Etsy, the beloved e-commerce platform known for its unique, handmade goods, recently experienced a dip in shares following the release of its second-quarter results. Despite exceeding expectations in gross merchandise sales, investor confidence wavered, prompting a closer look at the company’s strategies and future prospects. In an exclusive interview with Bloomberg Technology, Etsy CEO Josh Silverman provided insights into how the company is navigating a challenging macroeconomic environment and leveraging artificial intelligence (AI) to bolster its platform.

Navigating a Tough Macro Environment

Silverman acknowledged the difficulties posed by the current economic landscape, particularly for discretionary products. “We’re really swimming upstream with a tough macro environment, and it’s hitting the consumer directly,” he stated. Despite these challenges, Etsy has maintained a steady number of active buyers, reaching an all-time high of 91.5 million. “We came in at the top of our guide on every metric, and we’re proud of how we’re doing in this volatile macro,” Silverman added.

The CEO emphasized that the company is not succumbing to the race to the bottom on pricing. Instead, Etsy is doubling down on its unique value proposition. “We’re focused on making Etsy even more Etsy, leaning into our point of differentiation,” Silverman explained. This approach has helped Etsy remain resilient, even as other e-commerce platforms struggle to keep pace.

Leveraging AI to Enhance Customer Experience

A key component of Etsy’s strategy is its investment in AI to improve user experience and drive growth. Silverman highlighted the challenge of organizing Etsy’s vast inventory, which includes over 120 million unique items. “There’s no army of humans you could hire to do that, but AI is really good at organizing huge amounts of information in a way that’s easy for humans to understand,” he said.

Etsy’s recent launch of gift mode is a prime example of AI’s impact. This feature, powered by AI algorithms, helps users find the perfect gift, boosting performance during key shopping occasions like Mother’s Day, Father’s Day, and graduations. “We significantly outgrew the market for those holiday occasions, with gifting growing 4% year over year while the rest of the site shrank in low single digits,” Silverman noted. This success underscores the potential of AI to drive top-line growth, even in a challenging market.

Medical and Non-Medical Applications

Beyond enhancing customer experience, AI is also set to revolutionize other areas of Etsy’s operations. Silverman pointed out that Etsy has a long heritage in machine learning, having built out its AI infrastructure over several years. This includes using neural net technology to understand user intent and improve search results. “If you come to Etsy now and ask for cocktail attire for men, we’ll show you blue blazers, even though there’s no words in common between those searches,” he explained. This capability demonstrates Etsy’s commitment to staying ahead of the curve in AI innovation.

Future Prospects and Technological Aspirations

Looking ahead, Etsy sees AI as a critical driver of future growth. The company aims to transform how users interact with the platform, making it easier to discover and purchase unique items. “Our next big opportunity is to be a place you go to start your search when you’re planning a wedding or redecorating your home,” Silverman said. By leveraging AI, Etsy can offer personalized recommendations and streamline the shopping experience, making it more intuitive and enjoyable for users.

Silverman also touched on the broader implications of AI for Etsy’s mission. “Keeping commerce human is what drives us,” he stated. With 7 million sellers, the vast majority of whom are women working from home, Etsy plays a crucial role in supporting small entrepreneurs. “Our mission is incredibly motivating, and it’s a key factor in attracting and retaining world-class talent,” he added.

Philosophical and Existential Considerations

The integration of AI into Etsy’s platform also raises important philosophical and existential questions. As AI becomes more prevalent, ensuring its ethical use and accessibility is paramount. Silverman emphasized the importance of aligning AI development with Etsy’s mission of supporting small businesses and fostering creativity. “We must be vigilant in how we develop and deploy this technology to ensure it benefits all of humanity, not just a privileged few,” he stressed.

Reflections on the Future

As Etsy continues to navigate the post-pandemic world, the company remains focused on its core values and long-term vision. Despite the challenges, Etsy’s unique offerings and strategic use of AI position it for sustained growth. “We were and are a great success story of the pandemic,” Silverman reflected. “Tens of millions of people came to Etsy during the pandemic and have come back again and again because we offer something truly different.”

In conclusion, while Etsy faces a tough macroeconomic environment, its strategic investments in AI and commitment to its mission provide a strong foundation for future success. As Silverman aptly put it, “Our focus is making Etsy even more Etsy, delighting our customers, and they’ll love us when we win.” The road ahead may be challenging, but with its innovative approach and steadfast dedication, Etsy is well-positioned to thrive in the evolving e-commerce landscape.