ETSY INC

Overview

Our Mission

Etsy’s mission to “Keep Commerce Human” is rooted in our belief that, although automation and commoditization are parts of modern life, human creativity cannot be automated and human connection cannot be commoditized. We believe consumers are demanding more of the businesses they support and companies that build win-win solutions that are good for people, the planet, and profit will be best positioned to succeed. We are committed to growing sustainably by aligning our mission and business strategy to help create economic impact through entrepreneurship. You can read more about Etsy’s Impact and environmental, social, and governance (“ESG”) strategies beginning on page 19, where we report on metrics aligned with both our self-identified Impact priorities and widely accepted third-party frameworks.

About our Company

Etsy operates two-sided online marketplaces that connect millions of passionate and creative buyers and sellers around the world. These marketplaces - which collectively create a “House of Brands” - share our mission, common levers for growth, similar business models, and a strong commitment to use business and technology to strengthen communities and empower people.

Our primary marketplace, Etsy.com, is the global destination for unique and creative goods made by independent sellers. The Etsy marketplace connects creative artisans and entrepreneurs with thoughtful consumers looking for items that are a joyful expression of their taste and values. By surfacing quality listings at a great value and providing a reliable shopping experience to buyers, we aim to create a virtuous cycle that not only benefits Etsy, but creates economic opportunities for the millions of sellers in our marketplace. Our success is aligned with our sellers; we make money when they do. In addition to bringing them an audience of tens of millions of buyers, we offer a range of features and services designed to help them generate more sales and run their businesses. Similarly, we also make money when we meet our buyers’ expectations. When they find quality listings, at great value, and have a reliable and dependable experience from discovery to delivery, it fuels a virtuous cycle, benefiting our global community of sellers and buyers, as well as Etsy and our broader stakeholders.

In addition to our core Etsy marketplace, our “House of Brands” consists of Reverb Holdings, Inc. (“Reverb”), our musical instrument marketplace acquired in 2019, and Depop Limited (“Depop”), our fashion resale marketplace acquired in 2021. Our marketplaces primarily operate independently, although some of our key operational functions such as finance, legal, and human resources, for example, support all of our marketplaces to some extent. The Reverb and Depop marketplaces are included in all financial and other metrics discussed in this report, unless otherwise noted, from their respective dates of acquisition. On August 10, 2023, Etsy completed the sale of Elo7 Serviços de Informática S.A. (“Elo7”), a Brazil-based marketplace for handmade and unique items. The results of Elo7 are included in all financial and other metrics discussed in this report, unless otherwise noted, from the date of acquisition on July 2, 2021 until August 10, 2023.

Our sellers generated $13.2 billion of Gross Merchandise Sales (“GMS”) in 2023. Of this, Etsy marketplace GMS was $11.6 billion or 88.0% of the total and the Reverb, Depop, and Elo7 marketplaces generated approximately $942.1 million (7.1% of the total), $599.6 million (4.6% of the total), and $42.1 million (0.3% of the total) of GMS, respectively. We anticipate that the Etsy marketplace will continue to be the primary driver of our overall financial performance for the foreseeable future.

Here are a few key statistics about our marketplaces:

•The Etsy, Reverb, and Depop marketplaces collectively connected a total of 9.0 million active sellers to 96.5 million active buyers as of December 31, 2023.

•Our top six retail categories on the Etsy marketplace in 2023 were homewares and home furnishings, jewelry and personal accessories, apparel, craft supplies, paper and party supplies, and toys and games. These categories represented approximately $10 billion, or 87% of 2023 GMS.

•Reverb provides a significant presence in the market for musical instruments, and Depop enhances our apparel offering in the resale space.

•We are a global company, and 45% of our consolidated 2023 GMS was generated when a seller or buyer, or both, were located outside of the United States.

•Approximately 68% of our 2023 consolidated GMS came from purchases made on mobile devices, with mobile app being the fastest growing device for the Etsy marketplace.

Our Strategy

As illustrated below, our strategy is focused around:

•Building a sustainable competitive advantage for the Etsy marketplace - our “Right to Win;”

•Growing the Etsy marketplace in our six core geographies and globally; and

•Leveraging our marketplace playbook across our “House of Brands.”

Building a sustainable competitive advantage - our “Right to Win”

Our “Right to Win” is centered on four key elements that we believe make Etsy.com a better place to shop and sell and, which, in turn, will bring more buyers, lead to increased frequency and size of purchases, and build long-term loyalty to the Etsy marketplace. We believe that when executed effectively, these elements can create a multiplier effect that will drive future growth.

Our sellers’ unique items: The foundation of Etsy.com’s competitive advantage is our sellers’ millions of unique items. Sellers choose to list their unique items on our marketplace because they believe that we are the best place for them to start and grow a creative business and that we have created a community that attracts, supports, and retains some of the world’s most talented makers. The unique nature of our sellers’ items requires that we invest in the other three elements of our strategy: search and discovery, human connections, and a trusted brand in order to deliver a best-in-class marketplace experience.

Best-in-class search and discovery: We are focused on continuing to develop a search and discovery experience that unlocks the value of the unique items that can be found on the Etsy marketplace by elevating the highest quality listings. With over 100 million items listed on Etsy.com that do not map to a catalog or a stock keeping unit (“SKU”), our challenge is delivering world-class search and discovery technology that organizes and surfaces the right unique product to the right buyer at the right time in order to drive buyer satisfaction and sales. We use a combination of artificial intelligence, machine learning, large language models, and human curation to help organize, curate, and personalize the search experience, and enable Etsy buyers to more easily browse, filter, and find the items they desire. In addition to helping a buyer find what they are currently looking for, we are also investing in multiple areas to understand buyer tastes and preferences to better anticipate and inspire their next purchase.

The power of human connections: Our mission to “Keep Commerce Human” is a vital part of our strategy. We continue to emphasize the role that humans play in every aspect of our business. What makes the Etsy marketplace special isn’t just the unique items in our marketplace, it’s also the stories of how those items were brought to life by the hands of real people. Our buyer experience allows Etsy buyers to work with Etsy sellers to personalize or customize items to their exact specifications. We believe that fostering and elevating the quality of these human connections will continue to enable us to drive buyer engagement, loyalty, and purchase frequency, thus differentiating Etsy.com from other places you can shop.

A trusted brand: We will continue to focus on being a reliable brand that inspires trust along the buyer journey — when buyers search, purchase, anticipate, and receive their special items, and all the steps in between. Since Etsy sellers have relatively unknown brands and unbranded items, we aim to ensure that the Etsy brand is recognized and valued for providing an excellent end-to-end experience. There are two key elements to being a trusted brand: standing for something that buyers understand and rely on, and delivering a purchasing experience that feels efficient and safe. Our goal is to bolster trust in the Etsy brand, Etsy sellers, the items available on Etsy, and in the overall Etsy experience. We also need to be reliable for our sellers, offering a suite of compelling services to help them comply with marketplace policies and have peace of mind transacting on Etsy.

Growing the Etsy marketplace in our six core geographies and globally:

We are focused on growing the Etsy marketplace in our six core geographies (as illustrated above). Our six core markets are the United States, the United Kingdom, Germany, Canada, Australia, and France. While we have sellers and buyers around the world, we define our core geographies as locations that meet any of the following criteria:

•represent our most attractive GMS opportunities,

•where we currently have a vibrant two-sided marketplace, or

•where we are strategically investing on the demand and supply side to accelerate domestic growth.

At this time, we are focused on bringing our vibrant community of sellers in India potential sales through cross-border, global transactions. Given we are not currently prioritizing developing a domestic marketplace in India, we no longer consider it a core geography as defined above. In addition to our primary focus on growing domestic vibrancy in our core geographies, we also see significant opportunity to further increase cross-border transactions between buyers and sellers.

Leveraging our marketplace playbook across our "House of Brands"

We have three values-aligned e-commerce marketplaces offering non-commoditized items in our “House of Brands:” Etsy, Reverb, and Depop. Each of these marketplaces stands for creativity, community, and “special” and shares common commitments to operate in a way that makes a positive impact on the world. Our goal is that our marketplaces benefit from shared expertise in product, marketing, technology, and customer support, and that the sum of the whole, over time, will equal more than its individual parts.

We believe our marketplaces all share key elements central to success, including:

•analytical frameworks, product experiment and measurement approaches, and operating rhythms that prioritize resource allocation towards the most impactful outcomes;

•sophisticated search and discovery technology;

•compelling on-site customer experiences;

•efficient payment platforms;

•value-added seller services, such as advertising platforms and effective shipping options;

•strong brand and performance marketing capabilities; and

•a commitment to investments that protect the marketplace.

Capital Allocation Strategy

Etsy’s overall capital allocation strategy is focused in three areas: core investments in organic growth, which includes investments in our “House of Brands;” selectively pursuing acquisitions of businesses or technologies that complement our marketplaces or align with our overall growth strategy; and mitigating dilution to our stockholders through stock repurchase programs that have and may continue to be authorized by our Board of Directors. In addition, from time to time we may opportunistically lean in to share repurchasing beyond just offsetting the dilution created by the equity we grant to our employees as a form of compensation, as we did in 2023. As of December 31, 2023, we had fewer shares outstanding than we did as of December 31, 2017, evidence that our stock repurchase activities have enabled us to effectively mitigate the dilution associated with employee equity.

How We Make Money

We see our business model as a virtuous circle - we connect sellers and buyers, enable their transactions, receive fees for our services, and then reinvest in customer experiences to further grow Etsy and our sellers’ revenue. We generate revenue primarily from marketplace activities, including transaction (inclusive of offsite advertising), payments processing, and listing fees, as well as from optional seller services, which include on-site advertising and shipping labels. For more information, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Components of Our Results of Operations—Revenue.”

On April 11, 2022, we increased the Etsy marketplace seller transaction fee. As part of our long-standing principle to provide a “fair exchange of value” for the fees Etsy earns on marketplace transactions, we reinvested most of the incremental revenue generated from the transaction fee increase into the Etsy marketplace platform. You can read more about our investments in the Primary Business Drivers section below.

Marketplace Revenue

(Required fees)

•Transaction Fee (inclusive of Offsite Advertising Fee)•Payments Processing Fee•Listing Fee

Services Revenue

(Optional value-added services)

•On-site Advertising•Shipping Labels•Other

Our “House of Brands” Marketplaces

The Etsy Marketplace

Buyers come to the Etsy marketplace for meaningful, one-of-a-kind items handcrafted and curated with passion and expertise by our creative entrepreneurs, often items they can’t find anywhere else. Etsy buyer surveys* indicate:

*Above data reflects averages from monthly Etsy marketplace buyer surveys completed in 2023.

Building buyer consideration by knocking down barriers and focusing on specific purchase occasions:

About half of our active buyer base shops on Etsy one purchase day per year, with the other half purchasing an average of approximately five purchase days per year. Buyers too often think of Etsy only for very specific needs or at the end of their shopping journey; or it simply takes too much time and effort to find the best things among our now over 100 million items; or buyers worry about the post-purchase experience. We believe that given our sellers’ broad array of unique merchandise, Etsy should be able to drive existing and potential buyers to think of us more often for a wider range of purchase occasions, including higher stake ones, to drive long-term growth and market share gains.

During 2023, we developed initiatives to drive buyer consideration by highlighting our sellers’ quality listings, at great value, that we believe our sellers can deliver in a way that is both reliable and dependable. You can read more about these specific initiatives on page 8 in the Product Development section. These initiatives remain part of our ‘Vital Few’ focus areas, which we currently expect to remain priority areas for investment in 2024.

Furthermore, we believe we can do more to raise ‘top of mind’ awareness for Etsy in key categories and purchase occasions. Our 2023 survey data shows that the majority of consumers in the United States are aware of Etsy and say the brand is relevant to them, and they agree we have inspiring items. Yet many generally don’t know when to think of us, or think of us only for limited types of purchases. Further, while our aided brand awareness is approximately 90% among buyers in the United States and United Kingdom and over 80% among buyers in Germany, large gaps still exist in unaided awareness of the Etsy brand for some of our top categories and purchase occasions - such as Home and Living, Gifting, and Style. For example, when recently surveyed by Etsy, only 10% of buyers in the United States name Etsy as a place to shop for Gifts.

Our'Etsy Has It' brand campaign, introduced in 2023, is an important component of our focus on building buyer consideration given its direct messaging and call-to-action, along with a significant amount of on-site product work such as our new Wedding, Baby, and Gift registries, new Home and Living category pages, and more. We are confident that while it will take time to build this type of brand association, we can ultimately do much more to help buyers and potential buyers better understand thewhen andwhy of Etsy.

We believe the Etsy marketplace is characterized by several unique qualities, including:

•A brand that stands for “Conscious Shopping:” In a world of increasing automation and commoditization, Etsy.com is a marketplace where creativity lives and thrives because it’s powered by people. We help our community of sellers turn their ideas into successful businesses. Our platform connects them with millions of buyers looking for an alternative—something special that expresses their taste and values, providing a destination for conscious shopping that supports small business.

•Large assortment of unique and creative goods: Etsy boasts a large assortment of handmade, customized, personalized, vintage, and craft supply products from all over the world. As of December 31, 2023, there were over 100 million items listed on the Etsy marketplace, and approximately 30% of our 2023 GMS was from custom or made-to-order merchandise.

•Global reach: Our platform makes it easy for Etsy buyers and sellers to interact across borders even if they do not speak the same language and wish to transact in different currencies. We use innovative machine translation technology to translate listings, reviews, Etsy Ads, and conversations between buyers and sellers. We invest in localization, particularly within our core non-U.S. markets, to create a more localized experience such as browse features and local payment methods, which has resulted in more sellers selling to buyers within their own country and across borders.

