Founded in 2005, Etsy became the most-prized website for people searching for one-of-a-kind gifts. The unprecedented success of Etsy as an e-commerce platform is commendable. The platform boasts more than 5.3 million active sellers.
Amazon and eBay were the behemoths of the marketplace since the 90s, but yet, Etsy managed to establish a strong identity with its foundation on bespoke items and community building.
According to Etsy’s statistics, the company had nearly 450,000 registered sellers who generated $26 million in sales annually, within just 2 years after its inception. The same year, Etsy received over $3 million in venture funding as well.
In a report by Yahoo, the e-commerce platform had welcomed 2 million vendors with 50 million products through its community of independent sellers by the end of 2018.
After facing several controversies over the years, Etsy is relentless in expanding its horizons. To become bigger, any company has to endure massive changes and restructuring terms.
But poignant sellers are frustrated with the new terms and conditions of Etsy that harm them and make them feel that the platform is no longer what it had intended to be when it started.
An analysis by Refinitiv expected Etsy’s 2022’s third-quarter revenue to be $565 million. The ecommerce website surpassed this expected revenue to $594.5 million.
Even with such success, Etsy is facing a backlash with the rise in the suspension of accounts and a hike in overall charges (listing, commission and advertising), which is making thousands of users protest or leave the platform. Could this be the end of Etsy’s era?
Here is how Etsy grew from humble beginnings in the last 18 years and got embroiled in controversies which led to its current predicament.
THE RISE OF ETSY’S HANDMADE EMPIRE:
Since its inception, Etsy has etched itself as a creative niche and online market platform where small businesses and independent artists can sell vintage, handmade/custom-made jewelry, home decor, clothing, arts and other unique articles.
Etsy was headquartered in ‘relatively humble roots’ in Brooklyn. Robert Kalin, Haim Schoppik and Chris Maguire launched the initial company which took two and half months to build. The global headquarters then relocated to a bigger space just a few blocks away from its original location to retain its essence, whilst looking at a brighter future.
The main intention of Etsy was to provide a platform for the handmade industry and not allow mass-produced goods or resellers.
“Etsy is a nonsense word because I wanted to build it from scratch. In Italian, etsi is said a lot. It means “eh, si”, “oh, yes”. In French, it’s “what if.” And in Greek, it’s “just because.” :~Kalin, Founder
In July 2007, Etsy had achieved its one-millionth sale and by November, buyers spent $4.3 million on purchasing 3,00,000 items on sale on the platform.
In 2008, Etsy received additional funding of $27 million from venture capitalists Jim Breyer, Union Square Ventures, and Hubert Burda Media.
In the same year, Etsy proved its mettle as a worthy opponent when eBay was facing dissatisfaction.
Kalin handed over his CEO position to Maria Thomas. Many important people including the founders left the company in 2008, and the year was full of changes. Reviewers enjoyed the specialized search tools such as “Shop Local.”
In September, Etsy hired Chad Dickerson, formerly working at Yahoo, as the CTO (Chief Technology Officer).
Many complaints that were filed on the platform for stores and concerns raised for vendors selling other people’s work as their own, were acknowledged.
In May 2009, Etsy’s monthly sales were $10-$13 million. By December 2010, it recorded seven million registered users.
In July 2011, Dickerson became the CEO. Under his tenure of leadership, Etsy grew from a chaotic startup to a publicly-traded company with a 14x revenue growth. Dickerson’s high-growth business strategies and rigorous hustle for a value-led culture, shaped the platform into what it is today.
Etsy’s Terms of Service had always maintained that the products had to be handmade. But, a few incidents prompted many community members to criticize the forum for being inconsistent in foregoing with the rule because in 2012, a writer of a popular blog, Regretsy had found evidence that a special featured vendor, Ecologica Malibu, was actually a reseller.
In 2013, Dickerson revealed to Entrepreneur his plans for Etsy to lead the charge in creating its own economic system.
“The Etsy economy is people-powered with person-to-person commerce. It feels like a farmer’s market instead of a supermarket.” :~Dickerson, Then-CEO
This “people-powered economy” has proven to give immense growth for numerous entrepreneurs around the world.
