SWOT analysis is a critical tool that facilitates businesses in understanding their strengths and weaknesses and also determines the opportunities in their marketplaces so as to take advantage of those opportunities and at the same time use the company’s strengths to overcome whatever threats that they are facing the company.
For example, Etsy is an American-based online marketplace that acts as an intermediary between artists and customers, between collectors of vintage products and crafters of handmade items and buyers.
Etsy – At a Glance
| Name | Etsy, Inc. |
| Website | www.etsy.com |
| Founders | Rob Kalin, Haim Schoppik, Jared Tarbell |
| Chief Executive Officer (C.E.O.) | Josh Silverman (3 May 2017–) |
| Headquarters | Brooklyn, New York, United States |
| Type of Corporation | Public |
| Year Founded | 18 June 2005, Brooklyn, New York, United States |
| Revenues (2019) | $1.7 Billion |
| Key Products/Services | handmade or vintage items and craft supplies like jewelry, bags, clothing, home décor and furniture, toys, art, as well as craft supplies and tools |
| Key Competitors | aftcra, ArtFire, Big Cartel, Storenvy, and Shopify |
Etsy’s Strengths
High Customer Satisfaction
According to Sitejabber.com, Etsy has a 3.5/5 stars rating indicating that the majority of the customers are generally satisfied. The company has a 3.9/5 stars rating out of 2,319 votes on consumeraffairs.com; however, it has 4.6/5 stars rating out of 85 reviews on bestcompany.com. in a bid to enhance the company’s customer satisfaction, the company has created an improved propriety search function that allows customers to find whatever they are looking for more easily.
In addition, the brand has allowed sellers to use videos in their product listings to showcase how items are made and how they can be used. The company also introduced a ‘star seller’ section to encourage faster response and speedy shipping times of up to 95%. This will ensure more insights into customer experiences.
Growth in Customer Base
The company’s customer base grew from 9.32 million active buyers in 2012 to 81.9 million active users in 2020. The highest growth was experienced between 2019 and 2020, where the company experienced an almost double growth from 46.35 million active users to 81.9 million active users. Growth in active users is indicative of growth in revenues and in gross merchandise volume.
By the second quarter of 2021, the company recorded a 67% increase in year-over-year growth inactive users. This growth is also a strength as it ensures more growth due to networking among existing active users, reducing costs of acquisition of new active users of the platform. As Etsy’s network of active users grows, so will the network effects grow.
Stronger Dealer Base
Etsy is keen on strengthening its relationships with its dealers; it seeks to help the dealers grow their levels of service to ensure more sales. For instance, Etsy launched in 2020 offline ads for sellers where Etsy pays the upfront advertisement fees, and the seller will only be charged a small fee when a visitor clicks on the offsite ad and makes a purchase at the particular seller’s shop.
It is built on loyalty and great services. The company does not just provide its dealers with products; it helps the dealers to promote their products; it helps to build a mutually beneficial relationship and as well create strong dealer relationships.
Strong e-commerce Presence
Etsy is primarily an online commerce platform and has strongly integrated social features like user-profiles and collections into its website. It has also integrated seller storefronts as well as the ability to other social networks. The site is simple but with powerful tools to use and designed for non-techie users.
Reliable Suppliers
Etsy curates a reliable supplier network. It is from this reliable supplier base that the company is able to give the safest and secure commerce experience. The supply base is characterized by well-trained and highly qualified professionals who enhance safety for the company and its products. The company also charges a small entry fee of $0.20 for every supplier as a commitment to credibility and integrity.
Growth in Financial Strength
Etsy has reported a 144.1% growth in its revenues year-over-year and a 132.3% year-over-year GM growth. The first quarter of 2021 ended with $1.7 billion in cash, cash equivalents, and short-term investments.
In 2020 and into 2021, the world has noticed the brand’s highly differentiated value preposition. The company has thereby experienced a growing momentum in investments that are projected to continue into the coming years. As a result, earnings grew by 211% over the year ending August 2021, and its share price went up by 150% in 2020.
Strong Distribution Network
Etsy as a company has outlets spread across the US, and UK among other locations. Reliable supply chains support these outlets to help avail the right products at the right time for the consumers. A strong distribution network is critical in supporting a reduction in opportunity costs, holding costs, and ordering costs, among others. This, in the end, goes to increase profitability.
Strong Product
Etsy, as a marketplace, is known for handmade and vintage products. These unique items, coupled with best-in-class tools for search and discovery, a trusted brand, and a huge number of traffic on the site, make the whole experience of shopping at Etsy worthwhile.
Etsy’s Weaknesses
Low Barriers to Entry
The company operates in an industry that has low barriers to entry. While the company was an early entrant into the industry, there is a need for a more concerted effort in addition to network effects and initial investment in technologies to raise the barriers to entry which will help protect the company’s market share.
Gaps in Customer Experience
Etsy has an average score of around 3 stars. While the average score is above average, the company needs to scale up its customer experience to reduce any unpleasant experiences that will send its active users to competitors in search of a better experience. There is room for growth upwards to 5 stars.
Etsy’s Opportunities
Technology
Technology continues to offer huge unexplored opportunities to enhance Etsy’s growth strategy. The technology is critical in the innovation of unique products, enhancing both seller’s and buyer’s experiences online and in giving the company a competitive edge.
Growth in Talent and Unique Products
The human capital needed for the creation of unique products is huge and inexhaustible. Etsy needs to invest more in attracting top talent and acquisition of more unique products for its marketplace.
Etsy’s Threats
Fierce Competition
The world on online marketplaces has fierce competition and given the industry faces low barriers to entry, Etsy needs to have a formidable strategy that will help the company defend its market share. The company will need to continuously invest in technology, customer experience, employee experience, advertising, marketing, and marketplace oversight.
Irregular Supply of Vintage and Unique Products
While this is the core function of Etsy, the continuous and regular supply of unique and vintage products often cannot be guaranteed.
Conclusion
Etsy has had great achievements in the recent past that have reflected positively in their financials and wealth creation for investors. However, this only calls for more efforts in the acquisition of more unique products, raising barriers to entry, and locking inactive users of the platform to help protect the brand’s market share.
