impacted by changingwhat lasting effects the COVID-19 pandemic and the macroeconomic patterns created as a result will have on consumer spending patterns when the pandemic abates. Factors that could affect consumers’ willingness to make discretionary purchases include, among others: levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions, and stimulus checks. In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and we could experience lower than expected GMS, revenue, net income, and Adjusted EBITDA.e-commerce generally.
The uncertainty around the duration of business disruptions and the timing of vaccine rollouts, herd immunity and the lifting of shelter in place restrictions in the United States and other areas of the world will likely continue to adversely impact the national and/or global economy and negatively impact consumer discretionary spending, even in the e-commerce space, which experienced growth during the pandemic.
The full extent of COVID-19’s impact on our operations, key metrics, and financial performance depends on future developments that are uncertain and unpredictable, including the timing of vaccine rollouts and herd immunity, the occurrence of virus mutations and variants, the pandemic’s impact on capital and financial markets, and any new information that may emerge concerning the virus and vaccines and containment,or treatments, all of which may vary across regions. Any of these factors could have a material adverse impact on our business, financial condition, operating results, and ability to execute and capitalize on our strategies.
Our quarterly operating results may fluctuate, which could cause oursignificant stock price to decline.fluctuations.
Our quarterly operating results, as well as our key metrics, may fluctuate for a variety of reasons, many of which are beyond our control, including:
•fluctuations in GMS or revenue, including as a result of adverse marketuncertainty or changing spending patterns resulting from U.S. or global macroeconomic conditions, due tosuch as inflation or rising interest rates, recession, geopolitical events, such as the crisis in Ukraine, COVID-19, pandemic and the re-opening of traditional brick and mortar retail and other options for discretionary spending as and when restrictions on movement are loosened, the seasonality of market transactions, and our sellers’ use of services;
•adverse economic and market conditions, including declines in consumer discretionary spending, currency fluctuations, rapidly rising inflation, supply gluts or shortages, and adverse global events;
•uncertainty regarding overall levels of consumer spending and e-commerce generally;
•our success in attracting and retaining sellers and buyers;
•our ability to convert marketplace visits into sales for our sellers;
•the amount and timing of our operating expenses;
•our success in attracting and retaining sellers and buyers;
•our success in executing on our strategy and the impact of any changes in our strategy;
•the timing and success of product launches, including new services and features we may introduce;
•the success of our marketing efforts;
•the success of our “House of Brands” strategy, including Depop and Elo7, each of which we acquired businesses, such asin 2021, and Reverb, which we acquired in 2019;
•adverse economic and market conditions, such as those related to the current COVID-19 pandemic, currency fluctuations, and adverse global events;
•disruptions or defects in our marketplaces, such as privacy or data security breaches, errors in our software, or other incidents that impact the availability, reliability, or performance of our platform;platforms;
•the impact of competitive developments and our response to those developments;
•our ability to manage our business and future growth; and
•our ability to recruit and retain employees.
The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including, among other things, declines in consumer confidence, declines in economic growth, fluctuations in unemployment rates, supply chain disruptions and gluts, increases in inflation rates, higher interest rates, potential recessionary factors, foreign exchange rate volatility, uncertainty resulting from COVID-19, and uncertainty about economic stability. For example, the ongoing crisis in Ukraine has created extreme volatility in the global capital markets and is expected to have further global economic consequences, including disruptions to the global supply chain and energy markets (collectively with the factors identified in the prior sentence, the “Macroeconomic Conditions”). These Macroeconomic Conditions may adversely affect us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner, on favorable terms, more costly, or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, higher inflation and macroeconomic turmoil and uncertainty could also adversely affect our buyers and sellers, which could reduce demand for the products sold in our marketplaces.
Fluctuations in our quarterly operating results, key metrics, and the price of our common stock may be particularly pronounced in the current economic environment due to the uncertainty caused by the Macroeconomic Conditions and the unprecedented nature of, the current COVID-19 pandemic,changes in consumer spending patterns, and the impacts of the gradual reopening of the offline economy and lessening of restrictions on movement. patterns. Fluctuations in our quarterly operating results and key metrics may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline. FluctuationsFluctuations in our results could also cause a number of other problems. For example, analysts or investors might change their models for valuing our common stock, we could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish, and other unanticipated issues may arise.
We believe that our quarterly operating results and key metrics may vary in the future and that period-to-period comparisons of our operating results may not be meaningful. For example, our overall historical growth rate and the impacts of the COVID-19 pandemic may have overshadowed the effect of seasonal variations on our historical operating results. These seasonal effects may become more pronounced over time, which could also cause our operating results and key metrics to fluctuate. You should not rely on thequarter-to-quarter or any other period-to-period comparisons of our results of one quarteroperations as an indication of future performance.
We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which wouldcould cause our stock price to decline.
From time to time, we release earnings guidance in our quarterly and annual earnings conference calls, quarterly and annual earnings releases, or otherwise, regarding our expected future performance that represents our management’s estimates as of the date of release. For example, we historically have provided annual guidance, but we withdrew our 2020 annual guidance on April 2, 2020 given the economic uncertainty caused by the COVID-19 pandemic and have been providing only quarterly guidance since.
On February 25, 2021,22, 2023, we provided guidance for the first quarter of 2021.2023. This guidance includes forward-looking statements based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that are based on information known when they are issued, and, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies onrelating to our business, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. Some of those key assumptions include the timing and impact of broad Macroeconomic Conditions, particularly in our core markets, and the COVID-19 pandemic and its duration, particularly once a vaccine becomes widely available and restrictionsresulting impact of these factors on movement are lifted, future consumer spending patterns and the associated economic uncertainty on our business. These assumptions are inherently difficult to predict, particularly in the long term. long-term.
We intend togenerally state possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested ranges. Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our actual business results may vary significantly from such guidance or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by geopolitical events, such as the ongoing COVID-19 pandemic,crisis in Ukraine, rising inflation, rising interest rates, potential recessionary factors, and foreign exchange rate volatility, and the impactscontinued evolution of reduced movement,COVID-19, which could adversely affect our business and future operating results. There are no comparable recent events that provide insights on the probable effecteffects of the COVID-19 pandemic and recent Macroeconomic Conditions, and, as a result, the ultimate impactimpacts of the COVID-19 pandemic isand/or the Macroeconomic Conditions are highly uncertain and subject to change. We are relying onuse the reports and models of economic and medical experts in making assumptions relating to the duration of this crisis, resumption of freedom of movementconsumer discretionary spending and predictions as to timing and pace of any future economic recovery.impacts. If these models are incorrect or incomplete, or if we fail to accurately predict the full impact that theMacroeconomic Conditions or COVID-19 pandemic will have on all aspects of our business or the duration of those impacts, the guidance and other forward-looking statements we provide may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors, or other interested parties, the price of our common stock could decline.
Given the uncertainty surrounding the impacts and duration of COVID-19, the efficacy of a vaccine, and the timing and impacts of the opening of freedom of movement, we may continue not to provide guidance, or continue to provide more limited quarterly guidance, as we did in 2020. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly fromfrom actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material. In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this Risk Factors section in this report could result in the actual operating results being different from our guidance, and the differences may be adverse and material.
We track certain operational metrics with internal systems and tools and do not independently verify such metrics. Certain of these metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies may adversely affect our business and reputation.
We track certain operational metrics, including active buyers and active sellers, GMS, including mobile GMS, GMS ex-U.S. domestic, GMS from specific categories of goods or classes of buyers or sellers, and other information about our communities, including with internal systems and tools that are not independently verified by a third-party. The methodologies used to measure certain of these metrics require significant judgment, are susceptible to errors, and may differ from estimates or metrics published by third parties due to differences in sources, methodologies, or the assumptions on which we rely. We also use surveys to collect and track information about our buyers and sellers and rely on third-party data to evaluate and report on our opportunity. Our internal systems and tools have a number of limitations, and our surveys or data collection methodologies may have errors or could change over time, which could result in unexpected changes to our metrics, including the metrics we publicly disclose. If the internal systems and tools or surveys we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we report may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics, there are inherent challenges in measuring this data. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If our operating metrics are not accurate, or if investors do not perceive them to be accurate, investors may lose confidence in our operating metrics and business and we expect that we could be subject to legal claims, and our business, reputation, financial condition, and results of operations would be adversely affected.
If we experience a technology disruption or failure that results in a loss of information, if personal data or sensitive information about members of our communitycommunities or employees is misused or disclosed, or if we or our third-party providers are unable to protect against software and hardware vulnerabilities, service interruptions, cyber incidents, ransomware, security incidents, or other security breaches, then members of our communitycommunities may curtail use of our platform,platforms, we may be exposed to liability or incur additional expenses, and our reputation couldmight suffer.
Like all online services, we are vulnerable to power outages, telecommunications failures, and catastrophic events, as well as computer viruses, break-ins, intentional or accidental actions or inaction by employees or others with authorized access to our networks, phishing attacks, denial-of-service attacks, malicious or destructive code, malware, ransomware attacks, and other cyber attacks, breaches and security incidents. We have experienced in the past, and may experience in the future, technology disruptions, cyber incidents, and security breaches, including intentional, inadvertent, or social engineering breaches occurring through Etsy or third-party service provider technical issues, vulnerabilities, or employees. Any of these occurrences could lead to interruptions or shutdowns of one or more of our platform,platforms, loss of data, or unauthorized disclosure of personal or financial information of our members or employees.employees, or theft of our intellectual property or user data. Furthermore, if our employees or employees of our third-party service providers fail to comply with our internal security policies and practices, member or
employee data may be improperly accessed, used, or disclosed. As we continue to grow our business, expand internationally, and gain greater public visibility, we may continue to face a higher risk of being targeted by cyber attacks.
Although we have integrated a variety of recovery systems, security protocols, network protection mechanisms and other security measures into our systems, networks and physical facilities, which are designed to protect against, detect and minimize security breaches, including security testing, encryption of sensitive information, and authentication technology, we cannot assure you that such measures, which are designed to protect against, detect, and minimize security breaches, will be adequate to prevent or detect service interruption, system failure, data loss or theft, or other material adverse consequences, directly or through our vendors. While we continue to invest in recovery systems, security and access controls, and assessments of our vendors’ security for us and our acquired subsidiaries, some of these systems and controls are not yet fully in place and, even when in place, have not always been in the past, and in the future may not be, sufficient to prevent or detect a cyber attack, system failure, or security breach particularly given the increasingly sophisticated tools and methods used by hackers, organized cyber criminals, and cyber terrorists. The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which would have an adverse effect on our business.
We operate in a hybrid work environment where a sizable portion of our workforce is fully remote. In addition, we have experienced in the past, and may experience in the future, security breaches asindustry has generally moved to online remote infrastructure for core work. If a result of non-technical issues, including intentional, inadvertent,natural disaster, power outage, connectivity issue, or social engineering breaches occurring throughother event that impacted our employees or employees of our third-party service providers. In addition, if our employees or employees of our third-party service providers failemployees’ ability to comply with our internal security policies and practices, member or employee datawork remotely were to occur, it may be improperly accessed, used,difficult or, disclosed.in certain cases, impossible, for us to operate our business for a substantial period of time. The increase in remote working for employees, vendors, or contractors may also result in increased consumer privacy, IT security, and fraud concerns or increased administrative costs.
Our security and access controls for our systems may not be adequate, which may heighten the risk of a cyber attack or security breach. Among other things, our applications, systems, networks, software and physical facilities could have material vulnerabilities, be breached or the personal or confidential information that we store could be otherwise compromised due to employee error or malfeasance, if, for example, third parties attempt to fraudulently induce our employees or our members to disclose information or user names and/or passwords, or otherwise compromise the security of our networks, systems and/or physical facilities. Additionally,As in the past, employees or service providers may inadvertently misconfigure resources or misdirect certain communications in manners that may lead to security incidents on which we must then expend effortcould be expensive and expensestime consuming to correct.
As we have moved to a fully remote work environment due to the COVID-19 pandemic, and as the industry generally moves to online remote infrastructure for core work, we and our partners may be more vulnerable to cyber attacks. Cyber attacks could also result in the theft of our intellectual property or user data.
A successful cyber attack could occur and persist for an extended period of time before being detected. Because the techniques used by hackers change frequently, we may be unable to anticipate these techniques or implement adequate preventive measures. In addition, because any investigation of a cybersecurity incident would be inherently unpredictable, the extent of a particular cybersecurity incident and the path of investigating the incident may not be immediately clear. It may take a significant amount of time before an investigation can be completed and full and reliable information about the incident is known. While an investigation is ongoing, we may not necessarily know the extent of the harm or how best to remediate it, certain errors or actions could be repeated or compounded before they are discovered and remediated, and communication to the public, regulators, members of our community,communities, and other stakeholders may be inaccurate or incomplete, any or all of which could further increase the costs and consequences of a cybersecurity incident. Applicable rules regarding how to respond, noticerequired notices to users, and reporting to regulators vary by jurisdiction, and may subject Etsy to additional liability and reputational harm.
Our production systems rely on internal technology, along with cloud services and software provided by our third-party service providers. In the event of a cyber-incident, even partial unavailability of our production systems could impair our ability to serve our customers, manage transactions, or operate our marketplaces. We have implemented disaster recovery mechanisms, including systems to back up key data and production systems, but these systems may be inadequate or incomplete. For example, these disaster recovery systems may be susceptible to cyber-incidents if not sufficiently separated from primary systems, not comprehensive, or not at a scale sufficient to replace our primary systems. Insufficient production and disaster recovery systems could, in the event of a cyber-incident, harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.
The costs and effort to respond to a security breach and/or to mitigate any security vulnerabilities that may be identified could be significant, our efforts to address these problems may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position. We could be required to fundamentally change our business activities and practices in response to a security breach or related regulatory actions or litigation, which could have an adverse effect on our business.
Cyber attacks aimed at disrupting our and our third-party service providers’ services have occurred regularly in the past, and we expect they will continue to occur in the future. If we experience, or our third-party service providersare perceived to experience, security breaches that result in marketplace performance or availability problems or the loss, compromise or unauthorized disclosure of personal data or other sensitive information, or if we fail to respond appropriately to any security breaches that we may experience, or are perceived to do so, people may become unwilling to provide us the information necessary to set up an account with us. Existing sellers and buyers may also stop listing new items for sale, decrease their purchases, or close their accounts altogether. We could also face damage to our reputation, potential liability, regulatory investigations in multiple jurisdictions, and costly remediation efforts and litigation, which may not be adequately covered by, and which may impact our future access to, insurance. Any of these results could harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.
We are also reliant on the security practices of our third party service providers, which may be outside of our direct control. Additionally, some of our third party service providers, such as identity verification and payment processing providers, regularly have access to payment card information and other confidential and sensitive member data. We may have contractual and regulatory obligations to supervise the security and privacy practices of our third-party service providers. Despite our best efforts, if these third parties fail to adhere to adequate security practices, or experience a cyber attack such as a breach of their networks, our members’ data may be improperly accessed, used, or disclosed. More generally, our third-party service providers may not have adequate security and privacy controls, may not properly exercise their compliance, regulatory or notification requirements, including as to personal data, or may not have the resources to properly respond to an incident. Many of our service providers have moved to a remote work environment and may, as a result, be more vulnerable to cyber attacks.
Our software is highly complex and may contain undetected errors.
The software underlying our platformplatforms is highly interconnected and complex and may contain undetected errors or vulnerabilities, some of which may only be discovered after the code has been released. We rely heavily on a software engineering practice known as “continuous deployment,” meaning that we frequently release software code to our platforms. For the Etsy marketplace platform we typically release software code many times per day. This practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platform,platforms, which can impact the user experience and functionality of our marketplaces. Additionally, due to the interconnected nature of the software underlying our platform,platforms, updates to parts of our code, third partythird-party code, and APIs,application programming interfaces, on which we rely and that maintain the functionality of our marketplaces and business, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platformplatforms that negatively impact the user experience, and functionality or accessibility of our marketplaces. In some cases, such as our mobile apps, errors may only be correctable through updates distributed through slower, third partythird-party mechanisms, such as app stores, and may need to comply with third partythird-party policies and procedures to be made
available, which may add additional delays due to app review and user delay in updating their mobile apps. In addition, our systems are increasingly reliant on machine learning systems, which are complex and may have errors or inadequacies that are not easily detectable. These systems may inadvertently reduce the efficiency of our systems, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies, or otherwise are inconsistent with our brand,brands, guiding principles, and mission. Any errors or vulnerabilities discovered in our code after release could also result in damage to our reputation, loss of members of our community members,communities, loss of revenue, or liability for damages, any of which could adversely affect our growth prospects and our business.
We rely on Google Cloud for a substantial portion of the computing, storage, data processing, networking, and other services for Etsy.com.the Etsy Marketplace. A significant disruption of or interference with our use of Google Cloud would negatively impact our operations and seriously harm our business.
Google Cloud Platform provides a distributed computing infrastructure as a service platform for the Etsy marketplace’s business operations, and weoperations. We have migrated Etsy’sthe Etsy marketplace’s primary production environment and data centers to Google Cloud, increasing our reliance on cloud infrastructure. Any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and willwould cause us to incur significant time and expense. Our products and services arerely in significant part reliant on continued access to, and the continued stability, reliability, and flexibility of Google Cloud. Any significant disruption of, or interference with, our use of Google Cloud would negatively impact our operations, and our business would be seriously harmed. In addition, if hosting costs increase over time and if we require more computing or storage capacity, our costs could increase disproportionately. If we are unable to grow our revenues faster than the cost of utilizing the services of Google or similar providers, our business and financial condition could be adversely affected. To a lesser extent, Reverb, reliesDepop, and Elo7 rely on Amazon Web Services for some business operations,their primary production environment, and isthose marketplaces are thus subject to similaranalogous risks.
The trustworthiness of our marketplaces and the connections within our community are important to our success. Our business, financial performance, and growth depend on our ability to attract and retain an active and engaged community of buyers and sellers. If we are unable to retain our existing buyers and sellers and activate new ones, our financial performance could decline.
We are focused on ensuring that our marketplaces embody our mission and values, and that we deliver trust and reliability throughout the buyer and seller experiences. Our reputation and brand depend, in part, upon our ability to maintain trustworthy marketplaces, and also upon our sellers, the quality of their offerings, their adherence to our policies, and their ability to deliver a trusted purchasing experience.
We view the trustworthiness and reliability of our marketplaces, as well as the connections we foster in our buyer/seller communities, to be cornerstones of our business and key to our success. Many things could undermine these cornerstones, such as:
•complaints or negative publicity about us, our platform, or our policies and guidelines, even if factually incorrect or based on isolated incidents;
•an inability to gain the trust of prospective buyers;
•disruptions or defects in our marketplaces, privacy or data security incidents, website outages, payment disruptions or other incidents that impact the reliability of our platform;
•lack of awareness of our policies or confusion about how they are applied;
•changes to our policies that members of our community perceive as inconsistent with their best interests or our mission, or that are not clearly articulated;
•inadequacies in our terms of use;
•frequent product launches, updates, and experiments that could deteriorate member trust;
•a failure to enforce our policies effectively, consistently, and transparently, including, for example, by allowing the widespread listing of prohibited items in our marketplaces;
•inadequate or unsatisfactory customer service experiences;
•a failure on the part of our sellers to fulfill their orders in accordance with our policies, their own shop-specific policies, or buyer expectations;
•a failure to respond to feedback from our community; or
•a failure to operate our business in a way that is consistent with our guiding principles and mission.
