Nov. 17, 2020

E-commerce is retail’s promised land

For an economy that’s almost constantly buying things, we sure have a lot of struggling retailers. That’s due to a confluence of factors, not the least of which are a saturated field of competitors and a finicky consumer.

Recently, though, retail has landed in something of a promised land with e-commerce. Our propensity to shop online has been the saving grace for IRL sellers put out by Covid-19 shutdowns. But can our inclination toward online shopping stick around?

That’s what we’re asking this week on Business Casual in a deep dive into e-commerce: how the industry’s biggest players are innovating, why it matters for our economy as a whole, and what comes next in an uncertain holiday shopping season. Today’s guest: Etsy CEO Josh Silverman.


Transcript

Kinsey Grant, Morning Brew business editor and podcast host [00:00:08] Hi, everybody, and welcome to Business Casual. I am your host, Kinsey Grant, and today we are taking on a big one. So, let's get into it. [sound of a ding]

 

Kinsey [00:00:18] A copy of "Madame Bovary," a 2-pound bag of ground coffee, a pair of trendy jeans that I'll almost inevitably send back because I'm too old to pull off an asymmetrical waistline. These are the last three things that I bought online, and they've all been within the span of about a week. I, just like you, shop online a lot. And these days, I'm shopping online more than ever before in an effort to work on my hermit skills and also avoid the spread of COVID-19. 

 

Kinsey [00:00:45] We are facing a massive shift in the ways that we buy things. More and more, that buying is happening on screens instead of at checkout counters face to face. In fact, according to data from IBM, the pandemic has accelerated the shift away from physical retail into digital retail via ecommerce by roughly five years. And as far as I can tell, it won't be easy to turn back that progress. 

 

Kinsey [00:01:08] But, I'm just a humble podcast host with a slight and sometimes manageable shopping addiction. So that is why I am bringing in an expert in ecommerce to help me understand its future, Josh Silverman, CEO of Etsy. Welcome to Business Casual. 

 

Josh Silverman, CEO of Etsy [00:01:23] Thanks for having me. Great to be here. 

 

Kinsey [00:01:24] I am excited to talk with you today. Like I said, I want to talk about retail's future and parse through this seemingly kind of sudden, and certainly had been accelerating at a decent clip for a while, but a pretty [chuckles] meaningful shift into a preference for online shopping, and talk about whether or not that can be sustained as we move forward in 2020 and into 2021. 

 

Kinsey [00:01:45] And I want to talk about this now because we do have a fairly meaningful shopping season coming up. We are close-ish to the holidays. I know that 2020 has felt like a crazy time warp of a year for a lot of us, but the holidays are still coming. People are still going to be doing a lot of shopping for all we can tell. So let's understand how they're gonna do it and what it means for the business world. 

 

Josh [00:02:07] Yeah, looking forward to it. It's definitely gonna be an exciting holiday season. And there's no doubt that this year has changed a lot for ecommerce. So there's a lot to talk about. 

 

Kinsey [00:02:14] Yeah, absolutely. And I think that we should just get right into it, shall we? We are definitely going to talk about COVID-19. It is certainly inevitable in the business world in 2020. But before we do get into all of that, I want to get a better understanding of why ecommerce is so important for our broader economy. 

 

Kinsey [00:02:33] So we know, according to the Census Bureau, seasonally adjusted retail ecommerce sales for the second quarter of 2020 totaled $212 billion, which was up 32% from the first quarter. So, Josh, can you offer some context for why that increase happened and what that increase means for retail? 

 

Josh [00:02:53] Yeah. Well, look, if you're listening to this podcast—if you're listening to podcasts at all—you probably do a ton of shopping online. And certainly, if you listen to this podcast, what's helpful to realize, though, is most people who are listening to this podcast aren't like everyday Americans. So more than half of people living in the U.S. shopped rarely, if ever, online before 2020, which a lot of us are surprised by. But ecommerce made up about 11% of total retail in 2019. And suddenly now in 2020, it's 16%. 

 

Josh [00:03:29] So that's a massive, massive increase. And what's happened is there's tens of millions of people who rarely, if ever, shopped online before the pandemic, who all of a sudden need to shop online and are discovering that it's actually pretty convenient and it works pretty well. And then, of course, we've got a bunch of people who would shop online only occasionally, maybe once every three or four months, that are now suddenly shopping online like every week. 