•Organic traffic base: The unique nature of our sellers’ inventory and power of our brand have enabled us to organically build a loyal, global base of Etsy buyers on the platform. In 2023, the percentage of our GMS attributed to performance marketing (paid GMS) was 20%, meaning that the vast majority of our GMS comes to us organically through awareness of our brand, as well as from non-paid channels such as search, social, email, and push notifications.

•Human connection between buyers and sellers: As of December 31, 2023, 92.0 million buyers and 7.0 million sellers were active on the Etsy marketplace. We emphasize that the items listed for sale on the Etsy marketplace are brought to life by real people and that buyers can connect directly with sellers in order to ask questions and personalize or customize items to their specifications.

•Connected experience across all devices: We want to engage Etsy buyers wherever they are and provide an enjoyable and accessible shopping experience regardless of the device used. Our desktop and mobile web experiences, as well as our Etsy mobile app for Etsy buyers (“Buy on Etsy”) include search and discovery, curation, personalization, augmented reality, and social shopping features. For the year ended December 31, 2023, approximately 67% of Etsy.com GMS was generated on a mobile device. We have made product investments designed to drive buyers to our app, which is beneficial to our conversion rate, as our mobile app has the highest conversion rate among platforms. In addition, we offer similar desktop, mobile web, and mobile app experiences to help sellers manage their shops and successfully serve buyers on Etsy.

Beginning in 2020 and continuing through 2021, the COVID-19 pandemic and other global macroeconomic factors drove a significant shift to online purchasing in many retail categories. During this period, the Etsy marketplace experienced significant growth - more than doubling our GMS from 2019 through 2021. We believe this growth can be attributed to the diversity of the merchandise on Etsy, the differentiation of our brand and shopping experience as explained above, as well as our capital light business model, among other factors.

As the COVID-19 pandemic eased beginning in February 2022, consumer mobility significantly increased, resulting in very strong reopening headwinds in 2022. While reopening headwinds normalized in 2023, macroeconomic headwinds included significant pressure on consumer discretionary product spending, high inflation, elevated interest and mortgage rates, splurges on experiential spending, declining consumer savings balances, and a highly promotional and competitive retail environment. These challenges were further magnified for our lower household income buyers, where GMS declined on a year-over-year basis 1.

While Etsy was one of the few e-commerce companies to maintain our pandemic gains, we did not grow GMS in 2023 as many other e-commerce peers did (according to Euromonitor International Ltd; Retail 2024 edition, accessed February 5th, 2024, global e-commerce revenue growth in our core markets increased 7% year-over-year in 2023, while Etsy marketplace GMS declined nearly 2% over the same period). We believe the following factors were the primary reason for our underperformance in 2023: difficult year-over-year comparisons for Etsy, the fact that we are not known for or do not sell certain ‘essentials’ such as groceries, staples, and consumer electronics, pressure on several of our largest categories, and how our sellers’ price their items, which often does not account for inflation.

Despite the above factors, the Etsy marketplace continued to maintain the vast majority of gains achieved during the pandemic (with 2023 GMS equal to 98% of 2022 GMS and up 145% from 2019). We believe our ability to largely maintain our pandemic gains is a result of our significant investments in improving the customer experience and deepening our engagement with buyers. Despite soft GMS trends over the past two years, we continued to grow our revenue through changes to our seller fees, key investments to expand coverage of our payments platform, growth in international markets where transactions yield higher payments fees, technology advancements in our Etsy Ads product line that enabled us to utilize more of our sellers’ advertising budgets, and other initiatives.

Restructuring Plan announced late 2023:

On December 12, 2023, our Board of Directors approved a restructuring plan designed to increase Etsy’s operational efficiencies, reduce operating costs, and better align Etsy’s workforce and cost structure with current business needs, top strategic priorities, and key growth opportunities (collectively, the “Restructuring Plan”). See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Restructuring Plan.”

The Reverb Marketplace

Reverb, headquartered in Chicago, is a two-sided marketplace launched in 2013 on the principle that buying and selling musical instruments should be easy. Reverb connects buyers and sellers of new, outlet, used, and vintage music gear from all over the world, uniting music makers with the gear that inspires them. As of December 31, 2023, our Reverb marketplace had 845 thousand active buyers and 229 thousand active sellers. Reverb’s buyers and sellers range from beginners looking for their first instruments to professional musicians expanding their gear collections, local music stores that use Reverb to do more business online, and the largest music retailers in the world that use Reverb to reach an even larger audience. Based upon third party data and our own estimates, we believe that, since its founding, Reverb has become the third largest seller of musical instruments in the United States. Reverb has a vibrant and engaged community. For example, in 2023, approximately 56% of Reverb’s active sellers also bought on Reverb, and those that bought and sold gear spent nearly three times more than those that bought gear on Reverb but did not sell on Reverb. Nearly 80% of Reverb’s GMS is from the sale of used instruments, and, similar to the Etsy marketplace, approximately 80% of traffic is unpaid, evidencing the strength of the Reverb brand. Over 40% of Reverb’s GMS comes from its mobile app.

Reverb’s unique characteristics include the depth and breadth of its sellers’ inventory, its range of sellers (including retailers, manufacturers, and individual sellers distributed across the globe), one of the largest musical instrument databases with historical pricing data in the world, and a large and passionate community of musicians and music gear lovers. In 2023, Reverb invested in optimizing its conversion rate, delivering a more customized experience, and highlighting affordable used and outlet gear.

In 2023, Reverb’s GMS was flat to 2022, while macroeconomic factors weighed on consumer discretionary spending. Despite these headwinds, Reverb, similar to Etsy, continued to maintain the vast majority of its 2020 and 2021 GMS gains. Given the continued pressure on GMS, Reverb completed an approximately 13% reduction in force in October 2023 designed to gain operational efficiencies and enable critical growth investments into 2024 and beyond. Revenue increased on a year-over-year basis in 2023 largely due to higher payments revenue.

Reverb’s 2023 investments included improvements to the buyer and seller experiences, including enhanced search capabilities such as new category filters and attributes to help buyers find the perfect piece of gear. Reverb also made checkout easier and faster, focused on deals and affordability, and introduced additional payment and shipping options. In marketing, Reverb focused on optimizing its performance marketing spend to continue to drive efficiencies, expanded into mid-funnel video advertising, and continued to invest in content for YouTube and select social channels to drive brand awareness.

The Depop Marketplace

Depop, headquartered in London, is on a mission to ‘Make Fashion Circular.’ Since its founding in 2011, Depop has been a people-powered fashion marketplace where anyone can buy, sell, explore, and discover incredible secondhand fashion. Depop had approximately 35 million registered users, 3.6 million active buyers, and 1.8 million active sellers at December 31, 2023, up from approximately 1.7 million as of December 31, 2022. Commencing with this Annual Report, Depop’s active seller count has been adjusted

1 Household income (“HHI”) estimated by utilizing United States Census data of average income by zip code.

to exclude certain disqualified sellers, consistent with the Etsy marketplace’s active seller definition. For comparative purposes, the 2022 Depop active seller count is also provided using this new methodology. Approximately 56% of Depop sellers who made a sale in 2023 also made at least one purchase in 2023, which we believe shows the strong engagement of Depop’s user base. Nearly 95% of Depop’s GMS is in the apparel category.

Depop is a place for anyone to discover and share their style by selling items directly from their closets and buying secondhand garments from others whose style they admire. Depop’s circular ecosystem extends the life of millions of garments every year, providing a more sustainable way to enjoy fashion. We believe the growth opportunity for Depop is meaningful due to its: 1) differentiated position in the fast-growing resale space; 2) passionate and highly engaged community of buyers and sellers that advocate for the brand; 3) strong affinity with the Generation Z (“Gen Z”) and Millennial consumer demographics, who are adopting resale shopping faster than other demographics; and 4) significant market share opportunity in the United States and United Kingdom where Depop has meaningful brand awareness.

After two years of challenging macroeconomic conditions, Depop’s performance significantly improved in 2023. In particular, we believe that Depop’s inventory of low-cost, fashionable, resold merchandise was highly relevant to a value conscious consumer. The marketplace returned to healthy year-over-year GMS growth in 2023, and delivered meaningful revenue growth, in part, through take rate expansion. In particular, Depop’s focus on expanding share in the very large resale market in the United States bore fruit, with double digit U.S. GMS growth on a year-over-year basis.

Etsy believes Depop is a highly-relevant and authentic re-commerce brand that is still early in its growth lifecycle and plans to continue to invest accordingly. In addition to a better macroeconomic backdrop for its type of goods, we believe that a significant part of Depop’s improved performance in 2023 is the result of strategies put in place by Kruti Patel Goyal, Etsy’s former Chief Product Officer, who became Depop’s Chief Executive Officer in September of 2022. New leadership has focused on building momentum in the business, identifying the fewest, most impactful things to re-accelerate growth and improve operational efficiency in service of the Depop community. Depop has improved the buyer experience by increasing product development velocity by over 70% from 2022 to 2023, strengthening its machine learning capabilities, enhancing search relevance and item recommendations through improved ranking and personalization, scaling performance marketing channels such as product listing ads (“PLA”), and expanding community-driven marketing initiatives. In addition, Depop launched or expanded key GMS and revenue driving initiatives, such as ‘Make an Offer,’ Depop Payments, ‘Buy Now Pay Later,’ and Boosted Listings.

Primary Business Drivers

We leverage technology to connect people around the world through commerce. Among other things, we invest in our technology infrastructure, product development, marketing, trust and safety, member support and helping sellers grow as we strive to continuously improve our marketplaces for our buyers and sellers. While the discussion below focuses on the primary drivers of the Etsy marketplace, there are similar business drivers at each of our marketplaces.

Technology Infrastructure

Our engineering team has built a sophisticated platform that enables millions of sellers and buyers to smoothly transact across borders, languages, and devices. This team writes, deploys, and operates the software and services that enable us to run our business, including the web and mobile products we deploy externally and internally, and maintains our cloud environment and local office networks, and more. Etsy also makes significant investments in areas such as foundational infrastructure, our payments platform, cyber security, internal information technology, data enablement, and system architecture.

We collect and analyze large volumes of data to enhance the performance of our platform, personalize search and discovery, improve our search experience, and test features on our website. We apply a combination of proprietary and non-proprietary machine learning (“ML”) algorithms, large language models (“LLM”), and neural networks, as well as human curation to personalize the search and discovery experiences and enable buyers to more easily browse, filter, and buy that perfect item, even when they may not have something specific in mind. These search engine technologies include: 1) text based, our word based search; 2) relational search engines such as our XWalk, which understand interactions between buyers, listings, and shops; and 3) neural information retrieval, which interprets what a buyer means even if they don’t know how to describe the item. In 2023, we tested new Generative AI enabled features in order to develop new ways to move search functionality from keywords to conversations.

Our use of these technologies can also help sellers and buyers connect across the platform, even if they don’t speak the same language. We translate listings within our Etsy marketplace, which we believe significantly increases the items available to non-English speaking Etsy buyers and gives Etsy sellers access to a truly global audience.

We expect to continue to invest in innovative ways to harness the power of advanced ML technologies to improve customer experiences across our platform. For example, we see opportunities across these areas, and more:

In addition, we maintain an agile technology infrastructure, leveraging our operations in Google Cloud to dynamically flex computing power in sync with traffic. This infrastructure aids operational efficiencies, allowing a greater portion of our engineers to spend time working on GMS driving initiatives and less time on infrastructure activities.

In 2023, we began to invest in initiatives to democratize ML across the Etsy platform, with the goal to streamline and automate ML modeling in order to allow more Etsy engineers to deploy these models in significantly less time. During the year, we deployed third-party chat bot technologies that we expect will enhance our engineering team’s ability to write code, as well as improve other work streams across our platform.

Our other marketplaces Reverb and Depop also operate their marketplaces in the cloud and make similar technical development investments with Amazon Web Services (“AWS”). In 2023, both Reverb and Depop leveraged ML capabilities across their platforms to improve efficiencies and enhance their site experiences.

Product Development

Etsy’s product development and engineering organization is built around the core belief that we can create connections between our sellers and buyers that are personal and fundamentally different from other platforms where you can shop or sell. We believe we have a novel approach to product development, which we call our Product Development Culture, an evolving set of key principles, mindsets, and habits that guide how our teams work, experiment, and interact as we develop great experiences for our customers and business. Our teams are organized around a collection of initiatives that support a common strategy aligned with our “Right to Win,” with cross-functional teams focused on delivering a key customer outcome that we measure by a set of objectives and key results, all meant to solve key customer friction points. Product and engineering teams work across all areas that matter to our buyers and sellers - the core buyer and seller experience, search and ads, payments, fulfillment, member support, and more. Our approach to solving customer challenges includes customer and market research and analysis, data analysis, A/B and multivariate experimentation, prototyping and testing, quality assurance, and go-to-market strategies.

We continue to advance our “Right to Win” strategy, our playbook designed to ensure Etsy is the first stop for consumers who want to shop their tastes and values, as well as differentiating our value proposition in a competitive environment. With many millions of items listed on Etsy.com, and an average buyer search result yielding over 1,000 listings today, we believe that the application of personalization and curation can help buyers have a less overwhelming and more joyful shopping experience.

