Etsy, the popular e-commerce platform known for its handmade and unique items, recently made headlines with its announcement of a workforce restructuring. Facing a challenging macro and competitive environment, the company is looking to streamline costs and reorganize its internal structure. This move comes at the height of the holiday season, adding to the significance of the decision. In this article, we’ll delve into the details surrounding Etsy’s decision, the impact it will have on the company, and the reasons behind this strategic move.
The Challenging Economic Landscape
Etsy CEO Josh Silverman acknowledged the difficulties the company is facing in a letter to employees. Despite doubling in size since 2019, Etsy’s gross merchandise sales have remained essentially flat since 2021. This stagnation in sales, coupled with the growth in employee expenses, has created an unsustainable trajectory for the company. In order to address these challenges and refocus on driving sales for its sellers, Etsy has decided to make significant changes to its workforce.
Workforce Reduction and Impact
Approximately 225 employees, representing 11% of Etsy’s workforce, will be affected by the restructuring. This reduction will bring the headcount for the core Etsy marketplace to around 1,770 people, similar to early 2022 levels. Despite the workforce reduction, Etsy remains committed to delivering value to its stakeholders and reigniting growth.
The layoffs come at a crucial time, as the holiday season is typically a peak period for shopping. To support impacted employees during this time, Etsy has committed to paying them through at least January 2. In addition to severance payments, impacted employees will receive extended COBRA health insurance benefits and the option to keep their company laptops.
Financial Implications and Fourth-Quarter Guidance
Etsy anticipates that the workforce restructuring will cost between $25 million to $30 million. The majority of these costs will be allocated to severance payments, employee benefits, and other related expenses. However, the company expects that over time, the restructuring will deliver operational efficiencies and cost savings.
In terms of financial performance, Etsy has updated its fourth-quarter guidance. The company now expects gross merchandise sales to decline between 1% and 2% compared to the year-ago quarter. However, revenue is projected to increase between 2% and 3%. Etsy has also revised its adjusted EBITDA margin guidance to between 27% and 28%, up from the previous range of 26% to 27%.
Leadership Changes and Consolidation
As part of the restructuring, Etsy’s chief marketing officer, Ryan Scott, will be leaving the company. His role will be consolidated under the chief operating officer position, currently held by Raina Moskowitz, a former American Express executive. Additionally, Etsy’s chief human resources officer, Kimaria Seymour, will also be departing. Toni Thompson, the company’s current vice president of global people and talent strategy, will assume the role of chief human resources officer.
Industry Trends and Comparison to Hasbro
Etsy’s decision to restructure its workforce is not an isolated incident in the current economic climate. Toymaker Hasbro recently announced its own workforce reduction, cutting 1,100 employees due to soft sales during the holiday shopping season. This trend highlights the challenges faced by companies in the current economic landscape, particularly during the crucial holiday period.
See first source: CNBC
FAQ
1. Why is Etsy undergoing a workforce restructuring?
- Etsy is restructuring its workforce to address challenges related to a stagnation in gross merchandise sales and increasing employee expenses. The company aims to streamline costs and reorganize its internal structure to reignite growth and refocus on driving sales for its sellers.
2. How many employees will be affected by the restructuring at Etsy?
- Approximately 225 employees, representing 11% of Etsy’s workforce, will be impacted by the restructuring.
3. What support is Etsy providing to affected employees during the holiday season?
- Etsy has committed to paying impacted employees through at least January 2. In addition to severance payments, these employees will receive extended COBRA health insurance benefits and the option to keep their company laptops.
4. What are the financial implications of the workforce restructuring for Etsy?
- Etsy anticipates that the restructuring will cost between $25 million to $30 million, with the majority of costs allocated to severance payments, employee benefits, and related expenses. However, the company expects the restructuring to deliver operational efficiencies and cost savings over time.
5. How has Etsy’s financial guidance for the fourth quarter been affected by the restructuring?
- Etsy has updated its fourth-quarter guidance, expecting gross merchandise sales to decline between 1% and 2% compared to the year-ago quarter. However, revenue is projected to increase between 2% and 3%, and the adjusted EBITDA margin guidance has been revised to between 27% and 28%.
6. Are there any leadership changes at Etsy as part of the restructuring?
- Yes, Etsy’s chief marketing officer, Ryan Scott, will be leaving the company, and his role will be consolidated under the chief operating officer position. Additionally, the chief human resources officer, Kimaria Seymour, will also be departing, with Toni Thompson assuming the role of chief human resources officer.
7. Is Etsy’s workforce restructuring part of a broader trend in the industry?
- Yes, the workforce restructuring at Etsy is reflective of broader challenges faced by companies in the current economic climate. Toymaker Hasbro, for example, also recently announced its own workforce reduction due to soft sales during the holiday shopping season. This trend highlights the difficulties companies are facing during this crucial period.
Featured Image Credit: Photo by Kelly Sikkema;Unsplash – Thank you!
