ETSY INC Management's Discussion and Analysis of Financial Condition and Resultsof Operations. (form 10-Q)
ETSY
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q ("Quarterly Report") and with the audited consolidated financial statements included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on February 26, 2021 (the "Annual Report"). This discussion, particularly information with respect to our outlook, key trends and uncertainties, our plans and strategy for our business, and our performance and future success, includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in Part II, Item 1A, "Risk Factors." For more information regarding key factors affecting our performance, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Key Factors Affecting our Performance" in our Annual Report, which we incorporate by reference.
Business
We are focused on attracting potential buyers to the Etsy marketplace for everyday items that have meaning and those "special" purchase occasions that happen throughout the year. We are focused on deepening our engagement with our existing buyers by inspiring purchases across our many retail categories and special occasions. Purchases for use in the everyday include handmade or vintage clothing, accessories, household items, or furniture that the buyer wants to reflect her sense of style. Special purchase occasions can occur many times throughout the year and include shopping for occasions that reflects an individual's unique style; gifting that demonstrates thought and care; and celebrations that express creativity and fun. Buyers tell us that they come to Etsy.com because Etsy sellers offer items that they can't find anywhere else.
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Our revenue is diversified, generated from a mix of marketplace activities and other optional services we provide to sellers. Marketplace revenue is comprised of the fees a seller pays us for marketplace activities. Marketplace activities primarily include listing an item for sale; completing transactions between a buyer and a seller, which includes, beginning in the second quarter of 2020, an additional transaction fee related to offsite advertising; and using our payments services to process payments, including foreign currency transactions. Etsy.com fees include the $0.20 listing fee for each item listed (for up to four months); the 5% transaction fee that an Etsy seller pays for each completed transaction, inclusive of shipping fees charged; where applicable, an additional transaction fee of 12% or 15% related to offsite advertising; and fees for Etsy Payments, our payment processing product. Services revenue is comprised of the fees a seller pays us for our optional other services ("Services"). Services primarily include on-site advertising services, which allow sellers to pay for prominent placement of their listings in search results; and shipping labels, which allow Etsy.com sellers in the United States, Canada, United Kingdom, Australia, and, commencing in the second quarter of 2021, India to purchase discounted shipping labels. Our primary strategy is focused on growing the Etsy marketplace in our seven core geographies and building a sustainable competitive advantage around four elements of our business that we believe differentiate us from our competitors, or what we call our "Right to Win." The foundation of Etsy's competitive advantage is our collection of our sellers' unique items, which, we believe, when combined with best-in-class search and discovery, human connections, and a trusted brand, will enable us to continue to stand out among other e-commerce platforms and marketplaces. Our investments in product, marketing, and talent will be focused on capitalizing on these four elements of our business. Ultimately, the goal of our long-term strategy is to drive more new buyers to the Etsy marketplace, give existing buyers reasons to come back more often, encourage buyers to spend more per order, and fuel success for our sellers. While current macroeconomic conditions have had a dramatic effect on the global economy and on our business, these impacts have led us to reaffirm and strengthen our commitment to our long-term strategy.
We see a number of similarities between the levers of growth for Etsy and for our acquired marketplaces, Reverb (in July 2019), Depop (in July 2021), and Elo7 (in July 2021). These include improving search and discovery, making selling and buying easier, and building global brands and user communities.
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