Etsy lends itself to being utilized by low-income, entrepreneurial people who are looking to take control of their finances by starting a business and reaching customers they would have never met otherwise.
In October 2013, Dickerson announced in an online Town Hall Meeting that Etsy would permit factory-made goods, provided that the seller either designed or disclosed the ownership of the process to the platform.
‘Handmade’ was redefined to include ‘factory-made.’
Why Did Etsy Become Popular?
Etsy increasingly became popular among people for many reasons.
It had given opportunities to people who could quit their 9-5 job and run a full-fledged successful business on the e-commerce site.
Etsy recognized sellers who brought distinct products to the platform and featured them, specially. Also, few large corporations noticed popular Etsians and placed massive orders.
The owner of a small pottery business Sarah Woodson told Entrepreneur that her brand, Downing Pottery grew slowly over the years but when Etsy contacted her in February 2013, it took off well.
Etsy featured Woodson’s popular mugs as the “first local seller” of Nordstrom.
“There is no downside to selling on Etsy. Some people feel that it has gotten too big and it’s easy to get lost in the crowd, but I haven’t seen that” :~Woodson, Downing Pottery
Another Etsy seller Irina Adam was spotted by the mega-retail store Anthropologie on Etsy’s front page for her clean beauty products. Today, Adam’s beauty business, Phoenix Botanicals, has been introduced globally.
A few more reasons on how Etsy became popular, include:
1. Community Building:
Etsy’s prominent emphasis on community building and personal connection helped create an authentic experience of trust and growth.
2. Status Of Sellers:
Small businesses and independent creators were receiving a myriad of customers and recognition. The income of an average Etsy seller is nearly over $56,000 per year.
3. Supplementary Income:
While 69 percent of sellers consider their Etsy Shop a business, according to a survey of Etsy’s worldwide sellers in 2021, it was denoted that 63 percent of Etsy sellers started their shop as a side business.
4. Focus On Unique Commodities:
The distinct stature of the handmade products made from upcycled materials appealed to thousands of shoppers. Product photos are typically artistic instead of commercial. The platform is easy to navigate, making it a popular destination.
5. Advertising Efforts:
Etsy’s heavy investment in branding campaigns and partnerships was rewarded by hitting the goal of attracting more customers. 40 percent of buyers are repeat customers.
6. Strategic Acquisitions:
Etsy expanded its reach through many strategic acquisitions. For example, Reverb, a marketplace for musical gear and instruments was acquired for $275 million.
7. Strong Seller Support:
The online platform provided support and resources to its sellers, which included tools for managing businesses, and connecting with customers, which fostered community and loyalty.
8. Diversity:
The diverse demographic backgrounds of the employees of Etsy are a plus point. The business is 83 percent women-oriented and 37.5 percent ethnic minorities. As per CNBC Markets, Etsy is also one of those rare tech-based companies largely run by women, used mostly by women entrepreneurs, to sell to a women-centric base.
9. Dream Job:
As noted by Forbes in 2018, Etsy’s headquarters flaunted indoor and outdoor meeting spaces as well as “crafternoon” workshops for employees. Senior Vice President Raina Moskowitz told Forbes that a majority of employees recommended Etsy as a great place to work.
THE CONTROVERSIAL PHASE OF ETSY SHOP:
2015:
In 2015, Etsy had 54 million members generating $1.93 billion. It went public by filing a $100 million IPO. Etsy raised $237 million in IPO proceeds and ended up with a valuation of $1.8 billion.
Less than a month later, Etsy’s stock dropped more than 8% – From $30 in April to $20.32 in May.
A group of investors filed a class action lawsuit claiming fraud. The suit was described as Etsy’s CEO and personnel’s failure to disclose a multitude of problems with the site.
The lawsuit claimed that the management was aware but hid the factors affecting the stock price. There were reports of more than 5 percent of all merchandise on the website being counterfeit or containing a copyright infringement, which jeopardized listing fees and commissions.
“Etsy’s growth-oriented actions gave way to counterfeiters.” :~Gil Luria, Equity Analyst.
There were over 5000 cases that identified sellers who outsourced poorly manufactured goods, reported New York Times.
2017-18:
After experiencing a loss in May 2017, Etsy cut 8 percent of its workforce. Board member Josh Silverman replaced Dickerson as CEO.
