E-commerce giant Etsy has made the difficult decision to lay off 11% of its workforce, affecting approximately 225 employees. The company aims to restructure its business and streamline costs in response to a “very challenging” macro and competitive environment. Etsy CEO Josh Silverman emphasized the need for substantial changes to navigate the current realities.
Etsy’s marketplace, well-known for its platform of handmade items and connection between buyers and local artisans worldwide, has experienced significant growth since 2019, more than doubling in size. However, despite this growth, gross merchandise sales have remained relatively stagnant since 2021. This lack of sales growth has prompted the company to reassess its strategies and make necessary adjustments.
In conjunction with the layoffs, Etsy provided updated fourth-quarter guidance. The company now expects a decline in gross merchandise sales by 1% to 2% compared to the same period last year. However, revenue is projected to increase by 2% to 3%. Additionally, Etsy adjusted its EBITDA margin guidance to be between 27% and 28%, up from the previous range of 26% to 27%.
Following the announcement, Etsy’s stock experienced a 2% decrease in value, with earlier drops of up to 7%. Etsy CEO Josh Silverman stated that the company remains focused on reigniting growth, increasing sales for its nearly 7 million sellers, and delivering value to all stakeholders. The decision to reorganize their internal structure will allow Etsy to prioritize these efforts, although it comes at the unfortunate expense of approximately 225 employees.
The layoffs will incur costs between $25 million and $30 million, primarily allocated to severance payments, employee benefits, and related expenses. However, the company anticipates that the restructuring will eventually result in significant operational efficiencies and cost savings, particularly in terms of salary expenses and benefits. The restructuring process is slated to conclude by the end of the first quarter of 2024.
As part of the restructuring effort, Etsy’s Chief Marketing Officer, Ryan Scott, will be leaving the company. His role will be consolidated under the Chief Operating Officer position, currently held by Raina Moskowitz, a former executive of American Express. Additionally, Chief Human Resources Officer Kimaria Seymour will depart, with Toni Thompson, Etsy’s current Vice President of Global People and Talent Strategy, taking over the role.
Acknowledging the challenging timing of the layoffs during the holiday season when many employees are typically shopping for gifts, Etsy intends to provide continued support to affected staff. Even though most employees’ last working day will be Wednesday, the company has committed to pay them through at least January 2. Moreover, the affected employees will receive severance pay equal to 16 weeks of base pay, along with additional benefits such as extended COBRA health insurance coverage and the option to retain their company laptops.
Etsy’s decision to restructure and streamline operations is not unique within the industry. Toymaker Hasbro recently announced the layoff of 1,100 employees due to soft sales, an issue also impacting the crucial holiday shopping season. The layoffs at Hasbro, a company with around 6,300 employees, highlight the broader economic challenges faced by companies operating in the current market environment.
Etsy’s announcement of layoffs amid challenging market conditions signifies the company’s commitment to adapt and overcome the obstacles it faces. By implementing changes and streamlining operations, Etsy aims to position itself for future growth while keeping a focus on delivering value to its sellers and stakeholders.
Leave a Reply