Creating a trusted brand is one of the key elements of our strategy. In particular, we are focused on enhancing the customer experience for both sellers and buyers. We continue to evolve our offerings and invest to improve our customer experience on our marketplaces. If our efforts are unsuccessful, or if our customer service platform or our trust and safety program fails to meet our requirements, legal requirements, or our customers’ requirements, we may need to quickly invest significant additional resources. If we are unable to do so, our ability to maintain trustworthy marketplaces, attract buyers and sellers, and maintain our trusted brand, could be harmed.
Our business, financial performance and growth depends on our ability to attract and retain an active and engaged community of buyers and sellers.
Our financial performance has been and will continue to be significantly determined by our success in attracting and retaining active buyers and active sellers. For example, our revenue is driven by the number of active buyers and buyer engagement, as well as the number of active sellers and seller engagement. If we are not successful in encouraging buyers to return to us and purchase items in our marketplaces more frequently and sellers to list items for sale and use our services, our financial performance may be negatively impacted.
Our GMS and revenue is concentrated in our most active buyers and sellers. The pandemic has fueled an unprecedented increase in the growth of new buyers and reactivated lapsed buyers. We have also seen a higher than recent historic growth rate of new sellers. If we lose those buyers, or sellers, due to the abatement of pandemic restrictions or otherwise, our financial performance and growth could be harmed. Even if we are able to attract new buyers and sellers to replace the ones that we lose,
we may not be able to do so at 2020 levels, they may not maintain the same level of activity, and the GMS and revenue generated from new buyers and sellers may not be as high as the GMS and revenue generated from the ones who leave our marketplaces. If we are unable to retain existing buyers and sellers and attract new buyers and sellers who contribute to an active community, our business, financial performance, and growth could be harmed.
Additionally, the demand for the goods listed in our marketplaces is dependent on consumer preferences which can change quickly and may differ across generations and cultures, or due to other macro events. If demand for the goods that our sellers offer declines, we may not be able to attract and retain our buyers and our business could be harmed. A shift in trends away from socially-conscious consumerism or unique or vintage goods, could also make it more difficult to attract new buyers and sellers. Our growth would also be harmed if the shift from brick and mortar retail to e-commerce does not continue, or reverses when the COVID-19 pandemic abates. We believe that many new buyers and sellers find us by word of mouth and other non-paid referrals from existing buyers and sellers. If existing buyers do not find our platform appealing, whether because of a negative experience, lack of competitive shipping costs, delayed shipping times, inadequate customer service, lack of buyer-friendly features, declining interest in the nature of the goods offered by our sellers, or other factors, they may make fewer purchases and they may stop referring others to us. Likewise, if existing sellers are dissatisfied with their experience on our platform, or feel they have more attractive alternatives, they may stop listing items in our marketplaces and using our services and may stop referring others to us. Under any of these circumstances, we may have difficulty attracting new buyers and sellers without incurring additional expense.
We rely on our sellers to provide a fulfilling experience to our buyers.
A small portion of buyers complain to us about their experience on our platform. As a pure marketplace, our sellers manage their shops, most policies, products and product descriptions, shipping and returns. As a result, we may not have the ability to control important aspects of buyers’ experiences on our platform. For example, buyers may report that they have not received the items that they purchased, that the items received were not as represented by a seller, or that a seller has not been responsive to their questions. Similarly, we occasionally identify sellers who are unable to fulfill orders in a time frame or manner consistent with buyer expectations. Trending sellers may experience an influx of orders that may be beyond their ability to fulfill in a timely manner. For example, a subset of sellers who offered cloth masks during 2020 may have experienced periods of high activity beyond their ability to fulfill as a small business. While we have procedures designed to mitigate spikes in orders, we cannot guarantee those procedures will be effective.
Negative publicity and sentiment generated as a result of these types of complaints, or any associated enforcement action taken against sellers, could reduce our ability to attract and retain our sellers and buyers or damage our reputation. We take action against sellers who we are aware may have violated our policies. However, our actions may be insufficient, may not be timely, and may not be effective in creating a good purchase experience for our buyers.
As our marketplaces grow, our controls over fraud and policy violations are important to maintaining user trust, but they may not be adequate and may not be sufficient to keep up with quickly-shifting techniques used by those attempting to undertake fraudulent activity on our platform. While we regularly update our processes for handling complaints and detecting policy violations, these processes are by their nature imperfect in a dynamic, quickly growing marketplace, and include risk to us, our sellers, and our buyers from both under-enforcement and over-enforcement.
A perception that our levels of responsiveness and support for our sellers and buyers are inadequate could have similar results. In some situations, we may choose to reimburse our buyers for their purchases to help avoid harm to our reputation. While we take steps such as requiring reserves, including to cover such reimbursements, from some sellers based on indicia they may not be able to fulfill orders, we may not be able to recover the funds we expend for those reimbursements. When we do recover funds used to reimburse buyers from sellers, it may increase general seller dissatisfaction and reduce their desire to continue selling using our platform. Although we are focused on enhancing customer service, our efforts may be unsuccessful and our sellers and buyers may be disappointed in their experience and not return.
Anything that prevents the timely processing of orders or delivery of goods to our buyers could harm our sellers. Service interruptions and delivery delays may be caused by events that are beyond the control of our sellers, such as interruptions in order or payment processing, interruptions in sellers’ supply chain, transportation disruptions, natural disasters, inclement weather, terrorism, public health crises, or political unrest. For example, many countries continue to experience delays in shipping due to the COVID-19 pandemic. If buyers have a negative purchase experience, whether due to delay or other reasons, our reputation could be damaged.
Our business depends on third partythird-party services and technology which we utilize to maintain and scale the technology underlying our platformplatforms and our business operations.
Our business operations are dependentdepend upon a number of third-party service providers, such as cloud service providers, marketing platforms and providers, payments and shipping providers, and contingent labor teams, and network and mobile infrastructure providers. Any disruption in their services, any failure on their part to deliver their services in accordance with our scale and expectations, or any failure on our part to maintain appropriate oversight on these third-party providers during the course of our engagement with them, could significantly harm our business.
Our production systems rely on internal technology, along with cloud services and software provided by our third-party service providers (and other entities in our supply chain). In the event of a cyber-incident, even partial unavailability of our production systems could impair our ability to serve our customers, manage transactions, or operate our marketplaces. We have implemented disaster recovery mechanisms, including systems to back up key data and production systems, but these systems may be inadequate or incomplete. For example, these disaster recovery systems may be susceptible to cyber-incidents if insufficiently distributed across locations, not sufficiently separated from primary systems, not comprehensive, or not at a scale sufficient to replace our primary systems. Insufficient production and disaster recovery systems could, in the event of a cyber-incident, harm our growth prospects, our business, and our reputation for maintaining trusted marketplaces.
Cyber attacks aimed at disrupting our and our third-party service providers’ services have occurred regularly in the past, and we expect they will continue to occur in the future. If we or our third-party service providers (and other entities in our supply chain) experience any cyber attacks or other security breaches or incidents that result in marketplace performance or availability problems or the loss, compromise or unauthorized disclosure or use of personal data or other sensitive information, or if we fail to respond appropriately to any security breaches or incidents that we may experience, people may become unwilling to provide us the information necessary to set up an account with us.
We also rely on the security practices of our third-party service providers, which may be outside of our direct control. Additionally, some of our third-party service providers, such as identity verification and payment processing providers, regularly have access to payment card information and other confidential and sensitive member data. We may have contractual and regulatory obligations to supervise the security and privacy practices of our third-party service providers. Despite our best efforts, if these third parties fail to adhere to adequate security practices, or, as has occurred from time to time in the past, experience a cyber incident or attack such as a breach of their networks, our members’ data may be rendered unavailable, improperly accessed, used, or disclosed. More generally, our third-party service providers may not have adequate security and privacy controls, may not properly exercise their compliance, regulatory or notification requirements, including as to personal data, or may not have the resources to properly respond to an incident. Many of our service providers continue to operate in a partial or fully remote work environment and may, as a result, be more vulnerable to cyber attacks. Consequently, a security incident at any of such service providers or others in our supply chain could result in the loss, compromise, or unauthorized access to or disclosure of sensitive or personal data of our buyers or sellers.
We are unable to exercise significant oversight over some of these providers, which increases our vulnerability to their financial conditions and to problems with the services they provide, such as technical failures, deprecation of key services, privacy or security concerns. Our efforts to update our infrastructure or supply chain may not be successful as we may not sufficiently distribute our risk across providers or geographies or our efforts to do so may take longer than anticipated. If we experience
failures in our technology infrastructure or supply chain or do not expand our technology infrastructure or supply chain successfully, then our ability to run our marketplaces could be significantly impacted, which could harm our business.
Our business depends on continued and unimpeded access to third party services, platforms and infrastructure that we rely upon to maintain and scale our platform.
Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces. Internet service providers may choose to disrupt or degrade access to our platform or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps.
Internet service providers or mobile network operators could also attempt to charge us for providing access to our platform. In addition, we could face discriminatory or anticompetitive practices that could impede both our and our sellers’ growth prospects, increase our costs, and harm our business.
Outside of the United States, it is possible that governments of one or more countries may seek to censor content available on our platform or may even attempt to block access to our platform. If we are restricted from operating in one or more countries, our ability to attract and retain sellers and buyers may be adversely affected and we may not be able to grow our business as we anticipate.
In addition, our sellers rely on continued and unimpeded access to postal services and shipping carriers to deliver their goods reliably and timely to buyers. As a result of the COVID-19 pandemic, Macroeconomic Conditions, and other factors, our sellers have at times experienced increased delays in delivery of their goods. If these shipping delays continue or worsen, or if shipping rates increase significantly, our sellers may have increased costs, and/or our buyers may have a poor purchasing experience and may lose trust in our marketplaces, which could negatively impact our business, financial performance, and growth
Our business depends on access to third-party services, platforms and infrastructure that are critical to the successful operation of our business.
Our sellers and buyers rely on access to the internet or mobile networks to access our marketplaces. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. We also depend on widely-adopted third-party platforms to reach our customers, such as popular mobile, social, search, and advertising offerings. Internet service providers may choose to disrupt or degrade access to our platforms or increase the cost of such access. Mobile network operators or operating system providers could block or place onerous restrictions on the ability to download and use our mobile apps or deny or condition access to application programming interfaces or documentation, limiting the functionality of our products or services on the platform, including in ways that could require us to make significant changes to our marketplaces, websites, or mobile apps. If we are not able to deliver a rewarding experience on these platforms, if our or our sellers’ access to these platforms is limited, if the cost or terms of accessing these platforms increases or changes, or if these large platforms implement features that compete with us or our sellers, then our business may suffer.
Internet service providers, mobile network operators, operating system providers and/or app stores have in the past placed and may continue to place technical and policy restrictions on applications and platforms that use their services. They have also and could in the future attempt to charge us for, change the applicable rules and policies for, or restrict our ability to access or provide access to certain platforms, features, or functionality that we use in our business, and such changes may adversely affect our marketplaces.
In addition, the success of our marketplaces could also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including:
•policy changes that interfere with, add tolls or costs to, or otherwise limit our ability to provide users with a full experience of our platforms, such as for our mobile apps or social network presence, including policy changes that effectively require us to use the provider’s payment processing or other services for transactions on the provider’s operating system, network or platform;
•unfavorable treatment received by our platforms, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store;
•increased costs to distribute or use our platforms via mobile apps, social networks, or established search and advertising systems;
•changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps, our understanding of the data and usage related to our services, or that give preferential treatment to competitive products;
•changes to social networks that degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products; or
•implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features, or marketing of our services or our sellers’ shops and products.
Any of these events could materially and adversely affect our business, financial performance, and growth.
Our payments systems have both operational and compliance risks, including in-house execution risk and dependency on third-party providers,providers.
The payment offerings provided on each of our marketplaces differ and, as such, are subject to varying degrees and types of risk. In particular, each payment offering has a complex landscapedifferent level of evolving laws, regulations, rules,reliance on third parties to perform certain aspects of its services. We have and standards.
Our buyers primarily pay for purchases using our payments services (i.e., Etsy Payments and Reverb Payments) or PayPal, and in the United States, may pay in installments with Klarna. In the United States and other countries where our payments services are available, our sellers accept various forms of payments such as credit cards, debit cards, gift cards, PayPal, Google Wallet and Apple Pay. We plan to continue to invest ongoing internal resources into our payments tools and infrastructure to maintain existing availability, expand into additional markets, and offer new payment methods, offerings and tools to our buyers and sellers. If we fail to invest adequate resources into our payments platform,platforms, or if our investment efforts are unsuccessful or unreliable, our payments services may not function properly, keep pace with competitive offerings, or comply with applicable laws and regulatory requirements, any of which could negatively impact their usage and our marketplaces, as well as our trusted brand,brands, which, in turn, could adversely affect our GMS and results of operations.
We rely upon third-party service providers to perform key components of our payments platform,platforms, including payments processing and payments disbursing, compliance, currency exchange, identity verification, sanctions screening, tax collection, and fraud analysis. If these service providers do not perform adequately, or if our relationships with these service providers were to change or terminate, it could negatively affect our sellers’ ability to receive orders or payments, our buyers’ ability to complete purchases, and our ability to operate our payments program, including maintaining certain compliance measures, including fraud prevention and detection tools. This could decrease revenue, increase costs, lead to potential legal liability, and negatively impact our brandbrands and business. If we (or a third-party payment processor) suffer a security breach affecting payment card information, we could be subjected to fines, penalties, and assessments arising out of the major card brands’ rules and regulations, contractual indemnification obligations or other obligations contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards as payment for our services and our sellers’ goods and services.
In addition, we and our third-party service providers may experience service outages from time to time that negatively impact payments on our platform.platforms. We have in the past experienced, and may in the future experience, such payments-related service outages and, if we are unable to promptly remedy or provide an alternative payment solution, our business could be harmed. In addition, if our third-party providers increase the fees they charge us, our operating expenses, or those of our sellers, could increase, and it could negatively impact our sellers’ businesses or our business.
Further, our ability to expand our payments services into additional countries is dependent upon the third-party providers we use to support these services. As we continue to expand the availability of our payments services to additional markets or offer new payment methods to our sellers and buyers in the future, we, along with our sellers may become subject to additional and evolving regulations, compliance requirements, and may be exposed to heightened operational and fraud risk, which could lead to an increase in our operating expenses.
Our payments systems are subject to a complex landscape of evolving laws, regulations, rules, and standards.
Various laws and regulations govern payments, and these laws are complex, evolving, and subject to change and vary across different jurisdictions in the United States and globally. Moreover, even in regions where such laws have been harmonized, regulatory interpretations of such laws may differ. As a result, we are required to spend significant time and effort determining whether various licensing and registration laws relating to payments apply to us as our business strategy and operations evolve. In addition, should one of our subsidiaries become regulated as a financial services entity in any jurisdiction, we would be subject to additional regulation. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, result in liabilities, cause us significant reputational damage, or force us to stop offering our payments services in certain markets. Additionally, changes in payment regulation may occur that could render our payments systems non-compliant and/or less profitable.
Further, through our agreements with our third-party payments service providers, we are and could be subject to evolving rules and certification requirements (including, for example, the Payment Card Industry Data Security Standard), or other contractual requirements or expectations that may materially negatively impact our payments business. Failure to comply with these rules andor requirements could impact our ability to meet our contractual obligations with our third-party payment processors and could result in potential fines or negatively impact our relationship with our third-party payments processors.
We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements, including as a result of a change in our designation by major payment card providers, could make it difficult or impossible for us to comply and could require a change in our business operations. In addition, similar to a potential increase in costs from third-party providers described above, any increased costs associated with compliance with payment card association rules or payment card provider rules could lead to increased fees for us or our sellers, which may negatively impact payments on our platform,platforms, usage of our payments services, and our marketplaces.
Our business could be adversely affected by economic downturns, inflation, natural disasters, public health crises, such as the COVID-19 pandemic, political crises, geopolitical changes such as Brexit,events, or other similar events.macroeconomic conditions, which have in the past and may in the future negatively impact our business and financial performance.
Macroeconomic conditionsConditions have and may continue to adversely affect our business. If general economic conditions deteriorate in the United States or other markets where we operate, consumer discretionary spending may decline and demand for the goods and services available on our platformplatforms may be reduced. This would cause our Marketplace and Services revenue to decline and adversely impact our business. For example, the ongoing COVID-19 pandemicconflict in Ukraine negatively impacted the global economy, including by contributing to a rapid rise in the cost of living (driven largely by higher energy prices) in Europe. As the adverse effects of this conflict continue to develop, both in Europe and throughout the rest of the world, our buyers’ discretionary spending may be negatively impacted. In addition, as of April 2022, due to expanding sanctions and business restrictions, sellers in Belarus and Russia are unable to access our marketplaces.
Global economic conditions have also generated pressure on consumer discretionary spending. Consumer purchases of discretionary items, including the goods that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Factors that could further affect consumers’ willingness to make discretionary purchases include, among others: high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market and macroeconomic uncertainty;
home foreclosures and reductions in home values; fluctuating interest rates, increased inflationary pressures and lack of credit availability; rising fuel and energy costs; rising commodity prices; and other general uncertainty regarding the overall future political and economic environment. We have experienced many of these factors, including current inflationary pressures, and are experiencing negative impacts on client demand and discretionary spending as a result. For example, the U.S. Federal Reserve System raised interest rates several times during 2022 in response to concerns about inflation, and has caused significant uncertaintycontinued to raise interest rates in 2023. Higher interest rates, coupled with reduced government spending and volatility in the global economy,financial markets, may increase economic uncertainty and may causeaffect consumer discretionary spending to decline for an unknown period of time. We have also seen significant and rapid shifts in consumer purchasing behavior as this pandemic has evolved, particularly as it relates to items sought on Etsy.spending. It is difficult to predict how our business might be impacted by changing consumer spending patterns. In the event of a prolonged economic downturn or acute recession, significant inflation, or increased supply chain disruptions impacting our communities of sellers and the economy as a whole, consumer spending habits could be materially and adversely affected, as could our business, financial condition, operating results, and ability to execute and capitalize on our strategies.
If recent trends supporting self-employment, and the desire for supplemental income were to reverse, the number of sellers offering their goods in our marketplaces and the number of goods listed in our marketplaces could decline. In addition, currency exchange rates may directly and indirectly impact our business. For example, continuing uncertainty over rollout of the January 1, 2021 trade deal between the United Kingdom and the European Union (“Brexit”), as well as uncertainty about areas not covered under the agreement, such as cross-border services, may lead to exchange rate volatility or changes in tariffs, taxes, and cross-border regulations, any of which could negatively impact us or our sellers.
If the U.S. dollar strengthens or weakens against foreign currencies, particularly if there is short termshort-term volatility, our foreign currency denominated GMS and revenue, when translated into U.S. dollars, could fluctuate significantly. Currency exchange rates may also dampenimpact demand for cross-border purchases, which could impact GMS and revenue. For the year ended December 31, 2020,2022, approximately 78%72% of our GMS was denominated in U.S. dollars.
