By Katherine Hamilton

Etsy aims to collect more data about its shoppers with the goal of turning around its gross merchandise sales, which slumped in the fourth quarter and haven't shown immediate signs of recovery.

Shares fell 10% to $51.72 on Wednesday after the company posted decreasing gross merchandise sales that were lower than Wall Street expected.

The online marketplace for handmade and second-hand goods said Wednesday consolidated gross merchandise sales slipped almost 7% to $3.74 billion in the fourth quarter, missing analysts' expectations by about $10 million. It expects to see a similar decline in 2025 to the 4% slide it recorded the year before.

"We're disappointed as we know you are and we're working with tremendous urgency and focus to inflect the trajectory of the Etsy marketplace GMS performance," Chief Executive Joshua Silverman told analysts Wednesday morning.

While revenue is up, Etsy has struggled to expand the amount of sales it makes as the e-commerce industry has skewed toward companies that offer low prices and fast delivery.

"That's a game we're unlikely to win," Silverman said.

Etsy is trying to emphasize its one-of-a-kind product inventory, while tailoring customers' shopping experience by better understanding what they're interested in. In the fourth quarter, it shifted its focus away from making as many sales as possible, so it could work on improving the customer experience, but that cost a few hundred million dollars in gross merchandise sales, Silverman said.

Etsy is also following social media companies such as TikTok and Pinterest to collect more in-depth data about its shoppers so it can not only figure out what they're looking for in the moment, but also learn enough about them to suggest other products that would suit their needs.

The company has previously tracked what items consumers put in their cart or like, but now it is aiming to track what products they hover over, enlarge or scroll past quickly. That data can give greater insight into what kind of style someone has and whether they have a pet or a child.

"When you come back and search on Etsy, we can apply all of that because we know so much more about you," Silverman said. "Like window shopping in a store curated just for you."

Etsy is increasingly using artificial intelligence, large-language models and machine learning to collect data and predict interests, it said. It plans to increase investments and do some incremental hiring in AI in 2025.

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

February 19, 2025 11:27 ET (16:27 GMT)

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