Etsy: Skinny Dipping with Mask Money

Etsy took advantage of the pandemic. Well, really Etsy did nothing.  Etsy’s network however went to work, quickly. Its the beauty of decentralization. In Q2, 112k sellers had a mask sale. The scale and speed is extremely impressive.

Etsy did nothing and profited from it. That is the beauty of it all (and the problem). Etsy is a good company in the right place at the right time. You can make a lot of money off of that. The network is decentralized and that has major advantages. E-commerce is booming, while retail is dying. The niche store is by default moving to Etsy! The niche customer is looking on Etsy. Everything is flowing great… right now. In the short to medium term, Etsy is a great buy for these reasons. But, as Warren Buffett said, “It’s only when the tide goes out that you learn who has been swimming naked”.

But the question is, how much value does Etsy really add for the seller? Sure, they give them a platform and some shipping discounts, but in the long term, is that enough? I’d say no. Its a good deal for the seller, not a great one. Etsy is doing all the easy, clean stuff. Staying away from inventory and fulfillment is the easy decision, but is it the right one? It might even make no sense to take on inventory/fulfillment for a decentralized network, but the point is, Etsy needs to add more value. Do you really think you can change your TAM from ending with a B to a T by making the easy decision?

It all sounds good and Etsy is doing great. I expect a blowout quarter. But how will things look when the tide comes in? I am long Etsy, but rougher waters could be ahead.