Any events causing significant disruption or distraction to the public or to our workforce, or impacting overall macroeconomic conditions, such as natural disasters and other adverse weather and climate conditions, public health crises, supply chain disruptions, political instability or crises, terrorist attacks, war, social unrest, or other unexpected events, could disrupt our operations, internet, or mobile networks, or the operations of one or more of our third-party service providers. These events if they occur, may also impact buyer demand for discretionary goods, impact sellers’
ability to run their businesses on our marketplaces and ship their goods, and impact our ability to execute on our strategy, any of which could negatively impact our business and financial performance.
Further expansion outsideThe global scope of the United States will subjectour business subjects us to risks associated with operations abroad.
Doing business outside of the United States subjects us to increased risks and burdens such as:
•complying with different (and sometimes conflicting) laws and regulatory standards (particularly including those related to the use and disclosure of personal information, online payments and money transmission, intellectual property, product liability, consumer protection, online platform liability, e-commerce marketplace regulation, labor and employment laws, business practices, including those related to the environment, and taxation of income, goods, and services); sometimes with attempts to apply these laws and regulatory standards extra-territorially;
•defending our marketplaces against international litigation, including in jurisdictions that may not offer judicial norms or protections similar to those found in the United States;
•conforming to local business or cultural norms;
•barriers to international trade, such as tariffs, customs, or other taxes, or, when applicable, cross-border limits placed on U.S. technology companies;
•uncertainties on the continuing impact of pandemic-related quarantines, closures, delayed or shut down delivery services, supply chain delays, and movement restrictions on operations, and geopolitical events such as natural disasters, pandemics, terrorism, and acts of war;
•varying levels of internet, e-commerce, and mobile technology adoption and infrastructure;
•potentially heightened risk of fraudulent or other illegal transactions;
•limitations on the repatriation of funds;
•exposure to liabilities under anti-corruption, anti-money laundering and export control laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act of 2010, trade controls and sanctions administered by the U.S. Office of Foreign Assets Control of the U.S. Treasury Department, and similar laws and regulations in other jurisdictions;
•our ability to enforce contracts, our terms of use and policies, and intellectual property rights in jurisdictions outside the United States;
•fluctuations of foreign exchange rates; and
•uncertainties and instability in U.K. and E.U. markets caused by ongoing negotiations of cross-border service agreements triggered by Brexit.
Our sellers face similar risks in conducting their businesses across borders. Even if we are successful in managing the risks of conducting our business across borders, if our sellers are not, our business could be adversely affected.
Our ability to recruit and retain a diverse group of employees and retain key employees is important to our success. Significant attrition or turnover could impact our ability to grow our business.
Our ability to attract, retain, and motivate a diverse group of employees, including our management team, is important to our success. We strive to attract, retain, and motivate our employees, from our office administrators to our engineers, to our management team, who share our dedication to our communitycommunities and our mission to “Keep Commerce Human.” We cannot guarantee we will continue to attract and retain the number or caliber of employees we need to maintain our competitive position, particularly in the uncertainty of the current macroeconomic environment. We may not meet our impact goal of building a diverse and inclusive workforcesworkforce that areis broadly representative of theirour communities.
Some of the challenges we face in attracting and retaining employees include:
•skepticism regarding our ability to continue to accelerate GMS growth in the future;
•continuing ability to offer competitive compensation and benefits;benefits, including continuing to support the well-being of our employees, as the legal landscape in the United States evolves;
•competition for talent in our industry, which could cause payroll costs, including stock-based compensation, to become a larger percentage of our total cost base;
•evolving expectations regarding the ability to work remotely;
•enhancing engagement levels among existing employees and supporting their work-life balance;
•attracting high quality talent in a timely fashion;
•retaining qualified employees who support our mission and guiding principles, and continuing to do so in a remote orour hybrid work environment;
•continuing to find promotion opportunities to retain key employees for leadership positions;
•hiring employees in multiple locations globally, and building a diverse, equitable, and inclusive workforce; and
•responding to competitive pressures and changing business conditions in ways that do not divert us from our guiding principles.
Filling key strategic roles, including engineering and product management, particularly in New York City, San Francisco, Dublin, and Chicago, is challenging.challenging and may be challenging in London, São Paulo, and Mexico City as well, as competition for engineering talent continues to increase rapidly. Qualified individuals are limited and in high demand, and we may incur significant costs to attract, develop, retain and motivate them. Even if we were to offer higher compensation and other benefits, people with suitable technical skills may choose not to join us or to continue to work for us. In addition, job candidates and existing employees often consider the value of the stock awards they receive in connection with their employment. If the perceivedThe value of our stock awards declines, particularly in thisa volatile macroeconomic environment it may adversely affect our ability to recruit and retain highly skilled employees.
Our employees are currently almostWe operate in a hybrid work model in which a sizable portion of our workforce is fully remote. As stay-at-home orders and movement restrictions are lifted and we reopenremote while others have returned to our offices we may need to reexaminewith a flexible schedule. It is possible that these arrangements could have a negative impact on our long term remote versus in-office model.workplace culture and on the execution of our business plans and operations. If our needs are not aligned with our employees’ preferences, or if we are unsuccessful in optimizing our hybrid work environment, it may adversely affect our ability to recruit and retain employees. If we do movecontinue to operate with a more remotesignificant portion of our employees located outside of our offices, and we are unable to adapt to new hybrid work model,modes, it maycould negatively impact our company culture.
In general, our employees, including our management team, work for us on an at-will basis. The unexpected loss of or failure to retain one or more of our key employees, such as our Chief Executive Officer, Chief Financial Officer, or Chief Technology Officer, or unsuccessful succession planning, could adversely affect our business. Further, if members of our management and other key personnel in critical functions across our organization are unable to perform their duties, we may not be able to execute on our business strategy and/or our operations may be negatively impacted. Other companies, including our competitors, may be successful in recruiting and hiring our employees, and it may be difficult for us to find suitable replacements on a timely basis or on competitive terms.
If we experience increased voluntary attrition in the future, and/or if we are unable to attract and retain qualified employees in a timely fashion or on reasonable terms, particularly in critical areas of operations such as engineering, we may not achieve our strategic goals and our business and operations could be harmed.
We may be unable to adequately protect our intellectual property.
Our intellectual property is an essential asset of our business. To establish and protect our intellectual property rights, we rely on a combination of trade secret, copyright, trademark, and patent laws, as well as confidentiality procedures and contractual provisions. We also rely on trade secret protection for parts of our technology and intellectual property. The efforts we have taken to protect our intellectual property may not be sufficient or effective. We generally do not elect to register our copyrights, relying instead on the laws protecting unregistered intellectual property, which may not be sufficient. We rely on both registered and unregistered trademarks, which may not always be comprehensive in scope. In addition, our copyrights and trademarks, whether or not registered, and patents may be held invalid or unenforceable if challenged, and may be of limited territorial reach. While we have obtained or applied for patent protection with respect to some of our intellectual property, patent filings may not be adequate alone to protect our intellectual property.property, and may not be sufficiently broad to protect our proprietary technologies. Additionally, it is expensive to maintain these rights, both in terms of application and maintenance costs, and the time and cost required to defend such rights, if necessary, could be substantial. From time to time we acquire intellectual property from third parties, but these acquired assets, like our internally developed intellectual property, may lapse, be abandoned, be challenged or circumvented by others, be held invalid, be unenforceable, or may otherwise not be effective in protecting our platform. We rely on trade secret protection for parts of our technology and intellectual property. To the extent we do seek patent protection, any U.S. or other patents issued to us may not be sufficiently broad to protect our proprietary technologies.platforms.
In addition, we may not be effective in policing unauthorized use of our intellectual property and authorized uses may not have the intended effect. Even ifwhen we do detect violations, we have in the past and may in the future need to engage in litigation, use of takedowns and similar procedures, or licensing to enforce our intellectual property rights. Any enforcement efforts we undertake, including litigation, could be time-consuming and expensive and could divert our management’s attention. In addition, our efforts may be met with defenses and counterclaims challenging the validity and enforceability of our intellectual property rights or may result in a court determining that our intellectual property rights are unenforceable.
We attempt to protect our unregistered intellectual property and confidential information in part through confidentiality, non-disclosure, and invention assignment agreements with employees, advisors, service providers and other third parties who develop intellectual property on our behalf, or with whom we share information. However, we cannot guarantee that we have entered into such agreements with each party that has developed intellectual property on our behalf or that has or may have had access to our confidential information, trade secrets and other intellectual property. These agreements may also be breached, or may not effectively prevent unauthorized use, disclosure, or misappropriation of our confidential information or intellectual property. Moreover, these agreements may not provide an adequate remedy for breaches or in the event of unauthorized use or disclosure of our confidential information or infringement of our intellectual property. The legal framework surrounding protection of intellectual property changes frequently throughout the world, particularly as to technologies used in e-commerce, and these changes may impact our ability to protect our intellectual property and defend against third partythird-party claims. If we are unable to cost-effectively protect our intellectual property rights, then our business could be harmed.
We may experience fluctuations in our tax obligations and effective tax rate.
We are subject to a variety of taxestax and tax collection obligations in the United States and in numerous other foreign jurisdictions. We record tax expense, including indirect taxes, based on current tax payments and our estimates of future tax payments, which may include reserves for estimates of probable or likely settlements of tax audits. We may recognize additional tax expense and be subject to additional tax liabilities, including tax collection obligations, due to changes in tax law, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. Such changes could come about as a result of economic, political, and other conditions. An increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes, such as digital salesservices taxes or online sales taxes. During his election campaign, President Joseph R. Biden, released a roadmaptaxes, targeting online commerce and the remote selling of hisgoods and services. These include new obligations to withhold or collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations. For example, non-U.S. jurisdictions have proposed or enacted taxes on online advertising and marketplace service revenues. Proliferation of these or similar unilateral tax plan that identified several significant modification to key provisions, as well as introductionmeasures may continue unless broader international tax reform is implemented. Our effective tax rate, results of new provisions, to the U.S. internal revenue code. Although it is uncertain if some or all of the identified provisions willoperations and cash flows could be enacted, a change in U.S. tax law may materially and adversely impact our income tax liability, provision for incomeaffected by additional taxes and effective tax rate. imposed on us prospectively or retroactively.We may also be subject to increased requirements for marketplaces to report, collect, remit, and hold liability for their customers’ direct and indirect tax obligations, or as a result of changes to regulations, administrative practices, outcomes of court cases, and changes to the global tax framework.
On August 16, 2022 President Joseph R. Biden signed into law the Inflation Reduction Act of 2022 (“IRA”). The IRA includes a 15% corporate alternative minimum tax for companies with modified GAAP net income in excess of $1 billion, a 1% excise tax on certain stock repurchases, and numerous environmental and green energy tax credits. Currently, we are not subject to the corporate alternative minimum tax. We are currently evaluating the impacts of the excise tax on our stock repurchase program, however we do not currently expect the new law to have a material impact on our results of operations.
Our effective tax rate and cash taxes paid in a given financial statement period may be adversely impacted by results of our business operations including changes in the mix of revenue among different jurisdictions, acquisitions, investments, entry into new geographies, the relative amount of foreign earnings, changes in foreign currency exchanges rates, changes in our stock price, intercompany transactions, changes to accounting rules, expectation of future profits, changes in our deferred tax assets and liabilities and our assessment of their realizability, and changes to our ownership or capital structure. Fluctuations in our tax obligations and effective tax rate could adversely affect our business.
In the ordinary course of our business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. Although we believe that our tax positions and related provisions reflected in the financial statements are fully supportable, we recognize that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretation of tax laws, developments in case law, and closing of statute of limitations. To the extent that the ultimate results differ from our original or adjusted estimates, our effective tax rate can be adversely affected.
The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which we operate. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by us. In addition, tax authorities periodically review income tax returns filed by us and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which we operate. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes or penalties against us. If the ultimate result of these audits differs from original or adjusted estimates, they could have a material impact on our effective tax rate and tax liabilities.
At any one time, multiple tax years could be subject to audit by various taxing jurisdictions. As a result, we could be subject to higher than anticipated tax liabilities as well as ongoing variability in our quarterly tax rates as audits close and exposures are re-evaluated.
The terms of our debt instruments may restrict our ability to pursue our business strategies.
We do not currently have any obligations outstanding under our credit facility. While the indentures governing our outstanding convertible notes do not include material restrictions on our ability to pursue our business strategy, our credit facility requires us to comply with, and future debt instruments may require us to comply with, various covenants that limit our ability to take actions such as:
•disposing of assets;
•completing mergers or acquisitions;
•incurring additional indebtedness;
•encumbering our properties or assets;
•paying dividends, making other distributions or repurchasing our common stock;
•making specified investments; and
•engaging in transactions with our affiliates.
These restrictions could limit our ability to pursue our business strategies. If we default under our credit facility and if the default is not cured or waived, the lenders could terminate their commitments to lend to us and cause any amounts outstanding to be payable immediately. Such a default could also result in cross defaults under other debt instruments. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse effect on our cash flow and liquidity.
Our insurance may not cover or mitigate all the risks facing our business.
While we have insurance coverage for mostmany aspects of our business risk, this insurance coverage may be incomplete or inadequate, or in some cases may not be available. Our business has evolving risks that may be unpredictable. For certain risks we face, we may be required to, or may elect to, self-insure or rely on insurance held by third parties, legal defenses and immunities, indemnification agreements or limits on liability, which may be insufficient.
For example, we may not have adequate insurance coverage related to the actions of third party sellers on our platform.platforms. In evolving areas such as platform products liability, recent court decisions such asMcMillan v. Amazon in Texas, and Loomis v. Amazon and Bolger v. Amazon in California, suggest that platforms, if they undertake certain typesdifferent jurisdictions may take differing positions on the scope of retailer-like activity, could be responsible for some or alle-commerce platform liability for the actions by, or products of, sellers on their platform, even if the platform has little or no control over those sellers’ actions orseller products. In some circumstances, a platform might be held liable for violations of applicable legal regimes by sellers orand their products, such as intellectual property laws, privacy and security laws, product regulation, or consumer protection law.laws. Court decisions and regulatory changes in these areas may shift quickly, both in the United States and worldwide, and our insurance may be inadequate or unavailable to protect us from existing or newly developing legal risks.
Finally, while some sellers on our platformplatforms may be insured for some or all of these risks, many small businesses do not carry any or sufficient insurance, and, even if a seller is insured, the insurance may not cover the relevant loss.
These factors may lead to increased costs for insurance, our increased liability, increased liability or requirements on sellers on our platform,platforms, changes to our marketplacemarketplaces or business model, or other damage to our brandbrands and reputation.
Strategic Risks Related to Our Business and Industry
We face intense competition and may not be able to compete effectively.
Operating e-commerce marketplaces is highly competitive and we expect competition to increase in the future. To be successful, we need to attract and retain sellers and buyers. As a result, weWe face competition from a wide range of online and offline competitors.
We compete for sellers with marketplaces, retailers, social media commerce, and companies that sell software and services to small businesses. For example, in addition to listing her goods for sale on the Etsy an Etsymarketplace, a seller can list her goods with other online retailers, such as Amazon, eBay, Google, or Alibaba, or sell her goods through local consignment and vintage stores and other venues or marketplaces, including through commerce channels on social networks like Facebook, Instagram, and TikToc.TikTok. She may also sell wholesale directly to traditional retailers, including large national retailers, who discover her goods in our marketplaces or otherwise.
We similarly compete for sellers on our other marketplaces, Depop, Reverb, and Elo7, which sellers may list their goods with online retailers such as eBay, Vinted, ThredUp, Poshmark, and The RealReal, in the case of Depop, Sweetwater, in the case of Reverb, or MercadoLibre, in the case of Elo7, among others, or sell through other venues, marketplaces, retailers, or commerce channels. Depop also competes with vendors of new and secondhand items, including traditional brick-and-mortar consignment and thrift stores, branded goods stores, department stores, and specialty retailers.
We also compete with companies that sell software and services to small businesses, enabling a seller to sell from her own website or otherwise run her business independently of our platform,platforms, or enableenabling her to sell through multiple channels, such as BigCommerce, Wix, and Shopify.
We compete to attract, engage, and retain sellers based on many factors, including:
•the value and awareness of our brand and its awareness;brands;
•the effectiveness of our marketing;product and marketing investments;
•the effectiveness of our scaled member support and trust and safety practices and policies;
•the global scale of our marketplaces and the breadth of our online presence;
•our tools, education, and services, which support a seller in running her business;
•the number and engagement of buyers;
•our policies and fees;
•the ability of a seller to scale her business;
•the effectiveness of our mobile apps;
•the strength of our community;communities; and
•our mission.
In addition, we compete with retailers for the attention of buyers. A buyer has the choice of shopping with any online or offline retailer, including large e-commerce marketplaces, such as Amazon, eBay, or Alibaba, national retail chains, such as West Elm, Walmart, or Target, local consignment and vintage stores, social commerce channels like Instagram or Facebook, event-driven platforms and vertical experiences like Zola and Wayfair, resale commerce and streaming video commerce sites and apps, and other venues or marketplaces. Many of these competitors offer low-cost or free shipping, fast shipping times, favorable return policies, and other features that may be difficult or impossible for our sellers to match. As pandemic-related restrictions on movement ease, competition may intensifyCompetition also intensified as buyers returnreturned to traditional brickbrick-and-mortar retail stores, and mortar retail stores.it is difficult to predict what lasting effects the COVID-19 pandemic will have on consumer spending patterns and e-commerce generally.
We compete to attract, engage, and retain buyers based on many factors, including:
•the breadth and quality of items that sellers list in our marketplaces;
•the ease of finding items;
•the value and awareness of our brand, its trust and awareness;brands;
•the effectiveness of our marketing;
•the person-to-person commerce experience;
•customer service;
•our reputation for trustworthiness;
•the effectiveness of our mobile apps;
•the availability of timely, fair, and free shipping offered by Etsy sellers to Etsy buyers;
•ease of payment;
•localization and experiences targeted based on regional preferences, and
•the availability and reliability of our platform.platforms.
Many of our competitors and potential competitors have longer operating histories, greater resources, better name recognition, or more customers than we do. They may invest more to develop and promote their services than we do, and they may offer lower fees to sellers than we do. Large, widely adopted platforms may benefit from significant user bases, access to user or industry-wide data, the ability to unilaterally set policies and standards, and control over complementary services such as fulfillment, advertising or on-platform apps or e-commerce transactions. To the extent Etsy and our sellers may rely on these competitors’ services, such services may be integrated into site functionality, and these competitors may have access to substantial data about Etsy and its communities of buyers and sellers. As a result, they may unintentionallyhave the ability to reduce our ability to service our users, reduce our ability to obtain analytics or information to optimize advertising or intentionally seek to disintermediate Etsy.
We believe that it is, and that it should continue to be, relatively easy for new businesses to create online commerce offerings or tools or services that enable entrepreneurship. However, as the technology space is increasingly subject to regulation, there is a risk that legislation, and regulatory or competition inquiries, even if focused on large, widely adopted platforms, may inadvertently impede smaller platforms and small businesses, including us and our sellers. For example, legislation and inquiries may result in obligations with which only large platforms are situated to comply. If legislation or inquiries, even if focused on other entities, requires us to expend significant resources in response or results in the imposition of new obligations, our business and results of operations could be adversely affected.