 

Kinsey [00:03:52] Yeah. I think that's so important to really get a good understanding of before we get into this conversation—is that online shopping feels like such an everyday activity for so many people listening to this. But when we think about it in the grand scheme of all of the money being [chuckles] spent in this economy on retail, it's actually pretty small. 

 

Kinsey [00:04:09] Why do you think that we—and we, as in the business community—have put so much pressure on online retail and let ecommerce account for so much more than it actually does in reality, when we understand, you know, the nature of retail in the U.S., at least. 

 

Josh [00:04:23] Well, it feels really big and it is really big. You know, 11% of retail in 2019 is still a lot. Amazon was still worth hundreds of billions of dollars. Now it's worth, obviously, you know, approaching $2 trillion. But it was approaching $1 trillion even in 2019. So it was still a lot. 

 

Josh [00:04:41] But, we accomplish a lot of things when we shop. One of them is that we actually need something. That's the reason most of us go and buy something in the first place. But another element is that it's social—that it provides a form of entertainment or form of release sometimes. And there's been a perception that shopping offline is very convenient and that shopping offline is social. You get a chance to get out beyond the Main Street or be in the mall. 

 

Josh [00:05:06] And more and more of those needs, I think, are now being met online, and people maybe needed to try it and experience it to understand how convenient it can be. And even at times how social it can be. And so I think that's gonna change perceptions quite a lot. 

 

Kinsey [00:05:22] Yeah. I think the convenience aspect is pretty easy to grapple with. We can understand that it's easy to just hop on in, like, to my earlier point, buy a big giant bag of coffee because you don't ever want to run out. But, the social commerce aspect, I also think is really compelling. Can you explain a little bit more how buying things online can become a social process? 

 

Josh [00:05:41] Sure. First, I think that people are generally in two modes when they're shopping. One is the directed shopper, and she has a clear idea that I need to buy this. I need six pounds of coffee. I want Arabian, I want dark roast. She knows just what she wants. And so she is focused on what's the price of it? How long is it gonna take to arrive? Is it gonna be heavy to lug back to my house, you know, yada, yada? There's a set of convenience factors. 

 

Josh [00:06:04] And online and offline have a different set of pros and cons for people. And I think there's been a perception that going down the street and getting it and having it in my apartment right away or my house right away is the sort of fastest and easiest way to do it. But actually, I think people are more and more realizing that ordering online can have a different set of conveniences and also, by the way, drive a lot of value for people. 

 

Josh [00:06:27] The social element is different. And first, I want to say that the more disposable income you have, the more opportunity you have to shop socially. And so I do want to acknowledge that there's a part of—obviously a large part—of the population who has just enough to get by, and particularly during a time of pandemic, doesn't have the opportunity to have a lot of discretionary spending. So it's important to acknowledge that that's true. 

 

Josh [00:06:52] But for many people, they also have some amount of their budget that is for, you know, inspiration for a little bit of luxury, a little bit of indulgence. And frankly, to get out of the house and be around a little bit. When I was younger, going to the mall was something you did to pass time, right? It was just something you did for fun. 

 

Josh [00:07:09] For a lot of people, window shopping is a way that they get inspiration. They go to a few of their favorite stores and they get inspired by what's the home decor style that's hot right now or what clothing style is in right now. And so that sense of inspiration and being social is something that offline retail did for us for a couple of hundred years. 

 

Josh [00:07:29] And all of a sudden, we have different ways, you know, Etsy, obviously, we focus a lot on that. There's also Instagram and Pinterest and other ways that we can get inspired. We can get a sense for the latest trends and what influencers or other people are shopping for or doing. 

 

Kinsey [00:07:45] Yeah, we talk about it a lot on this show—this pivot to living so much more of our lives online than we previously had been used to. And it certainly extends to retail and the ways that we buy the things that we need or the things that we even just want and find inspiration for what we should want next season or next year, what have you. But it is also in any way, you know, in many ways right now, it's the way that we talk to friends. It's the way that we learn. It's the way that we go to college classes. [laughs]

 

Kinsey [00:08:12] And I think that we can't undervalue that shift to online. But I'm curious about how that had been evolving prior to 2020. Did you see the momentum happening as I guess, maybe as you expected to? Etsy was founded in, what, 2005? It's been around for a while in terms of a tech-ish company. So is this the pace that you expected for ecommerce from Etsy's perspective? 