As mentioned above, in 2023, we targeted investments focused on building buyer consideration by highlighting quality listings, at great value, that we believe our sellers can deliver in a way that is both reliable and dependable, as well as raising ‘top of mind’ awareness in Etsy’s key categories and purchase occasions. For example, we made meaningful progress on elevating the best of Etsy in our search results, including our ‘Curation at Scale’ efforts to combine human curation with ML models. Our number of product development launches in 2023 increased by approximately 30% compared to 2022.

Etsy also shares aspects of its product development culture and strategies with our other marketplaces. In 2023, Reverb and Depop increased their focus on experimentation, search and discovery, and fulfillment, with the aim to improve the customer experience and drive incremental GMS. For example, Reverb delivered its best year ever in terms of GMS growth driven by product wins; and Depop significantly increased its product development velocity in 2023, delivering a number of meaningful product wins.

We believe that our approach to investments in marketing are somewhat different from some other players in e-commerce, and we continue to evolve and refine these activities as a core component of our business. We’ve evolved our marketing strategy to reinforce our core brand promise in the minds of Etsy buyers, and strengthened our capabilities by employing a full-funnel marketing approach, optimizing our investments in each area of the funnel. Our two primary types of marketing investments, performance and brand - where we spent approximately $451 million and $162 million, respectively on a consolidated basis in 2023 - are discussed below. In 2023, the percentage of GMS attributed to performance marketing (“paid GMS”) was 20%, meaning that the vast majority of our GMS comes to us organically through awareness of our brand.

Performance marketing

Our investments in performance marketing, which we define as paid media spend related to the digital acquisition and re-engagement of buyers, adjusts according to demand and scale based on incremental return. We do not set fixed budgets for our marketing team. Our investment philosophy for performance marketing is to invest until the marginal return on investment (“ROI”) on the next dollar spent is below our target minimum ROI. Increases in buyer lifetime value (“LTV”), driven by visits, conversion rate, incremental revenue, and frequency, shift the return curve higher, enabling us to spend more in marketing. The vast majority of return comes in-period, although some does fall into subsequent quarters. Our performance marketing spend naturally adjusts with demand, which we believe has worked well through changing demand and pricing for third-party marketing channels as it allows us to dynamically lean into more efficient opportunities. We continue to test the effectiveness of our performance marketing and expand into new channels and geographies. For example, in 2023 we added the Czech Republic, Greece, Hungary, Poland, Portugal, Romania, and Slovakia to the countries where we invest in performance marketing.

Offsite Ads. Offsite Ads is an innovative advertising program for Etsy marketplace sellers, where Etsy pays the upfront costs to promote Etsy sellers’ listings on multiple internet platforms and takes a ‘success fee’ when a sale is made. The program works as follows: when a shopper clicks on an offsite ad featuring a seller’s listing and purchases from the seller’s shop within 30 days of that click, the seller pays Etsy an additional transaction fee on that sale. We believe our Offsite Ads program is a win-win for Etsy and our sellers since: 1) the seller only pays a transaction fee when a sale is made; and 2) the additional fee expands Etsy’s LTV, as outlined above, enabling us to spend deeper for performance marketing to drive more visits to our marketplace. In 2023, revenue from the Offsite Ads program offset approximately 35% of the Etsy marketplace’s performance marketing spend.

Other performance marketing. Our performance marketing strategy also includes “mid funnel” advertising, such as on social media channels and through corporate marketing partnerships which target specific buyer demographics. We enhanced the Etsy marketplace’s social marketing strategy in 2023 to focus on our sellers’ merchandise in a specific category or for a specific purchase occasion, leading to improved ROI, a meaningful increase in visits, and increased buyer spending resulting from these channels. For example, we leveraged our new Home and Living category page to target relevant buyers shopping a specific category or purchase occasion in order to re-engage with our existing and lapsed buyers, as well as attract new buyers. We also focused on our influencer program through which influencers, buyers, and sellers are incentivized to develop Etsy content to drive engagement with existing buyers and introduce new buyers to Etsy.

As part of the Etsy marketplace’s focus on highlighting ‘great value,’ we held three site-wide promotional events in 2023 funded by a small allocation of Etsy’s marketing dollars, which we continued to test as a way to drive buyer engagement.

Brand marketing

Since 2018, Etsy has leaned more heavily into “upper funnel” brand marketing strategies through TV and digital video to create a flywheel designed to elevate the effectiveness of our other marketing channels. Etsy regularly surveys buyers on ‘brand funnel’ metrics such as awareness and loyalty, and, in 2022, we refreshed the questions asked in these surveys to better track the results of our investments. United States consumer surveys indicate that, since the fourth quarter of 2018, prompted awareness for the Etsy marketplace is up more than 10%, purchase intent grew well over 100%, and visit intent increased nearly 100%. We are also seeing great movement in our brand funnel metrics in the United Kingdom and Germany. Since the fourth quarter of 2020, our prompted awareness in the United Kingdom is up nearly 15% and purchase intent is up approximately 30%. During the same period in Germany, prompted awareness and purchase intent both increased over 100%.

Early indications also suggest that our‘Etsy Has It’ brand campaign, which includes direct messaging and call-to-action in Gifting, Home and Living, and Style, may have contributed to increased brand association for these categories and purchase occasions in 2023. We began testing TV advertising in Austria and Switzerland in the third quarter of 2023, complementing the favorable GMS growth trends in these markets. Given these healthy performance metrics, as well as our validation of performance through multiple third-party methodologies, we anticipate that upper funnel brand marketing strategies will continue to be a growing part of our marketing investment mix over time. We also strive to reinforce our brand image globally through earned media that features Etsy as a trend-setter and global destination for conscious shopping that supports small business.

Select other marketing

Our marketing strategy includes sophisticated Customer Relationship Management (“CRM”) tools that enable us to segment and target our buyers for engagement on and off Etsy. We believe our CRM and mobile app push notifications are efficient tools to drive engagement with our active and lapsed buyers, as well as meaningful drivers of our strong buyer reactivation levels. We also elevated Etsy-funded and seller funded promotional events throughout 2023 to highlight our sellers’ quality listings at great value.

Our subsidiaries also enhanced their marketing strategies in 2023. For example, Reverb and Depop both shifted and scaled their paid marketing spend to deliver solid results and a positive ROI. Reverb expanded its‘If it’s gear, it’s here’ campaign that emphasized the breadth of unique inventory and great deals available on Reverb. In addition to Depop’s meaningful improvement to paid marketing, it launched its YouTube campaign in the United States and its‘I got it on Depop’ marketing campaign in the United Kingdom in 2023, both of which drove improved brand awareness.

Trust & Safety

The trustworthiness of our marketplaces and the connections among people in our community are cornerstones of our business. Our policies are designed to encourage transparency among our members by clearly outlining the rights and responsibilities of sellers and buyers participating on our platform.

On Etsy.com we strive to give the Etsy buyer comfort that they are purchasing goods from a shop that adheres to certain standards, which starts with our policies. Fundamentally, we require that goods listed on Etsy be handmade (whether by the seller alone or with the help of a production partner), vintage, or craft supplies. Etsy is an unjuried marketplace, meaning sellers run their own shops, create, sell, and ship their own products, and are responsible for complying with our robust Seller Policy. Items on Etsy do not have barcodes or SKUs, and Etsy does not ever touch or possess the items for sale on the Etsy marketplace. The unique nature of Etsy sellers’ product inventory, combined with the constantly evolving nature of policy interpretation, necessitates expert, human involvement in content moderation, which we combine with the power of ML and other cutting-edge technology. Our teams regularly re-evaluate content on Etsy.com in the context of emerging trends to determine whether such content violates our House Rules or terms of use, including our Prohibited Items policy. Etsy.com has a zero tolerance approach for items that promote, support, or glorify hate or violence or that perpetuate the spread of harmful misinformation.

Beyond prohibited content detection and removal, we have grounded our content moderation program and product roadmap in ensuring that buyers can trust their experience and have the information they need to make informed purchase decisions, and that sellers can understand what is required of them, including whether their listing is permitted under our policies. We remain committed to ensuring that any member can easily alert Etsy about potential violations of our policies. We have also taken steps to ensure that Etsy sellers are positioned for success by making our policies easy to understand, refining our violation notification process, and providing resources to help sellers when they have compliance questions.

As the Etsy marketplace has experienced significant growth since 2019, we have increased our investments and resources dedicated to trust and safety. This includes scaling our teams and investing in new tools and advanced technologies to enable these teams to more effectively and efficiently do their jobs. This included growing our content moderation team, expanding our handmade and counterfeit team dedicated to fighting counterfeits and violations of our Handmade Policy, and creating a dedicated trust and safety ML engineering team.

In 2023, we meaningfully expanded proactive listing review and enforcement of our Handmade Policy to protect the integrity of our marketplace. For example, we removed approximately 140% more listings for violations of our Handmade Policy than in 2022, and estimate we have reduced how often buyers are seeing merchandise that appears to violate our listing guidelines by more than half since the first half of 2023. In order to protect our brand and our sellers’ unique items, we plan to expand proactive moderation capabilities while providing sellers with new tools to accurately describe their items and stay policy-adherent.

We publish an annual Transparency Report, which details our policy enforcement for the year on Intellectual Property, Prohibited Items, and Requests for Member Information policies. We have shared this report on our corporate website annually since 2015 and believe that publicly reporting on our enforcement efforts builds trust in our marketplace and community.

Our subsidiaries – Reverb and Depop – also care about running trustworthy marketplaces, and maintain robust community guidelines and prohibited items policies. In 2023, there was significant sharing of best-practices and information on these important items across our “House of Brands.” For example, Reverb expanded and restructured its trust and safety team to enhance its user verification process; and Depop stepped up investments in a new third-party content moderation tool to streamline this process, improving its average issue handling time and enhancing the user experience. You can read more about our other marketplaces’ respective policies and procedures by visiting each of their marketplace websites.

Member Support

As the Etsy marketplace has scaled, so have our investments in member support. As the primary touch point for our vibrant community of buyers and sellers, our Member Services team serves as both the voice of the Etsy brand and an important advocate for our community. When an issue arises, or a user has a question, we want to ensure they get support quickly and easily.

In 2023 we increased buyer and seller support through enhanced experiences, such as use of self-service support functions in chat, expanded use of live chat, enhancing our seller appeals process, and clarifying our Etsy Purchase Protection program.

Our subsidiaries also require similar member support activities. For example, Reverb revised its Buyer Protection program with the aim to provide an easy and seamless process when an item is not delivered as described; and Depop continued to improve Member Support efficiencies, including enhancements to its Dispute Resolution Center.

Helping Sellers Grow

We aim to be the easiest, most effective, and highest-value online selling platform for sellers with the skill and will to thrive. In addition to our Offsite Ads program and paid services which include Etsy Ads, our on-site advertising platform for sellers, andour shipping labels product, we provide a wide range of insights, programs, and educational resources to give Etsy marketplace sellers the support and power they need to manage and grow their businesses. We believe combining these efforts with access to a global audience of buyers creates a heightened desire for our sellers to keep transacting with buyers on Etsy. Below are some examples of our efforts:

•We continued to expand our successful Star Seller program, with the number of sellers with a badge up approximately 13% year-over-year as of December 31, 2023. In 2023, we introduced a Star Seller filter in our search, which led to increased purchase frequency and buyer spend, as we continue to elevate high quality listings and excellent customer service on Etsy.

•The Etsy Purchase Protection program, designed to help buyers feel more confident making a purchase and allow sellers to keep their earnings on qualifying orders up to $250 when an item does not match the description, arrives late or damaged, or never arrives, continues to provide support for our sellers when a transaction goes wrong through no fault of their own.

•In 2023, we launched the Etsy Share & Save program, a way for sellers to save on Etsy fees for sales they directly drive to their Etsy shop from their own channels.

•We began developing initiatives to help our sellers set sustainable pricing strategies, and published a new ‘Pricing Guide,’ which provides practical tips and guidance on factors to consider in doing so. We started testing our ‘Seller Growth Tips’ within Shop Manager, providing sellers personalized checklists such as tips for how to stand out in search results, build buyer trust, and other helpful resources.

•We launched a ‘Make an Offer’ (“MAO”) feature to all U.S. sellers and sellers listing items in U.S. dollars, allowing sellers to drive sales through direct price negotiation with their buyers.

•We offer an array of Blog posts, video tutorials, the Etsy Seller Handbook (available on Etsy.com), Etsy.com online forums, and insights from our support teams designed to help sellers grow. In May 2023, we held our second global Etsy Up seller event. This interactive online experience included access to trends, services, and actionable takeaways to help grow our sellers’ shops. This virtual event generated a record number of seller registrations and garnered over 1.6 million views across all content as of December 31, 2023.

Our subsidiaries also offer many features and services for their seller communities, including tips and tools for success, community events, and shipping carrier relationships and support. For example, Reverb increased visibility of its Great Value badge in the listing process, making it easier for sellers to see when their listing is set at competitive prices, and leveraged its seller ‘Price Guide’ and offer negotiation tools. Depop launched a ‘Sold Item Index’ as part of its listing process that provides sellers real-time information on market prices for similar items.

The Etsy Marketplace: Our Passionate and Engaged Community

Over the past few years, Etsy’s investments in our growth strategy and business drivers, as well as external factors that drove dramatic changes to the way people engage with e-commerce marketplaces in general and with the Etsy marketplace in particular, have led to significant changes in engagement and retention of our seller and buyer communities. This section outlines characteristics of the Etsy marketplace seller and buyer cohorts, which we believe is a useful barometer to track our performance over time.

