Etsy plans to test its first-ever loyalty program as it aims to boost sales

Etsy said Wednesday it will begin testing its first-ever loyalty program in September, a move designed to boost the e-commerce site's sluggish sales and draw in occasional shoppers.

The New York-based company said select buyers will receive an invitation for the program, which will offer free shipping across the U.S. and access to discounts.

“We want people to start their shopping journey on Etsy rather than come to Etsy when they’re just looking for something very specific,” Raina Moskowitz, the company’s chief operating and marketing officer, said in an interview.

Etsy is launching the program — called Etsy Insider — with the aim of reversing a decline in its gross merchandise sales, a measure of the amount of goods sold over a certain period.

Etsy did not disclose how much customers must pay for the new loyalty program. But Moskowitz said the monthly fee will be close to the cost of a latte. She also said the company will decide on whether or not to do a nationwide rollout of the program after seeing what resonates with consumers.

The company with roots as an online crafts marketplace experienced a boom in its business during the COVID-19 pandemic, when homebound consumers turned to it for items such as artistic face masks. But it's been facing more challenges since the worst of the pandemic eased and consumers, who typically go on its site to buy discretionary items, began to feel more pressure from inflation. Like Amazon, it is also facing more competition from Temu, the online retailer owned by the Chinese e-commerce company PDD Holdings.

During the first three months of this year, Etsy reported merchandise sales on its marketplace were down 5.3% compared to the same period last year. Consolidated sales, which include purchases made by consumers on two other online sites it owns, had declined by 3.7%, following a slight dip last year.

The company's stock price has lost nearly 78% of its value since late 2021. In December, it said it would lay off 225 employees, which represented nearly 11% of its workforce.

Though Etsy’s business has softened due the wider economic environment and the loss of pandemic-era sales, some of the challenges can also be tied to the fact that the platform has become more challenging for shoppers to navigate, said Neil Saunders, managing director at GlobalData Retail.

Saunders said he calls the evolution the “junkification” of Etsy.

“Etsy used to be a very focused site that really was about makers, crafting, authentic and unique products,” he said. “That’s still true to some extent, but there’s a lot more junk on the site and a lot of random things being sold.”

Furthermore, Saunders said Etsy's search functions have gotten worse, which has the potential to turn customers off.

More recently, the company has put more focus on returning to its artisan roots as it seeks to differentiate itself in a competitive e-commerce landscape.