When Etsy (NASDAQ:ETSY) announced it was going to raise transaction fees for sellers, there was immediate backlash. Tens of thousands of Etsy sellers signed a petition protesting the increase. Starting on Monday, many of them went on strike by closing down their Etsy storefronts for the week. So far, the impact on ETSY stock has been minimal. In fact, shares experienced a slight uptick on Monday. However, there are long-term implications here that extend to other e-commerce companies that rely on third-party marketplace sellers, including Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).
Through the pandemic, Etsy saw sales increase as online shopping surged. Active sellers reportedly enjoyed a 23% sales increase from 2019 to 2021. From November 2019 to November 2021, ETSY stock soared by around 600%. In late February, Etsy sent a memo to its sellers. The company announced that it would be boosting spending on marketing and other tools to keep the growth momentum going. However, the increased spending wasn’t the problem. The plan to pay for the spending through an increase in transaction fees from 5% to 6.5% was the sticking point. You can read all the details here.
The market reaction to the Etsy strike has been muted so far, although the strike has only been on for a day. ETSY stock closed Monday up by half a percentage point. Whether the strike succeeds in making Etsy back off on the fee increase or not, it raises an important point that many investors have been overlooking when it comes to e-commerce stocks. Many of these companies rely heavily on third party sellers.
Amazon and Walmart are classic examples of e-commerce leaders that rely much more on third party sellers than you might realize. Marketplace vendors accounted for 56% of sales on Amazon in 2021’s fourth quarter. Walmart’s e-commerce growth has been driven by marketplace sales that grew 500% in 2021. These retailers — and many others — have worked to seamlessly integrate third party marketplaces into their online shopping experience. It is a great way to increase product variety without having to actually stock all the additional products. Like Etsy, those third party vendors pay transaction fees.
The Etsy strike is a wakeup call. Having tens of thousands of sellers strike is not a big deal for Etsy, which claims to have 5.3 million sellers. It is clearly not hurting ETSY stock. But this could be just the first move and it could gain steam. Investors looking at e-commerce stocks including ETSY, AMZN, and WMT should be watching closely. The reliance these companies have on third party sellers is suddenly a much larger risk factor than you may have realized.
On the date of publication, Brad Moon did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.