Etsy places faith in its mobile application amidst ongoing sales declines
Etsy, the popular online marketplace known for its handmade and unique items, is taking significant steps to enhance its platform and deliver a better user experience. The company is focusing on three key strategies: advancing its mobile app experience, integrating AI to personalize shopping and search, and tightening seller policies to reinforce trust and originality.
Mobile Focus
Etsy is heavily investing in its mobile app as a central growth driver. The app now accounts for nearly 45% of total Gross Merchandise Sales (GMS) and offers a more intuitive and inspiring browsing experience. This mobile-centric approach includes reducing traditional TV marketing spend and shifting towards streaming and influencer partnerships to build brand awareness that feeds directly into an engaging app experience.
AI and Personalized Shopping
Etsy is transitioning from primarily keyword-based search algorithms toward fully personalized, AI-driven shopping experiences. This includes learning from user behavior signals like clicks, favorites, add-to-carts, and dwell time to curate feeds and improve visibility dynamically. The platform is implementing AI-powered discovery mechanisms that drive engagement and sales in the app environment, elevating visibility beyond traditional search mechanics.
Seller Policy Updates
Etsy updated its Creativity Standards in mid-2025, tightening rules particularly around computer-generated items and the originality of designs. Sellers must now use original designs rather than third-party templates or scans. This policy aims to protect the "handmade" ethos of the marketplace but has caused disruption as many listings were flagged or removed without prior seller notification. The updates enforce stricter compliance and originality to maintain buyer trust and marketplace integrity.
In addition to these strategies, Etsy is creating more diverse and engaging recommendations by scoring items across a broad range of interests. The company is also focusing on bringing sellers to the forefront and creating more seamless connections between them and buyers. Etsy is working to improve its ability to predict and match buyer interest over time, as it has already done with its smaller U.K.-based Depop marketplace, where GMS increased by 35.3% to $249.6 million.
Net income for Etsy reached $28.8 million, down by $24.2 million compared to last year. Overall GMS for Etsy decreased by 4.8% to $2.8 billion, with the flagship marketplace experiencing a 5.4% decline in GMS year over year, reaching $2.4 billion. The total number of active buyers for Etsy decreased by 3.4% to 93.3 million.
Etsy is also retooling its ranking platform to leverage capabilities of Large Language Models (LLMs) in generative AI. The company plans to reduce its marketing via linear cable television to a low single-digit percentage of its U.S. brand media spend. Etsy completed the sale of Reverb on June 2, a musical instrument site it acquired six years ago. The company's Chief Technology Officer, Rafe Colburn, is newly returned.
In summary, Etsy is injecting strength into its marketplace by making the shopping experience more mobile-friendly and personalized with AI, while enforcing stricter seller policies to ensure authenticity and creativity. This three-pronged approach addresses consumer demand for sustainability and uniqueness while leveraging technology to enhance user engagement and discovery on its flagship platform.
Technology plays a significant role in Etsy's strategy to enhance its platform, with the company investing heavily in its mobile app to deliver a more intuitive and inspiring browsing experience. AI is also being integrated to personalize shopping and search, learning from user behavior signals to curate feeds and improve visibility dynamically. The updates to seller policies are aimed at tightening rules against computer-generated items and enforcing originality to maintain trust and marketplace integrity.
