eBay and Etsy are betting on AI-powered personalization to enhance how people shop on their platforms. According to WSJ, The marketplaces are taking cues from social media giants like TikTok, Instagram, and Pinterest to transform their online shopping experiences. They are shifting away from traditional shopping and adopting AI-powered personalization. The goal is to create feed-like interfaces to keep shoppers engaged.

For years, platforms like eBay and Etsy thrived as go-to destinations for products. But Shopping habits have changed drastically. Consumers no longer just search for items. They expect to discover them much like they do on their social media feeds.

Platforms like TikTok and Instagram have capitalized on this trend and more people are buying goods directly on these apps. 

With social media platforms integrating online shopping with their services, this trend is growing. TikTok Shop, for example, displays short videos of products in users' feeds, allowing them to purchase items directly. 

This model has proven highly effective, as impulse and discretionary shopping thrive on social media. According to WSJ, eMarketer analyst Sky Canaves says the average social media shopper spends around $820 a year.

In January, TikTok Shop experienced significant growth in the U.S., surpassing e-commerce competitors like Shein and Temu. It is now expanding to more countries, such as Spain, bringing e-commerce directly into the platform. 

Facebook Marketplace is winning against Amazon and eBay in the resale market. More people are choosing to buy and sell second-hand items on Facebook Marketplace. 

“We have a lot to learn from folks like TikTok and Instagram and Pinterest,” Etsy CEO Josh Silverman said last month. “We can take Etsy and turn it into a really personalized experience.”

How eBay and Etsy plans to use AI to improve personalization

To compete, eBay and Etsy are investing in AI-powered product recommendations. Instead of relying on traditional search functions, the platforms are using AI to tailor product recommendations based on browsing behavior. The goal is to create a shopping experience that feels more like a personalized feed rather than a search-driven catalog.

According to WSJ, Etsy is using machine learning and large-language models (LLMs) to analyze user behavior. The company is developing AI capabilities to better understand individual shopping habits, allowing the platform to surface products that align with users’ unique preferences. “Our products don’t map back to a catalog or SKUs,” Nick Daniel, Etsy’s Chief Product Officer, said. “We’re using advanced machine learning and LLMs to analyze the items in our marketplace, and show them to buyers based on their individual preferences.”

eBay is looking to create a “more feed-like” shopping experience. “The game changes so quickly with AI,” eBay’s Chief Product Officer, Eddie Garcia, said. “I think in five or 10 years, every person has their own personal eBay.”

The platform already has an AI feature that generates images of products based on what a user is shopping for and links them to similar items available on the marketplace. This approach mirrors Pinterest’s shopping features, which connect product images with shoppable links.

Other online marketplaces, including Wayfair and ThredUp, are also exploring ways to incorporate social media-like experiences into their shopping platforms. Pinterest has already demonstrated how visual discovery can drive e-commerce, with clicks to advertisers quadrupling over the past two years.

Why eBay and Etsy need this shift

eBay and Etsy have faced slow growth in recent years. These platforms are struggling to keep pace with evolving consumer shopping behaviors. Etsy’s gross merchandise sales (GMS) dropped 4.4% year over year in 2024, reaching $12.6 billion—7% lower than its peak in 2021. The company’s active buyers and sellers also declined as of December 2024.

Shoppers have also expressed frustration over product discovery on these platforms. “It’s easier for customers to get lost on those sites because they can’t find what they’re looking for,” said Wedbush analyst, Scott Devitt. 

Additionally, both platforms have faced criticism for allowing mass-produced goods to overrun their inventories. AI-powered recommendations could help surface more relevant listings.

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