Etsy wants to know its shoppers – like, really know them – and it’s turning to artificial intelligence to do it.
The handmade marketplace is using AI to figure out not just what customers buy, but why they’re shopping and what they might want next. The technology is being used to build detailed customer profiles that could influence everything from search results and recommendations to advertising.
Etsy has built more precise profiles on more than 70 percent of its nearly 90 million shoppers and plans to create profiles for the rest, Chief Financial Officer Lanny Baker told the Wall Street Journal in a report published Tuesday.
The profiles track shoppers’ purchase histories, preferences and habits, including clues about whether they’re buying something for themselves or as a gift. They can also identify what shoppers may be preparing for, from back-to-school shopping and moving to a new home to collecting rare books or hunting for gifts.
The idea is to make Etsy’s recommendations less predictable than they have been in the past. Someone who bought a belt buckle, for example, might previously have been shown a matching belt or hat. A shopper who bought a baby shower gift could later receive recommendations assuming they were having a baby, Baker said.
“We’ve been kind of, somewhat clumsy about it in the past,” Baker told the WSJ. “But we’re really dedicating ourselves to getting more effective on it.”
The strategy comes as Etsy tries to turn around a recent slowdown. Marketplace sales rose 7.5 percent to $2.58 billion in the latest quarter, compared with a nearly 9 percent decline a year earlier. Baker said the more personalized shopping experience has been one factor driving the improvement.
Etsy is also taking its AI strategy beyond its own website. The company is working with ChatGPT and other AI platforms on everything from advertising to checkout options that could let shoppers purchase products directly through chatbots.
Etsy is also trying to win over younger shoppers. Its customer base has aged over the years, partly because the company lacked a strong presence on social media and streaming platforms, Baker said.
Younger customers may spend less initially, but Etsy hopes to establish a relationship with them before they reach major spending milestones such as buying a home or starting a family.
The company is also betting shoppers will pay more for higher-quality products. Etsy customers have absorbed price increases from sellers responding to tariffs over the past year, Baker said.
While Etsy had worried higher prices could push shoppers away, demand held up and customers have increasingly been willing to pay more for higher-end products.
At the same time, Etsy is trimming parts of its business to focus on its core marketplace. The company sold secondhand fashion platform Depop to eBay in July and announced plans last month to cut about 12 percent of its workforce.
Baker said the cuts are aimed at improving the customer experience by breaking down barriers between teams and making room for employees who can improve search across Etsy’s more than 100 million listings.
“It wasn’t about driving our margins up,” he told the WSJ, adding that Etsy will likely rehire for growth-focused roles.
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