Etsy, Inc. (ETSY) Earnings Call Transcript & Summary

Thanks for joining us. My name is Kunal Madhukar, analyst with UBS. Joining us is Josh. Josh needs no introduction, he's the CEO of Etsy. You've seen his work over the past couple of years. We will get there. Jessica in Investor Relations has a message.

I just want to remind everyone to look at the Etsy website for our safe harbor.

Josh, first of all thank you for doing this.

Thanks for having me.

Yes. This is a question that you would be getting at any meeting is you talked about October being strong versus the rest of the e-commerce space kind of saying, hey, you know what, October was weak versus 3Q trends. What did you see? What did you do different?

Honestly, I don't have a silver bullet answer to that. I will say that what we saw was October was a slight uptick versus our trends in Q3, which we felt good about. It seems like maybe relative to the industry was more of an outlier. I get asked a lot why have we held on to so much of our pandemic gains, frankly, a lot more than even we thought we would have. And the answer, as we talk to our customers, seems pretty simple. People just really like the Etsy experience more than they thought they would. Millions of people came and shopped on Etsy for the first time during the pandemic because they had very few other choices, and it just was better than they thought. Search works better than they thought. Quality of the product is better than they thought. Items arrive on time. They're priced really attractively. They come with a handwritten note from the seller that connects with the seller. And then when the item actually arrives, you unbox it, people are delighted with the product. So we keep getting better at all the core blocking and tackling of the business, and I'm sure we'll dive into a lot of that. But honestly, I think most of it is, Etsy does something different than what everyone else is trying to do. We've got Amazon that's great at what it does. Everyone else is trying to compete with Amazon on their terms. They're going to try to sell you the exact same product that's for sale on Amazon, $0.02 cheaper or ship it 2 minutes faster. And we wish them the best of luck. That is a hard road to tow. Etsy genuinely offers different experience that turns out to be relevant quite a lot of the time and is really compelling. And I think people are more and more becoming aware of that.

Great. And a follow-up to that question is, so what's the rest of the 4Q kind of looking like? And you don't talk about intra-quarter trends, but can you talk about what the competitive environment is? We've heard from other retailers it's extremely promotional. But if you can talk about the competitive environment and what you are doing that is different?

Yes. We know it's a tough environment right now. And especially when I think about what we're lapping from last year. So at this time last year, if you remember, the only thing everyone was talking about was supply chain issues. Everyone had supply chain issues, almost everyone. Etsy, we said, was not having any supply chain issues. Our supply chain is 2 hands making. And so we said all through last year that our sellers are shipping absolutely as normal. And we know we got a real tailwind from that. In fact, the Biden administration was talking about us specifically as a proof point that supply chains are okay because it was hard to find a lot of other examples out there. So we're lapping that. And yet, we gave guidance that we thought was pretty robust for the fourth quarter. We entered the quarter with confidence based in part on the October business -- October trends that you're saying, but also just based on all the other core health metrics that we're seeing. In terms of the competitive environment, it is certainly competitive. There's a lot of promotional activity out there. We have been building tools to allow our sellers to put things on sale and making those tools better for the past few years, and sellers are sort of steadily availing themselves of that. So I know there's been some reporting about, oh, it's on sale on Etsy. I wouldn't say we're doing anything different. We're just giving our sellers tools to run sales and promotions, and they are doing so at a sort of steadily greater rate. The amount of discounting tends to be not as big or not massive at Etsy, 10% or 20% discounts, not as often 40% and 50% discounts. Those discounts are -- the vast majority of them are funded by sellers, not funded by Etsy. Those are decisions our sellers make as part of the story. But you're also seeing us lean in with marketing to the fact that items on Etsy are very affordable. That's a word you hadn't heard us use in the past, but it's true. And so we're running a TV series right now, a TV campaign right now that's talking about how Etsy is special and it's made just for you, but it's also affordable. And I think that message is really resonating.

That's interesting that we talked about 2 hands, and so the supply chain isn't a big issue. How does the 2 hands kind of limit your TAM? How many hands can you have? And how much can they build?

