Unleashing Etsy's Unstoppable Growth

Table of Contents

1. Introduction
2. The Rise of Etsy in 2020
3. The Core User Base of Etsy
4. Etsy's Push for Growth and Adoption
5. Challenges Faced by Etsy in Maintaining its Identity
6. Comparison with Competitors: Shopify and Big Cartel
7. Advantages of Selling on Online Marketplaces
8. The Early Days of Etsy
9. The Leadership Changes at Etsy
10. The Changes and Challenges Faced by Etsy
11. Alternatives to Etsy
12. The Future of Etsy

Article

The Rise of Etsy in 2020

2020 was a year of many challenges and uncertainties, but for online marketplace Etsy, it turned out to be a year of tremendous success. As the world came to a standstill due to the global pandemic, people sought comfort, inspiration, and unique products to lift their spirits. This is where Etsy stepped in and emerged as one of the biggest winners of the year.

Etsy's stock price skyrocketed, experiencing a meteoric rise from $45 to $178, indicating a nearly 300 percent increase. The company's revenues also witnessed a significant growth, with a jump from $819 million in 2019 to $1.1 billion in just the first three quarters of 2020. This projection suggests that Etsy's total revenue for the year would reach nearly $1.5 billion. These numbers raise an important question: Has Etsy managed to maintain its core user base despite its efforts to grow and adopt practices from other massive online marketplaces? And what implications does this have for the future of the company?

The Core User Base of Etsy

The underlying idea behind Etsy is that it serves as an online marketplace that offers unique and handmade products, as well as vintage items and unique factory goods. It provides a platform for skilled individuals to showcase their creativity and make a living from their talents. On the other side of the coin, buyers flock to Etsy in search of one-of-a-kind, handmade products that cannot be easily found elsewhere.

However, with the company's push for growth and desire to compete with the likes of Amazon and eBay, some concerns have arisen regarding whether Etsy has strayed too far from its core user base. The days when the majority of products on Etsy were truly handmade seem to be fading away. For every unique handmade item, there are now multiple listings of mass-produced goods disguised as handmade products. This shift has become particularly evident in categories like jewelry, where one can easily come across listings that are clearly sourced from AliExpress.

(Pros of Etsy's core user base:)

• Provides a platform for skilled individuals to showcase their creativity and make a living from their talents.
• Offers buyers a unique shopping experience for one-of-a-kind, handmade products.

(Cons of straying from the core user base:)

• Potential loss of trust and credibility among buyers who seek genuine handmade products.
• Risk of alienating the original Etsy community and creating a negative perception of the platform.

Etsy's Push for Growth and Adoption

While Etsy continues to be the undisputed king of handmade goods e-commerce, its efforts to adopt similar business practices as Amazon and eBay have garnered mixed responses. In the short term, there is no denying that Etsy's reach and promotional capabilities set it apart from other platforms. Its potential for growth has been fueled by successful practices such as targeted advertising, easy account creation, and an existing customer base actively searching for unique products.

(Pros of Etsy's push for growth and adoption:)

• Expanded reach and promotional capabilities.
• Access to existing customer base and advertising tools.
• No technical knowledge required to launch a store on Etsy.

(Cons of Etsy's push for growth and adoption:)

• Risk of compromising the authenticity and uniqueness of handmade goods.
• Potential alienation of core user base and loss of trust.

However, the question remains whether Etsy can continue to thrive while trying to adopt similar business practices as Amazon and eBay. The success of Etsy lies in finding the delicate balance between growth and maintaining its identity as a marketplace for handmade and unique products. It is essential for the company to consider the concerns of its core sellers and buyers, as they are the heart and soul of the platform.

Challenges Faced by Etsy in Maintaining its Identity

Etsy's journey has not been without its fair share of challenges. As the company grew in popularity, it faced the dilemma of how to scale while still staying true to its original vision. Many startups struggle with the issue of profitability in their early years, constantly seeking growth at the expense of immediate financial gains. However, Etsy seemed to have built a solid foundation that could have eventually led to profitability, even without drastic changes.

