In a strategic move to combat the impact of declining demand for handcrafted goods, Etsy Inc. has announced a significant workforce reduction, leading to a dip in its share prices. The e-commerce platform revealed plans to cut 11% of its workforce, amounting to 225 employees, as part of a broader cost-cutting initiative.
The company disclosed in regulatory filings that it anticipates incurring financial charges ranging between $25 million and $30 million for severance payments, employee benefits, and related costs associated with the downsizing. Etsy’s decision to streamline its workforce reduction is a response to the challenges posed by a weakening demand for handcrafted items, coupled with a “very challenging” macro and competitive environment, according to a company statement.
Etsy Workforce Reduction: Not bringing our sellers more sales
This restructuring effort will result in organizational changes and the departure of several executives, including Chief Marketing Officer Ryan Scott. Following the layoffs, Etsy’s total headcount is expected to decrease to 1,770 people, reflecting a 32% workforce reduction in its workforce year-to-date.
Etsy CEO Josh Silverman addressed employees in a letter, acknowledging the substantial growth the platform has experienced since 2019 but emphasizing the need for adjustments in light of the current market realities. “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,” Silverman stated.
Despite the significant cutbacks, Etsy remains optimistic about its prospects. The company has outlined its updated fourth-quarter guidance, expecting a decline in gross merchandise sales between 1% and 2%, while anticipating revenue to increase between 2% and 3%. Etsy’s adjusted EBITDA margin is also expected to improve, ranging between 27% and 28%.
More sustainable trajectory in the competitive e-commerce landscape
The move by Etsy echoes broader market trends, as companies across various sectors grapple with challenges presented by the current economic landscape. The layoffs at Etsy come on the heels of a similar announcement from toymaker Hasbro, which recently revealed plans to cut 1,100 employees amid soft sales during the crucial holiday shopping season.
While Etsy’s shares initially experienced a notable decline, closing 2% lower following the announcement, the company remains committed to reigniting growth and delivering value to its stakeholders. The cost of the restructuring is expected to be offset over time by operational efficiencies and meaningful cost savings in salary and benefits, positioning Etsy for a more sustainable trajectory in the competitive e-commerce landscape.
