How Etsy won the stock market in 2020

Pin up the artful balloon garlands and toss the custom glitter confetti: Etsy Inc is having a gangbusters year.
The online marketplace for handmade, vintage and other creative goods, which joined the S&P 500 Index last month, is the best-performing stock in that group year to date:
Like many of its e-commerce-focussed peers, Etsy benefited
earlier this year when brick-and-mortar retailers were forced to close, sending droves of shoppers online. Spending has remained strong on Etsy as consumers continue to avoid physical stores over safety concerns, helping fuel its 146% increase in gross merchandise sales in the second quarter. The company attributed its sales growth in part to the whopping
12 million new shoppers that came to its marketplace during that period. For context, mega-retailer Macy’s Inc said it acquired
4 million new online customers in the second quarter.
Some of Etsy’s advantages in the crowded e-commerce business have been evident for years. With its macramé wall hangings and chunky-knit throw blankets, it has a unique merchandise assortment. People don’t come to it for commodity products like diapers or laundry detergent, so it doesn’t compete directly with the core businesses of giants such as Amazon.com Inc and Walmart Inc. Also, while those mega-stores are efficient places to knock out errands, Etsy stands out as an appealing digital destination for those who take pleasure in browsing and shopping for the sport of it.
The pandemic, though, has put a spotlight on another strength of Etsy’s model: The ability of its army of small sellers to speedily change their merchandise selections. This was evident in how the site became a go-to place for face masks. In the early days of the Covid-19 crisis, CEO Josh Silverman put out a call to sellers urging them to crank up their sewing machines and make these in-demand items. They answered the call, in the most Etsy of ways. There are listings on the site for gingham masks, satin masks, and kid-sized muslin ones. There are some emblazoned with a picture of the “Golden Girls” cast, others with sports team logos or hand-embroidered birds.
More than 110,000 sellers sold a total of $346 million in masks through Etsy in its June quarter. By comparison, clothing industry behemoth Gap Inc sold $130 million of masks in its quarter ended on August 1. The difference suggests that Etsy sellers — 95% of whom operate their small businesses out of their homes — were able to reap rewards from being fast and flexible in a way that bigger players with global supply chains couldn’t quite match.
Of course, the boom in Etsy face mask sales won’t last forever; either the market for them will
become saturated, or, more optimistically, the public health crisis will wane. Whenever that happens, it won’t be too big a blow.

—Bloomberg