Nevertheless, Etsy's leadership changes have brought about significant shifts in the company's direction. Chad Dickerson, who served as CEO from 2011 to 2017, aimed to bring explosive growth to the company. While he did manage to increase revenues and make Etsy profitable for the first time, employee morale reportedly suffered, and many sellers felt that the work environment and company culture had changed for the worse.

Under the leadership of Josh Silverman, who became CEO in 2017, Etsy has made drastic changes that have caused many sellers to leave the platform. One of the core tenets of Etsy, the limitation on sellers to list only handmade and vintage goods, has been revoked. Sellers are now allowed to list items as handmade, even if they are produced with the help of manufacturers. This change has led to an influx of listings that do not align with the original ethos of Etsy.

Comparison with Competitors: Shopify and Big Cartel

In the small seller space, Shopify and Big Cartel are considered the closest competitors to Etsy. However, these platforms operate differently from Etsy. Rather than functioning as a marketplace, they provide tools for sellers to create their own e-commerce websites. While these platforms offer advantages such as the ability to customize one's online store, they require sellers to drive their own traffic and promote their products.

(Comparison with Shopify:)

• Shopify provides a build-your-own e-commerce site environment.
• Sellers have greater control over the design and branding of their online stores.
• Requires sellers to drive their own traffic and promote their products.

(Comparison with Big Cartel:)

• Similar to Shopify, Big Cartel offers a build-your-own e-commerce site approach.
• Designed for smaller-scale artists and makers.
• Also requires sellers to generate their own traffic and promote their products.

While Shopify and Big Cartel have their own merits, they do not possess the same marketplace features and advertising tools as Etsy. The advantage of using online marketplaces like Etsy lies in the instant access to a built-in customer base and the convenience of established advertising options.

Advantages of Selling on Online Marketplaces

Selling on online marketplaces like Etsy offers several advantages over starting one's own website. These advantages make it an attractive option for sellers, especially those who are new to e-commerce. Some of the key advantages include:

1. No technical knowledge required: Setting up an online store on a marketplace like Etsy does not require extensive technical knowledge. By simply creating an account, sellers can quickly launch their store and start selling.

2. Access to advertising tools: Online marketplaces have established advertising tools that sellers can utilize to promote their products. These platforms invest in advertising and marketing campaigns, reducing the burden on sellers to drive their own traffic.

3. Existing customer base: Marketplaces like Etsy already have a customer base actively searching for products. Sellers benefit from the visibility and the potential to reach a larger audience without having to build a customer base from scratch.

It is these advantages that have contributed to the growth and success of Etsy and made it an appealing platform for sellers.

(Pros of selling on online marketplaces:)

• No technical knowledge required to start selling.
• Access to advertising tools provided by the marketplace.
• Exposure to an existing customer base.

(Cons of selling on online marketplaces:)

• Limited control over branding and customization.
• Platform fees and transaction costs.
• Potential competition from other sellers within the marketplace.

The Early Days of Etsy

Etsy's journey began in 2005 with the vision of creating an online platform for craftsmen to sell their goods. Rob Kalin, one of the founders, was an amateur furniture maker who struggled to market his wood-encased computers. Recognizing the power of a group of sellers generating interest, Kalin conceived the idea of an online marketplace specifically for handmade and vintage products.

The name "Etsy" has an elusive origin. The founders have avoided directly answering questions about its meaning, stating that it sounded nice and catchy. However, it is interesting to note that "Etsy" can be interpreted in different languages as "what if" or as a variation of "sc," meaning "oh yes." The name was intentionally selected as a gibberish word free of biases, allowing customers to approach the platform with an open mind.

Within two months of launching, Etsy was already online, but the challenge remained to attract both buyers and sellers. The company took a unique approach by sending a team to arts and craft shows across the U.S. and Canada. By interacting with influential artists, providing them with lunch and promotional materials, Etsy aimed to entice them to sign up and bring their buyers to the platform.

