American e-commerce site and craft marketplace Etsy (ETSY) plans to lay off 11% of its staff as part of a new cost-saving restructuring. BTIG Director Marvin Fong calls this a right-sizing move to offset the rapid hiring Etsy employed during the COVID-19 pandemic.

"So they had a lot of growth, but all of that was... concentrated in 2020 and 2021, and 2022 and 2023 have really been... digestion years," Fong says to Yahoo Finance on Etsy's growth. "They pulled forward so much demand that they have been finding it hard. And the other thing, I think, is that Etsy is your classic, very discretionary purchase. They're not selling things like Amazon."

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This post was written by Luke Carberry Mogan.

Video Transcript

[AUDIO LOGO] JOSH LIPTON: E-commerce giant Etsy announcing it's laying off 11% of its staff.

The cuts coming as CEO Josh Silverman says expenses are going up, but the company's sellers are not bringing in more sales.

Etsy trying to stay agile as they restructure and focus on key growth areas.

For more on the state of Etsy, we're going to turn to BTIG Director Marvin Fong.

Marvin, it's great to see you.

So the news here is a restructuring.

They're going to eliminate 11%, it's about 225 employees.

Just get your take, Marvin, on this news and also, as an analyst who covers the name, were you surprised by it, Marvin?

MARVIN FONG: Not too surprised.

I think-- thanks for having me on, by the way.

But I think if you look at-- first of all, we've been hearing about layoffs from other tech companies, Spotify comes to mind.

But even if you go back to this time last year, you know, we were actually at the peak of tech layoffs.

You look at December and January of 2022, that was record numbers of tech layoffs.

And actually, Etsy was actually still onboarding some headcount, because, at that time, they were saying, we grew so much during COVID.

We're just trying to catch up on a hiring.

As 2023 has evolved, it has been a challenging year for Etsy.

And now they're kind of realizing, you know, with growth kind of challenged, we do have to right size the workforce.

So they're kind of actually lagging a bit kind of the trends.

So they weren't laying off this time last year.

And now was kind of the time to right size the workforce.

So I don't really see it as anything alarming per se.

It's always good to be more agile, be more efficient.

And this will allow them to sort of reprioritize and kind of run the business with a little quicker time to market.

JULIE HYMAN: Marvin, why haven't gross merchandise sales been better for Etsy?

What's not working at Etsy right now on the demand side?

MARVIN FONG: Yeah.

So great question.

You know, Etsy will tell you if you go back and compare us to our benchmarks 2019 levels, we have grown a lot more than just about any other competitor, especially if you look at it vertical by vertical.

So home goods is their top category.

They've grown over 3x or almost 3x by that measure.

Wayfair, Beyond, which now owns Bed Bath, you know, they haven't grown nearly as much.

In clothing kind of same story for Etsy.

So they had a lot of growth.

But all that was sort of concentrated in 2020 and 2021.

And 2022 and 2023 have really been sort of digestion years.

They pulled forward so much demand that they have been finding it hard.

And the other thing, I think, is that Etsy is kind of your classic, very discretionary purchase.

They're not selling things like Amazon.

They don't sell diapers or things of that nature that are everyday consumables.

They're quite a bit on the discretionary end.

And so that's also something where the consumer, you know, especially for much of 2023, they were under so much pressure.

Necessities cost so much and eating up so much consumer budgets that it was sort of that very discretionary item that has been the most challenged.

So a couple of different factors working against Etsy.

They've been doing their best to counteract that with lots of other strategic initiatives.

But it's all kind of washed out to fairly flat growth.