Local companies or more established companies based in markets where we operate outside of the United States may also have a better understanding of local customs, providing them a competitive advantage. For example, in certain markets outside the United States, we compete with smaller, but similar, local online marketplaces with a focus on unique goods that are attempting to attract sellers and buyers in those markets.
If we are unable to compete successfully, or if competing successfully requires us to expend significant resources in response to our competitors’ actions, our business and results of operations could be adversely affected.
If we are unable to successfully execute on our business strategy or if our strategy proves to be ineffective, our business, financial performance, and growth could be adversely affected.
factors, including the ability of our senior management team and key team leaders to execute the strategy, our ability to iterate in a rapidly evolving e-commerce landscape, maintain our pace of product experiments coupled with the success of such initiatives, our ability to meet the changing needs of our sellers and buyers, and the ability of our employees to perform at a high level. If we are unable to execute our strategy, if our strategy does not drive the growth that we anticipate, if the public perception is that we are not executing on our strategy, or if our market opportunity is not as large as we have estimated, it could adversely affect our business, financial performance, and growth. For more details on our strategy, see Part I, Item 1, "Business—Overview—Our Strategy."If we are not able to keep pace with technological changes and enhance our current offerings and develop new offerings to respond to the changing needs of sellers and buyers, our business, financial performance, and growth may be harmed.
Our industry is characterized by rapidly changing technology, new service and product introductions, and changing customer demands and preferences, and we are not able to predict the effect of these changes on our business. The technologies that we currently use to support our platformplatforms may become inadequate or obsolete, and the cost of incorporating new technologies into our products and services may be substantial. Our sellers and buyers, however, may not be satisfied with our enhancements or new offerings or may perceive that these offerings do not respond to their needs or create value for them. Additionally, as we invest in and experiment with new offerings or changes to our platform,platforms, our sellers and buyers may find these changes to be disruptive and may perceive them negatively. In addition, developing new services and features is complex, and the timetable for public launch is difficult to predict and may vary from our historical experience. As a result, the introduction of new offerings may occur after anticipated release dates, or they may be introduced as pilot programs, which may not be continued for various reasons. In addition, new offerings may not be successful due to defects or errors, negative publicity, or our failure to market them effectively.
New offerings may not drive GMS or revenue growth, may require substantial investment and planning, and may bring us more directly into competition with companies that are better established or have greater resources than we do.
If we do not continue to cost-effectively develop new offerings that satisfy sellers and buyers, then our competitive position and growth prospects may be harmed. In addition, new offerings may not drive the GMS or revenue that we anticipate, may have lower margins than we anticipate or than existing offerings, and our revenue from the new offerings may not be enough to offset the cost of developing and maintaining them, which could adversely affect our business, financial performance, and growth.
If the widely adopted mobile, social, search, and/or advertising solutions that we, our sellers and our buyers rely on as part of our key offering are no longer available or effective, or if accessContinuing to these major platforms is limited, the use of our marketplaces could decline.
We are dependent on widely-adopted third party platforms to reach our customers, such as popular mobile, social, search and advertising offerings. If we are not able to deliver a rewarding experience on these platforms, or if our or our sellers’ access to these platforms is limited, or if these large platforms implement features that compete with us or our sellers, then our products and marketing efforts may suffer, and our sellers’ ability to manage and scale their business may be harmed. In addition, we may not be able to deliver a rewarding experience, we may have limited access to, or we may be unable to invest significant time and resources towards, integration with and offering our services through new or updated devices, operating system versions, social networks, or search platforms (including Internet of Things (IoT) based or voice based platforms). If our solutions and integrations are ineffective or unavailable, then our products and marketing efforts may suffer, and our sellers’ ability to manage and scale their business may be harmed. As a consequence, our sellers may choose to sell elsewhere, and our business may suffer.
Conversion rates differ between web, mobile web, and mobile app traffic. If visits to our platform from sources with lower conversion rates (such as mobile web) were to increase as a percentage of overall visits, it could adversely impact our conversion rate and reduce GMS on our platform which could adversely affect our business, financial performance and growth.
The success of our marketplaces could also be harmed by factors outside our control, such as actions taken by providers of mobile and desktop operating systems, social networks, or search and advertising platforms, including:
•policy changes that interfere with, add tolls to, or otherwise limit our ability to provide users with a full experience of our platform, such as for our mobile apps or social network presence;
•unfavorable treatment received by our platform, especially as compared to competing platforms, such as the placement of our mobile apps in a mobile app download store;
•increased costs to distribute or use our platform via mobile apps, social networks, or established search and advertising systems;
•changes in mobile operating systems, such as iOS and Android, that degrade the functionality of our mobile website or mobile apps or that give preferential treatment to competitive products;
•changes to social networks that degrade the e-commerce functionality, features or marketing of us or our sellers’ shops and products; or
•implementation and interpretation of regulatory or industry standards by these widely adopted platforms that, as a side effect, degrade the e-commerce functionality, features or marketing of us or our sellers’ shops and products.
If sellers and buyers encounter difficulty accessing or using our marketplaces through these widely adopted access providers, our business, financial performance, and growth may be adversely affected.
Expandingexpand our operations outside of the United States is part of our strategy, and the growth of our business could be harmed if our expansion efforts do not succeed.
We are focused on growing our business both inside and outside of the United States. Although we have a significant number of sellers and buyers outside of the United States, we are a U.S.-based company with less experience developing local markets internationally and may not execute our strategy successfully. Operating outside of the United States also requires significant management attention, including managing operations and people over diverse geographic areas with varying cultural norms and customs, and adapting our platformplatforms and business operations to local markets.
Our ability to grow our international operations may also be adversely affected by any circumstances that reduce or hinder cross-border trade. For example, the shipping of goods cross-border is typically more expensive and slower than domestic shipping and often involves complex customs and duty inspections and the dependency of national postal carrier systems. If jurisdictions become increasingly fragmented, with additional regulation of small sellers and platforms, tariffs, certifications, representative
requirements, and customs requirements that increase the cost or complexity of cross-border trade, whether on the seller’s sourcing of materials or between the seller and buyer, our business could be adversely impacted. In addition, varyingour international growth strategy may be adversely affected by the extent to which the COVID-19 pandemic outside the United States results in further quarantines, closures, delayed or terminated delivery services, and movement restrictions related to the ongoing COVID-19 pandemic may interfere with our international growth strategy.restriction.
Our success outside the United States also depends upon our ability to attract sellers and buyers from the same countries in order to enable the growth of local markets. An inability to develop our communitycommunities globally or to otherwise grow our business outside of the United States in a cost-effective manner could adversely affect our GMS, revenue, and operating results.
Competition is also likely to intensify outside of the United States, both where we operate now and where we plan to expand. Local companies based outside the United States may have a substantial competitive advantage because of their greater understanding of, and focus on, their local markets, along with regulations that may favor local companies. Some of our competitors may also be able to develop and grow internationally more quickly than we will.
Despite our execution efforts, the goods that sellers list on our sitesEtsy and Reverb marketplaces may not appeal to non-U.S. consumers in the same way as they do to consumers in the United States. In addition, non-U.S. buyers are not as familiar with the Etsy and Reverb brands as buyers in the United States and may not perceive us as relevant or trustworthy. Also, visits to our Etsy and Reverb marketplaces from buyers outside the United States may not convert into sales as often as visits from within the United States, including due to the impact of thea strong U.S. dollar relative to other currencies and the fact that most of the goods listed on our platform these platforms are denominated in U.S. dollars. Similarly, non-U.K. consumers may be less familiar with Depop, or find the listed items less appealing, than consumers in the United Kingdom, and non-Brazilian consumers may be less familiar with Elo7, or find the listed items less appealing, than consumers in Brazil, which may make it challenging to expand into new markets.
ContinuedContinuing international expansion may also require significant financial investment. For example, Etsy has made initial investments to exploreis investing in growth opportunities in India, a dynamic market where we have limited operating experience.experience, and acquired Elo7 in 2021 which extends Etsy’s reach in Latin America. To facilitate continued international expansion, we plan to investcontinue investing in seller and buyer acquisition marketing, enhancing our machine translation and machine learning to help sellers and buyers connect even if they do not speak the same language, forming relationships with third-party service providers, supporting operations in multiple countries, and potentially acquiring additional companies based outside the United States and integrating those companies with our operations. Our investment outside of the United States may be more costly than we expect or unsuccessful.
We continue to integrate Depop and Elo7 and may experience difficulty in realizing the expected benefits of the acquisitions.
We continue to integrate Depop and Elo7 and may continue to incur significant expenses as we invest to grow their businesses and implement compliance policies and procedures. We expect that our acquisitions of Depop and Elo7 will continue to require significant attention and resources from our management team and workforce, including our technology, operations, accounting, and human resource units. Devoting resources to the integration of Depop and Elo7 means that these resources will be redeployed to varying degrees from their normal day-to-day activities supporting existing Etsy functions. Additionally, integrating Depop and Elo7 and may prove to be costlier and take longer than we anticipate, which may ultimately reduce or eliminate the benefits to Etsy of the acquisitions.
Also, the success of the Depop and Elo7 will depend, in part, on our ability to apply Etsy’s technological, marketing, and operational expertise to help scale their growth in a profitable, efficient, and effective manner, including maintaining relationships with their respective sellers, buyers, and third-party service providers. Because our business and the Depop and Elo7 businesses differ in certain respects, we may not be able to manage these businesses smoothly or successfully and may experience difficulty in realizing the expected benefits of the acquisitions.
If we are unable to successfully integrate Depop and Elo7 into our “House of Brands” strategy, we may be unable to realize the benefits we expect to achieve as a result of these acquisitions. As a result, our business, growth and/or results of operations could be adversely affected.
We have incurred impairment charges for our goodwill and may incur further impairment charges for our goodwill and other intangible assets, which would negatively impact our operating results.
In the quarter ended September 30, 2022, we recorded non-cash impairment charges of $897.9 million and $147.1 million to write-off goodwill in full for the Depop and Elo7 reporting units, respectively. These impairment charge amounts were recorded to Goodwill Impairment and had a material adverse effect on our balance sheet and results of operations. After the recognition of such impairment charges, there were no balances of goodwill remaining from our acquisitions of Depop and Elo7, on July 12, 2021 and July 2, 2021, respectively. We review goodwill for impairment at least annually in the fourth quarter of the year or more frequently if indicators of impairment arise, and should the Macroeconomic Conditions continue to deteriorate, including a rise in the risk-free long-term interest rates, or a decline in our results of operations, the result of such review may indicate a decline in the fair value of goodwill requiring additional impairment charges for reporting units other than Depop and Elo7. In the event we are required to record an additional non-cash impairment charge to our goodwill, other intangibles, and/or long-lived assets, such a non-cash charge could have a material adverse effect on our consolidated statements of operations and balance sheets in the
reporting period in which we record the charge. For additional information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates and Policies—Valuation of Goodwill.”
We may expand our business through additional acquisitions of other businesses or assets or strategic partnerships and investments, which may divert management’s attention and/or prove to be unsuccessful.
We have acquired a number of other businesses in the past and may acquire additional businesses or technologies, or enter into strategic partnerships, in the future. We may not realize the anticipated benefits of our acquisitions or any partnerships, and possible future acquisitions or relationships may disrupt our business and divert management’smanagement’s time and attention. Acquisitions also may require us to spend a substantial portion of our available cash, issue stock, incur debt or other liabilities, amortize expenses related to intangible assets, or incur write-offs of goodwill or other assets.
In addition, integrating an acquired business or technology is risky. Any future acquisitions or partnerships may result in unforeseen operational difficulties and expenditures associated with:
•integrating new businesses and technologies into our infrastructure;
•clearing any required regulatory review that may be complex, costly, time consuming, or place additional requirements on the business;
•implementing growth initiatives;
•integrating administrative functions;
•hiring, retaining, and integrating key employees;
•supporting and enhancing morale and culture;
•retaining key customers, merchants, vendors, and other key business partners;
•maintaining or developing controls, procedures, and policies (including effective internal control over financial reporting and disclosure controls and procedures, as well as information privacy controls); and
•assuming liabilities related to the activities of the acquired business before and after the acquisition, including liabilities for violations of laws and regulations, intellectual property infringement, commercial disputes, cyber attacks, taxes, and other matters.
We also may issue additional equity securities in connection with an acquisition or partnership, which could cause dilution to our stockholders. Finally, acquisitions or partnerships could be viewed negatively by analysts, investors, or the members of our community.communities.
Our marketing efforts to help grow our business may not be effective.
Maintaining and promoting awareness of our marketplaces and services is important to our ability to attract and retain sellers and buyers. One of the key parts of our strategy for the Etsy marketplace is to bring more new buyers to the marketplace and create more habitual buyers by inspiring more frequent purchases across multiple categories and purchase occasions. We continue to iterate on and invest in our marketing strategies for each of our marketplaces, which may not succeed for a variety of reasons, including our inability to execute and implement our plans.
Our performance marketing efforts currently include search engine optimization, search engine marketing, affiliate marketing, and display advertising, as well as social media, mobile push notifications, and email marketing. If we fail to scale and deliver an effective return on investment in any of these marketing efforts, it may harm our business. We also engage with celebrities and influencers as part of our marketing efforts, and our perceived affiliation with these individuals could cause us brand or reputational damage in the event they undertake actions inconsistent with our brandbrands and values.
Additionally, we invest significantly in brand advertising via channels such as television and digital video advertising. If we do not produce effective content or purchase effective air time and placement for that content, it could fail to deliver a return on our investment, and damage our brandbrands and/or business. Many of our marketing efforts include our sellers and products from their shops selected via automated systems. These automated systems may not always operate effectively. While both our manual and automated systems have tools and procedures designed to account for our and our partners’ policies, despite our best efforts, we may inadvertently include in our marketing efforts sellers or their products inconsistent with our policies, brandbrands, and values, which could result in failure to deliver a return on our investment, media or regulatory scrutiny, and damage to our brandbrands and/or business.
We obtain a significant number of visits via search engines such as Google. Search engines frequently change the algorithms that determine the ranking and display of results of a user’s search, alter analytics or search engine optimization data available to us or make other changes to the way results are displayed, which can negatively affect the placement of links to our marketplaces and reduce the number of visits or otherwise negatively impact our marketing efforts.
We also obtain a significant number of visits from social media platforms such as Facebook, Instagram, and Pinterest. Search engines, social networks, and other third parties typically require compliance with their policies and procedures, which may be subject to change or new interpretation with limited ability to negotiate, which could negatively impact our marketing capabilities (including marketing services for our sellers), GMS, and revenue. Etsy-provided controls for users to limit third partythird-party advertising features, the growing use of online ad-blocking software and technological changes to browsers and mobile operating systems maythat, for example, limit access to usage information for smaller platforms like Etsy, impact the effectiveness of, or our visibility and insights into, our marketing efforts becauseefforts. As a result, we may reach a smaller audience, fail to bring more buyers, or fail to increase frequency of visits to our platform.platforms. In addition, ongoing legal and regulatory changes in the data privacy sphere such asin U.S. states and countries throughout the E.U. General Data Protection Regulation (“GDPR”) the California Consumer Privacy Act of 2018 (“CCPA”),world – and the California Privacy Rights Actinterpretation of 2020 (“CPRA”),these laws by major search, social, and operating system providers – may impact the scope and effectiveness of marketing and advertising services generally, including those used on our platform.platforms.
We also obtain a significant number of visits through email marketing. If we are unable to successfully deliver emails to our sellers and buyers, if our email subscription tools do not function correctly, or if our sellers and buyers do not open our emails, whether by choice, because those emails are marked as low priority or spam, or for other reasons, our business could be adversely affected. As e-commerce, search, and social networking, as well as related regulatory regimes, evolve, we must continue to evolve our marketing tactics and technology accordingly and, if we are unable to do so, our business could be adversely affected.
Some providers of consumer devices, mobile or desktop operating systems, and web browsers have implemented, or have announced plans to implement, ways to block tracking technologies which, if widely adopted, could also result in online tracking methods becoming significantly less effective. Similarly, our vendors, particularly those providing advertising and analytics products and services have, and may continue to, modify their products and services based on legal and technical changes relating to privacy in ways that could reduce the efficiency of our marketing efforts and our access to data about use of our platform.platforms. Any reduction in our ability to make effective use of such technologies could harm our ability to personalize the experience of buyers, increase our costs, and limit our ability to attract and retain our sellers and buyers on cost-effective terms. As a result, our business and results of operations could be adversely affected.
Enforcement of our marketplace policies may negatively impact our brand,brands, reputation, and/or our financial performance.
We maintain and enforce policies that outline expectations for users while they engage with our services, whether as a seller, a buyer, or a third party.third-party and are implementing and enforcing similar policies at Reverb, Depop, and Elo7 as we integrate them into our marketplace policy program. Additionally, we prohibit a range of items on our marketplaces, including (but not limited to): drugs, alcohol, tobacco, weapons, endangered animal products, hazardous materials, recalled items or those that create an unreasonable risk of harm, highly-regulated items, items violating intellectual property rights of others, illegal products, pornography, items from federally-sanctioned jurisdictions, hateful content, and items that promote or glorify violence.
We enforce these policies in order to uphold the safety and integrity of our marketplaces, engender trust in the use of our services, and encourage positive connections among members of the community.our communities. We strive to enforce these policies in a consistent and principled manner that is transparent and explicable to stakeholders. However, even with a principled and objective approach, policy enforcement is a combination of human and technological review. As a result, there could be errors, itpolicy enforcement could be subject to different, inconsistent, or inconsistentconflicting regional consensus or regulatory standards in different jurisdictions, or it could be perceived to be arbitrary, unclear, or inconsistent. ThisSimilarly, the tools and processes in place at Reverb, Depop, and Elo7 are not as sophisticated or mature as those used by the Etsy marketplace. Shortcomings and errors in our ability to enforce our policies across our marketplaces could lead to negative public perception, of our enforcement, distrust from our members, or lack of confidence in the use of our services, and could negatively impact the reputation of our brand reputation.brands. In particular, certain enforcement decisions, even those we deem necessary for the health and safety of our marketplaces, may be received negatively by stakeholders or the public, such as:
•we may choose to limit or prohibit the sale of items in our marketplaces based on our policies, even though we could benefit financially from the sale of those items;
•from time to time, we may revise our policies in ways that we believe will enhance trust in our platform,platforms, even though the changes may be perceived unfavorably, such as updates to the way we define handmade.
We are subject to risks related to our environmental, social, and governance activities and disclosures.
Our Impact strategy focuses on Etsy’s mission to keep commerce human and the positive impact we want our business to have. We are committed to growing sustainably by aligning our mission and business strategy to help create economic impact through entrepreneurship. We have developed an Impact strategyalso announced a number of goals and initiatives and elected to publicly report on a significant number of environmental and social metrics that focuses on leveraging Etsy’s core business to generate value for our community and stakeholders through positive economic, social, and ecological effortswe monitor (our “ESG metrics”). Our Impact strategy aims to create more economic opportunity for our stakeholders, ensure equitable access to the opportunities we create, and build long-term resilience by fostering responsible resource use and reducing our carbon footprint. We have also elected to publicly share these ESG metrics and include them in this Annual Report on Form 10-K, and, asReport. As a result, our business may face heightened scrutiny for these activities. See Part I, Item I, “Business—ESG Reporting: Our Impact Goals, Strategy and Progress.”Progress”. While selected metrics receive limited assurance from an independent third party,third-party, this is inherently a less rigorous process than reasonable assurance sought in connection with a financial statement audit and such review process may not identify errors and may not protect us from potential liability under the securities laws. In addition, for
some of the metrics we report, the methodology of computation and/or the scope of our value chain assessed continues to evolve from year to year. As a result, period over period comparisons may not be meaningful.
