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Etsy (ETSY) vendors sold nearly $750 million worth of masks in 2020, as a whole industry sprang up to address the emerging and then pervasive threat of COVID-19. The company's latest numbers, though, have demonstrated how it has translated the hot demand for one product into customers sticking around for others. Analysts think it can hold on to that strategy to keep growing in 2021.
Half of mask purchasers on Etsy in the third quarter returned to buy another product in the fourth, the company said when it reported earnings. Overall, vendors on the platform sold $3.6 billion worth of merchandise in the final three months of 2020, translating into a 129% gain in Etsy's revenue, to $617 million.
"The most important thing is that customers are having a great experience, so if you came for a mask, or a non-mask, you're getting that item made just for you, from a seller with a handwritten note. And that experience is different than buying from some other place that feels anonymous, that feels commoditized," said Etsy CEO Josh Silverman in an interview with Yahoo Finance Live. This isn't a new refrain for Silverman, who has maintained since at least last May that while masks are a draw to the site, they're far from its only appeal.
Now there are fuller numbers to bear out his assertion: masks were the fifth-hottest category on Etsy last year, following home goods ($3.2 billion in sales), jewelry and accessories ($1.6 billion), craft supplies ($1.2 billion) and apparel ($1.0 billion).
Wedding-related merchandise is another strong segment, noted Wedbush analyst Ygal Arounian in a report to investors, with a 30% year-over-year gain in the fourth quarter. That growth "is a testament to how strength in weddings, events, and other depressed categories during COVID could offset some growth headwinds," he wrote.
Silverman also cited Etsy sellers' ability to follow consumer trends:
"Every single day, something happens in pop culture, and it is immediately reflected on Etsy. A fun example is at the inauguration, when Bernie Sanders showed up with the mittens, sitting grumpy in the chair, Etsy sellers sold $1.9 million worth of Bernie Sanders-inspired merchandise within days."
Etsy seller Staci Pompey told Yahoo Finance late last year that she initially built her online store around masks. She then expanded beyond them, and is still trying to think ahead. "Business has been great but I’m always in the mindset of 'what is next?'. I know that masks will some day come to an end so I’m constantly coming up with ideas to sustain my business beyond selling masks," she said in an email. She's been finding success with seasonal merchandise for the Super Bowl and Valentine's Day, for example.
The products on the site are also getting a boost from tweaks that Etsy has made to its search algorithms. "The company is making it easier for consumers to find what they are looking for on its platform through its search and personalization efforts," wrote D.A. Davidson analyst Tom Forte in a note to investors following earnings. Like Arounian, he has a Buy rating on the shares.
This isn't to say Etsy's sustainability of growth is a sure thing. Lauren Schenk of Morgan Stanley has a rare Underweight rating on the shares. Among her concerns is the fact that just over half of Etsy visitors drop in, buy one thing and don't return — or at least not for a long time. "While frequency of repeat purchasers did improve nicely, we still struggle with the overall frequency and annual spend of buyers on the platform," she wrote.
Meanwhile, while Etsy shares have pulled back along with many other tech stocks over the past week — down some 9% from their record close on March 1 — they're still up about 220% over the past year.
Melody Hahm, West Coast correspondent, contributed to this article.
Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET.