Etsy will invest $25M each year for new purchase protection policy - The Entrepreneurial Way with A.I.


Monday, June 6, 2022

Etsy will invest $25M each year for new purchase protection policy


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Dive Brief:

  • As of August 1, under a new Etsy Purchase Protection policy, Etsy customers can receive a full refund when they buy an item that doesn't match the description, is damaged or never arrives.

  • The marketplace company will invest at least $25 million annually “to cover refunds on behalf of sellers for qualifying orders up to $250,” in situations outside their control, according to a company press release.

  • Meanwhile, a group of sellers who held a strike in April announced its registration as a nonprofit via Twitter. The Indie Sellers Guild “will fill the role a union would fill in a traditional workplace,” per a blog post. An Etsy spokesperson said by phone that the group's goals align with the company's existing efforts, including the purchase protection just announced.

Dive Insight:

Etsy is facing a crunch, as e-commerce wanes while shoppers return to stores and inflation dampens discretionary purchases.

One way to coax buyers would be to elevate their trust in their purchases, given that three in five Etsy shoppers "are unsure we would have their back if something goes wrong with their transaction," CEO Josh Silverman told analysts last month. "Similarly, sellers worry about times when something goes wrong through no fault of their own. And we want them to know that we'll support them."

"We have enormous conviction that making Etsy a more trusted and reliable place to shop can be a big growth unlock," he said, according to a Seeking Alpha transcript.

The program could benefit gross margin in the mid-to-long term but is set to squeeze margins in the short term, UBS analysts led by Kunal Madhukar said in a June 2 client note. 

Continued macro uncertainty, Etsy's "skew towards consumer discretionary products" and its niche status are pressures in the short term, "although we expect growth could accelerate into the mid-to-high teens in 2023," UBS also warned.


Daphne Howland, Khareem Sudlow