Exclusive: Etsy Is Reorganizing Its Workforce, Which Includes More Layoffs

Jun 21, 2017

Etsy is reorganizing behind-the-scenes, which includes another reduction of 15% to its global workforce.

The Brooklyn, N.Y.-based business counted approximately 1,000 employees at the end of 2016, and had previously announced a headcount reduction earlier this year. All in all, Etsy's workforce will be cut by 22% this year, or approximately 230 people. Cuts were made across the organization with the intention of streamlining middle management and senior levels, according to Etsy. Many of reductions affected product management, marketing, and administrative roles.

Etsy's new CEO Josh Silverman tells Fortune exclusively that these changes are about realigning resources around the "fewest, most impactful areas where we need to succeed" with a cleaner organizational structure, less bureaucracy, and more focus on growth. "While there are often talented people in those roles, it slows us down," Silverman says.

Etsy said it expects to incur employee severance charges and other exit costs of between $6 million and $8.8 million related to the latest round of layoffs on top of the $6.5 million to $8 million of severance charges and other charges expected for the reductions announced in May.

While Silverman acknowledges that there will be long-term cost savings as a result of the headcount reduction, he stresses that wasn't the objective. "This puts us at our fighting weight," he says.

Etsy is enduring a tumultuous period, and shares have fallen off by as much as 30% since its initial public offering two years ago. For the first quarter of 2017, the marketplace reported a loss of $421,000 after earning $1.2 million a year ago. One of its shareholders—Black-and-White Capital, which owns 2% of the company—then called for Etsy to explore a sale as well as separate the roles of chairman and CEO.

Black-and-White, according to Reuters at the time, said growth in Etsy's gross merchandise sales (a.k.a. GMS, or the dollar value of items sold in its online marketplace) had slowed due to problems with its search algorithm.

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Chad Dickerson quickly stepped down as Etsy's CEO, succeeded by board member Silverman. Fred Wilson, a director on Etsy's board since 2007, assumed the chairmanship.

In his first interview since assuming the top job five weeks ago, Silverman tells Fortune that the restructuring is about doubling down around areas focused on creating the best buying experience on Etsy.com.

Etsy counted approximately 1.8 million active sellers and 29.7 million active buyers as of March 31, 2017—up from 1.6 million sellers and 25 million buyers the same quarter the year prior. Etsy is also seeing incremental but noticeable GMS growth both on mobile and internationally. Mobile GMS climbed to 51% of sales in Q1 2017 year-over-year, and international GMS grew from 30.3% to 32.1% over the same timeframe.

"We're doubling down on core international markets, where we're still in the early stages of our market opportunity," Silverman says. Etsy's biggest markets outside of the United States include the United Kingdom, Canada, Australia, France, and Germany. Most of the aforementioned layoffs concern the Brooklyn headquarters, but Etsy's global offices will be affected as well. As Silverman explains, many product and marketing opportunities can be done from centralized offices, so Etsy is reducing the number of "feet on the street doing primarily guerrilla marketing."

As with every company these days—tech or not—mobile is a key part of the long-term strategy, and Etsy is no different. "We need to meet our buyers where they are. Where they are is increasingly mobile," Silverman says. "We didn't make a mobile organization separately because mobile is the organization."

One recent project that might serve as an example of a distraction from Etsy's core mission: Etsy Studio, a new wing of the digital marketplace introduced this past February, catering to craft suppliers and Do-It-Yourself (DIY) practitioners. The project aimed to woo customers into staying around longer through its own DIY tutorials developed in-house while enticing them to buy the products on the same page as the lesson.

Etsy stressed this market's value when Studio debuted, highlighting the craft supply market is worth approximately $44 billion in the U.S. alone, according to a 2016 study from the Association of Creative Industries.

"I think the craft marketplace is a great marketplace for us," Silverman says. "But the investment to create a new top-level domain is very significant, and we've only begun just to tap the core Etsy.com market. So we reallocated resources back to Etsy.com so it can achieve full potential."

But it's not the end of Etsy Studio or similar projects as Silverman says the company will reevaluate over the next several months if separate branches like Studio contribute to the brand.

"We think the opportunity ahead is tremendous. It's even more vital today than before," Silverman says. "Automation is impacting every part of our society, but creativity cannot be automated."

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