The implementation of our Impact strategy, including our Impact investing strategy and other initiatives intended to help us meet our Impact goals, requires considerable investments, and our goals, with all of their contingencies, dependencies, and in certain cases, reliance on third-party verification and/or performance, are complex and ambitious, and we cannot guarantee that we will achieve them. If we do not demonstrate progress against our Impact strategy or if our Impact strategy is not perceived to be adequate or appropriate, our reputation could be harmed. We could also damage our reputation and the value of our brandbrands if we or our vendors fail to act responsibly in the areas in which we report, andor we fail to demonstrate that our commitment to our Impact strategy enhances our overall financial performance.
Further, we purchase verified emissions reductions (“VERs”) and use renewable energy credits (“RECs”), including RECs arising from a 15 year virtual power purchase agreement expiring in 2034, to help balance our carbon and energy footprints. If the cost of VERs were to materially increase or we were required to purchase a significant number of additional VERs or RECs, our cost to obtain these offsets and/or credits could increase materially which could impact our ability to meet our public goals or our financial performance.
Additionally, there can be no assurance that our current programs, reporting frameworks, and principles will be in compliance with any new environmental and social laws and regulations that may be promulgated in the United States and elsewhere, and the costs of changing any of our current practices to comply with any new legal and regulatory requirements in the United States and elsewhere may be substantial. Furthermore, industry and market practices may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends and stay competitive among our peers.
While most of the new laws being introduced are designed to promote more robust transparency and enhance resiliency, which can create the conditions for us to meet our Impact goals, laws have also been introduced in the United States that are designed to limit or restrict company activities on environmental and social issues. If such laws are successfully passed in the United States or elsewhere, or support for such laws grows, our Impact strategy and ESG metrics may subject us to heightened scrutiny or reputational damage.
Any harm to our reputation resulting from setting these metrics or our failure or perceived failure to meet such metrics could impact employee engagement and retention, the willingness of our buyers and sellers and our partners and vendors to do business with us, or investors’ willingness to purchase or hold shares of our common stock, any of which could adversely affect our business, financial performance, and growth.
If we are unable to successfully execute on our business strategy or if our strategy proves to be ineffective, our business, financial performance, and growth could be adversely affected.
Our ability to execute our strategy is dependent on a number of factors, including the ability of our senior management team and key team leaders to execute the strategy, our ability to iterate in a rapidly evolving e-commerce landscape, maintain our pace of product experiments coupled with the success of such initiatives, our ability to meet the changing needs of our sellers and buyers, and the ability of our employees to perform at a high level. If we are unable to execute our strategy, if our strategy does not drive the growth that we anticipate, if the public perception is that we are not executing on our strategy, or if our market opportunity is not as large as we have estimated, it could adversely affect our business, financial performance and growth.
We may need additional capital, which may not be available to us on acceptable terms or at all.
We believe that our existing cash and cash equivalents and short-termshort- and long-term investments, together with cash generated from operations, will be enoughsufficient to meet our anticipated operating cash needs for at least the next 12 months. However, we may require additional cash resources due to changes in business conditions or other developments, such as acquisitions or investments we may decide to pursue. We may seek to borrow funds under our credit facility or sell additional equity or debt securities. The sale of additional equity or convertible debt securities could result in dilution to our existing stockholders. Any debt financing that we may secure in the future could result in additional operating and financial covenants that would limit or restrict our ability to take certain actions, such as incurring additional debt, making capital expenditures, repurchasing our stock, or declaring dividends. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all. Weakness and volatility in capital markets and the economy in general could limit our access to capital markets and increase our costs of borrowing.
In addition, a significant portion of our cash and cash equivalents and short-term investments are invested in U.S. Government securities. In January 2023, the U.S. Treasury Department indicated it would soon reach its debt limit after which it would be required to take “extraordinary measures” to avoid default. Absent action to raise the statutory ceiling, the U.S. Treasury expects to exhaust those measures by early June 2023. Any default by the U.S. Government on all or a material portion of our investments in U.S. Treasury securities could create significant uncertainty and potentially negatively impact our liquidity.
We have a significant amount of debt and may incur additional debt in the future. We may not have sufficient cash flow from our business to pay our substantial debt when due.
Our ability to pay our debt when due or to refinance our indebtedness, including the 0% Convertible Senior Notes due 2023 we issued in March 2018 (the “2018 Notes”), the 0.125% Convertible Senior Notes due 2026 we issued in September 2019 (the “2019 Notes”) and, the 0.125% Convertible Senior Notes due 2027 we issued in August 2020 (the “2020 Notes”), and the 0.25% Convertible Senior Notes due 2028 we issued in June 2021 (the “2021 Notes” and together with the 2018 Notes , the 2019 Notes , and the 20192020 Notes, the “Notes”), depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. While we used a portion of the net proceeds from each of the Notes offerings to enter into separate privately negotiated capped call instruments designed to reduce the potential dilution and/or offset a portion of the cash payments due in respect of the Notes, there can be no assurance that the capped call
instruments will pay out in full or at all. If we are unable to generate suchthe cash flow necessary to pay our debts when due, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. In addition, any required repurchase of the Notes for cash as a result of a fundamental change would lower our current cash on hand such that we would not have those funds available for use in our business or could require us to obtain additional financing to fund the repurchase. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. WeFor example, the Federal Reserve has increased its benchmark interest rate multiple times in 2022 in a bid to reduce rising inflation rates in the United States, and it is expected that additional rate hikes may be adopted in the future. These interest rate increases have resulted in higher short-term and long-term borrowing costs and could impact the general availability of credit. Higher prevailing interest rates and/or a tightening supply of credit may adversely affect the terms upon which we will be able to refinance our indebtedness, if at all. As a result, we may not be able to
engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. Based on the daily closing prices of our stock during the quarter ended December 31, 2020,2022, holders of the remaining 2018 Notes and the 2019 Notes are eligible to convert their 2018 Notes and 2019 Notes, as applicable,respectively, and holders of the 2020 Notes and 2021 Notes are not eligible to convert their 2020 Notes and 2021 Notes, respectively, during the first quarter of 2021.2023. See “Note 13—Part II, Item 8, “Financial Statements and Supplementary Data—Note 12—Debt” in the Notes to Consolidated Financial Statements for more information on the 2018 Notes and 2019 Notes.
In addition, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. If, for example, we incur additional debt, secure existing or future debt, or recapitalize our debt, these actions may diminish our ability to make payments on our substantial debt when due.
Regulatory, Compliance, and Legal Risks
Failure to deal effectively with constantly evolving fraud or other illegal activity could harm our business.
Our operations are subject to anti-corruption laws, such as the FCPA, which generally prohibit us and our officers, employees, and third-party intermediaries from, directly or indirectly, offering, authorizing, or making improper payments to government officials and other persons for the purpose of obtaining or retaining business or another advantage. Our operations are also subject to U.S. and foreign export controls, trade sanctions, and import laws and regulations. Such laws may restrict or prohibit the provision of certain products and/or services to countries, governments, and persons targeted by U.S. sanctions. We have adopted policies and procedures that are intended to ensure compliance with law, including, for example anti-corruption, anti-money laundering, export control, and trade sanctions requirements, and we have measures in place to detect and limit the occurrence of fraudulent and other illegal activity in our marketplaces, however, those policies, procedures, and measures may not always be effective. Further, the measures that we use to detect and limit the occurrence of fraudulent and other illegal activity must be dynamic and require significant investment and resources, particularly as our marketplaces increase in public visibility and size. Bad actors constantly apply continually evolving technologies and ways to commit fraud and other illegal activity, and regulations requiring marketplaces to detect and limit these activities are increasing. Our measures may not always keep up with these changes. If we fail to limit the impact of illegal activity in our marketplaces, we could be subject to penalties, fines, other enforcement actions and/or significant expenses and our business, reputation, financial performance, and growth could be adversely affected.
We rely upon third-party service providers to perform certain compliance services. If we or our service providers do not perform adequately, our compliance tools may not be effective, which could increase our expenses, lead to potential legal liability, and negatively impact our business. In addition, we could be subject to penalties, fines, other sanctions, and/or significant expenses.
Our brandbrands may be harmed if third parties or members of our communitycommunities use or attempt to use Etsyour marketplaces as part of their illegal or unethical business practices.
Our emphasis on our mission and guiding principles makes our reputation particularly sensitive to allegations of illegal or unethical business practices by our sellers or other members of our community. We expect our vendors to comply with our Vendor Code of Conduct.communities. Our seller policies promote legal and ethical business practices. Etsy expects sellers to work only with manufacturers who comply with all applicable laws, who do not use child or involuntary labor, who do not discriminate, and who promote sustainability and humane working conditions. We also expect our suppliers to comply with our Supplier Code of Conduct. We expect that once we fully integrate Depop and Elo7 into our supply chain management program, Depop and Elo7 suppliers will also be subject to the Supplier Code of Conduct. Although we seek to influence, we do not directly control our sellers, vendors,suppliers, or other members of our communitycommunities or their business practices, and we cannot ensure that they comply with our policies. If members of our communitycommunities engage in illegal or unethical business practices, or are perceived to do so, we may receive negative publicity and our reputation may be harmed.
We may be subject to claims that items listed by sellers in our marketplacemarketplaces are counterfeit, infringing, illegal, harmful, or otherwise violate our policies.
We frequently receive communications alleging that items listed in our marketplaces, or other user-generated materials posted on our platforms, infringe upon third-party copyrights, trademarks, patents, or other intellectual property rights. We have intellectual property complaint and take-down procedures in place to address these communications, as well as proactive tools
and processes, and we believe such procedures are important to promote confidence in our marketplaces, along with both proactive and reactive anti-counterfeiting measures that we use and continue to develop. We follow these procedures to review complaints and relevant facts to determine the appropriate action, which may include removal of the item from our marketplaces and, in certain cases, closing the shops of sellers who violate our policies.
Our procedures may not effectively reduce or eliminate our liability. For example, on the Etsy marketplace we use a combination of automatic and manual tools and depend upon human review in many circumstances. OurNo tools and procedures are guaranteed to function completely without error, particularly for physical, non-standardized goods, our tools and procedures may be subject to error or enforcement failures and may not be adequately staffed, and we may be subject to an increasing number of erroneous or fraudulent demands to remove content. In addition, we may be subject to civil or criminal liability for activities carried out by sellers on our platform,platforms, especially outside the United States where laws may offer less protection for intermediaries and platforms than in the United States.
Under current U.S. copyright laws such as the Digital Millennium Copyright Act § 512 et. seq., we may benefit from statutory safe harbor provisions that protect us from copyright liability for content posted on our platformplatforms by sellers and buyers, and we rely upon user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230), that limits most non-intellectual property law claims against Etsy based upon content posted by users on our platform.platforms. However, trademark and patent laws do not include similar statutory provisions, and limits on platform liability for these forms of intellectual property are primarily based upon court decisions. Similarly, laws related to product liability vary by jurisdiction, and the liability of marketplace platforms for products and services of sellers, while traditionally limited, is subject to increasing debate in courts, legislatures and legislative proposals, and with regulators. TheseAny legislation or court rulings affecting these safe harbors or other limits on platform liability may adversely affect us and court rulings, including analogous onesmay impose significant operational challenges. For example, there are legislative proposals and pending litigation in other stateboth the United States (such as Gonzalez v. Google) and international jurisdictions, may change unfavorably.European Union that could diminish or eliminate safe harbor protections and/or immunities for websites and online platforms. Moreover, changes focused on actions by very large platforms that perform retailer-like functions, or handle mass user content, may directly or indirectly also impact us, our sellers, buyers and vendors.
Proposed and enacted laws in Europe and the United States may change the scope of platform liability, and ongoing case law developments may unpredictably increase our liability as a platformplatforms for user activity. In that event, we may be held directly or secondarily liable for the intellectual property infringement, product compliance deficiencies, consumer protection deficiencies, privacy and data protection incidents, or regulatory issues of our sellers, including potentially for their conduct over which we have no control or influence.
Regardless of the validity of any claims made against us, we may incur significant costs and efforts to defend against or settle them. If a governmental authority determines that we have aided and abetted the infringement or sale of counterfeit, harmful or unlawful goods or if legal changes result in us potentially being liable for actions by sellers on our platform,platforms, we could face regulatory, civil, or criminal penalties. SuccessfulAs in the past, claims by third-party rights owners could require us to pay substantial damages or refrain from permitting any further listing of the relevant items. These types of claims could seek substantial damages or force us to modify our business practices, which could lower our revenue, increase our costs, or make our platformplatforms less user-friendly. These claims, or legal and regulatory changes, could require the removal of non-infringing, lawful or completely unrelated content, which could negatively impact our business and our ability to retain sellers. Moreover, public perception that unlicensed, counterfeit, harmful or unlawful items are commonly offered by sellers in our marketplaces, even if factually incorrect, could result in negative publicity and damage to our reputation.
We have been involved in, and in the future may be involved in, litigation and regulatory matters that are expensive and time consuming and that may require changes to our strategy, the features of our platformplatforms, and/or how our business operates.
In addition to intellectual property claims, we may becomehave been involved in other litigation and regulatory matters, including matters related to consumer protection, product liability, security and privacy, commercial, or shareholderstockholder derivative lawsuits, either individually or, where available, on a class-action basis. We have been and may becomein the future be subject to heightened regulatory scrutiny, inquiries, or investigations, including with respect to our sellers, vendors or third parties, relating to both specific inquiries as well as broad, industry-wide concerns, such as antitrust, product liability, and privacy, that could lead to increased expenses or reputational damage. For example, while we have stated on our platform that items offered by sellers on Etsy, such as masks and hand sanitizers, are not medical-grade, and that our sellers cannot make substantive medical or health claims, we may nevertheless be subject to claims based in whole or in part on the actions of sellers in violation of that directive.
Under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of current and former directors, officers, and underwriters. Any lawsuit or regulatory action to which we are a party, with or without merit, may result in an unfavorable judgment. We alsohave in the past settled lawsuits and regulatory actions and may decide in the future to settle lawsuits or regulatory actions, even if non-meritorious,non-meritorious. Any such settlements may be on unfavorable terms. Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation, or adverse changes to our offerings or business practices. Any of these results could adversely affect our business. In addition, defending claims is costly and can impose a significant burden on our management.
We limit certain claims against us under our TermsHouse Rules, policies, and other terms of Use,use, including through requirements for arbitration, limits on class actions, limitations of liability, venue selection, and indemnification requirements. These requirements may be subject to differing interpretations and legal frameworks in different U.S. federal, state, and foreign jurisdictions orjurisdiction courts,
and may have reduced or no enforceability in some jurisdictions. IfWhere these claim limitations are unavailable to us, it could significantly increase our costs, require significant resources across multiple jurisdictions, result in complex or inconsistent decisions, and subject us to forum shopping by third parties seeking jurisdictions amenable to their claims.
ActionsLawsuits or other enforcement actions brought against us have resulted in settlements, and may result in lawsuits, enforcement actions, injunctions, settlements, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business. Although we establish accruals for our litigation and regulatory matters in accordance with applicable accounting guidance when those matters proceed to a stage where they present loss contingencies that are both probable and reasonably estimable, there may be a material exposure to loss in excess of any amounts accrued, or in excess of any loss contingencies disclosed as
reasonably possible.probable, particularly in more uncertain legal or regulatory environments. Such loss contingencies may not be probable and reasonably estimable until the proceedings have progressed significantly, which could take several years and occur close to resolution of the matter.
Expanding and evolving regulations in the areas of privacy and user data protection could create technological, economic and complex cross-border business impediments to our business and those of our sellers.
We collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, and share personal information, confidential information and other sensitive or potentially protected information necessary to provide our service, to operate our business, for legal and marketing purposes, and for other business-related purposes.
Data protection has become a significant issue in the United States, countries in the European Union, and in many other countries in which we operate. In addition to the actual and potential changes in lawdata protection laws described elsewhere in these Risk Factors, global developments in privacy and data security regulations are changinghave changed and may continue to change some of the ways we, our sellers, our vendors and other third parties collect, use, and share personal information and other proprietary or confidential information. Compliance with these changing regulationsinformation, and have necessitated some specific product changes for our non-U.S. activities,created and requiredwill continue to create additional compliance obligations for us and for our relationships with sellers, vendors, and other third parties.
In the European Union, the GDPRE.U. General Data Protection Regulation (“GDPR”) contains strict requirements for processing the personally identifiable informationpersonal data of individuals residing in E.U. member states, the European Economic Area (“EEA”), Switzerland and (in a form frozen as of December 31, 2020 and as further separately domestically amended), the United Kingdom.certain additional territories. The GDPR seeks to harmonize the data protection regulations throughout these jurisdictions. The regulation contains numerous requirements, and changes from previous E.U. law, including more robust obligations on data controllers and data processors, greater rights for data subjects, including, for example, the “right to be forgotten”, and increased data portability, access, and redress rights for E.U. data subjects (requiring potentially significant changes to both our technology and operations), security and accountability obligations, and significantly heavier documentation and record-keeping requirements for data protection compliance programs. Specifically, the GDPR introduced numerous privacy-related changes for companies operating in the European Union, including greater control over personal data by data subjects (e.g., the “right to be forgotten”), increased data portability, access, and redress rights for E.U. consumers,(including stringent data breach notification requirements,requirements), increased rules for online and email marketing, compliance requirements related to our sellers, vendors and other third parties, and stronger regulatory enforcement regimes.regimes, and significantly heavier documentation and record-keeping requirements. The GDPR is subject to changing interpretations due to decisions of data protection authorities, courts, and related legislative efforts both E.U.-wide and in particular jurisdictions. TheDue to the GDPR requirements apply to some third-party transactions (suchand the implementation following Brexit of the U.K. General Data Protection Regulation (“U.K. GDPR”) (i.e., a version of the GDPR as commercial contracts with partnersimplemented into U.K. law that combines the GDPR and vendors) and to transfersthe U.K. Data Protection Act of information between us and our subsidiaries, including user and employee information. GDPR requirements may also apply, depending on interpretation of its reach, to some users in our worldwide community of sellers. We2018), we may experience difficulty retaining or obtaining new E.U. or U.K. sellers, or current and new sellers may limit their selling into the European Union, due to the legal requirements, compliance cost, potential risk exposure, and uncertainty for them in respect ofabout their own compliance obligations with respect to the GDPR and U.K. GDPR. In addition, although our sellers are independent businesses, it is possible that a privacy authority could deem us jointly and severally liable for actions of our sellers or vendors, which would increase our potential liability exposure and costs of compliance, which could negatively impact our business. We could face potential liability, regulatory investigation, and costly litigation, which may not be adequately covered by insurance.
In the United States, rules and regulations governing data privacy and security include those promulgated under the authority of the Federal Trade Commission Act, the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, California’s CCPA (effective January 1, 2020)California Consumer Privacy Act of 2018 (“CCPA”) and CPRA (effective January 1, 2023)California Privacy Rights Act of 2020 (“CPRA”), and other state and federal laws relating to privacy, consumer protection, and data security. The CCPA and CPRA introduce new requirements regarding the handling of personal information of California consumers and households, including compliance and record keeping obligations, the right to request access to and deletion of their personal information, and the right to opt out of the sale and other uses of their personal information, and provides a private right of action and statutory damages for data breaches.
