The news: Etsy is using AI to build more precise customer profiles and offer shoppers an experience better customized to their needs, the company told The Wall Street Journal.

The retailer is tracking shoppers’ history and preferences while working to better distinguish when customers are buying for themselves or for others.

The details: Etsy currently has detailed profiles on more than 70% of its shoppers, enabling it to go beyond superficial recommendations—such as offering up baby gear to a shopper who purchased a baby shower gift—to more comprehensive suggestions that take into account whether someone is shopping for a specific event (such as back-to-school) as well as their tastes and hobbies. The more someone shops with Etsy, the more precise its recommendations become, allowing the retailer to deliver a more relevant shopping experience and increase the likelihood of a repeat purchase.

The retailer is also using more traditional methods to boost loyalty and conversions. Etsy is piloting “bespoke and ‘high touch’ premium support” for its top buyers, as well as experimenting with rewards, stamps, and other time-honored loyalty tactics, CEO Kruti Patel Goyal wrote in a recent shareholder letter.

Overall, those efforts are moving the needle on Etsy’s performance. Marketplace gross merchandise sales rose 7.5% YoY in Q2, while the number of active buyers rose by 350,000. Efforts to engage top customers showed early signs of success, with sequential gains among habitual and repeat buyer cohorts for the first time since 2023.

Implications for retailers: While many retailers focus on AI assistants and agentic commerce—investments that will take time to bear fruit—Etsy is using AI to deliver immediate benefits for consumers. By demonstrating a deeper understanding of shoppers’ preferences and buying habits, Etsy can differentiate itself from retailers whose personalization efforts remain largely superficial.

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