In September 2018, Etsy was on the receiving end of backlash, when a minority business owner posted that her popular Etsy apparel shop had been closed down. Olatiwa Karade owns Splendid Rain Co., popular for its controversial ‘clothing for activists.’ Karade suspected that Etsy has made it difficult for her because of her popularity. She did not receive any free advertising benefits that other Etsy shops did and was watched closely.
In 2018, Etsy raised its fee from 3.5 percent to 5 percent on sellers and took a cut from the shipping fees too. A year later, it demanded all Etsy Shops use its own payment system, Etsy Payments, where it would also take transaction processing fees of 0.25 percent.
2019:
In 2019, Silverman announced that Etsy was contemplating giving priority placements to sellers who included the shipping costs within the total pricing of their product, in the U.S. search results.
“It’s been a long time since buyers have been telling us that having to pay additional shipping is what stops them from shopping on Etsy more often.” :~Silverman
With this move, Etsy was alienating its sellers because this push and shove for free shipping did not sit well with most of them. They felt as though Etsy was forcing them to follow what other big corporations could afford. Some buyers too aired their concerns about Etsy prioritizing free shipping shops. Shipping free was not easy for small businesses as they would have to raise prices or pay the extra from their own pockets.
As the majority of sellers rejected this change, Etsy could not profit more from transactions, and its stock took a steep decline.
2020:
Once again Etsy came under fire in February 2020, when sellers objected to the introduction of ‘Offsite Ads.’ It wasn’t an Opt-out service, nor an optional Opt-in one. In this model, Etsy would pay to promote sellers on sites like Google and Facebook, but it would not reveal the budget of the advertising to the seller. Etsy would take a cut of a seller’s sale when led by the advertisement. It meant that sellers did not know how much they were spending upfront nor did they have any control over what was being advertised.
“When a customer clicks on the online ad of your product and purchases from your Etsy Shop, you have to pay an advertising fee within 30 days.” :~Etsy’s blog post explaining offsite ads.
Kevin Miller of American Broom Shop told The Verge that there was no transparency in this proposal. If Etsy said you owe them, you have to pay. Nobody could track anything and Etsy displayed wildly inaccurate information about their analytics.
2021-22:
Etsy held the right to suspend any account that did not abide by their ToC. Due to a glitch in 2021, many seller accounts that did not violate any terms, were suspended. It was happening very frequently and through an excruciating long process, some could manage to get their account unsuspended but some lost all chances of retrieving it.
In another attempt to raise its profits without showcasing concern to sellers, Etsy decided to hike the transaction fees from 5 percent to a 6.5 percent commission, in April 2022.
Sellers have time and again raised petitions for years but Etsy has ignored them. This could have been the last straw for fed-up Etsy Shops because more than 30,000 sellers decided to strike against the platform. Kristi Cassidy, one of the leaders of the petition called “The Indie Sellers Guild”, has boycotted the craft site for the hike in the fees and problems with resellers amongst other issues.
Cassidy told Fox Business that Etsy’s response to this strike has been lukewarm and insufficient.
Since going public in 2015, Etsy has made major acquisitions of $1.6 billion (Depop) and $217 million (Elo7) which has increased the revenue tenfold. Sellers felt as though they were giving up an additional cut of sales to the platform, despite Etsy’s financial position and felt as though Etsy was trying to maximize profits at the expense of the marketplace.
The group demands that Etsy cancel the increase in fee, stop the Star Seller Program, crack down on resellers, give ‘Golden’ support tickets to termination-affected sellers and give all Etsy shop owners the option to opt out of the offsite ads.
ETSY’S COMPETITORS AND ALTERNATIVES:
Etsy’s unreachable market expectations and low heed for sellers’ concerns are sparking outrage and shifting entrepreneurs’ interest to other worthy alternatives.
Some alternatives include Amazon Handmade, Shopify, Bonanza and ArtFire. Most of their features contrast with Etsy but if the ecommerce craft giant does not pay attention fast, it may lead to its own destruction.
Despite the competition, Etsy has always been able to maintain its popularity by proposing unique products that appealed to specific audiences. To satisfy shareholders with increased profits, Etsy may deviate its star foundation – the sellers with who Etsy has reached this far.
