By Jinjoo Lee

Crafts-focused online marketplace Etsy has been struggling to get out of a sales rut. The removal of a trade loophole for Chinese sellers could provide a small reprieve.

Earlier this month, the Trump administration moved to close the de minimis loophole for shipments from China, though implementation has been delayed to allow the Commerce Department to come up with a system to process such shipments. Previously, the provision exempted companies from having to pay import duties on packages with a retail value under $800.

Removing the exemption means that the bargain online sellers that have been a thorn in Etsy's side-such as Temu and Shein-will likely be forced to raise prices on U.S.-bound products.

On the company's earnings call Wednesday morning, Etsy Chief Executive Josh Silverman said the company "has vastly less dependence on products coming in from China than most of our competitors."

Of Etsy purchase activity in the U.S., about a quarter comes from Europe, according to Silverman. As long as the de minimis removal is limited to Chinese imports, Etsy should be a "net beneficiary," he said.

That was small comfort to Etsy investors: The company's shares sank nearly 10% after its fourth-quarter earnings announcement, which showed that the total value of products sold on the platform fell 6.8% in the period from a year earlier.

That was markedly worse than the 3.6% decline that Wall Street analysts polled by Visible Alpha expected. Sales on its platform have posted on-year declines in 10 out of the last 12 quarters.

For the current quarter, Etsy said sales on the platform are expected to decline at a similar rate as in the fourth quarter. Over the past year, Etsy has leaned in on improving the quality of its listings to differentiate itself from competitors selling cheap, commoditized products. That hasn't helped drive sales volume in the near term.

What Etsy calls its "cottage industry" of domestic sellers has been a competitive edge previously. During the 2020 Covid-19 pandemic, the army of small sellers helped drive up sales of face masks. And when supply chain disruptions in 2022 left various kinds of shipments from overseas stuck in the water, Etsy again benefited from having a dispersed base of domestic sellers. But these sales windfalls didn't last once the disruptions ended.

Etsy's focus on quality could well pay off in the long term, but only if there are enough consumers willing to pay for it.

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February 19, 2025 11:45 ET (16:45 GMT)

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