E-commerce companies are under pressure to offer free shipping from deal-chasing consumers, and those who don’t may run the risk of falling behind their competitors, Etsy President and CEO Josh Silverman said Wednesday.
“Free shipping is pretty much table stakes today,” Silverman told CNBC’s Jim Cramer in an exclusive interview. “About half of all the items on Etsy, buyers say, have shipping prices that are too high.”
Speaking after his handmade goods e-tailer reported better-than-expected earnings results and raised its full-year revenue guidance, Silverman said that sales were strong despite the shift in consumer preferences.
“We grew [gross merchandise sales] at 20 percent last quarter” even with buyers’ hesitation about shipping costs, he said on “Mad Money,” adding that “only about 20 percent of items have free shipping” in the broader e-commerce industry.
Etsy’s third-quarter results showed accelerating growth for the growing online marketplace, with a 41.3 percent boost in revenue year over year.
The company, which helps connect buyers with over 50 million handmade items, also raised prices this quarter, taking its commission from 3.5 percent to 5 percent per order in an effort to deliver more value to its “makers,” the CEO said.
“Charging a 5 percent commission … was, I think, fair value for our sellers, particularly because we’ve invested almost all of that,” Silverman told Cramer. “Eighty percent of that we’re reinvesting into the growth of the platform.”
And when it comes to what may be Etsy’s biggest competitor, Amazon Handmade, and the new headquarters Amazon is reportedly opening in Queens, the CEO said Etsy — which is headquartered in Brooklyn — was confident about its value proposition to potential employees.
“We think we’ve got the best team, certainly, in tech companies on the eastern seaboard,” Silverman said. “We continue to attract great talent, and the reason is, first and foremost, I think our mission is really a meaningful, important mission, and that matters.”
Shares of Etsy soared in Wednesday’s trading session, ending the day up 23.7 percent at $50.01.
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