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Etsy’s Evolution Strains Sellers

After a lackluster IPO, longterm shopkeepers notice shifts.

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When it set up digital shop in 2005, Etsy felt like the antithesis of eBay. Back then, online shopping was still very new, and with its offerings of vintage clothing, handmade jewelry, and crafted goods, Etsy’s boutique chic contrasted well against the auction site, which dominated peer-to-peer selling but felt more like a cluttered yard sale.

Now, two and a half years after a lackluster IPO, Etsy looks and feels much different, with one former Etsy loyalist, who used to rely on the site for every gift-giving occasion (and, disclosure, my personal friend), calling it “a slightly more curated eBay.” The number of active sellers has increased from 2016 to 2017, per Etsy’s earnings reports. But with 65-page threads in forums of sellers chronicling their declining sales, which many blame on Etsy’s search algorithms and the fact that mass-produced goods are clogging results, it’s clear that long-term sellers are noticing massive shifts.

“Etsy has grown bigger than I think anyone expected,” says Staci Egan, who joined in 2007 with her shop Contempo Jewelry and has been selling handmade earrings and necklaces full time for six years. She calls many of the discussions about the site’s changes, held in Etsy forums and Facebook groups, “exhausting” because they’re “like talking politics, there are always people with different views.”

Etsy’s desire to expand makes sense from a business standpoint, but for the people who have spent years on the site and feel emotionally invested, both in their shops and the community fostered on Etsy’s forums and groups, its shifting priorities can feel like a betrayal.

“There has definitely been growth among more ‘manufactured’ goods, and from what Etsy has communicated, that's been by design,” says Emily Popek, who began selling vintage clothing through her shop Bread and Roses Vintage in 2012. She notes that vintage and handmade clothing has been drowned out by options that can be produced “in volume.”

“I do not think Etsy is an independent marketplace, but you can still find independent artists — you just have to dig deeper,” agrees Leigh Kelsey, who started Rhymes With Twee in 2005, selling screen-printed goods and wearables. Popek believes that Etsy “has been working very hard,” both to attract new customers and to “combat an image that once existed of Etsy as a place for quirky, weird, or even ludicrous goods.” The weird crafts and bizarre offerings were lovingly mocked by the popular, but now defunct, blog Regretsy.

One reason for shifting away from the weird and the wacky is Etsy Wholesale, a program where sellers are able to sell in bulk to businesses instead of individual customers. Rather than making customized one-offs, sellers now have to think about what products could sell in high numbers at physical retail shops. Amy Stringer-Mowat, whose shop American Heirloom went viral in 2010 with its customized cutting boards (helping to kick off the trend of state-shaped everything), says the program has been invaluable in courting new customers, streamlining her product line, and balancing out the declining number of sales in her Etsy shop.

Egan, whose sales are also down, agrees that Wholesale has been a great step in expanding her business. She’s less enthusiastic about Etsy Studio, a new part of the sales platform that lets customers buy materials to make their own handicrafts. Studio is another example of Etsy experimenting with how to attract new kinds of customers, but many sellers complain it has pulled focus and resources away from normal Etsy shops, adding clutter to the site and cutting sales.

When you speak to Etsy sellers, it’s impossible to avoid talking about the impact that Etsy Studio and Etsy Wholesale have had on their businesses, even if they don’t sell through either platform. Because they allow sellers to outsource parts of production, further blurring the criteria around what counts as “handmade,” they represent a shift away from the distinguisher that set Etsy apart from other online-shopping rivals. Highly successful shops can’t fill orders without adding people to their team, and Wholesale’s expanded definition of “artisan-made” helps solve that problem. Etsy wants successful and growing shops to stay on the site, rather than transition to independent platforms, so there’s a big incentive to support shops that generate high sales and hire multiple employees or even outsource some work. But according to even the sellers who use Wholesale, many copycats and resellers buy cheap factory goods and sell them with a markup, taking advantage of loosened restrictions in order to flood the market.

Just search for an “octopus pendant” and you’ll see the problem — the same product pops up again and again. While some have been altered, and thus arguably count as handmade, others are identical to what you can find for a fraction of the price on Chinese sites like Alibaba. Figuring out the search-engine algorithm that determines if your product is on the first page or buried on the 200th is essentially impossible, says Stringer-Mowat, who agrees with Kelsey’s judgement that “keeping up with the ever-changing keyword updating” is a full-time job.

The octopus pendant all over Etsy.
Photo: Etsy

While Etsy’s cut of sales hasn’t changed, it does offer services like promoted listings, which began in 2014, that eat into already-tight profit margins. Now, more than half of the site’s revenue now comes from services used by sellers, a shift concurrent with individual artists noticing their own sales slow, even though Etsy’s gross merchandise sales are up 13.2 percent year-over-year in Q3. Still, Stringer-Mowat says, these services are worth it, “because the SEO is so tough to crack.”