I don't know. What we've said -- in 2017, when I joined Etsy, the big observation that I had is we're really demand constrained. There's far too much for sale on Etsy relative to the amount of demand. In fact, over 50% of search queries have more than 10,000 relevant items. And the big challenge we had was just getting to the good stuff fast. It's just overwhelming. There's too much good stuff on Etsy. Fast forward, we had 2.2 million sellers, then I forget how many items. Now we have over 5 million sellers in the Etsy core marketplace with over 100 million items. And the problem we have continues to be, we are hugely demand constrained. We have way too much stuff for sale relative to the amount of inventory -- amount of demand. I mean to give you some dimensionality on that, in April 2, 2020, sales on Etsy doubled literally overnight. Woke up in the morning to find that sales had more than doubled. And obviously, no time for sellers to stock up or anything differently. And sales that week were -- saw no issues. Masks, some sellers got a backlog of masks. But other than masks, our sellers shipped completely as normally. So what that would suggest is in April of 2020, we had way more than twice as much available supply relative to the demand. And the supply on Etsy has grown dramatically since then. So it's not obvious anytime in the medium term that supply will be constrained on Etsy.

So that brings us to the other side. When you talked about demand, there not being enough demand. I mean I remember earlier in this year, when we used to talk to Etsy bulls, what they used to tell us is, hey, on eBay, people are spending $450 to $550 per year on average per buyer. On Etsy, you are stagnating at around the $135 level. And you were at a $100 prior to the pandemic. So what drives that $135 up to $200, $250? How do you get there?

Well, first, stagnating is an interesting word. You're right, it went from about $100 to like, what, $140, $135. And that's in a world where everyone else is locked down. You can't shop offline, and most places online are out of stock or having huge delays. So in a world where you had very few other options, you saw GMS per active buyer grow by about 35% on Etsy. It would stand to reason that when the whole rest of the world reopens and people have a million other options where they can drop, that number would go down maybe substantially. And in fact, we've seen it be quite sticky. So I'm thrilled by the fact that GMS per active buyer has retained almost all of its growth in spite of people having a million other options. But there continues to be -- I agree with the premise of your question, which is there's a ton of opportunity for us to continue to grow GMS per active buyer, and it is significantly less than on many other platforms. For example, as you point out, eBay, it's 4x more than us or 5x more than us. So there's a frequency and an AOB opportunity. Starting with frequency, we have what we call habitual buyers. They're about 9% of buyers on Etsy, and they represent about 46% of spend. Those buyers buy an average of 13x per year, 13 purchase days per year. And most buyers buy much less than that, not because we aren't relevant for them, but because they don't think of us. Consideration is the biggest opportunity for Etsy. We have 15 different categories that have at least a million buyers out there. That means there's 15 categories where we can satisfy 1 million people's needs a year. We can satisfy a lot more people's needs in those categories. They just don't think of us. I mean, obviously, right now, with holiday season coming, Etsy and holiday gifts is great. But what about Etsy for your Halloween? How many people in here went to Etsy to buy for Halloween? How many people dressed up for Halloween? And how many of them bought your costumes on Etsy? I promise you, Etsy had better costumes than -- you would have been cooler at the party had you shopped on Etsy, but my guess is between 0 and 1 of you did. How many of you decorated your Thanksgiving table with Etsy? I promise, the table would have been cooler and felt more special if you had. How many of you did your back-to-school shopping on Etsy? I promise, your kid would have showed up with a cooler backpack that would have felt more special at a really fair price, and on and on and on. Any week we talk about, I can tell you why Etsy's got something for you that's better than your alternatives, you just didn't think of us. So that consideration gap is a huge opportunity. Why are those habitual buyers shopping so differently than everyone else? Mostly were top of mind. Another issue, another opportunity, what's different about habitual buyers, they know how to get the best out of Etsy. They know the right words to put into our search engine to get to the good stuff fast. They can get in and out. when you talk to buyers that are less savvy about Etsy, oh, there's 1,000 to the seller issue. Quite the opposite with nothing for sale, there's 1,000 things, and it's overwhelming. So how do we help them get to the good stuff fast? We're doing a lot to make search and recommendations better there. One fun feature, by the way, if you launch your Etsy app in the search bar, you'll see a little camera, we just launched this feature where you can take a photo of anything, and we'll show you what on Etsy we that's like that. I really encourage you to try it. Just around your house and then your daily life, you'll be shocked how many of the things you enjoy in life, there's a version of that for sale in Etsy. That's a great version and it's for sale at an affordable price. So get you to the good stuff fast and make it easier for nonexperts to do that. And the third piece is trust. Our habitual buyers know that it's going to arrive on time and it's going to be a great product, and they're going to have a great experience. Less experienced buyers are skeptical about that. And I get it, you're buying from an unbranded person and an unbranded item. We launched Etsy purchase protection in the third quarter. We said, if it gets lost at mail or it's not as described, Etsy will refund up to $250, no questions asked. And we told you that, that program is going to cost about $25 million. If you think about Etsy, $13 billion-ish of GMS, and that program only cost $25 million, what that tells you is things very rarely go wrong. Our sellers do a great job. And so it's about helping the new buyers get confidence in that, that we think can drive a lot of premium.