Other jurisdictions in the United States are beginning to expand existing regulations, or propose laws similar to the CCPA.CCPA, which will continue to shape the data privacy environment nationally. Aspects of certain newly enacted state privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply. If more stringent privacy legislation arises in the United States, it could increase our potential liability and adversely affect our business, results of operations, and financial condition. Additionally, other countries outside of Europe have enacted or are considering enacting similar cross-border data transfer restrictions and laws requiring local data residency, and strict limitations to the processing of personal information, which could increase the cost and complexity of delivering our services and operating our business. In the past year, for example, Brazil recently enacted the General Data Protection Law, New Zealand recently enacted the New Zealand Privacy Act, China released its draft Personal Information Protection Law, and Canada introduced the Digital Charter Implementation Act.
GDPR, CCPA, and similar laws coming into effect in other jurisdictions, and future changes to or interpretations of any of these laws, may continue to change the data protection landscape globally, may be potentially inconsistent or incompatible, and could result in potentially significant operational costs for internal compliance and risk to our business. Some of these requirements may introduce friction into the buying and selling experience on our platformplatforms and may impact the scope and effectiveness of our marketing efforts, which could negatively impact our business and future outlook. Complying with these laws and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to our services to enable us or our customers to meet new legal requirements, incur substantial operational costs, modify our data
practices and policies, and restrict our business and future outlook. Beyond GDPR and CCPA/CPRA, individual jurisdictions continueoperations. Any actual or perceived failure by us to pass laws related to data protection, such as data privacy and data breach notification, resulting in a diverse set of requirements across states, countries, and regions. Non-compliancecomply with these laws, could result in proceedings against us by oneregulations, or more data protection authorities, other public authorities, third parties,obligations may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs for remediation, damage to our reputation, or individuals. Underother liabilities. For example, under the GDPR alone, noncompliance could result in fines of up to 20 million Euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater. We may not be entirely successful in our compliance efforts due to various factors either within our control (such as limited internal resource allocation) or outside our control (such as a lack of vendor cooperation, new regulatory interpretations, or lack of regulatory guidance in respect of certain GDPR requirements).
In addition, E.U. data protection laws including the GDPR, also generally prohibit the transfer of personal information from Europe to the United States and most other countries unless the recipient country has been deemed to have adequate privacy protections in place to protect the personal information. Parties transferring protectedEtsy relies on a variety of compliance methods to transfer personal data of EEA individuals to jurisdictions deemed inadequate must establish a legal basis for, and implement specific safeguards for, such intra-party or inter-party transfers. A recent judgment of the Court of Justice of the European Union found a common basis for such transfers, the E.U.-U.S. Privacy Shield, insufficient, and a parallel arrangement with Switzerland may similarly be deemed insufficient. While Etsy didUnited States, including but not rely upon Privacy Shield for cross-border transfers, Reverb previously had done so. While effective solutions may be availablelimited to permit these transfers, such as Standard Contractual Clauses (“SCCs”) continuingas approved by the European Commission for transfers to and from third parties. Similarly, U.K.-based data exporters are required to use the International Data Transfer Agreement, (“IDTA”) and the International Data Transfer Addendum to the European Commission’s Standard Contractual Clauses (“U.K. Addendum”) as mechanisms to comply with the U.K. GDPR when making restricted international transfers of personal data of U.K. data subjects. To the extent Etsy relies on SCCs, the IDTA or the U.K. Addendum, we may be required to incur additional costs and take additional steps to legitimize certain cross-border data transfers from the EEA, including new contractual arrangements under the updated requirements to avoid limitations on Etsy’s ability to process EEA data in countries outside of the EEA.
Continuing changes to the rules related to cross-border transfers may nonetheless impede Etsy and Reverb’s our subsidiaries’ ability to effectively transfer data between jurisdictions with parties such as partners, vendors and users, or may make such transfers of personal data more costly. In particular, another recent decision and relatedcertain European Commission guidance and updates to the SCCs, IDTA or U.K. Addendum may impose additional obligations on companies seeking to rely on the SCCssuch compliance methods and may require significant expense and resources associated with compliance. For example, transfers withAdditionally, certain countries outside Europe have also passed or are considering laws requiring local data residency or otherwise impeding the United Kingdom might be deemed inadequate after its departure fromtransfer of personal data across borders, any of which could increase the European Unioncost and European Economic Area and require substantial expense and resources to comply with based upon adequacy mechanisms such as SCCs.complexity of doing business. Transfers by us or our vendors of personal information from Europe pursuant to SCCs may not comply with E.U. data protection law, may increase our exposure to the GDPR’s and U.K. GDPR’s heightened sanctions for violations of its cross-border data transfer restrictions, and may result in lower sales on our platformplatforms because of difficulty of establishing a lawful basis for personal information transfers out of Europe.
We also publish privacy policies and other documentation regarding our collection, processing, use, and disclosure of personal data. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance, such as if our employees or vendors fail to comply with our published policies and documentation. Such failuresWe are subject to occasional requests from regulators regarding these efforts. Failures can subject us to potential international, local, state, and federal action under both data protection and consumer protection laws. We are or may also be subject to the terms of our own and third partythird-party external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks and contractual obligations to third parties related to privacy, information security, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with data protection laws, or other obligations.
Our sellers and vendors may have been and may in the future be subject to similar privacy requirements, which may significantly increase costs and resources dedicated to their compliance with such requirements. We may have varying contractual and other legal obligations to notify relevant stakeholders of security breaches related to us or, in some cases, our third-party service providers. Many jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and others of security breaches involving certain types of data.data in some circumstances. In addition, our agreements with certain stakeholders may require us to notify them in the event of such a security breach. Such mandatory disclosures, even if only related to actions of a third-party vendor, are costly, could lead to negative publicity, may cause members of our community memberscommunities to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach, and may cause us to breach customer contracts. Our contracts, our representations or industry standards, mayto varying extents, require us to use industry-standard or reasonable measures to safeguard sensitive personal information or confidential information. A cyber incident or security breach could lead to claims by members of our community members,communities, or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or members of our community memberscommunities could end their relationships with us. There can be no assurance that any indemnifications, limitations of liability or other remedies in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.
We may not have adequate insurance coverage for security incidents or data breaches, including fines, judgments, settlements, penalties, costs, attorney fees, and other impacts that arise out of incidents or breaches. If the impacts of a security incident or data breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, is of a type not subject to insurance, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage, cyber coverage, and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss. Our risks are likely to
increase as we continue to expand, grow our customer base, and process, store, and transmit increasingly large amounts of proprietary and sensitive data.
Our business and our sellers and buyers may be subject to evolving sales and other tax regimes in various jurisdictions, which may harm our business.
The application of indirect taxes, such as sales and use tax, value-added tax, provincial tax, goods and services tax, business tax, withholding tax, digital service tax, gross receipt tax, and tax information reporting obligations to businesses like ours and to our sellers and buyers is a complex and evolving issue. Significant judgment is required to evaluate applicable tax obligations and as a result amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear when and how new and existing statutes might apply to our business or to our sellers’ businesses. In some cases it may be difficult or impossible for us to validate information provided to us by our sellers on which we must rely to ascertain anyEtsy’s potential obligations, that may apply to us related to our sellers’ businesses, given the intricate nature of these regulations as they apply to particular products or services and that many of the products and services sold in our marketplace are unique or handmade. If we are found to be deficient in how we have addressed our tax obligations, our business could be adversely impacted.
Various jurisdictions (including the U.S. states and E.U. member states) are seeking to, or have recently imposed additional reporting, record-keeping, indirect tax collection and remittance obligations, or revenue-based taxes on businesses like ours that facilitate online commerce. For example, the American Rescue Plan Act of 2021 included a provision which significantly increases the number of sellers for whom we must report payment transactions. If requirements like these become applicable in additional jurisdictions, our business, collectively with Etsyour sellers’ businesses, could be harmed. For example, taxing authorities in many U.S. states and in other countries have targeted e-commerce platforms as a means to calculate, collect, and remit indirect taxes for transactions taking place over the internet, and have enacted laws and others are considering similar legislation. Such changes to current law or new legislation could adversely affect our business and our sellers’ businesses if the requirement of tax to be charged on items sold on our marketplaces causes our marketplaces to be less attractive to current and prospective buyers, which could materially impact our business and Etsy sellers’ businesses.buyers. This legislation could also require us or our sellers to incur substantial costs in order to comply, including costs associated with tax calculation, collection, remittance, and audit requirements, which could make selling on our marketplaces less attractive. Additionally, the European Union, certain member states, and other countries have proposed or enacted taxes on online advertising and marketplace service revenues. Our results of operations and cash flows could be adversely effectedaffected by additional taxes of this nature imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to provide information about our buyers, sellers, and other third parties for tax reporting purposes to various authorities. In some cases, we also may not have sufficient notice to enable us to build solutions and adopt processes to properly comply with new reporting or collection obligations by the applicable effective date.
If we are found to be deficient in how we have addressed our tax obligations, our business could be adversely impacted.
Our business is subject to a large number of U.S. and non-U.S. laws, many of which are evolving.
We are subject to a variety of laws and regulations in the United States and around the world, including those relating to traditional businesses, such as employment laws, accessibility requirements, and taxation, and laws and regulations focused on e-commerce and online marketplaces, such as online payments, privacy, anti-spam, data security and protection, online platform liability, marketplace seller regulation, intellectual property, product liability, marketing, and consumer protection. In addition, new regulations, laws, policies, and international accords relating to environmental and social matters, including sustainability, climate change, human capital, and diversity, are being developed and formalized in Europe, the United States (both at the federal level and on a state by state basis), and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements. Examples include data localization requirements, limitation on marketplace scope or ownership, intellectual property intermediary liability rules, regulation of online speech and content moderation, limits on network neutrality, packaging and recycling requirements, seller certification and representative requirements, and rules related to security, privacy, or national security, which may impede us, our users, or our vendors. In light of our international operations, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. In some cases, non-U.S. privacy, data security, consumer protection, e-commerce, and other laws and regulations are more detailed or comprehensive than those in the United States and, in some countries, are more actively enforced.
These laws and regulations are continuously evolving, and compliance is costly and can require changes to our business practices and significant management time and effort. In some jurisdictions, these laws and regulations may be subject to attempts to apply such domestic rules world-wide against Etsy or its subsidiaries, and occasionally may subject us to inconsistent obligations across jurisdictions.
Additionally, it is not always clear how existing laws apply to online marketplaces as many of these laws do not address the unique issues raised by online marketplaces or e-commerce. For example, as described elsewhere inIn some jurisdictions, these Risk Factors, laws relating to privacy are evolving differently in different jurisdictions. Federal, state, and non-U.S. governmental authorities, as well as courts interpreting the laws, continue to evaluate and assess the privacy requirements that are applicable to Etsy.
New platform liability laws, potential amendments to existing laws and ongoing regulatory and judicial interpretation of these laws imparting liability for conduct by users of a platform may create costs and uncertainty for bothregulations subject us to attempts to apply domestic rules worldwide against Etsy and sellers on our platform. This may even be the case for new laws or regulations focused on other technology areas or other third parties that nonetheless indirectly or unintentionally impact us, our sellers or our vendors. For example, the European Union’s recent e-Copyrightsubsidiaries, and Platformoccasionally may subject us to Business directives, and pending Digital Services Act and Digital Markets Act, may impact us directly, as well as impacting our sellers and vendors.inconsistent obligations across jurisdictions. In addition, there have been various Congressional efforts to restrict the
scope of the protections available to online platforms for third party user content under intellectual property laws such as the Digital Millennium Copyright Act § 512 et. seq., or user content platform protections under 47 U.S.C. § 230 (commonly referred to as CDA § 230) and our current protections from liability for third-party content in the United States, could significantly decreasegovernments of one or change. We could incur significant costs investigating and defending such claims and, if we are found liable, significant damages.
We also operate under an increasing number of regulatory regimes protecting us and our sellers and buyers worldwide, such as intellectual property and anti-counterfeiting laws, payments and taxation, competition, marketplace platform regulation, hate speech laws, and general commerce regulation. These laws, and court or regulatory interpretations of these laws, may shift quicklymore countries have in the United Statespast and worldwide. We may not have the resources or scalecontinue to effectively adaptseek to and comply with any changes to these regulatory regimes which may limit our ability to take advantage of the protections these regimes offer. In addition, some of these changes may be at least partially inconsistent with how our platform operates, especially if they are adopted in the context of, or in a manner best suited for, larger platforms, which may make it harder for us to utilize these regimes to protect our marketplaces. If we are unable to cost-effectively protect our platform, sellers and buyers under these regulatory regimes, such as if the regulations place requirementscensor content available on our sellers that they find difficultplatforms (including at times over lawful content), or impossiblemay even attempt to comply with, limit the functions or featuresblock access to our marketplace can offer, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplace, our business could be harmed.
Existing and future laws and regulations enacted by federal, state, or non-U.S. governments or the inconsistent enforcement of such laws and regulations could impede the growth of e-commerce or online marketplaces, which could have a negative impact on our business and operations. Examples include data localization requirements, limitation on marketplace scope or ownership, intellectual property intermediary liability rules, regulation of online speech, limits on network neutrality, and rules related to security, privacy, or national security, which may impede us, our users, or our vendors. We could also face regulatory challenges or be subject to allegations of discriminatory or anti-competitive practices that could impede both our and our sellers’ growth prospects, increase our costs, and harm our business. We may be subject to regulatory requests for information or testimony related to regulatory challenges of third parties, such as our competitors or our vendors, which could cause us to incur significant costs and expend significant resources in response, and could impact our relationship with those third parties.platforms.
We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not fully comply in the future, particularly where the applicable regulatory regimes have not been broadly interpreted. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties, our reputation may be harmed, and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, which could negatively affect our business. In addition, if we are restricted from operating in one or more countries, our ability to attract and retain sellers and buyers may be adversely affected and we may not be able to grow our business as we anticipate.
Additionally, if third parties with whom we work violate applicable laws or our policies, those violations could also result in other liabilities for us and could harm our business. Our ability to rely on insurance, orcontracts, indemnification and other contractual remedies to limit these liabilities, may be insufficient or unavailable in some cases. Furthermore, the circumstances in which we may be held liable for the acts, omissions, or responsibilities of our sellers is uncertain, complex, and evolving. For example, certain laws have recently been enacted seeking to hold marketplaces like ours responsible for certain compliance obligations for which sellers have traditionally been responsible. If an increasing number of such laws are passed, the resulting compliance costs and potential liability risk could negatively impact our business.
Expanding our operations in Latin America and India may expose us to additional risks.
In 2021, we acquired Elo7, which currently operates principally in Brazil. We have also recently opened offices in Mexico and India. Each of these jurisdictions has a legal framework, regulatory environment, and culture that differs materially from those of North America and Europe where our operations have historically been located. If we are unable to manage these risks, it could adversely affect our business, financial performance, and growth. Further, the success of our Elo7 marketplace may be adversely affected by macroeconomic, social, and political conditions prevailing in Brazil and Latin America. Decreases in the growth rate, periods of negative growth, increases in inflation, persistent deflation, changes in law, regulation, policy, or future judicial rulings and interpretations of policies involving exchange and capital controls and other matters such as (but not limited to) currency depreciation, foreign exchange regulations, inflation, interest rates, taxation, employment and labor laws, banking laws, anti-corruption laws, and regulations and other political, economic, or regulatory developments in or affecting Brazil and/or other parts of Latin America may affect the overall business environment and may, in turn, adversely impact Elo7’s financial condition and results of operations in the future or create obstacles to the successful integration of Elo7 into Etsy.
Increased regulation of technology companies, even if focused on large, widely adopted platforms, may inadvertently impede smaller platforms and small businesses, including us and our sellers.
We believe that it is, and that it should continue to be, relatively easy for new businesses to create online commerce offerings or tools or services that enable entrepreneurship. However, as the technology space is increasingly subject to regulation, there is a risk that legislation, and regulatory or competition inquiries, even if focused on large, widely adopted platforms, may inadvertently impede smaller platforms and small businesses, including us and our sellers.
New platform liability laws, potential amendments to existing laws, and ongoing regulatory and judicial interpretation of these laws imparting liability for conduct by users of a platform may create costs and uncertainty for both Etsy and sellers on our platforms. This may even be the case for new laws or regulations focused on other technology areas, business practices, or other third parties that nonetheless indirectly or unintentionally impact us, our sellers, or our vendors. For example, the European Union’s Digital Markets Act (“DMA”) and Digital Services Act (“DSA”), and proposed changes to the General Product Safety Directive (“GPSD”), may impact us directly, as well as impacting our sellers and vendors. Similarly, anti-waste regulations in Germany and France and new proposed sustainability-related EU-wide regulations directly impact our sellers, as well as impose compliance verification obligations on us. In the United Kingdom, the Online Safety Bill (“OSB”) which continues through Parliament may impact us in a range of content regulation areas subject to our categorization by the regulator, including by imposing additional protections regarding illegal content, content that could affect vulnerable users, fraud, and platform transparency. If we and our sellers are unable to cost-effectively comply with new regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our sellers may elect not to ship into, or we may be required to restrict shipping into, the impacted jurisdictions, and our business could be harmed. In addition, there have been various Congressional efforts to require platforms to vet and police sellers, restrict the scope of the protections available to online platforms for third-party user content. As a result, our current protections from liability for third-party content in the United States could significantly decrease or change. We could incur significant costs implementing required changes, investigating and defending claims and, if we are found liable, significant damages. In addition, if legislation or regulatory inquiries, even if focused on other entities, require us to expend significant resources in response or result in the imposition of new obligations, our business and results of operations could be adversely affected.
We also operate under an increasing number of regulatory regimes which, if certain statutory requirements are met, may protect us and our sellers and buyers worldwide, such as intellectual property and anti-counterfeiting laws, payments and taxation, competition, marketplace platform regulation, hate speech laws, and general commerce regulation. These laws, and court or regulatory interpretations of these laws (including their limitations and safe harbors), may shift quickly in the United States and worldwide. For example, upcoming regulations may impose significant verification, certification or additional compliance obligations on both us and our sellers. We may not have the resources or scale to effectively adapt to and comply with any changes to these regulatory regimes which may limit our ability to take advantage of the protections these regimes offer. In addition, some of these changes may be at least partially inconsistent with how our platforms operate, especially if they are adopted in the context of, or in a manner best suited for, larger platforms, which may make it harder for us to protect our marketplaces under these regimes. If we are unable to cost-effectively protect our platforms, sellers and buyers under these regulatory regimes, such as if the regulations place requirements on our sellers that they find difficult or impossible to comply with, limit the functions or features our marketplaces can offer, or require us to take actions at a scale inconsistent with the size, investment, and operation of our marketplaces, our business could be harmed.
We may be subject to intellectual property claims, which, even if untrue, could be extremely costly to defend, damage our brand,brands, require us to pay significant damages, and limit our ability to use certain technologies in the future.