 

Josh [00:08:37] Well, until 2019, yeah. So first, Etsy was founded in 2005, and before the pandemic hit, Etsy had over 2 million sellers and over 50 million buyers. And we were on pace to do 4 or 5 billion dollars a year of commerce. Growing really nicely. And so I think that that was strong evidence of the growth of ecommerce. And in particular, I do think Etsy's a little bit different. Etsy is about keeping commerce human. That's our mission. It's keeping commerce human. 

 

Josh [00:09:09] So in a world where everything is becoming more commoditized, where you're getting more and more stuff that's cheap and it arrives fast and you've forgotten about it and put it in a landfill 10 minutes after you've used it, I think there's some desire to maybe buy fewer things, but have those things mean more. Express who you are. Last longer. Be recycled. And connect with the actual maker. Connect with other people in the process of buying. 

 

Josh [00:09:36] I think that's incredibly important, and I think a lot of people out there think that that's incredibly important. So when you come on Etsy, you're actually connecting with the person who made the thing. And, you know, I have some straws that I use to drink my iced coffee every morning, and they were made by a glassblower in the Midwest. And every morning when I drink my iced coffee, I think of her and this beautiful artwork that she made that I get to drink out of every morning. And it's a small piece of joy in my morning. 

 

Josh [00:10:04] And I think each of us wants that more and more. And so I think the opportunity to connect with amazing artisans, amazing craftspeople from around the world—that's something that wouldn't have been possible before. And frankly, when you walk down Main Street, you're not going to get that. 

 

Kinsey [00:10:19] Yeah. 

 

Josh [00:10:19] So Etsy, you know, provides that. 

 

Kinsey [00:10:21] Yeah. I think it's fantastic and incredibly important, especially as a company that is growing and has a ton of momentum and excitement around Etsy right now. I have to wonder, to borrow your words, the rising tide that should [laughs] theoretically lift all of us up together. What is the take on Amazon as far as ecommerce is concerned? 

 

Kinsey [00:10:43] Obviously, Etsy and Amazon are after different audiences and are doing different things. But do you think that this Amazon effect that we point to all the time can be a net good for all retailers who are trying to execute on this ecommerce play? 

 

Josh [00:10:57] Well, I think Amazon sets the table for all of us in ecommerce. It sets a standard that we are all measured against. And I think, to the benefit, it's created a habit around ecommerce. It's made ecommerce safe and convenient for millions and millions of consumers around the U.S. and around the world. And I think it drives down prices and it allows people to buy stuff cheaply and have it arrive quickly. And for a lot of things, that's what people care about. 

 

Josh [00:11:23] And so in those ways, I think it's had a real benefit. I think it's a vortex that is consuming everything we buy and it's commoditizing everything we buy. And I think there are things out there which should not be commoditized. When a craftsperson makes something beautiful with their own hands, that's made just for you, there's something special about that. 

 

Josh [00:11:48] And, you know, you're wearing a very nice sweater. Someone might have knit that by hand and put time into picking the yarn and knitting it just exactly for you. And if you just throw it up on a website with 50 mass-produced things made in China, it doesn't have a chance to stand out and to show why it is beautiful and different and expresses your individuality. 

 

Josh [00:12:09] And that's what Etsy's for. Etsy is to give the small makers, the individual makers, a real chance to stand out and to show what they do differently and what they do better. So I think there's a really important role for Amazon and I think there's a really important role for Etsy. I think we both do things that are very, very different. 

 

Josh [00:12:29] What I think is going to be challenging is I think there's a lot of people out there that are trying to sell the same mass-produced items that you can buy on Amazon. And ultimately it becomes a race to who can sell it cheaper or ship it faster. And I think that's going to be very difficult. 

 

Kinsey [00:12:45] Yeah, I'm sure it will be. It's so funny you bring up this sweater in particular, because this is a sweater that I took from my mother's closet that she's probably had since like the '70s or '80s. She got it when she was, like, in her 20s, I think she said. And I put it on today thinking, [laughs] like, yeah, this sweater's really seen things. [chuckles]

 

Kinsey [00:13:03] It's not like some fast fashion buy that I got off the street at, like, at Zara or something. It's like a sweater with a story. And there is a special place in my heart because of that. You think differently about the clothes you wear or the things you buy when they have a story to go with them. 