Interesting. You talked about Halloween, you talked about holiday. You've talked about everydayness in the past. And when we look at most of the inventory that is listed on Etsy, it's almost entirely consumer [ discretion ]. Now consumer spending hasn't gone down until now in the U.S., at least, as it has in maybe Europe. As you get into the next year and maybe the consumer spend kind of breaks down at that point in time, how do you tackle the recession with the platform that is completely consumer discretion?

So in a world where people want to buy fewer things, having them buy things that have more meaning at a fair price, we think, can really resonate. I think people are becoming a lot more aware of the supply chain they're part of. Friend-shoring is something we're suddenly all aware, not all, but many of us are suddenly more aware of where are things coming from? What are the values of the company I'm buying from? What does that say about me and how do I feel about that? And again and again, in those conversations, Etsy sellers stand out. People would rather support Etsy sellers in those moments. I think the lipstick effect is important. In a time when I can't afford the bigger luxuries, maybe I'll -- I can afford a small indulgence, and Etsy is great for small indulgences. And you're seeing us now talk about affordability in a way that we hadn't because we know it matters to buyers. Our sellers do a great job making things that are made just for you, but they also sell them at affordable prices. I think for a long time, we've looked at the benefits of scale, producing things in units of 10,000. But I think we're increasingly seeing that as you produce things in units of 10,000, you've now got to put it on a boat, get it to a port, get it on a train to get it to a warehouse to put it on a van to get it to your doorstep. And actually, someone who just makes it and ships it directly to you, it makes something that means something that works. And by the way, it doesn't have 3 layers of markup between it, with 6 different logistics points along the way. And so actually, you can deliver great value in small scale in a way that means something. And I think that matters to people. So it's interesting, Etsy is only 15 years old. We haven't been around at scale through a recession to tell you, here's how we perform in recession. We're going to find out together. There are reasons to be concerned about consumer discretionary, for sure. But there's a lot of reason actually to be optimistic as well about Etsy, and I continue to be optimistic.

Great. Before we go to the next one, you can definitely ask your questions, and I will get the pop up on the iPad over here. So if you have any questions, please do send them across me. So you talked a bit about the product cadence in terms of search and recommendations about this picture search that you have. How are you thinking of marketing as you get into 2023?

So we've made a lot of progress on brand awareness. Unaided and aided awareness in the U.S. and the U.K. is now much, much higher than it was before. Aided awareness in the U.S. is now around 90%. And if you just walk the street, ask your friends and neighbors, where do you shop online? More and more of them are going to say Etsy. And if you ask them, what do you think of Etsy? They're going to say, oh, I love Etsy. But if you ask people where do you go to shop for home furnishing? Where do you go to shop for jewelry? Where do you go to shop for art? Where do you go to shop for gifts? Etsy is not in the top 10 of any of those, except gifts. Home furnishings is our largest category by far, billions of dollars of home furnishings sold on Etsy. And yet, when you ask people, where do you go to shop for home furnishings? We're not even in the top 10. In fact, by our own internal research, Hobby Lobby came in 10th with 6% of people. I didn't even know Hobby Lobby sold home furnishings, but more people did name Hobby Lobby than Etsy. This is our opportunity. People generically think warm and fuzzy things about Etsy. But in the moment of truth, I need to go buy this thing, we are not top of mind. So attaching Etsy to specific purchase occasions is a big opportunity, and you're seeing us in this TV campaign we're running in Q4, you're starting to see us much more specifically lean into very specific purchase occasions, and that's going to be a theme in 2023 and beyond.

Interesting. One of the other things that the media has at least reported in terms of category-based buying, or category-based selling for you guys, how are you approaching the category-based kind of approach to kind of sell stuff to people?

