Grips has been talking to a lot of our investor and financial services clients about the performance of the e-commerce sector in the United States as well as the performance of some closely-watched publicly traded companies: Etsy (ETSY) and Wayfair (W). Ahead of the Q2 2023 earnings season, Grips is making some of what we’ve privately shared available to the public in this 6 minute video.
Earnings report preview: Video
- US E-commerce grew by 3.55% in Q2
- Car parts, Grocery & Beverage and Pet Food & Supplies posted the strongest growth while Furniture, Gardening and Electronics posted declines
- Etsy (ETSY) saw GMS fall 4.7%, driven by declining conversion rates
- Wayfair (W) saw global revenues fall by 7.1% with Europe down 39.4%
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Hi, everyone! Thank you for joining me today as we delve into the current state of commerce in the United States and analyze the earnings of three key stocks that will be reporting soon. I’m excited to share with you the latest insights and trends shaping the business landscape. Let’s jump right in!
Let’s start by examining the e-commerce trends in the US using Grips data which, as you can see here, tracks incredibly well with the official numbers from the US Census Bureau. According to our estimates, the growth of e-commerce revenue in the United States during Q2 2023 has been impressive, coming in at a solid 3.55% higher than the same period in 2022. We’ll now take a closer look at how specific categories performed during this period.
Among the categories, we saw impressive growth year-over-year in segments such as car parts, grocery & beverages, pet supplies, sports and more. Which all saw strong year-over-year growth. On the other hand, categories like gardening, furniture and consumer electronics experienced contractions in Q2 compared to last year. These declines are not entirely unexpected, as they are categories that saw some of the most significant increases in spending during the pandemic.
One remarkable standout is the ticketing category, which surged by about 35% quarter over quarter and a staggering 85% year over year. The growth was so strong, it wouldn’t even fit on this slide. And the FED recently reported that live events like the Taylor Swift concert have significantly impacted local economies.
Let’s take a dive into a few other specific categories starting with furniture, which showed really strong growth in Q1 2021 due to pandemic-related purchases, but which has changed course recently. In Q2 of this year, the furniture category declined by about 12% year over year, according to Grips. Some of that may be due to higher mortgage rates suppressing sales, but interestingly, grips also noted from our robust SKU-level database that consumers have shifted their focus from buying higher-ticket furniture items to purchasing more decorative items, affecting revenue negatively.
Similarly, the jewelry and luxury category demonstrated significant growth in Q1 2021 but has since plateaued to the point where Grips observe no growth in Q2 2023. Consumers seem to be switching from buying expensive luxury items to more affordable, everyday jewelry making it difficult for the category to grow.
The pets category continues to perform well, with a 10% year-over-year growth in Q2, the 10th straight quarter posting growth. As Covid-era adopted pets age, their specialized needs create opportunities for more expensive products and services, which is expected to drive sustained growth in this category.
As another way to measure the health of the economy, we looked into Google ad spend trends. And Grips is a leading provider of insights to The Street on the performance of Google’s advertising business. What we found was that globally, Google ads revenue increased by 0.7% in Q2 2023. The United States outperformed the global average, with a growth of about 1.8%. However, when looking at e-commerce sites specifically, ad spend in the US was flat, posting just a 0.1% increase year-over-year signalling some caution from businesses.
Now, let’s take a look at Etsy, which reports on August 2nd. The global gross merchandise sales, or GMS, for Etsy declined by 4.7% year over year, according to Grips. When excluding non-Etsy marketplaces like reverb and DEPOP, Grips saw that revenues declined by 4.6%.
Why is Etsy struggling? Well, in addition to Revenues, Grips also reports on sessions, Average Order Value, Conversion Rate, Marketing Channels, Ad spend and more providing us with additional insight into the underlying drivers of a site’s performance. And when we look at those metrics for Etsy, we see that sessions were actually up and average order values have remained stable. So what’s going on? Etsy is really struggling with conversion rates which have been on a steady decline for the past two years. Part of that is due to Etsy relying on Social channels to increase their sessions. Unfortunately, Social is a channel that has lower conversion rates, which is a noteworthy contributor to Etsy’s performance.
Finally, let’s examine Wayfair’s, which reports earnings the day after Etsy on August 3. Globally, Wayfair’s revenues fell by 7.1% in Q2 2023, according to Grips estimates. The US saw a milder decline of 5.7%, while Europe, particularly the UK and Germany, faced a significant setback with a 39.4% decline year-over-year.
Unlike Etsy, Wayfair is not driving higher sessions in Europe. Instead, sessions are falling almost as sharply as revenues. Combine that with a decline in conversion rates which Grips has observed in 2023 and you start to see why Grips is struggling so much in Europe.
If you’d like to learn more about how Grips can help you stay on top of e-commerce trends and the performance of tens of thousands of e-commerce sites, I welcome you to sign up for a free trial of Grips by visiting gripsintelligence.com.
Thanks for joining me and stay tuned for more updates. See you soon!