 

Kinsey [00:13:17] And certainly that isn't always the case with things that we buy from something like an Amazon. But I wonder if it's ever possible for these smaller retailers, whoever knit this sweater, to compete with some retailer that is selling on Amazon. Is it logical to even wonder if they can compete? And do you think that it ever would be possible for them to? 

 

Josh [00:13:38] I think, first, I use that exact same language when I'm talking about Etsy. When you buy something on Etsy, it comes with a story. You know, oh, I love your sweater. Oh, I bought it on Etsy. And, you know, the woman who makes it lives in Turkey. And here's how she makes it. And here's the wool she uses. 

 

Josh [00:13:53] You know, where anything you bought on Etsy it would be—or on Amazon, it would be, oh, I bought it on Amazon. That's always the end of the story, [laughs] not the beginning. There's never a story after I bought it on Amazon, right? So I do think people want to see self-expression in the things that they buy and creativity in the things that they buy. 

 

Josh [00:14:10] You'd never say, oh, I cared so much about getting this present for you that I bought it on Amazon. You'd never say, I had 30 minutes free and I just wanted to be inspired, so I went to Amazon. 

 

Kinsey [00:14:24] [laughs] Yeah, that's very true. 

 

Josh [00:14:25] There's certain, like, fill in the blank sentences you just would never fill in with Amazon. So there is a role for those. Etsy is the place I cared for you so much that I wanted to get you something special. So I got it on Etsy, right? 

 

Kinsey [00:14:37] Yeah. 

 

Josh [00:14:37] I wanted to be inspired, so I got it on Etsy. But I think that for, you know, we're seeing thousands and thousands of e-tailers pop up and tens of thousands, hundreds of thousands of e-tailers pop up. And in fact, if you look at what's happening in the stock market right now, all of these ecommerce builder sites have huge market caps. So the bet is that there's gonna be 100,000 places to buy things online. I think that's exceptionally unlikely. I think there's gonna to be like 50. 

 

Kinsey [00:15:06] Interesting. Why is that? 

 

Josh [00:15:08] Or 100 places to buy things online. Because I think the brain only has room to remember a few brands. 

 

Kinsey [00:15:14] Yeah. 

 

Josh [00:15:14] It takes cognitive effort to remember a brand, and people aren't willing to invest a lot of time and energy remembering a brand they're not going to use very often. And so if this sells pretty much the exact same thing Amazon sells for 1% cheaper, or it arrives one hour sooner occasionally, I'm not sure people are going to prioritize that. 

 

Josh [00:15:36] So anyone who's selling things that come with a barcode, Amazon sells that too. And how are you different and why are you better and are you enough better? And is that relevant often enough that you can earn one of the precious few spaces in someone's brain that they're going to remember you? 

 

Kinsey [00:15:54] Yeah. 

 

Josh [00:15:54] Right? And if not, I'm not saying you'll never get a sale, but your sale will always be downstream of Google or Facebook. Someone needed to go to Google then and search for the thing and then find you. And most of the economics then are going to end up at Google or Facebook. If you can't become an organic destination, it's very difficult to have a business that's profitable at any scale. 

 

Kinsey [00:16:18] Do you think that there are any subsectors within the broader retail landscape that are better suited for growth within ecommerce? 

 

Josh [00:16:27] You know, I think we'll end up buying most things online. I'm old enough to have been building up business in the first internet bubble of the late 1990s. So I was a co-founder and CEO of Evite in 1999 and 2000. And the joke then was pet supplies. There was something called Pets.com. And it went public and was worth a billion dollars and then was worth nothing. 

 

Josh [00:16:51] And everyone laughed and said, what a stupid idea, buying pet food online, because pet food is heavy, and it costs a lot to ship, and never, ever will things that cost a lot to ship succeed online. And that was the belief for 10 years or so from, call it, 99 to 2008 or so, you know, people thought you'd never buy. 

 

Josh [00:17:11] And now, obviously, there's some very, very successful ecommerce sites that focus only on pet food that's delivered to your home. And they're doing great. By the way, Etsy sells all kinds of pet supplies, [Kinsey laughs] which is great. [chuckles] I think to say that something's not appropriate for ecommerce is a pretty high bar. Most things over time, at least part of the business, moves to ecommerce. 

 

Kinsey [00:17:34] For me here, it brings to mind the question of size. You guys are a big company, almost $16 billion in market cap, last I checked, right? So the question is, what about the little guy and what about the mom-and-pop retailer that really needs to create an online presence to be competitive, but maybe doesn't have access to the kind of scale and tools that a company like Etsy does? 