Yes, it's a great question. So everything we've done at Etsy to date has been horizontal. It's a one-size-fits-all. So we just -- we launched a search update that works to make search better everywhere. We launched a UI update that makes the UI better everywhere. Most of our marketing has been about Etsy and why Etsy is better sort of generically. We are looking at leaning it more into vertical experiences. So if we're going to talk about home furnishings in our TV campaigns, which we plan to, and really say, Etsy is a place you should really think about first, start your search on Etsy for home furnishings. What's the landing expense look like if you come to the home page and do home furnishings? So right now, the taxonomy looks weird, frankly. When you're searching for home furnishings, you're used to searching by living room versus kitchen, right, or mid-century modern versus boho. Etsy is not organized that way because it's a lot of machine learning, figuring out what's going to drive the most convergent kind of in moment. So you'll see us clean up a lot of those experiences and really lean into some more verticalized experiences starting in 2023. How do we really make, for example, home furnishings feel like a more organized and better experience, particularly for newer and less savvy buyers who aren't as good at the sort of Etsy hacks that our more experienced buyers are good at.

It's interesting, you talked about Etsy hacks. A bit ago, you also talked about knowing the Etsy lingo. It's almost as if you have -- let's say, the analogy would be you have a physical store that is sitting 5 miles outside the downtown area. And so people that live in that local area know that, that is there and can shop, but people that live in the downtown are not able to do it because it's too far away. How do you get closer to the consumer?

Well, Fortunately, we are virtual. So everyone is just a mouse click away. But maybe in their brains, we're the store next door for our habitual buyers, and we're a shop in 3 states over for people who are less familiar. And the pandemic caused everyone to need to travel that 3 states over. And in doing that, Etsy became much more mainstream. And -- so where before the pandemic, maybe a few of your friends that maybe have received as little more crafting shopped on Etsy, you weren't as familiar with it, you weren't sure what to make of it. Now it's quite common. You're having dinner with some friends and it's just quite natural to say, yes, I got this on Etsy, right? So we're all encountering Etsy a lot more in our daily life, and we're gaining a lot of trust because more and more people we know and people like us are using Etsy, and it's becoming very mainstream. Our opportunity now is to build on that trust and to cement much more concrete and specific purchase occasions by getting back to that. But I do think we seem to have had a lasting benefit around just brand familiarity, brand trusted being more for kind of people like me. I mean in 1999, some friends and I launched Evite, and when we launched Evite in 1999, it was really a techy thing to do to get an invitation by e-mail, and not everyone had e-mail, was this weird techy thing. A few people in the room may be as old as me and will kind of remember those days. And so Evite was really mail, like connector-type people. And it took years for that to become a mainstream experience where we take it for granted that we're going to get invited to events through kind of online event. I feel like it's the Etsy's prospect chasm in the course of the pandemic. And so now it's become much more familiar and much more trusted. And I think that's -- we're working hard to make sure we take full advantage of that in this moment.

Great. And then while we are on the subject of marketing, new buyers, that has remained extremely robust even after you lapped 1Q '21. Where are the new buyers coming from? And is the cohort of new buyers for '22 kind of different from the previous cohorts that you've had?

Great question. So we -- there's no question, we had a massive pull forward of buyers during the pandemic. So there's been a big question of what's that going to mean in terms of our go-forward growth rates? I'm delighted to say, last quarter, we acquired 50% more new buyers than we did during the same quarter prepandemic. So somehow, about 5 million people lasted through the whole of the pandemic without ever shopping on Etsy, only to wake up last quarter and decide now is the time to go shop at Etsy, right? And so it is still the case that a very, very large number of people in the U.S. and U.K. have never shopped on Etsy. Because when we talk about new buyer, by the way, we mean truly new to Etsy. If you shop at Etsy a decade ago, and you come back and shop on Etsy again today, we don't count you as new. We count you as reactivated. You lapsed. You lapsed and now you're back. Bless you. So these are truly new to Etsy as far as we know. And we're seeing that the cohorts look quite similar to prepandemic. There are some -- there are slightly more male, and they're slightly less active. So we are penetrating deeper segments of the population than we were before. But Etsy was never particularly [ helpful ]. So these are changes on the margins, not massive changes. We have had a very strong female skew, and we're realizing now that some of that is probably a self-perpetuating cycle. Like inside of Etsy, we exclusively use the female pronoun when I'm talking about our customers, buyers and sellers, because historically, they've been over like 85% to 90% women, both sides. So we just haven't thought about male buyers. And we started looking at the data and say, well, we do have millions of male buyers, and we have great purchase occasions for them. So now you're starting to see us market in the NFL, and we're seeing that work. And so simply talking -- speaking to different communities has been important for us. As I said -- well, I don't know if I said, 30% of women in the U.S. shopped on Etsy in the last 365 days, that means 70% didn't. And if we're good enough to serve 30% of the population, you'd think we have a lot to offer for the next 70%. 10% of men, only 10% of men in the U.S. shopped on Etsy in last 365 days. We have a lot to offer to that other 90%. And that's before we talk about the rest of Western Europe. We've made great progress in the U.S. and the U.K. In the U.K., Etsy is now a top 5 e-commerce site. We're seeing great strength in Germany. Germany, our German business is 3x bigger than it was prepandemic. Off a smaller base, but 3x bigger. We're now a top 10 e-commerce site in Germany, not yet top 5. And our growth is quite robust in Germany, especially relative to war on their near border, all of the challenges that the German market is facing, we're quite pleased at how well we're doing there. And so there's a lot of the world left to address, and we're excited to go after that and invest for that.