Those interviewed said that other online platforms are still much more opportunistic when it comes to taking advantage of independent sellers, but many fear that Etsy will try too hard to mimic more corporate platforms like Amazon.

These are the “growing pains of being an investor-backed company,” says Kelsey, with the push for larger, and hopefully more profitable, manufacturers spurred by the company’s new obligations to stockholders. “Unfortunately [Etsy does] not do a whole lot to protect artists,” she adds, speaking both from observation and experience. Historically, Etsy has been “slow to act, or worse, not [acted] at all,” when designs have been stolen. According to site policy, if you discover a copyright infringement, you can file a claim for Etsy to remove the listing. Offending shops are allowed to remain open, and sellers are the ones who have to continue checking if their work has been re-copied. Etsy says that the accounts of repeat copyright infringers can be terminated, but sellers are dubious about how often this happens since there have been high-profile cases where Etsy did not enforce its reselling policies until it received massive press attention. As the site has expanded, and the logistics of monitoring listings has gotten even more complicated, many an annoyed seller has theorized that Etsy has little incentive to crack down since it makes a cut of sales either way.

According to Kelsey, now that larger manufacturers are involved, it’s even more difficult for independent designers to defend themselves, especially without a lawyer. She cites this as one reason artists say they’ve begun pulling away from the site. Other sellers shared similar stories of having their designs ripped off, resigned to the fact that getting copied, and competing against cheaper knock-offs, has become an increasingly inevitable part of doing business on the site.

Etsy’s responsibility to stockholders has resulted in more than tweaked SEO algorithms and aggressive pushes to grow the site’s offerings — since May, 22 percent of the company’s staff have been laid off, including then-CEO Chad Dickerson, who’s since been replaced by Josh Silverman. This taps into the deeper feeling of unease many sellers are experiencing — after spending years as part of a smaller site that prided itself on its strong community and forums, seller services are being streamlined, and having one-on-one relationships with staff just isn’t feasible. Lucky to have had her shop “directly supported” and promoted by the Etsy team when she first began, Stringer-Mowat notes that the members of staff she worked with were all let go during the layoffs.

Etsy hasn’t abandoned its sellers — on forums, you can still see staff answering questions — but the highly personalized and time-consuming process of building relationships with individual sellers is not sustainable. Plenty of sellers back in the day didn’t have the same opportunity to work with Etsy’s CEO, as Stringer-Mowat did, but there at least was a greater chance of it happening. While people don’t expect as much relationship-building from competitors like Amazon Handmade, because Etsy is a site that differentiated itself by focusing on its small and independent sellers, it is often held to a higher standard.

So is Etsy harder to break into than it once was? The slowed growth witnessed by some sellers suggests that the market may be reaching its saturation point. Thanks to the sheer amount of stuff on the site, and the time-consuming task of making sure your listings are the first that customers find, those interviewed say it’s definitely more work.

For those hoping to build their brand and find new customers without having to rely on Etsy’s SEO, cross-promotion on social media has become hugely important, says Popek, with Kelsey agreeing that “having a presence across social media is imperative, but likes do not always guarantee sales.” For customers who’ve drifted from Etsy, social media is also an easy way to stay up to date with their favorite shops.

New features, like guest checkout, show that Etsy is paying attention to how its sellers are branching out to different platforms, making cross-promotion easier by allowing customers to visit and buy from shops without having to make an account or engage with the larger site. This feature has been enthusiastically praised by sellers, and based on her interactions with guest buyers, Egan suspects it has tapped into a new market by attracting older shoppers.

“People have to realize that Etsy is only one [albeit important] tool in a toolbox,” advises Stringer-Mowat. It’s not 2005 anymore, and Etsy, whether people like it or not, is a company that now answers to stockholders more than sellers. But “one huge strength” of the platform remains, says Popek: its “very strong, very active community of sellers,” which is enabled by Etsy’s various networking tools. According to the sellers we spoke with, this key feature continues to set Etsy apart from its competition and preserves some of the original camaraderie that made the site so special to begin with. They say that’s worth holding onto.

Correction: November 16th, 2017

This article previously misstated that Etsy’s IPO was a year and a half ago; it was two and a half years ago. It has also been update to clarify that Chad Dickerson was replaced as CEO in May 2017; that while individual sellers have seen drops in sales, gross merchandise sales are up year-over-year; and that the number of active sellers on Etsy has grown from 2016 to 2017.

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