 

Kinsey [00:17:55] So do you think that maybe, I don't know, this leads to some sort of a bifurcation of retail where there are those who can and there are those who cannot in terms of ecommerce? 

 

Josh [00:18:04] Well, I think that there are folks who are the friends of the small. Etsy is very much the friend and partner to the individual artisan. An individual artisan who loves, you know, making pottery. That's what she does. And, you know, I actually worked for eBay for a bunch of years. And at eBay, our sellers thought of themselves as business people and they were looking for something to sell. 

 

Josh [00:18:28] At Etsy, our makers, our sellers, think of themselves as artists, and they're looking for people who want to buy their artwork. And so let's say I make ceramics. I don't want to become an expert in SEO. I certainly don't want to become an expert in machine learning. All of this stuff makes my head explode, you know, what is a Google Play and how do I advertise on Facebook? And it just seems impossible. 

 

Josh [00:18:50] And that's what Etsy does for her, right? All she needs to do is open a shop on Etsy, which takes 15 minutes or so. It cost 20 cents to create a listing. And she's up and running. And she's selling all of a sudden to an audience all around the world. And we take all of the complexity out. We handle—she can press one button and we'll print the shipping label for her. We handle marketing her products. So it makes it really easy. 

 

Josh [00:19:19] For mom-and-pop retailers out there, there's folks like Shopify and Wix and others who are also trying to make it super-simple for them to, with just the click of a few buttons, create a shop online. I think the challenge for many of those small retailers is getting online is not the hard part. It's figuring out what you're doing differently and why that matters enough to rise above and to actually succeed. 

 

Kinsey [00:19:43] Yeah. You have to differentiate yourself if you want to do anything. But certainly to take advantage of these third-party sort of companies that are out there trying to make lives [chuckles] easier, they exist for a reason. And I think there's also a reason that they are so well-funded and so successful right now because there's a need, and that is the name of the game and this ecommerce conversation we're having. 

 

Kinsey [00:20:02] So, Josh, we are going to talk, finally, about drumroll, please, COVID-19 and its impacts on the ecommerce space in just a second. But before we do that, we are going to take a short break to hear our partner. —

 

Kinsey [00:20:15] And now back to the conversation with Josh Silverman. Josh, COVID-19 obviously is a thing that [chuckles] has happened to all of us and one that we have certainly been talking about a lot on this show and the business world at large. What has the pandemic done to ecommerce? How has it impacted our perception of the ways that we shop and especially the ways that we shop online? 

 

Josh [00:20:38] So first, you know, it's been a horrible thing for the world and you'd never wish it on anyone. And if I could give it back in a heartbeat, I would. It has created a set of winners and losers online. And I think it's been incredibly binary. You are either a winner or a loser. 

 

Josh [00:20:55] If you're a winner, you have those ecommerce companies have benefited very, very meaningfully and probably permanently. And if you're a loser, it has really been very, very painful. So, if you're in the food delivery business, it's been great for you. If you're in the event ticketing business, it's been horrible. If you're in the weddings business, it's been horrible. 

 

Josh [00:21:16] For Etsy, it's driven a lot of consumers online. And it has, when they're coming online, they can't rely on getting things quickly from other places. They're open to, hey, what's going on at Etsy? And they're discovering that there's a lot of amazing stuff for sale on Etsy. And so our sales last quarter were up 119% year over year. 

 

Kinsey [00:21:41] Wow. 

 

Josh [00:21:41] So it's been an extraordinary accelerant to our growth. And I think people are having amazing experiences on Etsy. They're connecting with small businesses at a time when they want connection. They're feeling the ability to keep commerce human even while they're online to deal directly with the maker, to support small businesses, and to express their individuality. And I think that that's going to be a lasting habit for people in the months and years to come. 

 

Kinsey [00:22:11] Yeah. I love trying to take these broad strokes, ideas of what's going on in retail and in ecommerce, because I think understanding the big picture trends are so important. But, I also want to just reiterate how important [chuckles] it is to recognize that no two retailers are exactly alike. There are vastly different experiences for retailers based on what you're selling, where you're selling it, how you're selling it. And that matters. 

 

Kinsey [00:22:35] In Etsy's case, any time you Google Etsy right now, masks will immediately pop up. You guys did a ton of business in, you know, with masks as we started to wear face coverings earlier in 2020. And I think illustrates that it kind of matters what you're selling and what you're doing [laughs] in determining how successful or unsuccessful you are as a retailer. 

