As Etsy sees its sales slip, the eCommerce marketplace is gearing up to launch a loyalty program in an effort to drive greater spending and frequency among consumers who demand to be rewarded for their purchases.
On a call with analysts Wednesday (July 31) discussing the company’s second-quarter 2024 financial results, CEO Josh Silverman explained that an invitation-only beta test will launch to a “highly targeted group of occasional U.S. buyers” in September, following “many rounds” of research.
“We’ve focused on developing key benefits for buyers that highlight both the emotional and the rational characteristics of Etsy’s unique value proposition,” Silverman said. “… Our beta program is buyer-fee based and will include free U.S. domestic shipping on millions of items, item discounts, first access merchandise and more. We’ll test, learn and iterate, and are optimistic that over time, Etsy Insider can be a needle mover, driver of buyer frequency and Etsy love.”
By focusing on both the economic and sentimental aspects of Etsy’s value proposition, the loyalty program is designed to deepen the connection between the platform and its consumers. This approach not only incentivizes repeat purchases but also strengthens brand loyalty, which is crucial for long-term growth.
Indeed, a 2023 PYMNTS Intelligence survey revealed that 41% of United States shoppers highly prioritize loyalty rewards when deciding where to make purchases. Specifically, 6% of consumers cited rewards as the digital shopping feature they demand above all others, and another 35% said they consider rewards to be very or extremely important, but not the most.
The move to meet this demand for loyalty rewards comes as consumers pull back overall. The company reported that marketplace gross merchandise sales (GMS) decreased 3.2% year over year.
While sales overall declined, gifting GMS rose by 4.1%, outperforming the overall Etsy marketplace and suggesting that the company’s investments in improving the gifting experience are paying off.
Etsy’s introduction of new features, such as gift teaser video messages, gift lists and reminders, underscores the platform’s focus on making the gifting process more engaging and convenient. The strong performance in key gifting periods such as Mother’s Day and Father’s Day further illustrates the effectiveness of these initiatives.
Etsy’s investment in artificial intelligence (AI) and machine learning technologies comes as consumers demand more seamless eCommerce experiences. The use of large language models and GenAI techniques to better understand shopping missions and seller inventory is a significant step toward creating a more personalized shopping experience.
For instance, the reduction in the percentage of searches showing similar items and the increased visibility of diverse and higher-quality listings are direct outcomes of these AI initiatives.
Data from the PYMNTS Intelligence report “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces,” created in collaboration with Adobe, revealed that 40% of consumers said that they consider how easy it is to navigate an online store when selecting a digital merchant.
Silverman also discussed Etsy’s focus on mobile engagement, reflecting a broader consumer shift toward mobile shopping. The Etsy app, which now accounts for a significant portion of GMS, is being positioned as the centerpiece of the customer experience. With investments in optimizing app store positions, running paid ads for app downloads, and promoting app usage through various channels, Etsy is seizing on the trend of increased mobile device usage for shopping.
The PYMNTS Intelligence study “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave” found that more consumers make online purchases via mobile than via computer. Specifically, 15% had completed their most recent retail purchase using the former, while only 12% had done so using the latter.
The company’s efforts to shift buyer usage from mobile web and desktop to the app are aimed at driving frequency and engagement. This focus on mobile not only caters to consumers’ growing preference for on-the-go shopping but also provides Etsy with a platform to offer more personalized and engaging experiences.
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