What Does Etsy’s Sale of Reverb Say About Its Position in the Global Market?

News in the online marketplace game: Etsy is selling its music gear marketplace Reverb, which it acquired in 2019 as an additional eCommerce platform in Etsy’s portfolio. In 2024, Reverb made up approximately 7% of Etsy, Inc.’s total GMV.

The sale serves multiple purposes: Etsy is going to focus on its core business after the divestment of Reverb. Reverb, in turn, will be purchased by Creator Partners and Servco, two companies that own several music brands. Creator Partners operates a portfolio that includes BMI, SoundCloud and Colors+Studios.

What does this news mean for Etsy’s performance now and in the future?

Shifting Tides: Etsy Sells Reverb in Changing Market

Etsy has diversified its portfolio by acquiring marketplaces with similar business concepts to its own. These include Reverb (an eCommerce platform for trading used music gear) and Depop (a platform that allows users to buy and sell secondhand fashion).

Etsy bought Reverb and Depop during its expansion phase in the pandemic years. At the time, the business was thriving as people turned to online channels to buy and sell products.

Now, however, things are a little different. The global online economy is adapting to new trade and supply chain realities. As the conversation around tariffs intensifies, platforms like Etsy have been hit hardest by the influx of goods from overseas that are available to consumers at much lower prices.

Etsy’s Problem Is a Flood of Out-of-Concept Sellers

What is the issue with Etsy? The cost of managing multiple platforms with stagnant (or declining) sales has weighed on the company. That's how fast the tide can turn, as the market environment puts a strain on Etsy’s ability to make a profit across its portfolio. Reverb saw declining GMV over the course of the past years, while Depop’s has been stagnating.

The market is highly competitive, with many different business models vying for a share of consumer spending. On the one hand, there are generalist retailers like Amazon or Walmart that online shoppers turn to for almost all of their purchases. In concept, they pose no real threat to Etsy, which specializes in handmade products from small-business sellers.

But a changing pool of sellers on Etsy has undermined that distinction. In recent years, Etsy's marketplace has been flooded with sellers who do not adhere to the "small business" or "handmade" label, but rather sell products that appear or claim to be handmade. Dropshipping businesses included.

This led to a decline in consumer satisfaction and trust in the platform, which in turn resulted in a revenue decrease. Since 2022, Etsy, Inc. has seen declining GMV, first decreasing by -1.3% from US$13.3 billion in 2022 to US$13.2 billion in 2023, then by -1.2% the following year. This trend continued into 2024, with a -4.4% drop, resulting in a GMV of US$12.6 billion. The GMV decline is further going to be affected by the sale of Reverb. As it looks now, the post-sale decline will be -14.1%. But at the same time, this will reduce Etsy's operating costs.

Is It Possible for Etsy to Refocus on Its Core Business?

Recent market developments have put Etsy under pressure. Low-cost platforms from China, such as Temu or AliExpress, offer consumers many perky and unusual products at prices a lot of times lower than Etsy's. While the recent tariff battles aim to undermine the impact of these newcomers on businesses like Etsy, the damage has been done: It's now nearly impossible to distinguish between foreign products that adhere to Etsy's original concept and those that are looking for a broader outlet for their factory-made assortment.

In this light, Etsy’s restructuring moves can be seen as an effort to declutter the recent years’ disorder on Etsy, which has led to declining participation. Etsy’s differentiating factor has been under violation, which has already been countered through the ban of new accounts from Asia, but there remain enough workarounds to render the task a real challenge for Etsy.

What Does the Platform Shift Mean for Depop?

Depop GMV has seen incremental increases since 2023, even though growth was minor and consumers continued to have issues with the platform. Social recommerce is a popular concept right now, as is proven by Vinted’s success. But continuous spend to ensure customer satisfaction with platform services is paramount.

Given the fast-paced nature of the eCommerce market and Etsy’s move towards consolidation, it is not impossible that the company would sell Depop, given the right offer from an interested investor. This move would decrease Etsy’s GMV by another 8%, but reduce costs as well – money available to re-invest into core operations.