 

Josh [00:22:56] Yeah, that's true. In many ways, the pandemic has kind of been the perfect storm to highlight the strengths and uniquenesses of the Etsy model. So if we're talking about masks, it's not true that we've sold a ton of masks. [Kinsey laughs] We sold tens or hundreds of tons of masks. In fact, we've sold, so far this year, more than $500 million worth of masks. 

 

Josh [00:23:18] And to be clear, we basically—that was a product that didn't exist as of March of 2020. And by the second week of April, we had over 10,000 sellers who are making and selling masks. So, I think that does highlight the unique strengths of the Etsy model, where on April 2, the Centers for Disease Control changed its guidelines and said that masks they now recommend. And within a week, we had thousands of sellers, and within two weeks, we had tens of thousands of sellers who were making and selling masks. 

 

Josh [00:23:53] So this was sort of like, you know, cottage industry coming to the rescue of all of America at a time that it needed it. And we don't require purchasing, you know, units three months in advance. We don't require getting our factories up and running. We don't require storing things in warehouses. A maker pulls out her sewing machine, she makes a mask, and she sends it directly to the buyer. 

 

Josh [00:24:18] For many other sellers, even, you know, if they were purely online before the pandemic, they all of a sudden had big supply chain issues where the items that they wanted—toilet paper or hand sanitizer to pick two obvious examples—suddenly there was a huge amount of demand, but they couldn't get their hands on supply, and they couldn't ship it. 

 

Josh [00:24:42] And their warehouses were under tremendous pressure to deliver at a time when they're not supposed to bring many people in to work in their warehouses. And everyone in the warehouse has to stay distant from each other. And so people who had centralized supply chains, which is most people in ecommerce, felt a lot of pressure that even though the demand was there, they had a hard time fulfilling it. 

 

Kinsey [00:25:02] Yeah. It's all about when you're handed a moment, you want to take it and seize it and capitalize on it as much as you can. And to your earlier point, there are winners and losers in this season of life, at least for retailers and for ecommerce players here. How do you think that winners more broadly are going to keep this momentum going as we head into the holiday season and beyond? Do you see this shift to ecom sticking around for everybody, or is this a momentary blip for all of us, and we'll go back to going in-store at some point? 

 

Josh [00:25:34] Well, first to speak just to the general trends. I mean, there are a number of tailwinds that are happening right now and fewer headwinds, and you'd expect the tailwinds to lessen and the headwinds to increase in the future. So on the tailwinds side, it's still true in most places that people don't feel comfortable going outside. And even if you can go into your local retailer, it's not very much fun. 

 

Josh [00:25:57] You know, it's hard to try on clothing. You may or may not be allowed to try on clothing. You can't bring all your friends with you. You're wearing a mask. It's just not that pleasant. It's not that fun. And some of those retailers are closed, and some of them may not reopen. So all of that is providing a turbo boost to ecommerce. In addition to that, you have fewer opportunities to spend your money other than ecommerce. 

 

Josh [00:26:21] So, for example, people are not traveling much and they're not eating out much. And so a larger share of their discretionary spend is going to retail right now. All of that is providing great tailwinds for ecommerce. And I would expect that to lessen. I would expect that travel will reopen, restaurants will reopen, and the offline shopping experience will get better. And all of that will provide some pressure on ecommerce you're seeing today. 

 

Josh [00:26:47] The other thing we haven't experienced as much as I would have expected is meaningful effects of a severe recession. Tens of millions of people are out of work. And that is very distressing to me and to you, I'm sure, and to everyone. We would expect that to have had a bigger impact on consumer discretionary spending. And I still expect that it will. You know, we've had quite a lot of federal stimulus, and if we see more federal stimulus in the near term, that might really help. 

 

Josh [00:27:14] But without that, I think we're going to see the effects of the recession. So over the next near term, I won't be surprised if ecommerce—the turbo boost in ecommerce lessens a little bit. But I think the change in behavior, where people, millions of people have now learned that going online is fun and safe and convenient, I think that will cause a permanent change in shopping behavior that will have pulled forward ecommerce adoption. 