Interesting you bring up Germany. I mean Europe has been particularly weak recently, at least as far as retail sales is concerned, and more so in Germany. So what are the buyers in Germany really buying?

Home furnishings is popular in Germany. The category mix in Germany is not that different than the U.S. We -- starting from a lower base, we have more opportunity to grow there. Germany is a wonderful e-commerce market. Payments works well. The postal service works well. It's a high trust society. And Etsy offers something truly different. And I just think the German consumer base is just now sort of starting to wake up to the fact that you can buy a lot of really great things at really good prices. And the affordability thing, we'll come back to again, they are made just for you, they're designed just for your space. You have relationship with the seller. You're supporting a small business in hard times. You care even more about where your money goes and who you're supporting with that money. I think we're all even more aware of that. And it's at a price you can afford.

Interesting. Again, sticking with the marketing theme. One of the new things that you've started talking about is demand generation in India. And India, of course, is a big market. Yet, in India, you have a plethora of handcraft sellers. Practically every other market, every other pavement has sellers that are coming from one village or the other. How do you approach that kind of a market, which already has enough?

Yes. So first, I'd say that marketplaces, it's been my experience that Western Europe and North America make a common market with a relatively free flow of goods. And we see that, lots of cross-border trade that works quite well. That breaks down when you go to South America, when you go to Asia. Much less common to see a really good 2-way market. So we began investing in India because what we saw is we do have exporters. We have artisans in India who sell things on the Etsy marketplace. And we saw that when people buy things from Indian sellers, the lifetime value of the buyer goes up disproportionately. And in hindsight, maybe not a surprise, India has a wonderful history of craft and artisanship. They make great products. They do with care and they sell it at a good price. And lots of other people appreciate that. So we started to invest in bringing Indian sellers onto the marketplace several years with an eye towards export. And we've done that with care because you want to know that you're talking about a real seller who makes things in a good way and not factory that got inhumane practices. We care a lot about that. So we've had feet on the street with ability to go in to learn the Indian market and get invested in the Indian market, and we've seen great gains. We did start to hear signs of demand from the Indian market where people in India also appreciate craftsmanship and artisanship and going to your local off-line marketplace, more and more people are coming online. And so in the past year, we've invested in having our payments system support the rupee, now starting to have domestic payments, which is its own lift, as you may be aware of in the Indian market. Getting Indian shipping providers on and sort of putting the infrastructure in place to start to allow for domestic trade in India. We want to invest in India for the long run, and that means sustainably invest, not go and spend hundreds of millions of dollars in a year or 2 and think we're going to suddenly build a huge business. I've seen that fall over under the weight of it. So how do we invest in a thoughtful plan and sustainable way for the long term in that market, so we can build the business more organically. And we're excited to do that. We have a wonderful team, by the way, in India, such talented people, and I'm really excited to see where that market can go.

Great. One of the questions we get from investors, and this is away from marketing and more to numbers, is how high can your take rates go, given you don't do fulfillment? So how should we think of like take rates maybe in the medium term and then longer term?

