Etsy announced a major restructuring plan that includes laying off 11% of its workforce. The company, known for its handmade marketplace connecting artisans with buyers, cited a “very challenging macro and competitive environment” as the reason for the cuts.
Approximately 225 employees will be let go, bringing Etsy’s core marketplace headcount back to around 1,770 – similar to its size in early 2022 and above pre-pandemic levels. CEO Josh Silverman, in a letter to employees, acknowledged Etsy’s impressive growth since 2019 but emphasized the need for change.
“We have more than doubled in size since 2019, but today’s realities call for sweeping changes,” Silverman wrote. “Our gross merchandise sales have been flat since 2021, and we’re not delivering enough sales for our sellers. Meanwhile, employee expenses have grown despite significant cost-cutting measures.”
The news coincides with revised fourth-quarter guidance. Etsy now expects GMS to decline slightly (1-2%) compared to last year, while revenue will still see modest growth (2-3%). However, the company projects an improved adjusted EBITDA margin (27-28%) due to the restructuring.
Investors reacted negatively, with Etsy shares dropping 7% following the announcement.
The layoffs come amidst a broader trend of tech companies facing economic headwinds. Just two days prior, toymaker Hasbro announced it was cutting 1,100 jobs due to soft holiday sales.
Etsy’s restructuring aims to streamline operations, reduce costs, and reignite growth. The company expects the changes to be complete by the end of Q1 2024. It also includes leadership changes, with CMO Ryan Scott departing and his role being consolidated under COO Raina Moskowitz, and CHRO Kimaria Seymour being replaced by Toni Thompson.
In a gesture of support for affected employees, Etsy will pay them through at least January 2nd and offer a generous severance package, including 16 weeks of base pay, one week per year of service, extended health insurance benefits, and the ability to keep their company laptops.
While the holiday season layoffs are undoubtedly a blow for the affected employees, Etsy’s restructuring plan signals a decisive move to address current challenges and lay the groundwork for future growth. The success of this strategy remains to be seen, but it’s a story worth watching in the evolving e-commerce landscape.