 

Josh [00:27:43] Is it going to stay five years or is going to go back to four? I'm not sure. Somewhere between three and five years in the United States, ecommerce adoption will have been pulled forward. For each individual retailer, what will it mean? What does it take for them to hold on to these gains? They need to stand for something different. They need to do something different. 

 

Josh [00:28:03] If you have a memorably different and better experience than Amazon, you've earned the right to maintain the loyalty of the people you shop with. But you can't just be Amazon 2% cheaper or Amazon one hour faster. You know, it's got to be truly a better or different experience. 

 

Kinsey [00:28:20] Yeah, it's so true. And it's interesting to hear your perspective on this—that this turbo boost might not last forever. But in some respects,[chuckles] it'll stay boosted for a while because I imagine there will be this sort of culling of in-person retailers, of bricks-and-mortar retail, because we can't feel safe to go shopping right now and they'll close. And then we'll have no choice but to shop online in a lot of ways. 

 

Kinsey [00:28:45] So I have to wonder if this is just kind of the, to borrow the words on everybody's mind right now, this new normal—is this is how we're going to shop. And the growth might slow a bit, but our standard for how we shop is going to shift meaningfully and probably we can't undo it. [chuckles]

 

Josh [00:29:03] Yes, that's almost certainly true. There's a lot of, sadly, I think, there's a lot of small businesses will tragically, certainly—many, many small businesses have gone under or will go under and will not come back. And so offline retail will be impacted by that to a great deal for many years now. 

 

Josh [00:29:22] I have a lot of confidence in the inventiveness of the small business people and the entrepreneurs. I'm confident that we're going to come up with a lot of great new small businesses from this—from these ashes that will, I think, provide a lot of great innovation and economic opportunity for millions of people. 

 

Kinsey [00:29:38] Yeah, and they are important and we need them out there. So, we have gotten a wonderful understanding of the changes that are at play in ecom. And I say wonderful, meaning, insightful. [chuckles] Not all of it is happy and great. But we are going to take a quick break to hear from our partner. And when we come back, talk a little bit more about the future of ecommerce and the holiday season and all that good stuff. —

 

Kinsey [00:30:01] And now back to the conversation with Josh Silverman. So Josh, we've talked about whether or not this momentum in ecommerce is going to stick around in the long term. I have to wonder, in the shorter term, as we finish 2020, [chuckles] hopefully put it to bed and never wake it back up again, what do you expect from ecom during the holiday season? 

 

Josh [00:30:20] Well, it's certainly going to be different than any holiday any of us have experienced in anyone's lifetime. But I think at a time when we are forced to be distant, we care even more about finding ways to connect. So I think that the shopping season will be meaningful. I think people are still going to want to buy things online. I think they're going to still want to celebrate. 

 

Josh [00:30:41] Fun fact—I was expecting Halloween sales to be really depressed on Etsy because Halloween parties are—Halloween is the biggest party night of the year. And that I know, actually, from going back to my Evite days. Halloween is bigger for parties than New Year's. 

 

Kinsey [00:30:59] Interesting. 

 

Josh [00:30:59] And this year is a tough year to throw a Halloween party. So I thought, oh, gosh, we're not going to sell nearly as many Halloween stuff. And yet, we sold the same percentage of our sales for Halloween-related this year as every other year. So people are finding a way to celebrate differently, and still want to show and celebrate these holidays. 

 

Josh [00:31:21] I think they're going to want the gifts they give to be even more sort of personal and meaningful. I think that's where Etsy shines. I don't know the effects of the recession yet. And we've talked a little bit about that. But I expect that every week that goes by, where we don't have federal stimulus, unemployment insurance, and where the economy continues to be hurt, it's going to be harder and harder for people to spend money. So that's going to be difficult. 

 

Josh [00:31:44] And then I think people are concerned about whether things are going to arrive on time. You know, the logistics and shipping issues that have been very widely discussed. For Etsy, people have always been nervous that items won't arrive in time for the holidays [laughs] on Etsy. And so, Christmas tends to end on December 15 for us, where the 20th and 21st are huge days for other ecommerce players. So in some ways, I think it's going to kind of level the playing field for Etsy versus other ecommerce players. 

 

Kinsey [00:32:11] Do you think that consumers are prepared for that playing field [laughs] to be leveled? Do you think they know that Christmas actually is December 15? [laughs]

 

Josh [00:32:18] You know, last year the holiday shopping season got shortened by six days. So the calendar moves every year and the length between Thanksgiving and Christmas Day actually widens and shortens by up to six days. So last year, it got six days shorter. And sure enough, everybody waited until the day after Thanksgiving and then just spent the same amount of money in six fewer days. 