Companies in the internet and technology industries are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. We periodically receive communications that claim we have infringed, misappropriated, or misused others’ intellectual property rights. To the extent we gain greater public recognition and scale worldwide, we may face a higher risk of being the subject of intellectual property claims. Third parties have from time to time claimed or may in the future claim that they have intellectual property rights that they claim cover significant aspects of our technologies or business methods and prevent us from expanding our offerings. Third parties may alsosometimes allege a company is secondarily liable for intellectual property infringement, or that it is a joint infringer with another party, including claims that Etsy is liable, either directly, indirectly, or vicariously, for infringement claims against sellers using Etsy’s platform,platforms, our vendors, or other third parties, and that statutory, judicial, or other immunities and defenses do not protect us. Any intellectualIntellectual property claimclaims against us, with or without merit, have been and could in the future be time consuming and expensive to settle or litigate and could divert the attention of our management. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters. For claims against us, insurance may be insufficient or unavailable, and for claims related to actions of third parties, either indemnification or remedies against those parties may be insufficient or unavailable.
Some of our competitors have extensive portfolios of issued patents. Many potential litigants, including some of our competitors, patent holding companies, and other intellectual property rights holders, have the ability to dedicate substantial resources to enforcing their perceivedalleged intellectual property rights. Any claims successfully brought directly against us, or implicating us as part of an action against third parties, such as our sellers or vendors, could subject us to significant liability for damages, and we may be required to stop using technology or other intellectual property alleged to be in violation of a thirdthird- party’s rights in one or more jurisdictions where we do business. We alsohave been and might in the future be required to seek a license for third-party intellectual property. Even if a license is available, we could be required to pay significant royalties or submit to unreasonable terms, which would increase our operating expenses. We may also be required to develop alternative non-infringing technology, which could require significant time and expense. If we cannot license or develop technology for any allegedly infringing aspect of our business, we wouldcould be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.
We are subject to the terms of open source licenses because our platform incorporates,platforms incorporate, and we contribute to, open source software, potentially impairing our ability to adequately protect our intellectual property.
The software powering our platformplatforms incorporates software covered by open source licenses. In addition, we regularly contribute source code to open source software projects and release internal software projects under open source licenses, and we anticipate doing so in the future. The terms of many open source licenses relied upon by us and the internet and technology industries have been interpreted by only a few court decisions and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our marketplaces. Under certain open source licenses, if certain conditions were met, we could be required to publicly release aspects of the source code of our software or to make our software available under open source licenses. In addition, certain pending cases, such as the Google v. Oracle litigation currently before the Supreme Court, may impact the breadth of software API copyright protection and thus could alter the perceived scope of some open source licenses.
To avoid the public release of the affected portions of our source code, we could be required to expend substantial time and resources to re-engineer some or all of our software. In addition, use of open source software can lead to greater risks than use of third-party commercial software because open source licensors generally do not provide warranties or controls on the origin of the software. Use of open source software may also presentpresents additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform,platforms, and availability of patches or fixes may not be consistent or quickly available, as it may be subject to the continued community engagement in a particular open source project. Additionally, because any software source code we contribute to open source projects is publicly available, while we may benefit from the contributions of others, our ability to protect our intellectual property rights in such software source code may be limited or lost entirely, and we will be unable to prevent our competitors or others from using such contributed software source code. Similarly, we may be subject to third partythird-party intellectual property claims as a user of or contributor to such open source software. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial performance, and growth.
There remains pronounced legal, economic and implementation uncertainty surrounding the United Kingdom’s departure from the European Union, which may be a source of instability in international markets, create significant currency fluctuations, adversely affect our operations in the United Kingdom, and pose additional risks to our business, revenue and financial condition.
On January 1, 2021, the United Kingdom left the E.U. single market and customs union. While the United Kingdom and the European Union have agreed to the terms of the United Kingdom’s departure in a trade agreement, there remains a continued lack of clarity about future U.K. laws and regulations as the United Kingdom determines which E.U. rules and regulations to replace or replicate, including financial and banking laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, privacy and information security laws, payments regulations, environmental, health, and safety laws and regulations, immigration laws, and employment laws, all of which could decrease foreign direct investment in the United Kingdom, increase costs and depress economic activity. Additionally, under the terms of the United Kingdom’s departure, the European Union retains the right to impose tariffs if the United Kingdom violates certain “level playing field” standards relating to working conditions and environmental requirements. The long-term effects of Brexit will depend on how U.K. laws and relationships evolve, as well as the United Kingdom’s adherence to the “level playing field” standards, and how that impacts its ability to negotiate favorable trade agreements with other countries.
The United Kingdom is one of our core markets. We continue to monitor Brexit developments so that we may adjust our business and operations as appropriate with the goal of continuing to provide services to our U.K. and E.U. buyers and sellers. A failure by the United Kingdom and the European Union to smoothly implement the trade agreement or to negotiate favorable arrangements governing cross-border services and trade, and ongoing uncertainty with respect to potential divergent regulatory standards, however, could significantly increase friction on cross-border trade involving U.K. buyers and sellers or reduce the
number of sellers on our platform offering products between the United Kingdom and the European Union. It may also result in additional operational, financial, regulatory, and compliance costs to us as well as decreased revenue, all of which could adversely affect our business.
If we are unable to maintain effective internal controlcontrols over financial reporting, investors may lose confidence in the accuracy of our financial reports.
As a public company, we are required to maintain internal controlcontrols over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controlcontrols over financial reporting. It also requires our independent registered public accounting firm to attest to our evaluation of our internal controls over financial reporting. Although our management has determined, and our independent registered public accounting firm has attested, that our internal controlcontrols over financial reporting waswere effective as of December 31, 2020,2022, we cannot assure you that we or our independent registered public accounting firm will not identify a material weakness in our internal controls in the future.
If we have a material weakness in our internal controlcontrols over financial reporting in the future, we may not detect errors on a timely basis. If we have difficulty implementing and maintaining effective internal control over financial reporting at the businesses we have acquired or that we may in the future acquire, or if we identify a material weakness in our internal controlcontrols over financial reporting in the future, it could harm our operating results, adversely affect our reputation, cause our stock price to decline, or result in inaccurate financial reporting or material misstatements in our annual or interim financial statements. We could be required to implement expensive and time consuming remedial measures. Further, if there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, such as Section 404 of the Sarbanes-Oxley Act, investors may lose confidence in the accuracy and completeness of our financial reports and that could cause the price of our common stock to decline. We could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
In addition, our internal controlcontrols over financial reporting will not prevent or detect all errors and fraud, and individuals, including employees and contractors, could circumvent such controls. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Changes to the accounting method for convertible debt securities that may be settled in cash, such as the Notes, could have a material effect on our reported financial results.
Under Accounting Standards Codification 470-20—Debt with Conversion and Other Options, (“ASC 470-20”), which is the accounting standard applied in the financial statements included in this report, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The equity components of the Notes are required to be included in the additional paid-in capital section of stockholders’ equity on our Consolidated Balance Sheets, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we recorded interest expense in current periods presented as a result of the amortization of the discounted carrying value of the Notes to their face amount over the term of the Notes. We plan to adopt Accounting Standards Update (“ASU”) 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40)—Accounting For Convertible Instruments and Contracts in an Entity's Own Equity effective as of January 1, 2021 which we expect will result in our recognizing less non-cash interest expense relating to the Notes in future periods.
In addition, under the accounting standard applied to the financial statements included in this report, our 2020 Notes which may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method. Under the treasury stock method, shares issuable upon conversion of the 2020 Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the 2020 Notes exceeds their principal amount. In connection with our adoption of ASU 2020-06 we will be required to adopt the if-converted method for computing diluted earnings per share which will result in the inclusion of additional shares in the calculation of and may adversely impact our diluted earnings per share. For a discussion of certain other expected impacts of adoption of this ASU, see “Note 1—Basis of Presentation and Summary of Significant Accounting Policies—Recently Issued Accounting Pronouncements” in the Notes to Consolidated Financial Statements.
Other Risks
The price of our common stock has been and will likely continue to be volatile, and declines in the price of common stock could subject us to litigation.
The price of our common stock has been and is likely to continue to be volatile. Some companies that have experienced volatility in the trading price of their stock have been the subject of securities litigation. We have experienced securities class action lawsuits in the past and may experience more such litigation following future periods of volatility or declines in our stock price. Any securities litigation could result in substantial costs and divert our management’s attention and resources, which could adversely affect our business.
For example, sincebetween January 1, 2020,2022 and February 17, 2023, our common stock’s daily closing price on Nasdaq has ranged from a low of $31.69$69.00 to a high of $233.86 through February 19, 2021.$209.93. The price of our common stock may fluctuate significantly for numerous reasons, many of which are beyond our control, such as:
•variations in our operating results and other financial and operational metrics, including the key financial and operating metrics disclosed in this Annual Report, as well as how those results and metrics compare to analyst and investor expectations;
•forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections;
•failure of analysts to initiate or maintain coverage of our company, changes in their estimates of our operating results or changes in recommendations by analysts that follow our common stock or a negative view of our financial guidance or projections and our failure to meet or exceed the estimates of such analysts;
•the strength of the global economy or the economy in the jurisdictions in which we operate, particularly during times of macroeconomic uncertainty, including as a result of inflation, rising interest rates, currency fluctuations, and market conditions in our industry and those affecting members of our communities;
•entry into or exit from stock market indices;
•announcements of new services or enhancements, strategic alliances or significant agreements or other developments by us or our competitors;
•announcements by us or our competitors of mergers or acquisitions or rumors of such transactions involving us or our competitors;
•the amount and timing of our operating expenses and the success of any cost-savings actions we take;
•changes in our Board of Directors or senior management team;
•disruptions in our marketplaces due to hardware, software or network problems, security breaches, or other issues;
•the strength of the global economy or the economy in the jurisdictions in which we operate, particularly during the current COVID-19 pandemic, currency fluctuations, and market conditions in our industry and those affecting members of our community;
•the trading activity of our largest stockholders;
•the number of shares of our common stock that are available for public trading;
•litigation or other claims against us;
•stockholderstakeholder activism;
•the operating performance of other similar companies;
•changes in legal requirements relating to our business; and
•any other factors discussed in this Annual Report.
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the price of our common stock could decline for reasons unrelated to our business, financial performance, or growth. Stock prices of many internet and technology companies have historically been highly volatile.
Future sales and issuances of our common stock or rights to purchase common stock, including upon conversion of our convertible notes, could result in additional dilution to our stockholders and could cause the price of our common stock to decline.
We may issue additional common stock, convertible securities, or other equity in the future, including as a result of conversion of the outstanding Notes. We also issue common stock to our employees, directors, and other service providers pursuant to our equity incentive plans. Such issuances could be dilutive to investors and could cause the price of our common stock to decline. New investors in such issuances could also receive rights senior to those of current stockholders.
The conversion of some or all of the Notes would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of the Notes. Each series of Notes is convertible at the option of their holders prior to their scheduled maturity in the event the conditional conversion features of such series of Notes are triggered. Based on the daily closing prices of our stock during the quarter ended December 31, 2020,2022, holders of the 2018 Notes and the 2019 Notes are eligible to convert their 2018 Notes and 2019 Notes, as applicable, during the first quarter of 2021.2023. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely cash to converting holders of such Notes, we could be required to deliver to them a significant number of shares of our common stock, increasing the number of outstanding shares of our common stock. The issuance of such shares of common stock and any sales in the public market of the common stock issuable upon such conversion of the Notes could adversely affect prevailing market prices of our common stock. See “Note 13—Part II, Item 8, “Financial Statements and Supplementary Data—Note 12—Debt” in the Notes to Consolidated Financial Statements for more information on the Notes.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
•any derivative action or proceeding brought on our behalf, behalf;
•any action asserting a breach of fiduciary duty, duty;
•any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or Law; and
•any action asserting a claim against us that is governed by the internal affairs doctrine.
This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. While the Delaware courts have determined that choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than that designated in our exclusive forum provision. In such an instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provision of our certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees and may discourage these types of lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
Our business could be negatively affected as a result of actions of activist stockholders.
The actions of activist stockholders could adversely affect our business. Specifically, responding to common actions of an activist stockholder, such as requests for special meetings, potential nominations of candidates for election to our Board of Directors, requests to pursue a strategic combination, or other transaction or other special requests, could disrupt our
operations, be costly and time-consuming, or divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction in relation to the actions of an activist stockholder may result in the loss of potential business opportunities or the perception that we are unstable as a company, which may make it more difficult to attract and retain qualified employees. Our ability to continue to commit to our mission, guiding principles, and culture may also be questioned, which could impact our ability to attract and retain buyers and sellers. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
Our stock repurchases are discretionary and even if effected, they may not achieve the desired objectives.
OurWe have from time to time repurchased shares of our common stock under stock repurchase programs approved by our Board of Directors or in connection with our issuances of convertible notes. In May 2022, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $250$600 million of our common stock.stock, of which approximately $301 million remained available as of December 31, 2022. There can be no assurance that theseany repurchases pursuant to our stock repurchasesrepurchase programs will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased such shares. In addition, there is no guarantee that our stock repurchases in the past or in the future will be able to successfully mitigate the dilutive effect of recent and future employee stock option exercises and restricted stock vesting.vesting or of any issuance of common stock in connection with the conversion of Notes. The amounts and timing of the repurchases may also be influenced by general market conditions, regulatory developments (including recent legislative actions which, subject to certain conditions, may impose an excise tax of 1% on our stock repurchases) and the prevailing price and trading volumes of our common stock. If our financial condition deteriorates or we decide to use our cash for other purposes, we may suspend repurchase activity at any time.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, could limit attempts to make changes in our management and could depress the price of our common stock.
Provisions in our certificate of incorporation and bylaws and the Delaware General Corporation Law may have the effect of delaying or preventing a change in control of our company or limiting changes in our management. Among other things, these provisions:
•provide for a classified board of directors so that not all members of our Board of Directors are elected at one time;
•permit our Board of Directors to establish the number of directors and fill any vacancies and newly created directorships;
•provide that directors may only be removed for cause;
•require super-majority voting to amend some provisions in our certificate of incorporation and bylaws;
•authorize the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit stockholder action by written consent, which means all stockholder actions must be taken at a meeting of our stockholders;
•provide that our Board of Directors is expressly authorized to amend or repeal any provision of our bylaws; and
•require advance notice for nominations for election to our Board of Directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, Section 203 of the Delaware General Corporation Law may delay or prevent a change in control of our company by imposing certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. Anti-takeover provisions could depress the price of our common stock by acting to delay or prevent a change in control of our company.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Our headquarters are located in Brooklyn, New York where we occupy approximately 225,135225,000 square feet under a lease that expires in 2026.2039. We use these facilities for our principal administration, technology and development, and engineering activities.
We believe that our current facilities are suitable and adequate to meet our ongoing needs and that, if we require additional space, we will be able to obtain additional facilities.
Item 3. Legal Proceedings.
See “Note 14—Part II, Item 8, “Financial Statements and Supplementary Data—Note 13—Commitments and Contingencies—Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements.Proceedings.”
Item 4. Mine Safety Disclosures.
Not applicable.
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market for Etsy’s Common Stock
Our common stock has been listed on the Nasdaq Global Select Market under the symbol “ETSY” since April 16, 2015. Prior to that date, there was no public trading market for our common stock.
Holders of Record
As of the close of business on February 19, 2021,17, 2023, there were approximately 526757 stockholders of record of our common stock. The number of stockholders of record is based upon the actual number of holders registered on this date and does not include holders of common stock in “street name” by brokers or other entities on behalf of stockholders.
Dividend Policy
We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and future earnings and do not anticipate paying cash dividends in the foreseeable future. Any future decision to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board of Directors think are relevant.
Issuer Purchases of Equity Securities
The table below provides information with respect to repurchases of shares of our common stock during the three months ended December 31, 2020:2022:
| | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased | | Average Price Paid per Share(2) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)(5) | | Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3)(4) |
October 1 - 31, 2020 (1) | 191,235 | | | $ | 131.69 | | | — | | | $ | 77,500 | |
November 1 - 30, 2020 (1) | 628,294 | | | 125.18 | | | 618,841 | | | — | |
December 1 - 31, 2020 (1) | 10,203 | | | 154.67 | | | — | | | 250,000 | |
Total | 829,732 | | | 127.04 | | | 618,841 | | | 250,000 | |
| | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased(1) | | Average Price Paid per Share(2) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(3)(4) | | Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Programs (in thousands)(3) |
October 1 - 31 | 761,571 | | | $ | 101.76 | | | 487,548 | | | $ | 401,807 | |
November 1 - 30 | 483,439 | | | 106.77 | | | 467,869 | | | 351,609 | |
December 1 - 31 | 405,751 | | | 129.80 | | | 387,843 | | | 301,431 | |
Total | 1,650,761 | | | | | 1,343,260 | | | 301,431 | |
(1) The total number of shares purchased includes 210,891307,501 shares withheld to satisfy tax withholding obligations in connection with the vesting of employee restricted stock units (“RSUs”).
(2) Average price paid per share excludes broker commissions.
(3) In November 2018,May 2022, our Board of Directors approved a stock repurchase program for the repurchase of up to $200 million of our common stock. The program was completed in the fourth quarter of 2020.
(4) Our Board of Directors approved a new stock repurchase program for the repurchase of up to $250$600 million of our common stock. The stock repurchase program has no expiration date. As of the date of this Annual Report, there have been no repurchases under such program.
(5) A portion(4) All of these shares were purchased pursuant to a 10b5-1 trading plan. Share repurchases may be executed through open market repurchases, privately negotiated transactions or by other means, including repurchase plans designed to comply with Rule 10b5-1 and other derivative, accelerated share repurchase and other structured transactions. The timing and exact amount of any common stock repurchases will depend on various factors, including market conditions, common stock trading price, our liquidity and financial performance and legal considerations.
Performance Graph
Our 2019 Annual Report on Form 10-K included a comparison of the cumulative total return of our common stock with the S&P MidCap 400 and the Russell 1000 Index since our initial public offering on April 16, 2015. In 2020 there were changes to the indices that Etsy is included in, and, as a result, we believe that the S&P 500 Index is a more appropriate index than the S&P MidCap 400 for comparison of our stock performance. If a company selects a different index from that used in the immediately preceding fiscal year, the company’s stock performance must be compared with both the newly-selected index and the index used in the immediately preceding year. Accordingly, theThe following graph shows a comparison from December 31, 20152017 through December 31, 2020,2022, of the cumulative total returns for our common stock, the S&P MidCap 400, the Russell 1000 Index, and the S&P 500 Index. The graph assumes $100 was invested at the market close on December 31, 20152017 in the common stock of Etsy, Inc. Such returns are based on historical results and are not intended to suggest future performance. The S&P Mid Cap 400, the Russell 1000 Index and the S&P 500 Index assume reinvestment of any dividends.
This performance graph shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Securities Act or the Exchange Act.
Item 6. [Removed and Reserved][Reserved].
Item 7. Management’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statementsConsolidated Financial Statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K.Report. This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in Part I, Item 1A, “Risk Factors.” For more information regarding key factors affecting our performance, see “Key Factors Affecting Our Performance” below. We have omitted discussion of 20182020 results where it would be redundant to the discussion previously included in Part II, Item 7 of our 2019 Annual Report on Form 10-K.10-K for the year ended December 31, 2021.
