ETSY Case Study

Overview

Etsy was started in 2005 by Robert Kalin, Haim Schoppik, Jared Tarbell, and Chris McGuire. Schoppik and McGuire are no longer with the company. Kalin was let go by the company in 2011, replaced by Chad Dickerson as CEO. At the end of 2014, Etsy had approximately 54 Million users registered with the company. This figure continues to grow steadily as more users jump on board.

In the fiscal year ending 2015, revenues for the company increased an impressive 39% to $274 Million. However, the company’s net income came in at a loss of $54 Million.

Etsy is testing a crowdfunding feature of its website. This will allow sellers to raise the needed capital to produce their crafts and sell it on Etsy. The company enjoys a fee of 3.5% for this privilege.

How the Company Started

The company was inspired by reading through a crafting forum and discovering that many crafters wanted a venue to sell their crafts. This group tried to sell on eBay and were disappointed with the entire experience. They felt that eBay simply was not the right environment for this type of selling.

Etsy was funded primarily by venture capital. There have been several rounds over the years from various venture capital entities. In 2015, Etsy went public.

Initial Problems

The company’s objective was to allow for small craft artisans to sell online and try to make a profit. There have been instances where sellers banded together to form activist groups and use the crafts as a means to get out their message. The growth of these kinds of groups can shift the focus away from the true intention of the website. As these types of groups strengthen, they may pressure the company to take political actions.

Political affiliations aside, even regular sellers who grow to the point where they need to start mass producing their wares, come under criticism from the grassroots nature of the website.

Creating handmade items is the rule for selling on Etsy. However, that’s a difficult business model for sellers to take to the next level. Businesses expand by taking their concept to the factory, a practice that was not allowed with Etsy. They have since relaxed this requirement to some degree, but it’s a delicate balance and flows against their initial business concept.

Due to this restriction, sellers will always look for ways to expand their business. That is the nature of being in business. This will prompt them to try other services and if successful, may cause them to abandon Etsy, or at least significantly reduce the volume sold on its website.

Why it Works

Etsy caters to a particular niche, i.e., crafters. While the definition of what makes someone a crafter continues to evolve, having a specialized place to sell crafts became a huge hit with sellers.

The company also enjoys an almost sorority-like following (Etsy is made up primarily of women sellers) as buyers continue to match up with sellers. It’s a community-based system, which puts both buyers and sellers at ease when it comes to transacting with the site. Sellers can ask buyers what they want which makes selling a community-induced activity. Customers become part of the creative process. Customers warm up to this type of selling, which makes it easier for repeat sales.

Having a captive audience and being the only seller in the crafts space, gave the company a huge competitive advantage that still currently exists.

Promotion

Promotion is almost completely handled by the listed sellers on the website. It’s in their interest to bring traffic to their listings and to use social media to extend that reach. This means little needed to be done to attract visitors by the Etsy’s management.

Etsy also offers an affiliate program, which allows people to earn a commission on products sold via the website. This is another great way to get more exposure to the website, with virtually little effort required on the part of management. The affiliates take care of the promotions and management gives a commission on any sales generated. Currently, Etsy sellers are not permitted to join the affiliate program.

The company is also known to sponsor events at crafts fairs and other shows of that type, although management has maintained this is only a small portion of their marketing efforts.

The company did try some traditional advertising early on but felt that was counter-culture to what type of clientele they were trying to attract. They wanted to keep the grassroots feel of the website to allow it to be more community-oriented.

The website tends to get visitors from other craft-related and DIY websites. There are even sites that have spun off from Etsy with the intent of instructing others. Groups share ideas and concepts, and this extends well into the social media world. There are plenty of YouTube videos with the aim of giving tips to the genre.

Features

The website does have a five-star rating system along with the ability to enter comments about purchases. Visitors can also select the favorite button for products they have bought or are looking to buy in the future.

Sellers get quite created with what they sell. For instance, at the time of this writing, one seller was selling Cacti-Coasters, which looks like a cactus plant, but each “leaf” peels off to become a coaster. Here is the link:

https://www.etsy.com/listing/250255422/cacti-coasters

As is shown, this seller maintains a close to five-star rating and has over 9000 people who have favorited this listing. Other interesting and creative examples can be found on the website itself or featured listing within the blog of the company.

Lessons Learned by The Business

• There is a core group of users who define Etsy. Management has learned they need to cater to that core group. While changing times has led to some exceptions to its foundation, the company has tried to keep the mission of selling only vintage items and truly handmade crafts.

• The company realizes there are serious challenges ahead. Giants like Amazon have moved into Etsy’s market by introducing Amazon Handmade. Whether or not this will succeed or simply be a fad for Amazon is anyone’s guess. The lesson is it’s important to adapt to change without completely alienating your customer base.

• Matt Stinchcomb was assigned the marketing role early on. Before joining Etsy, he played in a semi-famous band called The French Kicks. He learned from his music days to keep his ego at bay. For everyone to stay focused on the goals of the company, all team members need to contribute. This is much more difficult to accomplish when egos are flying high.

How Other Businesses Can Learn from This

Try to hire people who have the same vision as you. Get them all in sync so their objectives will be one with the company. They will advocate for the company, which makes them champion the cause. They will be more in tune with customers, and they will enjoy the work they do.

Another great takeaway from the company is to sell in a community-based environment. This connects the consumers with the sellers in ways that no marketing effort can match. It also helps sellers give customers exactly what they are looking for instead of trying to force sales on them.