This strategy proved successful as many sellers, who had little to no e-commerce presence prior to Etsy, were highly motivated to promote the site to their loyal customers. Etsy's early adoption also benefited from word-of-mouth sharing among feminist bloggers, as the crafting community was strongly skewed towards women. The platform provided a space for their niche to flourish, attracting sellers and buyers alike.

By 2007, just two years after its launch, Etsy had amassed over half a million registered users and generated $26 million in annual sales. However, the company was still not profitable due to high overhead costs, employee expenses, and continuous technology enhancements.

The Leadership Changes at Etsy

Etsy's journey has been marked by significant changes in leadership. In 2011, Chad Dickerson became CEO, tasked with driving explosive growth for the company. Under his direction, Etsy went public in 2015 and gained a B-Corporation certification. While Dickerson's efforts did lead to increased revenues and Etsy's first year of profitability, there were consequences for employee morale and company culture.

In 2017, Josh Silverman joined Etsy as CEO, bringing a focus on raising the company's bottom line. He made changes that aimed to align Etsy's practices with the goal of profitability. However, employee morale declined, and many sellers felt that the changes were detrimental to their businesses. Numerous policy changes, such as allowing non-handmade items and implementing an automatic advertising program, drew criticism from sellers who felt their concerns were being ignored.

The Changes and Challenges Faced by Etsy

Etsy's drive for profitability has led to several changes that have not been well-received by its core sellers. One of the most contentious changes was the implementation of an automatic advertising program that does not allow sellers to opt out. Sellers expressed their frustration, stating that being forced to pay for advertising without control over its effectiveness was unfair.

Another significant change was the requirement for sellers to offer free shipping on orders over $35. Sellers who chose not to comply with this policy risked their products being penalized in search results and advertisements. Many sellers found it difficult to absorb the cost of shipping small items, ultimately resulting in the decision to raise product prices or reduce profits.

These changes, along with Etsy's decision to increase its fees from 3.5 percent to 5 percent, as well as taking a cut from shipping costs, have negatively impacted many sellers. The shift away from Etsy's original ethos of handmade and unique products has created frustration among sellers and buyers alike. As a result, some sellers have actively started seeking alternative platforms to sell their products.

Alternatives to Etsy

Etsy's controversial changes have led to sellers exploring alternative platforms to sell their handmade and unique products. Some of the prominent alternatives to Etsy include the following:

1. Handmade at Amazon: With the convenience of Amazon's vast customer base, Handmade at Amazon provides sellers with a platform to share and sell their crafts.

2. Instagram Marketplace: Instagram not only offers a great platform for sharing visually appealing images of crafts but also allows sellers to directly sell their products through the Instagram Marketplace feature.

3. Not on the High Street: Focusing on unique and original products, Not on the High Street aims to provide a similar experience to what Etsy originally offered.

4. Just Artisan: This platform caters specifically to artisans, artists, and makers, providing an opportunity to showcase and sell their creative products.

While these alternatives may not offer the same level of reach and promotion as Etsy currently does, they present viable options for sellers who feel disillusioned by Etsy's changing policies.

The Future of Etsy

As Etsy continues to navigate its growth and adapt its practices, it faces a critical juncture that will determine its long-term success. The balance between scaling and maintaining its authenticity as a marketplace for handmade and vintage products is no easy feat. Etsy needs to consider the concerns of its core sellers and buyers to avoid alienation and loss of trust.

Ultimately, Etsy's profitability should not come at the expense of compromising its identity. Straying too far from its original vision risks attracting more competition and losing its niche in the market. While the changes implemented by the current leadership have resulted in increased revenues and short-term growth, the long-term implications remain uncertain.

The path forward for Etsy lies in finding a way to reconcile growth with maintaining authenticity. By actively listening to feedback from sellers and buyers, and making thoughtful decisions that align with the core values of the platform, Etsy can continue to flourish as the go-to marketplace for unique and handmade products.

In conclusion, Etsy's rise in 2020 highlights its potential for growth and adaptation. However, it is crucial for the company to preserve the essence of what made it successful in the first place. By fostering the community of skilled individuals and offering a platform for their creativity, Etsy can ensure its continued success in the evolving e-commerce landscape.