Etsy Sellers

We believe that our 7.0 million active sellers are the backbone of Etsy’s business and that what matters most to them is our community of approximately 92.0 million buyers. We serve creative artisans and entrepreneurs around the world who choose to pursue their passions, offering them excellent value compared with other channels they may have to sell their products, and a cohesive suite of powerful tools and services to help them run their business and drive sales. Etsy sellers range from hobbyists to professional merchants and have a broad range of personal and professional goals.

In 2023, active sellers, those who sold an item or incurred a bill charge in the last 12 months, grew 29% compared to 2022 and 176% compared to 2019, which we believe evidences that Etsy continues to be a great place for creative entrepreneurs to start a business.

Seller Census: Etsy publishes further information about our sellers gleaned from a third-party survey. You can find results from the most recent survey on page 13 of our 2022 Annual Report. We currently plan to update this census biennially.

Etsy New Seller GMS Retention

NEW SELLER GMS RETENTION (%)

NEW SELLER GMS RETENTION ($)

† Note Etsy new seller GMS retention in “Year 1” in the above table represents 100%.

The above tables show two different views of the same data. Each new seller cohort includes the aggregate GMS from all sellers that created and were billed for their first listing on Etsy.com in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows retention in dollars. The GMS for each seller is calculated from the date of their first listing fee such that “Year 1” represents the GMS received by all sellers in the cohort within 365 days of their first listing fee. As a result, we do not yet have a full “Year 2” data set for the 2022 new seller cohort, as sellers who incurred their first listing fee later in 2022 have not yet had two years to age. These tables show that all seller cohorts initially inflected positively in terms of GMS value sold on the Etsy marketplace during the pandemic, and that seller cohorts are retaining a significant amount of the gains achieved.

Etsy Buyers

During the pandemic years, Etsy “pulled forward” a significant amount of new buyer acquisition in a way that we believe would have, under normal course, taken us many more years to acquire. We believe our efforts to engage new, lapsed, and existing buyers, as well as drive frequency, have helped support the health of our buyer cohorts overall despite stiff reopening headwinds and challenging macroeconomic conditions. The performance we have seen in our buyer cohorts is encouraging as trends remain healthy relative to pre-pandemic levels despite some degradation seen from pandemic period metrics.

Active Buyers

The number of active buyers on the Etsy marketplace increased 3% in 2023 compared with 2022, setting a new all-time high of 92 million. Our retention of active buyers in 2023 improved from the prior year and remained above pre-pandemic levels. Our number of active buyers - those buyers who have made a purchase within the trailing twelve months - increased over 100% from 2019, as shown in the chart to the left. This strength was largely driven by strong growth in reactivation of lapsed buyers, high new buyer acquisition levels, as well as healthy retention of active buyers.

GMS Per Active Buyer

GMS per Active Buyer: We believe that a useful way to track the success of our efforts to drive buyer retention, frequency, and purchases is to look at GMS per active buyer on a trailing twelve-month basis. After increasing rapidly during the pandemic years, our GMS per active buyer softened during the reopening and more recently as we saw pressures on consumer discretionary spending. Yet, GMS per buyer remains 22% higher than 2019, as shown in the chart. GMS per buyer declined 4% from 2022 to 2023 due to: 1) a greater mix of non-U.S. buyers, who generally have a lower GMS per active buyer than buyers in our more mature United States market; 2) a greater mix of reactivated buyers in the United States, who generally spend less than our more mature existing buyers but more than new buyers; and 3) the Etsy marketplace’s significant exposure to categories that were under pressure, such as Home and Living and Craft Supplies (which made up over 40% of our 2023 GMS). We are encouraged to see GMS per active buyer stabilize throughout 2023 and believe that we have meaningful opportunities to re-accelerate this metric over time as we continue to focus on increasing buyer frequency and growing our average order value, which we believe is a relatively untapped lever.

New Buyers: We believe that we have a significant opportunity to attract those who have never shopped on Etsy.com before. Since a buyer is separately identified by a unique e-mail address, a buyer is considered new if they use a unique e-mail address that has never been used for a purchase on the Etsy marketplace. During 2023, we had over 27 million new Etsy.com buyers, down 7% compared to 2022. GMS for Etsy marketplace new buyers was down 8% year-over-year and represented approximately 11% of overall Etsy marketplace GMS in 2023. While new buyers declined on a year-over-year basis, new buyer acquisition was up over 40% from 2019 as shown in the chart on the left. We believe we have significant opportunities to continue to attract new buyers to the Etsy marketplace, both in the United States and internationally.

Etsy New Buyer GMS Retention

New Buyer Cohort GMS Retention (%)

New Buyer Cohort GMS Retention ($)

† Note Etsy new buyer GMS retention in “Year 1” in the above table represents 100%.

These views of buyer retention focus on the retained GMS, which we believe is the best way to evaluate Etsy buyer behavior over a multi-year period. The above tables show the same data in two different views. Each new buyer cohort includes the aggregate GMS from all buyers who made their first purchase on Etsy in the designated year - the table on the left shows retention as a percentage of “Year 1” GMS and the one on the right shows it in dollars. Each buyer’s GMS is calculated from the date of their first purchase such that “Year 1” represents the GMS of all purchases by buyers in the cohort within 365 days of their first purchase. As a result, we do not yet have a full “Year 2” data set for the 2022 new buyer cohort, as buyers who bought later in 2022 have not had two years to age. Additionally, note that across our cohorts, GMS retention levels in years that include 2020 and 2021 were impacted by the pandemic.

These tables highlight that while all buyer cohorts initially inflected positively in terms of GMS value purchased on the Etsy marketplace during the pandemic, we have given back some of these gains during the strong reopening headwinds and challenging macroeconomic climate for consumer discretionary companies that have followed the pandemic. Overall, we believe the 2021 new buyer cohort GMS retention level is healthy, and notably, largely similar to the 2017 (pre-pandemic) Year 2 GMS retention.

Reactivated Buyers

Average Purchase Days per Repeat Buyer

Reactivated Buyers: Because buyers often “lapse” in their Etsy.com purchases (not making a purchase in a year or more), the activities outlined above in our strategy, product, and marketing sections are intended in part to reduce the number of buyers that lapse and also to re-engage lapsed buyers to get them to come back. The dramatic increase in active buyers during the pandemic resulted in more lapsed buyers in recent periods than in pre-pandemic periods, providing Etsy with opportunity to reactivate a very large pool of recently lapsed buyers. As a result of our increased focus on this opportunity, we reactivated 17% more lapsed buyers in 2023 on a year-over-year basis, with the majority located in the United States. Reactivated buyers have an approximately 40% higher LTV than new buyers in their first year back on the Etsy marketplace platform, so we expect to continue to prioritize activities to reengage lapsed buyers.

Repeat Buyers: Repeat Etsy buyers represent shoppers who made purchases on two or more days in the previous 12 months. We believe repeat purchases demonstrate the loyalty of Etsy buyers. In the chart on the left, you can see an increase in purchase days during the pandemic period, followed by less frequent purchase days as the world reopened and we faced macroeconomic headwinds over the past two years. We believe this metric has held up very well: increasing from 4.6 purchase days per year in 2019 to 5.0 purchase days per year in 2023. In 2023, approximately 48% of our active buyers were repeat buyers, in line with 2022 and above the approximately 41% level in 2019. Looking forward, we believe that we have significant opportunity to continue to drive frequency by building buyer consideration through our investments in highlighting Etsy’s high quality listings, at great value, that we believe our sellers can deliver in a way that is both reliable and dependable.

Active Buyers by Purchase Type

Summary of Active Buyers by Purchase Type: This chart represents a summary of active buyer behavior according to the number of days they purchase and the amount they spend on Etsy during a twelve-month period. Habitual buyers are defined as those who have spent $200 or more and made purchases on six or more days in the previous 12 months. This cohort comprised 8% of our active buyers and represented approximately 42% of our 2023 GMS. The number of habitual buyers declined 4% year-over-year in 2023 as we encountered the headwinds outlined above. The vast majority of the year-over-year decline in habitual buyers can be attributed to buyers moving into the repeat buyer category, as you can see in the chart on the left. In fact, we saw a 4% year-over-year increase in repeat buyers in 2023. Looking at our performance with this important buyer cohort on a longer timeframe you can see that the number of habitual buyers in 2023 grew 184% from 2019 levels, when they represented just 5% of active buyers.

Our Opportunity

The last several years have been volatile for e-commerce - with periods of very strong growth as well as declines - as global economies were impacted by the COVID-19 pandemic, supply chain imbalances, geopolitical tensions, high levels of inflation, pressures on consumer discretionary spending, and more. That said, we believe the e-commerce industry continues to have significant tailwinds in terms of its long-term growth opportunity. According to the previously mentioned Euromonitor report, global e-commerce revenue in our core markets is estimated to grow by a compounded annual growth rate of 8% through 2027.

Etsy Marketplace Opportunity

Looking forward, we continue to believe that Etsy has the opportunity to gain share within e-commerce and the broader retail marketplace. We believe that the nature of commerce is continuing to evolve: over the past few years, more people chose to purchase goods online and many consumers looked for special items as an alternative to mass produced goods. In particular, we believe that Etsy has something unique to offer global consumers, given that our sellers’ merchandise is made with creativity and craftsmanship, and often personalized - unlike mass manufactured branded goods, which are ubiquitously available in many locations, online, and off.

We expect that our future success hinges on our ability to highlight our differentiation to global consumers - particularly to help a buyer better understand whento think of Etsy, as well as the quality ofwhat they are buying andwho they are buying from when purchasing on Etsy - harnessing the power of our mission to “Keep Commerce Human.” By focusing on the growth strategies outlined in the above sections, our goal is to bring more buyers to the marketplace, and drive frequency of purchasing and the amount of spend on the Etsy marketplace. We’ve outlined below several key growth opportunities for the Etsy marketplace.

Capturing more of our total available market

Using the above mentioned Euromonitor report and other data, we estimate that the online market size across all relevant retail categories for the Etsy marketplace within our six core geographic markets represents an approximately $500 billion market opportunity, and an approximately $2 trillion market opportunity when offline sales are included. The “relevant retail categories” included in our estimate of total market size are apparel and footwear, beauty and personal care, home and living, craft supplies, paper and party, art and collectibles, personal accessories and eyewear, pet care, and toys and games. We believe that since our 2023 Etsy marketplace GMS represented approximately 2% of that online only portion, we have significant opportunity to gain further e-commerce market share. Since our estimated opportunity is focused on our core geographies and retail categories, additional upside to this opportunity could come from further geographic and/or category expansion for the Etsy marketplace.

Driving purchase frequency

As outlined above, about half of our active buyer base shops on Etsy one purchase day per year, with the other half purchasing an average of approximately five purchase days per year. Given our broad array of quality listings, we believe Etsy should be able to drive existing and potential buyers to think of us more often for more purchase occasions, driving long-term growth and market share gains.

Connected to increasing purchase frequency, in 2023, Etsy began to focus on highlighting brand consideration in specific categories and purchase occasions - such as Gifting, Home and Living, and Style (as described above on page 5). For example, we see significant opportunity to expand in the Gifting market, which we estimate represents a $200 billion relevant opportunity, online and offline, in the United States alone, and where we believe the Etsy marketplace has approximately 1% of that market. We recently launched the Etsy Gift Mode feature, designed to deliver a first-class experience to gift buyers and recipients. According to a buyer survey we conducted in 2019, about 45% of all gifting happens for holidays - from seasonal and secular holidays, Valentine’s Day, Mother’s and Father's Day, and more; 45% of gifts are purchased for personal occasions such as birthdays, births, and weddings; and the remaining 10% are 'just because’ gifting occasions - missing a loved one or sending a thoughtful item to a sick relative. We believe a focus on gifting can better connect our global buyers to the millions of unique gifting items offered by our sellers and drive more frequent purchasing among buyers.

Continuing to expand beyond our top geographies

While Etsy more than doubled the number of active buyers on our marketplace from 2019 to a record 92 million in 2023, we continue to believe that there are millions of additional consumers globally interested in unique and creative goods made by independent sellers. We estimate that approximately 30% of adults who identify as women in the United States and the United Kingdom shopped Etsy at least once in 2023, so there are many more millions of women who did not shop on Etsy during that time frame. We estimate our penetration with consumers who identify as men is much lower, with only about 10% of adult men in the United States and United Kingdom having shopped Etsy at least once in 2023. Furthermore, when looking at the next 15 largest markets beyond the United States and United Kingdom, our penetration rate of consumers shopping on Etsy is approximately 80% lower.

Continuing to retain and reactivate lapsed buyers

We continue to have a very large pool of over 100 million lapsed buyers to reactivate, and we expect that for the foreseeable future there will continue to be millions of buyers for us to reactivate each year. We also have a long history of healthy buyer retention and believe this trend can continue. See “The Etsy Marketplace: Our Passionate and Engaged Community” on page 12 for additional details.

Lastly, there are many millions of visitors to the Etsy marketplace each month who do not make a purchase when they visit. We believe that continued improvements in search and discovery and other components of our “Right to Win” strategy can help us better convert visitors into buyers and infrequent buyers into loyal customers.

“House of Brands” Opportunity

Since 2019, Etsy has taken several important strategic actions that deepen or enhance our total market opportunity beyond what is available to us through our Etsy marketplace. These include: our purchases of Reverb (musical instruments) and Depop (expanding our apparel category opportunity in the resale sector). Below we have provided third-party market research into the go-forward opportunities for these marketplaces.

