Etsy announces sale of its handmade platform Elo7. Is its "grand blueprint" for Latin America going to fail?

It is learned that according to foreign media reports, Etsy has agreed to sell its handmade platform Elo7 to Brazilian local retail giant Enjoei SA. The specific transaction amount has not been disclosed.

Etsy spent $217 million to acquire Elo7 in 2021 to enter the Latin American market. At the time of the acquisition, Elo7 was already one of the top ten e-commerce platforms in Brazil. At that time, Elo7 had 1.9 million active buyers, 56,000 active sellers, and approximately 8 million items for sale (mostly custom items).

When Etsy acquired Elo7 two years ago, it said that its mission was to "keep commerce human" and implement a two-sided market strategy focused on creative micro-entrepreneurs. Etsy called Elo7 an early-stage business, but it believed that Elo7 could leverage Etsy's mature value creation roadmap to drive further growth and profitability.

Like Reverb and Depop, Elo7 has remained independent following its acquisition, but Etsy has provided them with product, marketing, technology and customer support expertise.

In a filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday, Etsy CEO Josh Silverman said: "While the Elo7 team has worked very hard to build a well-loved marketplace and vibrant community in Brazil, we have not seen it achieve the performance we expected when we acquired it two years ago, in part due to the impact of the macroeconomic environment."

“Given this situation, we have decided to sell Elo7. We believe this is the best option for Etsy, our shareholders and other stakeholders, Elo7 and its employees, and the Elo7 community of buyers and sellers. Upon closing of the transaction, expected in the third quarter, Etsy’s House of Brands will consist solely of three scalable global marketplaces: Etsy, Reverb, and Depop.”

In addition, Josh Silverman stated that further updates related to the transaction will be provided during the second quarter 2023 earnings call scheduled for August 2.

It is learned that one of the pillars of Etsy's growth strategy is to form a "brand house" to pursue opportunities outside its core business. While the Etsy marketplace focuses on handmade and unique goods, other platforms acquired by it have expanded into other areas.

Etsy's total sales in the first quarter of 2023 were $3.1 billion, of which the Etsy marketplace had $2.7 billion in gross merchandise sales. The rest came from the company's other three marketplaces: Reverb, a musical instrument buying and selling platform, Depop, a fashion resale platform, and Elo7, a handmade platform.

Editor ✎ Nicole/

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