Etsy is an online marketplace where talented people can make money from selling their handmade products.
On Etsy, There are ~4 million active sellers, ~80 million listings & ~70 million active buyers. 2.33B in revenue, 15.18B Market Cap. (Excluding Covid with 110% growth, that's a roughly 30% revenue CAGR over 5 years)
Etsy is laser focused in customer satisfaction, and customers love Etsy because they get to support local, talented individuals against the 'big dogs'
Etsy has an algorithm, like youtube, so you get recommended more of what you like, making it easier to buy more products = Etsy makes more money.
If 2 people type in the same keyword on Etsy, they'll see very different results. Search results are personalized to the customer, maximizing the probability that they find what they're looking for.
Etsy has a great network effect, meaning the next customer is always cheaper to acquire than the last one was.
The recent covid pandemic was incredibly beneficial for Etsy, as so many talented individuals joined the platform to sell products, as they realized the need for a second income, as well as having much more time on their hands with the lock down. The pandemic also boosted e-commerce sales in general, as people started shopping online.
Key point: Etsy has no distribution centres, warehouses, trucks, or anything of that sort. This greatly reduces capex.
How Etsy makes money:
Transaction Fees, 5% of order;
Listing Fees, $0.20 per listing;
Etsy Payments, 3% of order + $0.25
Etsy Ads, Promote your product
Etsy's sellers are very attentive to trends, and typically join early. Added to that, creators are willing to pay for Etsy Ads to rank highest on searches, as their is lots if competition on the platform.
Etsy is a great business with a huge possibility to be a compounder. The big risk here is obviously a recession that takes away consumers disposable income, although I believe Etsy would survive just fine and it would be a great time to buy.
Etsy is a near monopoly in the handmade crafts e-commerce section, as Amazon isn't focused on handmade products, Shopify is mainly for cheap Chinese products and Ebay is for used products mainly.
I'd personally like a little discount on the current share price to start buying, but this is definitely an interesting business.
Cross post from r/HoldForeverInvesting
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