 

Kinsey [00:32:42] OK. [chuckles]

 

Josh [00:32:43] So everyone procrastinated to the last minute. If there's one thing I've seen people be good at, humans be good at, it's procrastination. So I've been pretty skeptical that they would pull their shopping forward. However, what we are seeing at Etsy is that people are shopping earlier now for the holiday. So when we look at keywords like tree ornaments, they are spiking this year earlier than they spiked last year. So I do think they're going to pull their shopping behavior forward, at least to some extent. 

 

Kinsey [00:33:12] This [chuckles] when to buy and when to expect your shipment to actually show up has been something very interesting this year, especially as we've talked about in this conversation already with the trouble at USPS and just any number of issues that the Postal Service has faced. But it's not just them. And we also had like, UPS and FedEx saying that they're either at or nearing capacity and that retailers need to prepare themselves. 

 

Kinsey [00:33:37] That's certainly been one challenge that I think, to your earlier point, with last-mile deliveries and innovations, we've been trying to figure it out. What are the other headwinds that you think are facing retail and especially ecommerce heading into the holiday season? And do you see any sort of big-picture innovations that are happening, like point of sale or marketing or payments or what have you? 

 

Josh [00:34:00] The other big one—many retailers are concerned about their supply chain and their fulfillment. So they're concerned that their inventory isn't going to arrive from the manufacturers, and that their ability to pick, pack, and ship at the warehouse is going to be constrained. And as we look at COVID cases spiking again, the potential for more lockdowns, we could well see a scenario in late November. 

 

Josh [00:34:26] And if you look what the models say—the healthcare models say—is like late November and mid-December is exactly the time when you might imagine having restrictions on not allowing people to come into warehouses and a lot of factories having a harder time producing product. So I think a lot of e-tailers are really concerned about their ability to keep inventory in stock. 

 

Josh [00:34:47] The demand is likely to be there, but their ability to actually keep that inventory in stock and ship it is something they're nervous about. And as a result, we're seeing people run their cybersales now. So they're sort of running away from the cyber weekend, which is the weekend immediately after Thanksgiving, when most people in ecommerce have run their biggest sales and leaned in the most. 

 

Josh [00:35:10] Etsy is still very much leaning in. This again highlights the difference of our model. You know, 3.7 million makers who make from their home and ship directly to you means that those are concerns and constraints that we don't have. But for most of the industry, I think they're pretty concerned about that. 

 

Kinsey [00:35:28] How do we solve this? [chuckles] Other than earlier promotions, is there a way to ensure that things get where they need to get on time? 

 

Josh [00:35:37] I think for e-tailers, they're trying to plan their inventory. They're trying to lock in supply earlier with their manufacturers. They might end up running a lot fewer sales. You know, Amazon prioritized essentials. They said we're gonna—and in fact, they locked out all their third-party sellers. So for months, all of the small businesses that market on Amazon discovered that Amazon wasn't going to prioritize them, and that they weren't going to be able to sell in the months of May and June. 

 

Josh [00:36:05] So I think we're gonna see e-tailers make hard choices around what items they're going to have enough depth around and are they going to choose to market and sell. And I think I am concerned that it could squeeze out the smaller players in this time. So let's see. 

 

Kinsey [00:36:21] Right. And this dual effort of trying to be the champion for the little guy on one side of things and then also face the reality that this is not always the case is certainly interesting and something I have really enjoyed learning more from you about. 

 

Kinsey [00:36:35] So, Josh, thank you so much for taking the time to come on Business Casual and share these wonderful insights with me. It certainly is a time of a lot of change within retail and within ecommerce, more specifically. But I think there is a lot to look forward to in terms of business prospects and what comes next. So I really enjoyed talking about all of that with you. And I'm really thankful for your time. 

 

Josh [00:36:56] Thanks for the great conversation. 

 

Kinsey [00:37:03] Thank you so much for listening to this episode of Business Casual. We are talking about ecommerce this week because it's shopping season. So I want to hear from you. What is the best gift you've ever given or received that was purchased online—or maybe the worst or maybe just the weirdest. Tweet at me to let me know. I am @KinseyGrant. That's @K-i-n-s-e-y-g-r-a-n-t. And I'll see you next time. [sound of a ding]