Overview
Business
Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers. Oursellers around the world. These marketplaces - which collectively create a “House of Brands” - share our mission, iscommon levers for growth, similar business models, and a strong commitment to “Keep Commerce Human,” and we’re committed to using the power ofuse business and technology to strengthen communities and empower people around the world.people.
Our primary marketplace, Etsy.com, is the global destination for unique and creative goods.goods made by independent sellers. The Etsy marketplace connects creative artisans and entrepreneurs with thoughtful consumers looking for items that are intended to be special, reflecta joyful expression of their sense of style, or represent a meaningful occasion.taste and values. Our sellers are the heart and soul of Etsy, and our technology platform allows our sellers to turn their creative passions into economic opportunity. We have a seller-aligned business model: we make money when our sellers make money. We offer EtsyEtsy.com sellers a marketplace with tens of millions of buyers along with a range of seller tools and services that are specifically designed to help our creative entrepreneurs generate more sales and scale their businesses.
We are focused on attracting potential buyersIn addition to theour core Etsy marketplace, for everyday items that have meaning and those “special” purchase occasions that happen throughout the year. We are also focused on deepening our engagement with our existing buyers by inspiring purchases across our many retail categories and special occasions. Special purchases for use in the everyday include handmade or vintage unique clothing, accessories, household items, or furniture that the buyer wants to reflect her sense“House of style. Special purchase occasions can occur many times throughout the year and include shopping for special occasions that reflects an individual’s unique style; gifting that demonstrates thought and care; and celebrations that express creativity and fun. Buyers tell us that they come to Etsy because Etsy sellers offer items that they can’t find anywhere else.
On August 15, 2019, we acquired all of the outstanding capital stockBrands” consists of Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace, Depop Limited (“Depop”), our fashion resale marketplace, and Elo7 Serviços de Informática S.A. (“Elo7”), our Brazil-based marketplace for $270.4 million, nethandmade and unique items. Each of cash acquired.our marketplaces operates independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all four marketplaces to some extent. Our goal is that all four marketplaces benefit from shared expertise in product, marketing, technology, and customer support. The results of Reverb, marketplace is a leading global online marketplace dedicated to buyingElo7, and selling new, used,Depop, acquired on August 15, 2019, July 2, 2021, and vintage musical instruments, with a vibrant community of buyers and sellers all over the world. Reverb, now a wholly-owned subsidiary of Etsy, Inc., isJuly 12, 2021, respectively, are included in all financial and other metrics from August 15, 2019 (the date of acquisition),discussed in this report, unless otherwise noted.noted, from their respective dates of acquisition.
OurWe generate revenue is diversified, generatedprimarily from a mix of marketplace activities, including transaction, listing, and otherpayments processing fees, and optional seller services, we provide to sellers to help them generate more sales and scale their businesses.
Marketplace revenue is comprised of the fees a seller pays us for marketplace activities. Marketplace activities include listing an item for sale; completing transactions between a buyer and a seller, which includes, beginning in the second quarter of 2020, an additional transaction fee related to offsite advertising; and using our payments services to process payments, including foreign currency transactions. Etsy fees include the $0.20 listing fee for each item listed (for up to four months); the 5% transaction fee that an Etsy seller pays for each completed transaction, inclusive of shipping fees charged; where applicable, an additional transaction fee of 12% or 15% related to offsite advertising; and fees for Etsy Payments, our payment processing product.
Services revenue is comprised of the fees a seller pays us for our optional other services (“Services”). Services primarily include on-site advertising services, which allows sellers to pay for prominent placement of their listings in search results; and shipping labels, which allows sellers in the United States, Canada, United Kingdom, and Australia to purchase discounted shipping labels.
Our strategy is focused on growingaround:
•Building a sustainable competitive advantage - our “Right to Win;”
•Growing the Etsy marketplace in our seven core geographiesgeographies; and building a sustainable competitive advantage around four elements
•Leveraging our marketplace expertise and playbook across our “House of our business that we believe differentiate us from our competitors, or what we call our “Right to Win.Brands.” The foundation of Etsy’s competitive advantage is our collection of our sellers’ unique items, which, we believe, when combined with best-in-class search and discovery, human connections, and a trusted brand, will enable us to continue to stand out among other e-commerce platforms and marketplaces.
Our investments in technology infrastructure, product development, marketing, trust and talent will be focused on capitalizing on these four elements ofsafety, member support, and sellers tools and education, and other areas support our business. Ultimately, the goal of our long-term strategy, is to drivewhich you can read more new buyers to the website, give existing buyers reasons to come back more often, encourage buyers to spend more per order,about in Part 1, Item 1, “Business—Primary Business Drivers.”
Annual Key Metrics and fuel success for our sellers. We see a number of similarities between the levers of growth for the Etsy and Reverb marketplaces, including improving search and discovery, making selling and buying easier, and building a global brand and user community.
While current macroeconomic conditions have had a dramatic effect on the global economy and on our business, these impacts have led us to reaffirm our long-term strategy and strengthen our commitment to it.
Year Financial Highlights
As of December 31, 2020,2022, our marketplaces connected 4.47.5 million active sellers and 81.995.1 million active buyers in nearly every country in the world. In the year ended December 31, 2020,2022, sellers generated GMS of $10.3$13.3 billion, approximately 67% of which approximately 61% came from purchases made on mobile devices. We are a global company and approximately 36%44% of our GMS in the year ended December 31, 20202022 came from transactions wherein which either a seller or a buyer was located outside of the United States.
Total revenue was $1.7$2.6 billion in the year ended December 31, 2020,2022, driven by strongsolid growth in both Marketplace and Services revenue. In the year ended December 31, 2020,2022, we recorded a net incomeloss of $349.2$694.3 million, and non-GAAP Adjusted EBITDA of $549.1$716.9 million. See “Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net (loss) income, the most directly comparable financial measure calculated in accordance with GAAP. The net loss included goodwill impairment expense of $1.0 billion related to the full impairment of the goodwill of Depop and Elo7. See Part II, Item 8, “Financial Statements and Supplementary Data—Note 6—Goodwill and Intangible Assets” for further information.
Cash and cash equivalents and short-term investments were $1.7$1.2 billion as of December 31, 2020. Etsy has2022. As of December 31, 2022, we had outstanding $1.0 billion aggregate principal amount of 0.25% Convertible Senior Notes due 2028 (the “2021 Notes”), $650.0 million aggregate principal amount of 0.125% Convertible Senior Notes due 2027 (the “2020 Notes”), $650.0$649.9 million aggregate principal amount of 0.125% Convertible Senior Notes due 2026 (the “2019 Notes”), and $43.9 million aggregate principal amount oftogether with the 2021 Notes, 2020 Notes, and 0% Convertible Senior Notes due 2023 (the “2018 Notes” and together with the 2020 Notes and the 2019 Notes,), the “Notes”). Additionally, we have the ability to draw down on itsour $200.0 million senior secured revolving credit facility. In the year ended December 31, 2020,2022, we had positive operating cash flows of $679.0$683.6 million.
Other Operational HighlightsEtsy Marketplace Transaction Fee Increase
The impacts of the ongoing COVID-19 pandemic on the global economy and on our business continue to evolve. Etsy’s performance for the year was extremely strong, with GMS growth of 106.7% and revenue growth of 110.9%. Factors contributing to this performance included our investments in our brand and marketplace; our agility in supporting our global seller community; our quick and successful transition to remote work; and guarding the health and safety of our team — all of which mitigated risk and maximized our financial performance. In addition, Etsy benefited from several tailwinds including the shift from offline to online shopping, specific competitive dynamics, retail business closures, new buyer cohorts, pent-up demand, emerging categories such as face masks, gifting trends, and government stimulus.
We have continued to invest in product development, making key improvements to the customer experience during the year. Highlights of our business initiatives during the year, including those related to COVID-19, are outlined below:
•Etsy assembled a COVID-19 task force in January and moved to a fully remote workforce for both Etsy and Reverb by early March. Despite this shift in working environment, our team remains highly productive. During this timeEffective April 11, 2022, we allocated resources to critical infrastructure improvements to more accurately categorize our inventory and are investing in longer-term initiatives such as search and frequency and are seeing encouraging data from our recent product launches.
•In living up to our mission to “Keep Commerce Human,” we introduced several initiatives during the year to support our seller community during this challenging time. These included waiving fees for our new Offsite Ads service, extending our free trial into May; a one-month grace period to give sellers extra time to pay their bills; a seller guide to managing an Etsy shop during COVID-19; and 24/7 member support to address any questions with their businesses, delivery times, and shipping issues.
•We completed the migration of seller listings to our new Offsite Ads, an iteration on our advertising offerings, to help sellers more effectively drive traffic to their listings. Etsy pays the upfront costs to promote Etsy sellers’ listings on multiple internet platforms without any upfront costs for sellers. We added enhancements to our Etsy Ads (formerly Promoted Listings) service, improving the relevance of ads in search and the speed of incorporating changes in a seller’s budget. We also made our Etsy Ads infrastructure more efficient, providing better search results while simultaneously using fewer cloud resources. To add to the seller experience, we launched performance graphs in the Etsy Ads dashboard, helping to make advertising on Etsy as easy as possible for our sellers.
•We adjusted our marketing strategies and spend for the Etsy marketplace during the year to respond quickly to the changing macro dynamics. Performance marketing spend adjusts naturally with demand, and we significantly increased our investments in marketing, launching several TV ad campaigns throughout the year, including both direct response ads and those designed to create an emotional connection with consumers, as well as holiday campaigns in the United Kingdom and Germany. Over the year we have made significant progress with full funnel marketing and optimization across channels.
•GMS excluding mask sales for the Etsy marketplace was $8.7 billion, up 84% year-over-year, and 8% of the Etsy marketplace’s overall GMS was from mask sales. The Etsy marketplace saw an influx of 60.7 million new buyers and reactivated buyers during the year, the latter being those who haven’t purchased in a year or more.
•We launched a buy now, pay later option for U.S. buyers through a partnership with Klarna, an online payments company, which offers buyers the flexibility to pay for an item in installments, making higher priced items more accessible.
•In search and discovery, we made additional progress by improving our query-listing matching and continuing to iterate on ranking algorithms to deliver more relevant recommendations further along in the purchase funnel and by leaning into saved searches and favorites to capture data on what buyers like and their tastes and preferences, which we believe we can leverage to make the site more organized and easier to search.
•We continued to strengthen the buyer experience by:
◦adding a more prominent “In Stock” indicator to increase buyer confidence that an item is not mass-produced;
◦collapsing the item information section on the listing page, allowing for buyers to more easily find items that interest them;
◦launching listing videos, which help sellers showcase their products to buyers in ways they previously could not with photos, showing their expertise in making and bringing their products to life, with approximately 3.2 million listing videos uploaded in 2020; and
◦improving shipping transparency and post-purchase experiences by helping buyers better understand when they should expect an item to arrive by expanding listing coverage of expected delivery dates.
•Reverb benefited from similar macroeconomic e-commerce tailwinds to Etsy, as well as a strong increase in GMS from new buyers, many of whom were novice musicians. We continued to execute on product and marketing initiatives to bolster Reverb’s two-sided marketplace. Beginning on August 4, 2020, Reverb increased its seller transaction fee from 5% to 6.5%. As part of our long standing principle to provide a “fair exchange of value” for the first timefee Etsy earns on marketplace transactions, we reinvested most of the incremental revenue generated from 3.5% to 5%, which will enable Reverb tothe transaction fee increase investments ininto marketing, expand its global customer engagement team, and grow the capacity of its team that creates and enhances seller tools, and services to increase visibility of seller shops and inventory.creating world-class customer experiences.
Convertible Debt
In August 2020, we issued $650.0 million aggregate principal amount of the 2020 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the “Securities Act”). The initial conversion price of the 2020 Notes represented a premium of approximately 52.5% over the price of our common stock. The net proceeds from the sale of the 2020 Notes were $639.5 million after deducting the offering expenses. The 2020 Notes will mature on September 1, 2027, unless earlier converted or repurchased.
We used $74.7 million of the net proceeds from the 2020 Notes offering to enter into separate capped call instruments (“2020 Capped Call Transactions”) with the initial purchasers and/or their respective affiliates. The 2020 Capped Call Transactions effectively limit the premium for conversion of the 2020 Notes to 150% and are generally expected to reduce potential dilution to our common stock upon any conversion of the 2020 Notes and/or offset any payments we make upon conversion.
In addition, we paid $137.2 million in cash and issued approximately 7.3 million shares of Etsy’s common stock to repurchase $301.1 million aggregate principal amount of the outstanding 2018 Notes through privately negotiated transactions.
We intend to use the remainder of the net proceeds from the 2020 Notes offering for general corporate purposes. For more information on the 2020 Notes, 2020 Capped Call Transactions, and the 2018 Notes, see “Note 13—Debt” in the Notes to Consolidated Financial Statements.
Key Operating and Financial Metrics
We collect and analyze operating and financial data to evaluate the health and performance of our business and allocate our resources (such as capital, people, and technology investments). The financial results of ReverbDepop and Elo7 have been included in our consolidated financial results (“Consolidated”) from August 15, 2019July 12, 2021 and July 2, 2021 (the daterespective dates of acquisition)., respectively. We are providing Etsy.comEtsy marketplace standalone information in certain instances where particularly relevant. The unaudited GAAP and non-GAAP financial measures and key operating and financial metrics we use are:
| | | | Year Ended December 31, | | % Growth Y/Y | | Year Ended December 31, | | % Growth Y/Y | | | Year Ended December 31, | | % (Decline) / Growth Y/Y | | Year Ended December 31, | | % Growth / (Decline) Y/Y |
| | | 2020 | | 2019 | | 2018 | | | | 2022 | | 2021 | | 2020 | |
| | | | (in thousands, except percentages) | | | (in thousands, except percentages) |
GMS (1)(2) | GMS (1)(2) | | $ | 10,281,101 | | | $ | 4,974,944 | | | 106.7 | % | | $ | 3,931,745 | | | 26.5 | % | GMS (1)(2) | | $ | 13,318,396 | | | $ | 13,491,828 | | | (1.3) | % | | $ | 10,281,101 | | | 31.2 | % |
Revenue | Revenue | | $ | 1,725,625 | | | $ | 818,379 | | | 110.9 | % | | $ | 603,693 | | | 35.6 | % | Revenue | | $ | 2,566,111 | | | $ | 2,329,114 | | | 10.2 | % | | $ | 1,725,625 | | | 35.0 | % |
Marketplace revenue | Marketplace revenue | | $ | 1,303,126 | | | $ | 593,646 | | | 119.5 | % | | $ | 444,765 | | | 33.5 | % | Marketplace revenue | | $ | 1,910,887 | | | $ | 1,745,824 | | | 9.5 | % | | $ | 1,303,126 | | | 34.0 | % |
Services revenue | Services revenue | | $ | 422,499 | | | $ | 224,733 | | | 88.0 | % | | $ | 158,928 | | | 41.4 | % | Services revenue | | $ | 655,224 | | | $ | 583,290 | | | 12.3 | % | | $ | 422,499 | | | 38.1 | % |
Net income | | $ | 349,246 | | | $ | 95,894 | | | 264.2 | % | | $ | 77,491 | | | 23.7 | % | |
Gross profit | | Gross profit | | $ | 1,821,519 | | | $ | 1,674,602 | | | 8.8 | % | | $ | 1,260,880 | | | 32.8 | % |
Operating expenses | | Operating expenses | | $ | 2,480,079 | | | $ | 1,208,870 | | | 105.2 | % | | $ | 836,871 | | | 44.5 | % |
Net (loss) income | | Net (loss) income | | $ | (694,288) | | | $ | 493,507 | | | (240.7) | % | | $ | 349,246 | | | 41.3 | % |
Net (loss) income margin (3) | | Net (loss) income margin (3) | | (27) | % | | 21 | % | | (4,800) | bps | | 20 | % | | 100 | bps |
Adjusted EBITDA (Non-GAAP) (1) | Adjusted EBITDA (Non-GAAP) (1) | | $ | 549,116 | | | $ | 186,268 | | | 194.8 | % | | $ | 139,510 | | | 33.5 | % | Adjusted EBITDA (Non-GAAP) (1) | | $ | 716,882 | | | $ | 716,613 | | | — | % | | $ | 549,116 | | | 30.5 | % |
Adjusted EBITDA margin (Non-GAAP) (1) | | Adjusted EBITDA margin (Non-GAAP) (1) | | 28 | % | | 31 | % | | (300) | bps | | 32 | % | | (100) | bps |
| Active sellers (1) | | 4,365 | | | 2,699 | | | 61.7 | % | | 2,115 | | | 27.6 | % | |
Active buyers (1) | | 81,898 | | | 46,351 | | | 76.7 | % | | 39,447 | | | 17.5 | % | |
Active sellers (1)(4) | | Active sellers (1)(4) | | 7,470 | | | 7,522 | | | (0.7) | % | | 4,365 | | | 72.3 | % |
Active buyers (1)(4) | | Active buyers (1)(4) | | 95,076 | | | 96,336 | | | (1.3) | % | | 81,898 | | | 17.6 | % |
| Percent mobile GMS (1) | Percent mobile GMS (1) | | 61 | % | | 58 | % | | 300 | bps | | 55 | % | | 300 | bps | Percent mobile GMS (1) | | 67 | % | | 64 | % | | 300 | bps | | 61 | % | | 300 | bps |
Percent international GMS (1) | | 36 | % | | 36 | % | | — | bps | | 35 | % | | 100 | bps | |
Percent GMS ex-U.S. Domestic (1)(5) | | Percent GMS ex-U.S. Domestic (1)(5) | | 44 | % | | 42 | % | | 200 | bps | | 36 | % | | 600 | bps |
Gross merchandise sales (“GMS”) is the dollar value of items sold in our marketplaces within the applicable period, excluding shipping fees and net of refunds associated with canceled transactions. GMS does not represent revenue earned by us. GMS is largely driven by transactions in our marketplaces and is not directly impacted by Services activity. However, because our revenue and cost of revenue depend significantly on the dollar value of items sold in our marketplace, we believe that GMS is an indicator of the success of our sellers, the satisfaction of our buyers, and the health, scale, and growth of our business. We track “Paid GMS” for the Etsy marketplace and define it as Etsy.com GMS that is attributable to our performance marketing efforts, which excludes most of our marketing investments focused on brand awareness like TV and digital video.
An active buyer is a buyer who has made at least one purchase in the last 12 months. A buyer is separately identified in each of our marketplaces by a unique e-mail address; a single person can have multiple buyer accounts and can count as a distinct active buyer in each of our marketplaces. We generate revenue when buyers order items from sellers, so we view the number of active buyers as a key indicator of our potential for growth in GMS and revenue, the reach of our platform,platforms, consumer awareness of our brand,brands, the engagement and loyalty of buyers, and the health of our business.
Mobile GMS is GMS that results from a transaction completed on a mobile device, such as a tablet or a smartphone. Mobile GMS excludes orders initiated on mobile devices but ultimately completed on a desktop. When calculating the percentage of mobile GMS, we do not take into account refunds associated with canceled transactions. We believe that mobile GMS indicates our success in converting mobile activity into mobile purchases and demonstrates our ability to grow GMS and revenue.
We calculate currency-neutral GMS growth by translating current period GMS for goods sold that were listed in non-U.S. dollar currencies into U.S. dollars using prior year foreign currency exchange rates.