I think the gating factor on take rates, first, how much value are we offering? We are always thoughtful about the fact that our take rate needs to go hand-in-hand with value delivered to our sellers. We've got to earn it. So we did a take rate increase in the beginning of this year. And we told our sellers we're going to reinvest this back in you and your growth, and we did. We invested in marketing. We invested in better product, better customer support. The result is, I think that's a meaningful part of why their growth has stayed so stable in such a difficult macro environment as we were able to invest more in marketing. We're able to give even better service. Our product investment, we've been able to scale our team. So they are seeing value from that. And as a result, you've seen our seller metrics stay quite sticky. You're seeing great buyer growth, which is ultimately what our sellers care about. So tying our pricing to our value is always the bedrock. The other thing we've got to be thoughtful about ultimately is our sellers' gross margin. Are they able to run a business in a way that makes sense for them, where the return on time as well as the return on money is really valuable. And so we're always thoughtful about that. You'll notice when you look at our take rate that some of it are mandatory fees, but a lot of it are opt-in services, things like Etsy ads that our sellers opt into, and that's driven a lot of our take rate expansion in the last few years is these value-added services our sellers opt into. As fast as GMS has grown, and it's grown very fast, Etsy Ads has grown even faster. And I continue to think there's a great runway for growth in these value-added services.

Yes. In fact, advertising, that is retail media has been really hot over the past 1.5 years, 2 years. And so how much -- so when you think of like growth in retail media dollars coming in from your sellers, is the opportunity more in terms of like adding more sellers to the base that is advertising? Or is the opportunity more in like increasing the spend per seller?

So on the Etsy Ads product, most of the sellers that are established enough on the Etsy marketplace to be advertising have opted into the Etsy Ads program. So adding more sellers is probably not where the gains are going to come. Most of the gains are better algorithm to match the right ads to the right buyer. And that's where a lot of the gains have been, and that's where I think a lot of the gains are going to continue to come from. There's so much science around that. It's very similar to the search problem. We've got 10,000 relevant ads, and we have room to show 8, which are the 8 out of these 10,000? And just getting better at personalization, getting better at relevance, all of these things are driving better ROAS for our sellers, which allows everyone to win. By the way, it's also a better buyer experience. So better algorithms is a lot of it. There is an opportunity to have our sellers raise their budget. So on average, we have a lot more budget in Etsy Ads than we can spend. But it's not evenly distributed. So there are some sellers who are giving us $10 a day of budget, and we can only spend $1 for them. But there are plenty of sellers that are giving us $1 a day of budget, and we could spend $10 at a good ROAS. So giving confidence to the sellers who should be raising their budgets, why they should be reaching their budget is a meaningful opportunity for us.

Great. And while we are talking numbers, this is a question from the audience. As we lap reopening headwinds, how do we think about normalized top line growth over the medium term?

So we gave long-term or medium-term guidance back in 2018. We haven't reiterated that guidance, and we're not going to give long-term guidance in this meeting. But I do think we've all been wondering how much of the reopening tailwinds that we've faced will stay. And in this most recent earnings call, we showed that we've now had 5 months of stability on a year-over-3-year basis. That gives me increasing confidence that the reopening headwinds, maybe we fully experienced those. And it's sort of increasing confidence that maybe this is a new normal. I will remind people, as you think about our growth that, that means that as we move through Q2 of next year is when we will have put the tough comps from the pandemic in the past. And I'm sick of talking about tough comps, you're sick of hearing about tough comps. And I think we're not that far from a point where we can stop talking about pandemic comps. So that's really encouraging. What's going to happen with the macro, lots of talk of recession and whatnot, who knows? So we're not planning on giving long-term guidance right now. What I would say is that I do believe that we are at the early stages of unpacking the opportunity for Etsy. Most people who should be shopping on Etsy still are not shopping on Etsy. Most people who shop on it, they are not shopping nearly as often as they should be shopping on Etsy. And I think we offer something truly different than what's out there. It's relevant very, very often, and it's better very, very often. And we've been saying for a long time, and I think we're starting to finally see it, the world is consolidating around fewer and fewer places to shop. So all the talk of everyone's going to have their own website, we're going to have millions of websites out there, millions of e-commerce places, it doesn't make any sense to me that there's going to be 1 million places to buy things online, or 100,000 or 10,000 places to buy things online. Why? Because we can't remember that many brands. So most of them are going to have to go to Google, and if you're downstream of Google or Facebook, all the rents go to them, right? The brands that are going to last are the ones that are important enough, often enough and different enough for you to actually remember them and come to them organically. There can only be a handful of those. Amazon almost certainly is going to be one. Maybe there's room for a few Amazon lookalikes, but there's got to be an alternative to Amazon, right? I'm not saying you're not going to shop on Amazon, you're just going to want not Amazon, a lot of the time. And if we're the first place you speak as the first alternative to Amazon, that is a huge opportunity for Etsy.