Reverb: According to Music Trades Global Market for Music Products Report (as of December 31, 2022) the total available market opportunity for musical instruments is $24 billion, with approximately $16 billion in new instruments and approximately $8 billion in used instruments, with Reverb having about a 4% market share of the total. Digging a bit deeper, we estimate that Reverb has about 6% share of the available market in the United States, and only 1% share of the international market. We remain optimistic about Reverb’s opportunity for future industry market share gains given its broad and deep range of supply, large and loyal community, and value offered on the marketplace.

Depop: According to a 2023 ThredUp Annual Resale Report, the global secondhand apparel market (including resale and thrifting) is forecasted to grow approximately three times faster on average than the broader global apparel market through 2027, reaching an estimated $350 billion. We believe that Depop is well positioned to capitalize on the strong growth opportunity in the resale market, hinging on its core differentiation including its unique inventory, affinity with Gen Z and Millennial consumer demographics, matching capabilities between buyers and sellers, value offered on the marketplace, trust in the Depop brand, as well as the ‘people powered experience’ offered. Depop is particularly focused on expanding share in the United States resale market, which, according to the same report, is forecasted to grow nine times faster than the broader retail clothing sector and reach about $40 billion by 2027.

Competition

For all of our marketplaces, sellers may choose to list their goods for sale with online retailers or sell their goods through craft fairs and local markets, local consignment and vintage stores and other venues and marketplaces, including through commerce channels on social networks like Facebook and Instagram. They may also sell wholesale directly to traditional retailers, including large national retailers, who discover their goods in our marketplaces or otherwise. We also compete with companies that sell software and services to small businesses, enabling sellers to sell from their own website or otherwise run their business independently of our platforms. We are able to compete for sellers based on our brand awareness, the global scale of our marketplaces and the breadth of our online presence, our investments in product and marketing for the benefit of our sellers, our tools, education and services which support a seller in running her business, the number and engagement of our buyers, our policies and fees, the effectiveness of our mobile apps, the strength of our communities, and our mission.

In addition, we compete with retailers of all shapes and sizes for the attention of our buyers. A buyer has the choice of shopping with any online or offline retailer, whether large e-commerce marketplaces, national retail chains, local consignment and vintage stores, the brands represented on social commerce channels, resale marketplaces, or other venues or marketplaces. We are able to compete for buyers based on the breadth and quality of items that sellers list in our marketplaces, the ease of finding items, the value and awareness of our brands, the person-to-person commerce experience, customer service, our reputation for trustworthiness, the effectiveness of our mobile apps, the availability of timely, fair, and free shipping offered by sellers to buyers, ease of payment, localization, and experiences targeted based on regional preferences, and the availability and reliability of our platforms.

We also compete for media placements, including with retailers competing for the attention of our buyers.

Intellectual Property

Protection of our technology and intellectual property is an important component of our success. We rely on intellectual property laws, including patent, trade secret, copyright, and trademark laws, in the United States and abroad. We also use confidentiality procedures, defensive licensing and acquisitions, non-disclosure agreements, invention assignment agreements, and other contractual rights to protect us and our intellectual property.

We file patents and register domain names, trademarks, copyrights, and service marks in the United States and abroad. We rely upon unregistered copyrights and common law protection for certain trademarks. We also use internal and external brand protection mechanisms that are intended to protect our brands from misuse by third-parties.

Government Regulation

As with any company operating on the internet, we are subject to a growing number of local, national, and international laws and regulations. These laws are often complex, unclear, sometimes contradict other laws, and are frequently changing. Compliance is costly and can require changes to our business practices and significant amounts of management time and focus. In addition, regulatory and other legal proceedings in the United States and abroad continue to pressure the boundaries of marketplace liability for the activities of their sellers and other third parties.

Laws may be interpreted and enforced in different ways in various locations around the world, posing a significant challenge to our global business. For example, federal and state laws in the United States, E.U. laws, and other national laws govern the processing of payments and consumer protection; other laws define and regulate unfair and deceptive trade practices. Still other laws dictate when and how sales or other taxes must be collected. Laws of defamation apply online and vary by country.

We are also subject to federal, state, and foreign laws and regulations regarding privacy and protection of consumer information. Our privacy policies describe our practices concerning the use, storage, transmission and disclosure of personal information, including buyer and seller data.

Many jurisdictions in which we operate have enacted laws and regulations requiring notification to users when there is a security breach of personal data, or requiring the adoption of minimum information security standards that are often vaguely defined and difficult to practically implement. In addition, some of these requirements introduce friction into the buying and selling experience on our platforms and may impact the scope and effectiveness of our marketing efforts. Additionally, because we operate internationally, we need to comply with various laws associated with doing business outside of the United States, including anti-money laundering, sanctions, anti-corruption, and export control laws. See Part I, Item IA, “Risk Factors—Regulatory, Compliance, and Legal Risks.”

Seasonality

Etsy.com sellers experience increased sales and use more Etsy services during the fourth-quarter holiday shopping season. This has resulted in increased GMS and revenue for us during the fourth quarter of each fiscal year. Our cost of revenue and marketing expenses also generally follow this trend, with the highest costs incurred in the fourth quarter of each fiscal year. We expect this seasonality to continue in future years.

ESG Reporting: Our Impact Goals, Strategy & Progress

We have developed an Impact strategy and goals that reflect the positive impact we want to have on the world while advancing and complementing our business strategy, and we are pleased to provide this update on our progress.

Our Approach to ESG Reporting:

We apply similar focus, discipline, and accountability to our environmental, social, and governance (“ESG”) reporting metrics as we do our financial metrics, and we believe that together they make us stronger and more resilient. We use our required filings with the Securities and Exchange Commission (“SEC”), as well as our Investor Relations website and Etsy News blog, as our primary communications channels for information relating to our Impact strategy and progress. We have various approaches for determining what information we disclose in our ESG reporting, including feedback we receive from the financial community and other stakeholders. In addition, we continue to report our ESG metrics using the relevant Sustainability Accounting Standards Board (“SASB”) sector standards for our industry and the Task Force on Climate-Related Financial Disclosures (“TCFD”) framework. We also strive to stay abreast of new disclosure regulations that we may be required to comply with so we can develop an action plan and prepare to comply.

We expect to continue to evolve our Impact strategy and ESG reporting in the future as our Impact work at Etsy and the broader industry matures. Our discussion of Impact strategy, highlights, and ESG data includes the operations of our Etsy, Reverb, and Depop marketplaces except where noted.

How We Drive Impact:

Underpinning our Impact strategy is a set of levers we employ to drive toward our Impact goals while advancing and complementing our business strategy.

Environmental

Building resilience for the long term

Net Zero

Goal: Achieve Net Zero through targets aligned with the science of climate change while continuing to offset our carbon emissions.

*Scope 1 emissions include direct emissions such as natural gas and refrigerants used at our facilities. Scope 2 emissions include indirect emissions from the generation of electricity and steam that we may purchase for our facilities. Scope 3 emissions include all other indirect emissions that occur in our value chain such as business travel, employee commuting, and the processing of waste from our operations.

Our Strategy

We believe our Net Zero work strengthens our position as a trusted brand, a core pillar of our long-term strategy, and makes us more resilient, drives efficiencies, and prepares us for anticipated regulations. What’s more, we believe the benefits of reducing emissions resonate beyond our corporate boundaries, contributing to the overall health of people and the planet. We have made consistent progress on our Net Zero goal year over year as seen below:

Scope of our Net Zero Goal: As of December 31, 2023, our Net Zero goal includes emissions from the Etsy marketplace, Reverb, and Depop, and is set against a 2020 baseline which has been adjusted to exclude Elo7.* The above 2020 and 2021 emissions include third-party assured Etsy marketplace and Reverb data and internally reviewed Depop data. Depop accounted for approximately 6% of these emissions in 2020 and 4% in 2021. Our 2022 and 2023 data includes third-party assured data for the Etsy marketplace, Reverb, and Depop. For additional details about how we quantify emissions, see our GHG inventory and related notes on page 37.

*Our SBTi approved Net Zero goal included estimated emissions for Elo7. In 2023, Etsy completed the sale of Elo7 and, therefore, the estimated Elo7 emissions previously included in our 2020 baseline have been removed resulting in a 0.5% reduction to the 2020 baseline. In accordance with SBTi materiality guidelines, we are not required to submit the adjusted target for revalidation by the SBTi at this time.

Shipping

Emissions from the shipping of items sold in our marketplaces are by far the largest source of our quantified Scope 3 emissions. In 2023, these emissions accounted for 59% of our reported Scope 3 emissions. This represents a 22% intensity reduction relative to 2022 and 43% intensity reduction relative to our 2020 baseline.

We drive reduction in shipping emissions primarily through advocacy, carrier engagement, and product (marketplace) design. In 2023, we advocated for the U.S. postal service’s commitment to exclusively purchase electric vehicles starting in 2026. We also expanded engagement on decarbonization with additional shipping carriers. Lastly, as part of our marketplace sustainability strategy, we deepened our product work to more easily enable buyers to shop locally and reduce shipping emissions. This included running a number of local experiments that resulted in GMS wins and valuable learnings to inform future shipping distance reductions efforts.

Our Supply Chain

Our corporate supply chain emissions are our second largest source of quantified Scope 3 emissions. Through direct supplier engagement, improved data quality (including leveraging more supplier specific emissions data), and supplier selection criteria, in 2023, our reported corporate supply chain emissions intensity decreased by 5% relative to 2022. Our analysis found that 56% of Etsy marketplace’s spend went to companies that have set an emissions reduction goal. We also piloted a new supplier carbon fee program with five suppliers in the fourth quarter of 2023. The program requires suppliers to achieve an A- on the annual Carbon Disclosure Project (CDP) assessment in order to avoid paying a carbon fee. In 2024, we plan to expand the program to additional suppliers while developing more incentives and tools to support our suppliers in measuring, reducing, and reporting their emissions in line with net zero.

Packaging

Emissions from our sellers’ packaging are the third largest source of our quantified Scope 3 emissions. In 2023, these emissions accounted for 12% of our reported Scope 3 emissions, which represents a 7% intensity decrease relative to 2022. Our work to help sellers reduce emissions from packaging is detailed in the Marketplace Sustainability section below.

Carbon Offsetting

We are focused on meeting our long-term SBTi- approved Net Zero goal. However, while we work toward long-term reductions in line with our goal, we are taking immediate action to address our impact through our commitment to purchase carbon offsets in an amount equal to our quantified annual emissions. We consider our Net Zero emissions reduction efforts to be separate, but complementary to our carbon offsetting, and expect to phase down our investments in offsets as we make progress towards our Net Zero targets.

For 2023, we offset Etsy marketplace, Reverb and Depop’s reported Scope 1, 2 and 3 emissions through investments in 468,924 verified emissions reductions (VERs) that, among other things, protect forests, finance solar development, and help develop greener methods for producing auto parts.

Investing in Climate Solutions

In 2023, Etsy allocated $3.0 million of our Impact Investment Fund (mentioned above) to support Greenbacker Capital Management (GCM). This investment supports GCM’s direct investments in renewable energy technology and other energy sector innovations that may reduce reliance on fossil fuels.

Sustainable Operations

Goal: Maintain best-in-class sustainable operations.

Striving for best-in-class sustainable operations allows us to focus on long-term cost reduction, minimizing waste, and creating a healthier office environment for our employees. In 2023, we continued to make good progress against our goals.

Energy Use

In 2023, our total quantified operational energy footprint was 14,556 MWh, of which 75% was from electricity. This includes energy usage from our office facilities, remote worker energy usage, and Google Cloud computing for the Etsy marketplace. Using our Cloud Jewels methodology, we estimate our energy consumption from Google Cloud in 2023 to have been 6,253 MWh for the Etsy marketplace. For more information on our energy mix, please see our SASB disclosure starting on page 33.

Renewable Electricity

Since 2020, we have sourced renewable energy for the electricity we measured or calculated as used to power our Etsy marketplace and Reverb offices and employees working from home, as well as Etsy marketplace's computing load in Google Cloud. For 2022 and 2023, we also sourced renewable energy for our quantified electricity used to power Depop's offices and used by employees working from home.

This was achieved through our 15-year virtual power purchase agreement (“VPPA”), international renewable energy credits (iRECs), and on-site solar arrays at select offices. Given continued elevated energy costs in 2023, our U.S.-based VPPA generated more settlement credit value than Etsy paid, effectively reducing electricity costs for our U.S. offices.

Energy Efficiency

Our 2023 energy use for Etsy’s offices was 4,326 MWh. In offices where we maintain operational control, we achieved a 34% reduction in energy intensity (kWh/sq. ft.) relative to our 2016 baseline. At our Brooklyn headquarters, we continue to participate in the NYC Mayor’s Carbon Challenge and our ongoing efforts led to a New York City Building Energy Grade of a B.

For Etsy marketplace’s computing energy use, our estimated energy usage per site visit (kWh/visit) decreased by 72% since 2016, largely due to our move to Google Cloud which has enabled us to dynamically flex our infrastructure capacity, while providing faster processing speed, improved page load time, and more nimble technology on an as needed basis depending on traffic volume.

“Zero Waste”

In 2023, Etsy's Brooklyn office headquarters received “Zero Waste” certification through the Total Resource Use and Efficiency (“TRUE”) certification program by Green Business Certification Inc. (“GBCI”) for the sixth year in a row for diverting over 90% of waste from landfill. We expect to pursue zero waste certification for our new Etsy marketplace office in Dublin during 2024 and are working towards zero waste at other offices by the end of 2025. To support our goal, in 2023, we implemented a new tech-enabled system in our Brooklyn office that measures waste streams and contamination in real-time and plan to roll it out to additional offices in 2024.

