Etsy Announces Major Layoffs, Leading to a 7% Fall in Shares

Etsy, the celebrated e-commerce platform known for selling handmade items, recently announced a significant restructuring of its operations. Amid a challenging economic and competitive landscape, Etsy is implementing cost-cutting measures at the peak of the holiday season involving laying off 11% of its workforce, which equates to approximately 225 employees. The remaining headcount for the Etsy marketplace will stand nearly at 1,770, mirroring figures from early 2022 and surpassing 2020 levels.

With the marketplace expanding by more than double since 2019, Etsy’s CEO Josh Silverman highlighted that the pressing realities of today necessitate major changes. The company has created an international platform that allows buyers to connect with local artisans, significantly contributing to its growth.

Along with the downsizing announcement, Etsy revised its guidance for the fourth quarter. The company now anticipates a slight decline in gross merchandise sales (1%-2%) from the year-ago quarter but expects an increase in revenue between 2% and 3%. The adjusted EBITDA margin is also projected to rise from 27% to 28%, an increase from the previous guidance of 26% to 27%. However, the company’s stock fell by 7% in the wake of this announcement.

Etsy’s decision to let go a portion of its workforce follows a similar move by toymaker Hasbro, which is grappling with subdued sales continuing into the holiday shopping season. The company laid off 1,100 employees from its total of approximately 6,300.

“We are operating in a very challenging macro and competitive environment, and [gross merchandise sales] has remained essentially flat since 2021. This means we are not bringing our sellers more sales, which is the single most important thing we can do for them. At the same time, employee expenses have grown, even as we have introduced significant cost-cutting measures and adjusted or paused hiring plans. This is ultimately not a sustainable trajectory and we must change it.”

Josh Silverman, Etsy CEO, via CNBC 

The cost of Etsy’s layoffs is estimated to fall between $25 million and $30 million. This primary expenditure will go toward severance payments, employee benefits, and other related costs. Through its restructuring, Etsy aims to achieve greater operational efficiencies, cost savings, and cost avoidance, particularly concerning salary costs and benefits. The company plans to finalize the restructuring process by the end of the first quarter of 2024.

As part of the changes, Chief Marketing Officer Ryan Scott will be departing from the company. His responsibilities will be absorbed by the current Chief Operating Officer Raina Moskowitz, a former American Express executive. Simultaneously, Chief Human Resources Officer Kimaria Seymour will be leaving her role, with the baton passed on to Toni Thompson, the company’s incumbent vice president of global people and talent strategy.

In light of the layoffs coming during the holiday season, Etsy has planned arrangements to ease the impact on affected employees. They will continue to be paid through at least Jan. 2, even though the last working day for most will be the preceding Wednesday. Additionally, they’ll receive 16 weeks of base pay as severance, plus one week for each full year of service. Further benefits include extended COBRA health insurance and the opportunity to keep their company laptop.