Etsy reveals plans to lay off 11% of its workforce, aiming to reshape its operations and cut costs in response to a "very challenging" macro and competitive environment.
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NEW YORK, NEW YORK - DECEMBER 13: The Etsy company logo is seen at it's NYC headquarters building on December 13, 2023 in New York City.
Facing Challenging Macro, Competitive Environment
In a strategic move during the bustling holiday season, Etsy has decided to implement a workforce reduction. This decision is part of a broader initiative aimed at restructuring the e-commerce giant's business model and optimizing operational costs.
CNBC reported that this targets 11% of its employees, a response to what Etsy describes as a "very challenging" macro and competitive environment. Approximately 225 positions are slated to be cut from Etsy's workforce, bringing the headcount for the core Etsy marketplace to around 1,770 individuals.
This adjustment aligns with the company's headcount figures from early 2022, surpassing the levels recorded in 2020. Etsy's Chief Executive Officer Josh Silverman conveyed this decision to employees in a letter, highlighting the substantial growth the Etsy marketplace has experienced since 2019.
Despite the significant expansion, Silverman underscores the current realities of the business landscape, deeming sweeping changes necessary for Etsy to navigate the challenges and uncertainties it faces.
Strategic Response to Evolving Market Dynamics
In light of a persistently challenging macro and competitive landscape, The Guardian reported that Etsy has addressed its flat gross merchandise sales since 2021 in a recent letter to employees.
The move appears to be a strategic response to evolving market dynamics, allowing Etsy to adapt and position itself effectively in the ever-changing e-commerce ecosystem.
The letter emphasizes the crucial need to enhance sales for sellers, stating that the current trajectory, marked by stagnant sales and rising employee expenses, is unsustainable, necessitating a shift.
Simultaneously, Etsy updates its fourth-quarter guidance, anticipating a 1% to 2% decline in gross merchandise sales compared to the year-ago quarter.
However, revenue is projected to increase between 2% and 3%, with an adjusted EBITDA margin expected to be between 27% and 28%, surpassing the earlier guidance of 26% to 27%.
In response to these changes, Silverman expressed the company's intense focus on reigniting growth, boosting sales for its extensive network of nearly 7 million sellers globally, and delivering value to stakeholders.
The restructuring is positioned as a strategic move to prioritize and intensify efforts toward these goals. The cost of Etsy's layoffs is estimated to be between $25 million and $30 million, with a significant portion allocated for severance payments, employee benefits, and related expenses.
The restructuring aims to bring about substantial operational efficiencies and cost savings, particularly in salary costs and benefits. The company anticipates completing the restructuring by the end of the first quarter of 2024.
Also Read: A Beginner's Guide to Selling on Etsy
As part of the restructuring, Etsy's Chief Marketing Officer, Ryan Scott, will be departing from the company. His role will be consolidated under the Chief Operating Officer, currently held by Raina Moskowitz, a former executive from American Express.
Reuters reported that Etsy's decision to lay off employees follows closely on the heels of Hasbro's announcement of cutting 1,100 employees, prompted by sluggish sales extending into the critical holiday shopping season. Hasbro's workforce stood at around 6,300 employees earlier this year.
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