Marketplace Sustainability

Goal: Establish our marketplaces as destinations for sustainably minded shoppers and conscious living by reducing the environmental impact of shopping and fulfillment lifecycles, and creating experiences that promote circularity.

We believe prioritizing sustainability within our marketplaces creates an opportunity to drive strategic growth and ensure we are our communities’ first stop when they want to shop according to their values. We’re bringing sustainability to life for buyers and sellers in several ways:

Item Sustainability

In 2022, the Etsy marketplace piloted optional sustainability listing attributes that allowed sellers to indicate if their items are made from environmentally conscious materials or are designed to be reusable or to reduce waste.

In 2023, we expanded the program by offering improved seller educational content and testing buyer-facing experiences. On December 31, 2023, 2.6% of active Etsy marketplace listings had at least one sustainability attribute, and 7.7% of sellers with an active listing on the Etsy marketplace had added a sustainability attribute to at least one of their active listings.

Circularity

Our strategy is to inspire and enable people to participate in the circular economy where products and resources remain in use at their highest value across our marketplaces. Our communities are participating in circular systems, from the creative materials they use, to the items they sell, to the packaging they use to ship. Over the course of 2023, sellers created 108 million listings with circular attributes on the Etsy marketplace, Depop and Reverb. Circular attributes on the Etsy marketplace are vintage, upcycled, reusable swaps, and “contains recycled content” (metal, glass, polyester, plastic, paper, or cotton), or “contains vintage gemstones.” On Depop, these listings are indicated as secondhand, reworked, destined for waste, or “made as circular." Reverb listings with circular attributes are those categorized as used.

In line with its mission to make fashion circular, and in support of Depop’s goal to inspire more people to shop circular, we published our first Environmental Impact Measurement Methodology, which details our approach to estimating the environmental impact of secondhand purchases made on Depop compared to brand-new items. We hope that by showcasing the environmental benefits of shopping secondhand rather than brand-new, we can continue to bring circular fashion to more people. Depop also launched “Repop,” a feature enabling users to easily re-list unwanted items they’ve previously purchased on Depop, keeping them circular.

Packaging

As part of our efforts to meet our Net Zero goal, we are helping inform sellers about ways to reduce emissions from the packaging they use to ship orders, through both reused packaging and more sustainable options. In 2023, we continued our partnership with EcoEnclose for both Etsy marketplace and Depop sellers in the United States. Through the partnership, sellers can access and buy affordable packaging made from recycled paper and certified responsibly sourced paper that buyers can also recycle easily at home. The program also supports sellers who reuse existing packaging, through a reused packaging sticker option. We also reinforced the environmental benefit of reused and more sustainable packaging through seller marketing channels and events.

Helping Our Sellers Build Climate Resilience

Our sellers face increasing challenges related to natural disasters. Recognizing this, we have developed a strategy to help sellers build climate resilience focused on recovery and preparedness. In 2023, we expanded our Disaster Response Grant program through Craft Emergency Relief Fund (CERF+), which offers grants to Etsy marketplace U.S. sellers impacted by a Federal Emergency Management Agency (FEMA) declared disaster. We also partnered with Nest, Inc. and the Environmental Defense Fund (“EDF”) to develop open-source resource guides that make it easier for sellers, and U.S. artisans more broadly, to access climate-related disaster information and funding. To drive uptake among Etsy’s U.S. sellers, we’ve adapted these resources into Etsy-specific educational content and seller-facing communications campaigns.

Social

Ensuring equitable access to opportunity

Prioritizing People

As the employee diversity, equity and inclusion programs have matured at Etsy, our value of “embracing differences” remains central. In 2023 we felt it was time to define the strategy that makes diversity, equity and inclusion at Etsy unique - so we developed what we believe is a distinctive approach, utilizing the acronym SIMPLE as defined below:

–Shared. This isn’t one person’s job at Etsy, it’s everyone’s shared responsibility.

–Integrated. Maintaining an equitable workplace remains a key part of our long-term company strategy and we embed this principle into our work across the company.

–Measurable. Monitoring the progress towards our goals, external audits, and engagement surveys keep us accountable.

–People-centered. Our employees are central to People policy decisions.

–Leader-driven. Etsy’s leaders set a positive and inclusive tone from the top.

–Ethical. Diversity, equity and inclusion is ethical. We know we can do well and do good at the same time.

We remain committed to building a workplace where people of all backgrounds and walks of life can thrive. In 2023, we reaffirmed our efforts to grow diverse and inclusive teams because we know diverse perspectives make us a better and stronger business and enhance the culture of Etsy. At Etsy marketplace, we focused on expanding our definition of diversity by placing additional emphasis on accessibility and disability inclusion. We deliberately reinforce inclusive values and practices into key moments in the employee life-cycle such as at New Hire Orientation and Manager Foundations. Across all brands we continued investing in our vibrant Employee Resource Group (“ERG”) programs. Related to these internal efforts is our commitment to driving diversity, equity, and inclusion within the tech ecosystem. This year we donated $150,000 to organizations driving inclusive tech workforce development programs.

Etsy continues to support hybrid working modes, while gathering together periodically with intention and careful planning. We offer paid family leave policies, as well as periodic company-wide “rest and recharge” days to supplement Etsy’s paid time off. Employees may also utilize regular “focus days,” full days where non-critical meetings are canceled and we focus on digging deep into individual work. Etsy also continues to offer mental health days and easy access to mental health benefits to our employees as part of our overall approach to well-being.

We continued our focus on employee engagement in 2023, which is linked with high performance, retention, innovation, and growth. We believe our employees have chosen to work at Etsy because they believe in our action-oriented, values-based, and purpose-driven work culture. In 2023, we conducted engagement surveys of all Etsy marketplace, Reverb, and Depop global employees. Of all employees surveyed across each brand, 85% of Etsy marketplace, 86% of Reverb, and 76% of Depop employees submitted a response. 80% of Etsy marketplace respondents, 72% of Reverb respondents, and 75% of Depop respondents reported favorable employee engagement. See our SASB disclosure on page 34 for more details.

On December 12, 2023, our Board of Directors approved the Restructuring Plan, which included an approximately 11% reduction of the Etsy marketplace workforce. Additionally, in the fourth quarter of 2023 Reverb reduced its workforce by approximately 13%. After giving effect to employee departures in connection with our Restructuring Plan, we had approximately 2,420 total employees worldwide on December 31, 2023, including approximately 240 Reverb employees and approximately 400 Depop employees.

Specifically related to the Etsy marketplace, when we decided to reduce our workforce, our goal was to ensure the new structure was better aligned to our Vital Few business priorities and foundational work streams, while keeping fairness at the forefront of this process. Etsy remains committed to diversity and will be continuing efforts to build diverse, equitable and inclusive teams.

Our employee diversity, equity, and inclusion metrics are reported below as of December 31, 2023 and do not reflect the Restructuring Plan related employee departures that occurred after December 31, 2023.

Employee Diversity, Equity and Inclusion

Goal: Build diverse and inclusive work forces that are broadly representative of their communities.

Racial/Ethnic Diversity

In 2018, Etsy marketplace set a goal to double the percentage of Black, Latinx, and Native American (collectively called “underrepresented communities” or “URC”) employees at the company by year end 2023. While we’ve significantly increased racial/ethnic diversity on our U.S. team since 2018, as of December 31, 2023 we’ve come up short of our original goal. We have a strong conviction that diverse and inclusive teams build more creative and innovative solutions that strengthen our business and enhance our ability to better serve wider audiences. We’ve added two additional years to the term of this goal and will continue to report our progress annually.

In 2023, we held onto the progress made between 2019 and 2022. Though the Etsy marketplace did less hiring this year than in the year prior, in 2023, URC employees constituted 18.8% of U.S. Etsy marketplace hires. As a result, at December 31, 2023, URC employees made up 15.4% of Etsy marketplace's U.S. workforce, up from 8.6% in 2018. That represents a 79.1% increase relative to where we began in 2018.

In 2023, Black, Indigenous, and People of Color (“BIPOC”) constituted 53.3% of Reverb’s U.S. hires, up from 27.7% in 2022. As of December 31, 2023, Reverb’s U.S. workforce included 21.5% BIPOC representation, compared to 18.9% on December 31, 2022. In 2023, Reverb’s hiring forecast decreased and Reverb’s diversity goal was adjusted to meet or exceed about 21% BIPOC representation (the previous goal was to double the 2020 benchmark of 16.6%).

In 2023, underrepresented ethnicities at Depop constituted 38.6% of hires in the U.S. and U.K., up from 24.2% over 2022. As of December 31, 2023, Depop’s U.S. and U.K. workforce included 26% underrepresented ethnicities, compared to 30% on December 31, 2022.

Gender Diversity

Etsy proudly maintains approximate gender parity in the overall employee population and among Leadership. We’ve identified Software Engineering as an area for focus on improving gender diversity. In the U.S., at December 31, 2023, the percentage of women and marginalized gender software engineers at the Etsy marketplace was 39.5%. Globally across all functions, at the Etsy marketplace, the representation of women and marginalized gender employees was 52.1% at year end 2023. Women and marginalized gender employees constituted 51.6% of new hires at the Etsy marketplace in 2023.

In 2022 we set goals to increase representation of women and marginalized genders on Software Engineering teams in Mexico and Ireland by the end of 2027. We are proud to be tracking above the goals that were set. As of December 31, 2023, in Mexico, we had 16.5% representation of women and marginalized gender employees, and, in Ireland, we had 23.8% representation of women and marginalized gender employees.

At Reverb, women and marginalized genders made up 45.2% of hires in 2023 compared to 51% in 2022. At Reverb, the representation of women and marginalized gender employees decreased from 36.4% at December 31, 2022 to 35.1% at December 31, 2023. Reverb remains committed to retaining employees from underrepresented communities, including through its mentorship programs.

At Depop, the representation of women and marginalized gender employees was 48.3% of the workforce at year end 2023, with that cohort making up 59.1% of 2023 hires. Depop set a goal in 2023 to achieve 27% representation of women and marginalized gender employees on the engineering and data teams by year end 2028. As of December 31, 2023, we had 26.8% women and marginalized gender representation on those teams, up from the baseline of 20% at December 31, 2022.

Expanding Our Understanding of Diversity

As Diversity, Equity and Inclusion at Etsy matures and evolves, so does our shared understanding of diversity. While our goals remain dedicated to creating a positive and inclusive workplace for all employees and addressing gaps in representation, we are making a concerted effort to view diversity as an expansive concept. For example, employees have an opportunity to self-identify, via secure survey, not only their gender and racial identity, but also their disability status, sexual orientation and veteran status. That data is used for aggregate reporting, and to inform programming and benefits needs. In 2023, we took important steps to deepen disability inclusion as described further below. Additional information on our Diversity, Equity and Inclusion can be found at careers.etsy.com/dei.

Our core ERGs continue to thrive, with ten formalized groups for the Etsy marketplace. The Diversity, Equity and Inclusion team also supports additional internal communities representing Interfaith, MENA (Middle Eastern and North African), Muslim, and Veteran identities. ERGs at Reverb have grown to include six formal groups and Depop has established four ERGs this year. ERG leaders receive a stipend in recognition of their contribution in building a culture of inclusion. Etsy marketplace’s ERGs also continue to utilize philanthropic giving to amplify their community building contributions.

In 2023, Etsy marketplace continued expanding the Dens program that is open to all employees. Dens are peer cohorts that meet regularly for facilitated dialog on leadership and the challenges we face at work. The program includes an option for identity-based cohorts that we call “Affinity Dens” for Asian, Black, and Latinx identifying employees, LGBTQ+ employees, neurodiverse employees, people with disabilities, as well as women and marginalized gender employees. Etsy marketplace’s Mentorship Circle Program also offers robust supports for Etsy employees, including those from underrepresented racial communities, employees with disabilities, neurodiverse employees, and LGBTQ+ employees. Reverb and Depop also support mentorship programs in cooperation with their respective Diversity, Equity and Inclusion leaders. Depop ran an Inclusion Week which offered an allyship panel and activities to promote ERG participation.

Progress On Disability Inclusion

In 2022, we set an ambitious goal to prioritize Disability Inclusion and Accessibility for employees at our Etsy marketplace, and the Etsy marketplace committed to scoring an 80 or above on DisabilityIn.org's Disability Equality Index in 2023. This commitment enabled us to create a roadmap of enhancements across our programs, policies, and practices for the Etsy marketplace - and we are proud to have achieved a score of 100 as a result. Examples of our enhancements include developing and implementing Disability inclusion training modules for new hires and managers, adding accommodations language to our recruiting content, training talent acquisition partners to effectively and inclusively recruit and work with candidates with disabilities, and updating our U.S. and U.K. self-identification questions on disability status for employees. Our CEO, Josh Silverman, also signed onto a public pledge of support for disability inclusion in the workplace with the “CEOs are IN” pledge. We are committed to maintaining a best in class score in 2024 for the Etsy marketplace, as well as engaging Reverb and Depop in benchmarking their current practices in order to build a roadmap of similar improvements for their respective organizations.

We believe a central measure of our progress is evident in employee self-disclosure of disability status. Without reason to share or enough trust between a company and its employees, individuals are unlikely to self-disclose. In 2023, 10.7% of U.S. and U.K. Etsy marketplace employees disclosed that they have or have had a disability.