Interesting. One of the things that came out, at least over the last couple of quarters is, when we look at the absolute number of your habitual buyers and the repeat buyers, that number has also been declining. And the thing is, one would expect that these are the guys that can talk Etsy lingo. They understand exactly what to search for and how to search for. Why is that number kind of declining?

It ticks down a tiny bit. I mean not by millions, by hundreds of thousands, I don't remember. It's a small amount. I guess I would say that we're coming through a period where people had very, very few alternatives and had to avail themselves of Etsy because they had very few alternatives. In light of the fact that in a short amount of time, it feels like the whole world reopened and suddenly, people have every alternative again, the fact that virtually all of those people are staying with us and staying habitual with us, the vast majority of them are, I think, is great cause for optimism.

Great. And then one thing, again, that we keep getting questions on is Depop, so what's happening there? So what is the -- how are you measuring the turnaround there? What is the time line that we can kind of hold you to in terms of maybe be in a better state kind of thing?

Yes. So just to remind folks, we bought Depop because we think, first, it's the choice for Gen Z in recommerce. And we think recommerce is an important space, and we think Gen Z is an incredibly important demographic. Their business model is just like Etsy and that it's very capital light. It's purely peer-to-peer marketplace, and we like peer-to-peer marketplace. And a lot of the dynamics of managing that market look a lot like Etsy. We took a very significant write-down last quarter. That's not something we take lightly. We love the business. We bought it, I think, at the wrong time, and we paid too high a price. It has experienced much more significant reopening headwinds than we did. The reopening headwinds Depop has faced are much more like most of e-commerce has faced. Etsy has, I think, held its gains better than most. That hasn't been as true of Depop. And teenagers who were locked in their apartment bought a lot online, and when you let them free, some of them want to go back to the mall in the near term. That's not that surprising. But over the medium term, we continue to think recommerce is an important trend. It's going to be much bigger in Gen Z. It's going to come from a lot of the spend of people. So we think that's important. So we continue to really like Depop and really like the space. We put in a new CEO, a new Chief Product Officer and a new head of engineering. Those are all folks who are long time Etsy alums who have been core part of the turnaround you've seen at Etsy. And the same kind of product discipline we brought at Etsy around focusing on the fewest things that are going to unlock the most growth, that mentality, that urgency, they're bringing. How do we optimize marketing spend or the return on last marginal dollar with like fanatic discipline, we're bringing that to the marketplace. So I think there's a lot of best practices from Etsy, we've injected some great and senior talent there. And we want to see that business growing and growing faster than Etsy and doing it sooner, the better.

Great. One last one. And you -- on the last call, you talked about getting back to growth next year. And yes, you have easier comps, and you are, of course, tired of talking about lapping COVID. So what gets you optimistic about '23?

So I think easier comp is not easy, but I am optimistic about 2023 in spite of all the macro. When I look at how we've been performing year-to-date, there's lots of reasons to be concerned about how Etsy might do with discretionary spend, reopening and all the other things. I think our performance year-to-date has been pretty strong. And I look at how we're doing in Germany, where that's a market that's facing a lot of challenges, and yet, doing quite well there, all things considered. So what gives me optimism is that I think we genuinely do something different, and I think it's something you're going to -- people are going to want more and more. I think people are becoming more conscious about where they spend, what they buy, what value they're getting for money, what relationships they have in life. All this conversation about friend-shoring, I think that stuff matters. And I think Etsy is on the right side of -- by the way, we've always cared a lot about our environmental footprint. And I think that's going to matter more and more. We've always cared about diversity and inclusion in our marketplace, and we've been -- put up some very public targets, and we report a lot on that. I think that's going to matter more and more. So I think we're on the right side of a lot of issues with over the medium term, I think, are going to serve us well.

Great. I think we are way over time. Thank you so much Josh, this was very helpful.

Thank you. I appreciate it. Thanks, everyone.