Although it has been a difficult year for small businesses, some companies doing business have experienced tremendous growth.
whose e-commerce platforms are mainly used by small businesses, increased dramatically during the pandemic. Etsy has more than quadrupled in size this year, while Shopify has tripled in size.
Analysts remain optimistic about the prospects for companies, even though their shares are expensive.
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Stores trade about 350 times what analysts expect futures to trade, while Etsy’s futures multiple is about 90 times. By comparison, technology giants like
about 35 or 70 times in advance.
The high valuations of Etsy and Shopify reflect the assumption that sales growth will continue at a rapid pace and that some of the changes in consumer behaviour that occurred during the Covid 19 pandemic will continue. The valuations also reflect the rush of investors to buy shares in all types of technology companies.
For many small entrepreneurs, the technology platforms served as a lifeline when their businesses turned to online sales.
owns a glassworks that makes custom beer glasses in Knoxville, Tennessee. He has been on Etsy since 2012, but didn’t completely switch to the internet until after the pandemic, when he had to close the doors of his shop. He said Etsy’s turnover has increased about tenfold this year.
Matthew Cummings plans to sell via Etsy after the pandemic and his shop is on its way to Australia.
Mr. Cummings said the sale of Etsy helped him to cover the costs of his business and his online store enabled him to close at a profit in 2020. After the pandemic he plans to sell through the platform and now he reaches Australia. He saw a new wave of regular customers who wanted to fill sets of his custom beer glasses.
While Etsy and Shopify used to be more casual destinations for customers looking for unique gifts, the pandemic has prompted shoppers to return several times, according to
Stock analyst at D.A. Davidson. According to Forte, both Etsy and Shopify have made a joint effort to support their suppliers with resources to attract more customers.
If you look at Shopify, it’s good because it’s retreating and trying to put them up for sale, he said. Shopify has launched a number of new features, including digital gift cards and help for merchants to improve their online stores.
Both companies maintained competitive prices during the pandemic. Etsy charges 20 cents per item mentioned by the seller and a commission of 5% per sale. Shopify offers differentiated monthly planning offers. The lowest level charges suppliers a monthly fee of $29 and a transaction fee of 2.9%.
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Masks are a kind of sale that shouldn’t go on after a pandemic.
Etsy reported that masks accounted for 11% of total gross sales in the third quarter.
Analysts remain optimistic about Etsy and Shopify. Forte believes that sales growth in the first half of 2021 will be good as long as people wait to be vaccinated against Covid 19.
The question is whether the end of the pandemic will change online shopping habits. Any decline in growth can lead to a reduction in stocks, according to Forte.
What is the impact of the pandemic on the American retail sector? As states across the country strive to revive trade, WSJ is investigating retail trends and how consumers can shop in a post-pandemic world.
Email Amber Burton at [email protected].
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Published on 24 December 2020 in a printed publication entitled Etsy Sales Platforms to Succeed in Small Business.