Pay Equity & Pay Band Visibility

Etsy takes proactive measures at each step of the employee journey in order to ensure fair pay practices. At the recruiting stage, we determine compensation packages within our existing frameworks by comparing outgoing offers to internal roles with comparable experience. During compensation reviews, we use guideposts when determining the size of merit and promotion increases and bonuses based on performance outcomes. Additionally, all compensation recommendations are reviewed by designated Human Resources Business Partners and senior leadership to ensure equity. Etsy also periodically makes market-based adjustments to compensation that we apply consistently within and across teams, to ensure pay for internal employees is aligned with that of new hires.

As part of our commitment to fair pay practices, we completed our most recent biennial Pay Equity analysis, conducted by a third-party consulting firm, in 2022. The purpose of this analysis is to look at pay across jobs and levels to ensure our practices are fair and consistent and that compensation is not influenced by gender, or race/ethnicity.

The analysis found no unexplained pay gaps adverse to women or employees from other marginalized genders, or non-white employees. Additionally, there were no unexplained pay gaps based on intersectionality (i.e., based on the combination of race and gender/ethnicity). We plan to continue to comprehensively audit pay equity biennially with an external consultant, and conduct internal reviews several times a year in conjunction with events such as rating and promotion decisions and market adjustments.

We also introduced pay band visibility in 2022 at Etsy and Reverb. We believe disclosing individual pay band information is an important component of equitable pay practices and helps our employees and prospective candidates better understand what factors contribute to pay decisions and pay progression for their roles.

Supplier Diversity, Equity and Inclusion

Goal: Create an equitable and sustainable supply chain that supports our “House of Brands” while reducing our carbon footprint, supporting diverse businesses and bringing new economic opportunities to our suppliers and their employees.

Supplier Diversity

Etsy renewed our commitment to enable equitable access to economic opportunities by launching a new Supplier Diversity Program in 2023, including a target to reach $120 million in diverse spend across our “House of Brands” by 2025. In line with our expectations, from January 1, 2022 through December 31, 2023, we achieved $55 million in spend with diverse owned suppliers, as defined above, across our “House of Brands.”

Critical to success for our program, we invested in foundational work designed to allow us to expand and mature our program in the coming years. We added Depop into our supplier Impact vetting process to track diverse supplier spend across the entire “House of Brands.” We automated our internal reporting processes and streamlined data collection, enabling us to identify opportunities to source new suppliers or deepen and consolidate spend with others.

To further our engagement with minority-owned suppliers, we became a corporate member of the National Minority Supplier Development Council (NMSDC), a nationally recognized nonprofit certifying body and corporate network. We kicked off efforts to utilize their verified NMSDC database to identify current suppliers that are certified minority-owned and identify additional diverse suppliers to build out our pipeline.

Employment Practice Priorities

Etsy utilizes a number of vendors, contractors, and consultants, collectively our vendor partners, in the ordinary course of its business. These vendor partners are typically engaged to (a) enable Etsy to access otherwise unavailable expertise; (b) to fill short term staffing requirements (for example, temporary leave replacements); or (c) support our operations, including to deliver 24-hour multilingual customer support and trust and safety support coverage.

In 2023, we continued to educate our vendor partners who employ contractors who do work for Etsy on Etsy’s aspirational guidelines for employment practices. We continued a process to survey and evaluate our third-party partners across key practices. Where we identify gaps, we open dialogues with our vendors, using these guidelines as a north star:

•Ensuring our contractors receive a progressive living wage, adjusted for market conditions, based on location.

•Using our leverage with vendor partners to achieve a progressive and flexible paid leave policy for all full-time contractors, including vacation time, sick time, and gender-neutral parental leave.

•Ensuring all full-time contractors have access to quality medical care for themselves and their dependents.

Creative Community Diversity, Equity and Inclusion

Goal: Build Marketplaces that are Diverse, Welcoming and Inclusive Places to Sell and Shop, and Drive Equity within Creative Communities.

Our Creative Community Diversity, Equity and Inclusion Targets & Commitments

In 2023, set a 5-year public target for how many economically disenfranchised, creative businesses we will strengthen through our investments in social impact and innovation.UPDATED: Provide programs and services to support economically disenfranchised creative businesses.

Following last year’s consolidation of our Marketplace Diversity, Equity and Inclusion and Social Innovation goals under a single Creative Community Diversity, Equity and Inclusion goal, we set out to develop targets to guide our work over the long term, while continuing to drive our social impact programs that support creative entrepreneurs. We're evaluating efficient mechanisms to set targets and collect reliable data consistently. In the meantime, we remain steadfast in our work to create pathways for equitable access to economic opportunity through creative entrepreneurship.

Commitment to Diverse Imagery

In 2023, we worked to ensure that the images we proactively created and shared in our Etsy marketplace were broadly representative of the communities in which we live. In 2023, 49.7% of the people in marketing assets on Etsy marketplace-owned and Etsy marketplace-managed channels in the United States had black or brown skin tone representation or were identified as people of color.

Commitment to Economic Opportunity

Etsy understands the critical role creative entrepreneurship can play in building economic independence and freedom for communities and has long been committed to utilizing our marketplace to help makers with a creative idea build a business online. Our work aims to ensure that the pathways to creative entrepreneurship are available to all.

Etsy marketplace’s Uplift Initiative focuses on supporting creative entrepreneurs facing challenges such as lack of access to an internet connection or limited digital skills and capital to grow their businesses. In addition to Etsy’s contributions to the Etsy Uplift Fund, in 2023 U.S. buyers elected to donate the change on their orders 4.2 million times. This enabled us to distribute $3.55 million in grants on behalf of Etsy and our buyer community to support organizations driving resources to creative entrepreneurs. This year’s grantees include:

–Accion Opportunity Fund - a nonprofit organization committed to providing small business owners with access to capital, networks, and coaching, that will extend tailored support to creative entrepreneurs.

–DreamSpring - a Community Development Finance Institution (“CDFI”) working to revitalize communities through their support of small businesses across the United States, with an emphasis on comprehensive programming to support the growth of creative businesses.

–Hello Alice - a small business community catalyzer championing entrepreneurship that will provide direct services aiming to help creatives launch and grow healthy businesses.

–Nest - a leading nonprofit driving access to economic opportunity for makers in the handcraft sector that will expand financial readiness and business growth for artisans.

In 2023, the Uplift Makers program carried on Etsy’s commitment to supporting heritage artisan communities in gaining economic independence through inclusion in the digital economy. In addition to growing the number of makers within prior cohorts, this year we expanded the footprint of our work with the Oaxaca Artesanía Collective, a group of skilled craftspeople from Oaxaca, Mexico. Uniting traditional artistry that has spanned generations with their own modern interpretations, these makers utilize their pieces to honor their traditions and share their culture with buyers. Over $285,000 in sales was generated in 2023 by Uplift Maker shops.

Investing in the Creative Economy

Etsy’s investments also drive forward positive impact for entrepreneurs. In 2023, our Impact Investment Fund invested $16 million with the hope to propel economic growth for entrepreneurs via:

•Grameen America - this allocation supports the growth of microloans available for low-income women business owners and their overall financial stability.

•Community Investment Management (CIM) - this investment provides capital to demonstrate and scale responsible innovation in lending for underserved communities.

•Local Initiatives Support Corporation (LISC) - this investment is focused on growing investment capital opportunities to creative businesses or projects that support those in creative industries in under-resourced neighborhoods in the United States.

These investments provide capital and wrap around business support services to entrepreneurs, particularly business owners who face barriers to access that impede their ability to grow.

Commitment Across our “House of Brands”

Supporting our communities is important for all of our brands. Reverb Gives advances music programs globally and in 2023 provided access to musical equipment by distributing approximately $86,000 in purchase credits and awards. In 2023, Depop surveyed more than 14,000 users to understand the make-up of its community, their inclusion sentiment and the barriers to success they faced with a view to inform our marketing and Impact programming in 2024. Depop also conducted an accessibility audit of its app on both iOS and Android in the fourth quarter of 2023 with a view to running accessibility user testing and starting to address areas for improvement in 2024.

Workforce Metrics

Our mission is to “Keep Commerce Human.” Our Diversity, Equity and Inclusion goals are integral to who we are as a company: namely, marketplaces and workplaces that are made stronger by the unique and special qualities of our communities.

We are committed to transparent reporting on workforce diversity. All metrics below are as of December 31 of the stated year. Our metrics as of December 31, 2023 do not give effect to any Restructuring Plan employee departures that occurred after December 31, 2023. Overall metrics include all employees globally. Leadership is defined as Director level and above. Tech employees are defined as those employees who work on Product, Engineering, Analytics, and HR Information and Financial Systems Administration teams. Engineering employees are defined as those employees who work within the Engineering Job Family Group. Other Business Roles are defined as those employees who work in roles outside of the Tech definition, inclusive of non-tech Leadership positions. Gender and age metrics represent our global employee base, while race ethnicity metrics represent U.S. only in the below graphs and table.

We remain dedicated to diversity at the Board level. In 2022, our Board of Directors strengthened its commitment to diversity by specifically requiring that any initial list of candidates considered by the Nominating and Corporate Governance Committee for nomination to our Board of Directors include at least two qualified candidates with diversity of race, ethnicity or gender. Etsy expects to provide additional disclosures on Board of Directors diversity in our Proxy Statement for our 2024 Annual Meeting of Stockholders (“Proxy Statement”) to be filed with the SEC within 120 days of the fiscal year ended December 31, 2023. Our 2022 consolidated equal employment opportunity (EEO-1) report can be found on our Investor Relations website.

Gender Metrics - Global

† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com. For Gender Metrics, 2021 includes Etsy marketplace and Reverb, 2022 includes Etsy marketplace, Reverb, Depop, and Elo7 (divested), and 2023 includes Etsy marketplace, Reverb, and Depop.

RACE & ETHNICITY METRICS - U.S. ONLY

† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com. For Race & Ethnicity Metrics, 2021 includes Etsy marketplace and Reverb, and 2022 and 2023 include Etsy marketplace, Reverb and Depop.

AGE METRICS - GLOBAL*

*Age Not Declared was .2% in 2021, .1% in 2022, and .04% in 2023.

† Etsy commissioned an external third-party to perform attest procedures with respect to our diversity metrics for the reporting period. Full details and data methodology are available at investors.etsy.com. For Age Metrics, 2021 includes Etsy marketplace and Reverb, 2022 includes Etsy marketplace, Reverb, and Depop, and Elo7 (divested), and 2023 includes Etsy marketplace, Reverb and Depop.

Governance

Fostering a culture of ethics and accountability

Responsible Marketplace Practices

The trustworthiness of our marketplaces and the connections among our buyer and seller communities are the cornerstones of Etsy’s business. For more information, please see Part 1, Item 1, “Business—Primary Business Drivers—Trust & Safety” of this Annual Report.

Thoughtful Corporate Governance

Our corporate governance practices include an independent Board Chair, a fully independent Board of Directors (except for our CEO), independent Committee members, sophisticated and fully engaged directors with different areas of relative expertise and additional dimensions of diversity, and a balanced distribution of director tenure. For a more complete description of our corporate governance practices, please refer to our Proxy Statement for the 2024 Annual Meeting of Stockholders. More information on our governance policies and guidelines is available at the Investor Relations section of our website.

In alignment with our mission to “Keep Commerce Human” and as part of our commitment to upholding and promoting human rights across our marketplaces and throughout our value chain, we published our Human Rights Commitment in 2023. In 2023 we also published our Modern Slavery Statement, developed roadmaps for updating our supplier selection and management processes, made updates to our Supplier Code of Conduct to more explicitly include human rights, and clarified and expanded upon elements of our Imagery of Minors policy. And while the connections we facilitate are uniquely human, they are rendered ever more seamless by the power of technology and artificial intelligence (AI). In 2023, we formed a cross-functional working group that reports to our Chief Technology Officer on the responsible use of AI across our marketplaces, in our operations, and through our partnerships.

Integrated ESG Reporting

We strive to continue to innovate and evolve our ESG disclosures to hold ourselves accountable and transparently engage with all of our stakeholders. Since 2018, we’ve shared our ESG metrics alongside our financial results in our Integrated Annual Report. This practice is intended to ensure that we’re transparent about and accountable for progress against our environmental and social goals.

Risk Oversight and Management

One of the key functions of our Board of Directors is to provide informed oversight of our risk management processes. While management is responsible for day-to-day management of the material risks we face, our Board of Directors is responsible for risk oversight. Since 2019, Etsy has had a Risk Steering Committee, which consists of a cross-functional management team that meets regularly to review and discuss the significant risks facing Etsy. Periodic reports on material risk are provided to the full Board of Directors or to the Board Committee assisting the Board of Directors with oversight of management of the particular risk. The Risk Steering Committee also periodically considers areas of new or evolving risks and works to understand risk analyses and establish appropriate mitigation plans. For more information on risk oversight generally, please see “Board Oversight of Risk” in Etsy’s Proxy Statement. For information on how we manage our climate related risks, please refer to our complete TCFD response beginning on page 38 of this Annual Report. For information on how we manage our cybersecurity risks, please refer to Item 1C, beginning on page 71 of this Annual Report.

SASB Disclosure

The Sustainability Accounting Standards Board’s (“SASB”) mission is to develop sustainability metrics for public corporations to disclose material, decision-useful information to investors. Etsy’s disclosures are designed to provide comparable and consistent data. We have included below the metrics from SASB’s Consumer Goods Sector – E-Commerce industry standard that are relevant to our business. Unless otherwise noted as relating to Etsy marketplace, Reverb, or Depop, information in this section applies to Etsy, Inc. and all of its subsidiaries.

† Etsy commissioned an external third party to perform attest procedures with respect to our carbon and energy metrics for the reporting period. Full details and data methodology are available at investors.etsy.com.

Notes on Our GHG Inventory

We note that the above emissions do not include any net calculation for the application of carbon offsets.For 2021, emissions generated from our co-located data centers are included in Scope 2 emissions; we did not have operations in any colocated data centers in 2022 or 2023.In 2022, we included emissions from Depop in our above calculations. For Scope 3 - Category 1, we utilized publicly available emissions data to derive emissions calculations for several suppliers that may cause this data to not be as comparable year-over-year. For the subsection of Scope 3 - Category 1, Cloud Computing - Google Cloud (Etsy marketplace only), we calculated the emissions partly with data provided by Google and partly by our own calculation of their market-based emissions. Using Etsy’s Cloud Jewels methodology, we estimated our Google Cloud Platform’s Scope 2 energy usage and with Google’s agreement, retired REC’s on behalf of this energy usage, thus reducing our supplier emissions from Google Cloud.In 2023, we made the following updates to our methodology for quantifying our GHG inventory:1 We moved to a new carbon data management vendor allowing us to derive a portion of our quantified Scope 2 location-based emissions with different and more commonly used emissions factors, resulting in an increase of emissions compared to the emissions factors used in 2022.2 Our new carbon data management vendor derived our emissions for Scope 3 - Category 1 and included calculations to account for inflation or deflation which resulted in a decrease in emissions due to spend amounts shrinking when adjusting the dollar value from 2012 to 2022. Our vendor also derived more supplier specific emissions factors based on publicly available data from some suppliers, resulting in a decrease in emissions as the emissions data from suppliers were lower than the average EPA EEIO factors previously used. Additionally, we updated our Google Cloud Platform emissions calculation by obtaining emissions data directly from Google, resulting in an increase in emissions as the data for Scope 2 Market-based emissions was higher than estimated in 2022.3 We re-categorized emissions from upstream and fuel and energy related activities that were a result of Business Travel, Commuting, and End User Energy from Scope 3 Category 3 into Scope 3 Categories 6, 7, and 11 respectively, resulting in increased emissions in these categories and a decrease in Scope 3 Category 3 emissions. We note that this change did not have an impact on overall emissions as it is just a re-categorization. Additionally, in Scope 3 - Category 6, our calculation of Air Travel emissions was changed to include emissions from radiative force in the emissions factors, resulting in an increase in emissions, as radiative forcing includes calculations with a higher global warming potential than those without. In Scope 3 - Category 7, we updated our calculations for employee commuting to use data from government sources and data aggregators.Overall the changes in methodology in 2023 decreased our calculated emissions when compared to methodologies previously used.As a result of the above changes in scope, methodology, and our continued efforts at further accountability, some categories of emissions data are not comparable from year to year. Additional details regarding the scope and data methodologies used to calculate our GHG emissions data can be found on our Investor Relations website.

The Task Force on Climate-Related Financial Disclosures

Etsy treats climate change and its related impacts seriously. Since 2020, we have reported enhanced climate-related disclosures in line with the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations. TCFD provides a framework with four thematic areas — Governance, Strategy, Risk Management, and Metrics and Targets — and eleven recommended disclosures. The following disclosures provide information intended to address each recommendation, including references to other publicly available sources for related information. ESG and climate governance as well as our Impact Strategy are set at an Etsy, Inc. level while the results from the climate risk assessment discussed in this section are limited to the Etsy marketplace. While we have identified and disclosed a number of relevant climate-related risks, we have determined that at this time none of these risks represent a material short-term risk to our business. For a discussion of certain risks we are exposed to in the normal course of our business activities, see Part I, Item 1A, “Risk Factors.”

Governance

Board of Directors oversight of climate-related risks & opportunities

Etsy’s full Board of Directors has overall responsibility for oversight of risk management at Etsy, including management of climate risk. The charter of the Nominating and Corporate Governance Committee (the “N&CGC”) of our Board of Directors provides that the N&CGC has responsibility for periodic review of our environmental and social Impact goals and our progress towards those goals. We typically report on our progress towards our Impact goals to the N&CGC or the full Board of Directors two times a year. Historically, the full Board of Directors received briefings, generally quarterly, on risk management-related topics. Toassist our Board of Directors with its oversight of Etsy’s management of risk exposures and processes for monitoring and mitigating risk, the Board of Directors recently formed a Risk Oversight Committee. Starting in 2024, we anticipate that many of the briefings on risk-management-related topics will be done at the Risk Oversight Committee. The work of the Risk Steering Committee helps inform which risks are reported to the Board of Directors and to Board Committees. (For a description of the Risk Steering Committee’s activities, see below.)

The full Board of Directors is responsible for reviewing significant acquisitions and other large scale capital expenditures. One of the criteria we use when evaluating acquisition opportunities is whether the transaction aligns with our mission, strategy, and values, including our Impact focus. In addition, the Audit Committee of the Board of Directors oversees the disclosure in our Annual Report, which includes Impact disclosures, and our auditor’s review of our Impact disclosures, and our Compensation Committee oversees our talent and employee development programs including our policies and strategies regarding diversity and inclusion. One member of our Board of Directors is experienced in sustainability accounting practices and is a Sustainability Accounting Standards Board (“SASB”) FSA Credential Holder. Information about Etsy’s Board of Directors and its Committees, including their charters and membership, is available in the Governance section of our investor relations website.

Management’s role in assessing and managing climate-related risks and opportunities

Our Executive Team, including our CEO and CFO, review our environmental goals annually. Our CFO approves material capital expenditures, including those related to climate-related issues, such as renewable energy projects, and investments in verified emissions reductions.

Oversight of climate risk at Etsy is supported by the Risk Steering Committee, a cross-functional management team which includes our CEO and CFO. This Committee meets at least quarterly to review and discuss the significant risks facing Etsy and its deliberations inform the risk management-related topics elevated to the Board of Directors and the Board Committees.

Etsy’s Sustainability team, led by the Senior Director of Impact and Sustainability (the “I&S Sr. Director”), oversees Etsy’s sustainability strategy and implementation, which includes climate impacts. The I&S Sr. Director reports to the GM, International and VP, Marketplace Initiatives, who reports to the Chief Operating and Marketing Officer, who is the Executive Sponsor for Etsy’s Impact strategy. The I&S Sr. Director presents progress on environmental metrics each quarter to the Senior Leadership Team, including the CEO and CFO. Etsy also has three cross-functional Impact Working Groups that all meet at least quarterly to manage the implementation of Impact projects and reporting.

Strategy

Climate-related risks and opportunities identified & impact on strategy

Etsy’s climate strategy is informed by periodic identification and prioritization of climate-related risks and opportunities. To date, while we have identified relevant climate risks, we have not identified any climate-related risks which are reasonably expected to have a material short-term impact on financial or strategic business operations. We believe that this is largely due to the Etsy marketplace’s business model, the wide geographic distribution of our seller and buyer base, and our long-standing work to mitigate climate risks. However, due to the systemic nature of climate change and its intensifying global impacts, we are continuing to monitor and manage both climate-related risks and opportunities.

The following disclosures highlight the climate-related impacts identified for the Etsy marketplace, as well as the ways in which our ESG strategy seeks to mitigate risks and leverage opportunities. We define short-term impacts as those expected to occur within 0-2 years, medium-term impacts as those expected to occur within 2-5 years, and long-term impacts as those expected to occur after 5 or more years. Etsy, Inc.’s Impact goal-setting process considers these climate-related impacts.

Identified Climate Opportunities & Management Response

Identified Climate Risks & Management Response

Resilience of strategy across different climate-related scenarios

Over the past few years, we have worked with two external vendors to assess current climate-related impacts and understand how they might change under different temperature pathways over time. In 2021, we conducted a qualitative scenario analysis in key markets across Etsy marketplace’s operations and marketplace activities while in 2022 and 2023 we conducted more quantitative scenario analysis focused on physical risks to our U.S. business and key partners. As part of these analyses, exposure pathways were mapped to prioritized climate-related issues based on the Etsy marketplace’s business model, data availability, and internal stakeholder input. We used a range of representative concentration pathway (“RCP”) scenarios, with the lowest emissions scenario being RCP2.6 and the highest emission scenario being RCP8.5, as well as models and reports from the Intergovernmental Panel on Climate Change (“IPCC”). Available climate scenario inputs and results were then collated and overlaid with the Etsy marketplace’s seller and buyer information in the United States and United Kingdom as well as key partner locations, allowing the analysis to pinpoint areas of concern.

Through this analysis we found that many key geographies are expected to face some degree of climate risk under different scenarios. However, because the Etsy marketplace’s buyer and seller base is distributed globally, we do not expect physical climate risks in any one geography to disproportionately impact the business under any scenario in the short to medium-term. In addition, we believe our strategy, articulated above, will help us reduce transition risks associated with a 2 degree or lower scenario. We aim to continue improving our data collection and analysis on these topics to improve our understanding of long-term climate-related risks, quantify opportunities and, if necessary, update our strategic planning.

Risk Management

Processes for identifying and assessing climate-related risks

Our climate risk identification and assessment process is integrated into our company-wide risk management. We use a mix of consultant support, third-party physical risk modeling, and public data to ground our research and risk analysis. Once a risk is identified, our Sustainability Team, including the I&S Sr. Director and the Sustainability Manager, engage relevant internal risk owners to evaluate the risk, assess existing controls, and, when necessary, escalate for oversight by senior management through Etsy’s Risk Steering Committee (see Governance in this section above for more detail). For example, the Sustainability Team collaborates with the Advocacy Team to review climate policy proposals at the U.S. federal and state level and in key non-U.S. jurisdictions that might impact Etsy, with the Analytics Team to monitor natural disaster impacts on buyers and sellers, and with the Sourcing Team to review climate-related risks within our supplier base.

Processes for managing climate-related risks

The Sustainability Team works cross-functionally to develop management plans to address potential climate-related impacts. They develop and propose updates to environmental goals on an annual basis, including goals designed to mitigate climate risks, which are reviewed and approved by our Executive Team. For example, our goal to source 100% renewable electricity for office operations and computing load, which was achieved for 2020 through 2023, reduces our exposure to carbon pricing and volatile energy prices. The Sustainability Team developed the goal, proposed short-term targets and strategies to measure and reach those targets, and solicited approval from the Executive Team, who ensured resources were provisioned and lines of accountability were appropriately set.

Processes for integrating climate-related risks into the overall risk management

At Etsy marketplace, climate-related risks are managed as part of ESG risk and are seen as both underlying drivers of other types of risks as well as standalone risks. These risks, as well as their drivers, are monitored by the Sustainability Team. The I&S Sr. Director provides a written status update on potential ESG risks to Etsy’s Risk Steering Committee typically quarterly. The work of the Risk Steering Committee helps inform which risks are reported to the Board of Directors.

Metrics and Targets

Metrics used to assess climate-related risks and opportunities in line with strategy and risk management process

We monitor metrics related to our public environmental targets including total energy consumed, renewable energy percent, grid electricity percent, Scope 1, 2, and 3 GHG emissions including product shipments, packaging, end-user energy use, water, and outgoing waste material streams. For a historical view of our metrics, please view pages 33-37 of this Annual Report.

Internally, we track a number of additional climate-related metrics. For example, in 2023 we offset carbon emissions across our quantified Scope 1, 2, and 3 categories, which effectively acts as an internal price on our emissions. To this end, we track the annual carbon offset costs, offset cost savings from specific emissions reduction activities, and carbon offset price projections for the voluntary carbon market. Related to natural disasters, we track GMS impacts from FEMA designated natural disasters as well as the percentage of our sellers and buyers in regions exposed to extreme weather events.

For all of our employees, compensation is tied to our financial performance, as well as individual contributions. While responsibility for delivering on our Impact goals is distributed across the Company, each goal owner is responsible for incorporating work associated with advancing their goal into team members’ individual goals, which are considered when making compensation decisions. Members of our Executive Team also serve as executive sponsors for specific Impact goals to help ensure teams stay on track and have the value of executive leadership as plans are executed. For more information on our Executive Team’s goals, please see our Proxy Statement.

Scope 1, Scope 2, and Scope 3 greenhouse gas (“GHG”) emissions, and the related risks

Please view pages 21-22 and 33-37 of this Annual Report for our GHG Emissions Summary.

Targets used to manage climate-related risks and opportunities and performance against targets

We have five climate-related targets: science-based emissions reduction, carbon offset commitment, renewable energy, total energy use, and waste. Details of these targets including actions taken as part of our efforts to achieve them and performance against each can be found on pages 21-23 of this Annual Report.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and file or furnish reports, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports, proxy statements, and other information with the SEC. These reports are available free of charge on our website at investors.etsy.com as soon as reasonably practicable after we have filed or furnished them to the SEC.

We also share certain workforce metrics, such as our most recent consolidated EEO-1 report, information derived from our most recent seller census, our annual Transparency Report, and our external facing policies, including our governance policies and guidelines, privacy policy and marketplace rules on our investor relations website. Information contained on or accessible through our websites or other websites referenced in this Annual Report is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites in this Annual Report are intended to be inactive textual references only. You should not rely on such information in deciding whether to invest in our common stock. Copies of our SEC reports and other documents are also available, without charge, by sending a letter to Investor Relations, Etsy, Inc., 117 Adams Street, Brooklyn, NY 11201, by sending an email to ir@etsy.com, or by calling (347) 382-7582.

Our SEC reports are also available on the SEC’s website at www.sec.gov free of charge as soon as reasonably practicable after we have filed or furnished them to the SEC.