1. business and industrial

IT’S AN ETSY LIFE | OCT 2012
WHY
THIS
CONSIDERED
HANDMADE
Etsy
redefines
the local
crafts
market into
its own
image
IS STILL
ETSY
GOES
PRO
Can Etsy Go Pro Without Losing Its Soul?
Can a marketplace for crocheted blankets and hand-beaded necklaces infiltrate
the shelves of your local mall?
by Rob Walker
wo years after setting
up her online shop, Terri
Johnson had the kind
of holiday season most
business owners dream
about. By Thanksgiving
2009, orders for her custom-embroidered goods
started streaming in at a
breakneck pace. And the
volume only increased
heading into December.
Johnson was hardly feeling festive, though. To
get the merchandise out
the door, she worked nonstop, hunched over the embroidery machine in her basement, stitching robes,
aprons, and shirts until just a few days before Christmas. “I was barely seeing my family,” she recalls. The
problem was that Johnson’s main venue, shopmemento, is a storefront on Etsy.com. And she feared
that if she hired help, invested in new equipment, or
rented a commercial workspace, she might run afoul
of Etsy policies and get kicked off the site.
After all, Etsy was designed as a marketplace for
“the handmade.” The whole point is that the site
offers a way for individual makers to connect with
individual buyers. But trying to keep up with orders
on her own was threatening to turn Johnson’s business into a one-woman sweatshop. Etsy rules allow
“collectives,” but that’s a vague and unbusinesslike
term. “No one knows what it means,” she says. After
the holiday crush, Johnson was so spent that she
shuttered her store for the entire month of January
to recover. She knew that if she wanted to build a
real business, she’d eventually have to scale up production. She wondered if she had outgrown Etsy.
This was a big problem for Johnson, but it was
also troubling for Etsy. Today the site attracts 42
million unique visitors a month, who browse almost 15 million products. More than 800,000 sellers use the service. Most are producing handmade
goods as a sideline. But losing motivated sellers like
Johnson, who are making a full-time living on Etsy,
means saying good-bye to a hugely profitable part
of its community.
From its start in 2005, Etsy was a rhetoric-heavy
enterprise that promised to do more than simply
turn a profit. It promoted itself as an economyshifter, making possible a parallel retail universe
that countered the alienation of mass production
with personal connections and unique, handcrafted items. There was no reason to outsource
manufacturing, the thinking went, if a sea of individual sellers took the act of making into their
own hands—literally.
Aim Carlson from
Hamilton, Ontario
shows off her Etsy
store, Alternative
Blooms, which she
opened last year
with her sister, Mel.
The world
The approach worked well enough to establish the startup. Etsy makes money from
every listing (20 cents apiece) as well as
every sale (a 3.5 percent cut). It has been
profitable since 2009, and in July 2012 yearover-year sales were up more than 75 percent. Not bad for a retailer selling mostly
nonessential products during one of the
most sluggish chapters in the history of
American consumer spending.
But now Etsy finds itself at a crossroads.
Sellers like Johnson, reaching the limits of
what the service allows (as well as what it
can do for them), are being forced to consider moving on. Meanwhile, the hobbyists and
artisans who make up the rest of the marketplace still value Etsy’s founding ethos—that
handmade items have an intrinsic value that
should be celebrated and given a forum outside of traditional retail.
How to reconcile these competing visions
of what it means to be an Etsy seller isn’t
clear. While the site wants to remain an accessible entry point for newbies, it doesn’t
want the narrative arc for successful sellers
to arrive at the inevitable plot point: “And
then I started a real business.”
To try to deal with this, Etsy has begun
implementing a host of changes. Some are
simple, like a proprietary payment system
designed to work better on mobile devices.
Other ideas on the table involve revising
seller policies—embracing such previously
verboten options as remote employees—to
hang on to booming “independent creative
businesses” (Etsy’s new buzz phrase). Boldest of all, the company now plans to offer its
community the option of integrating into the
mainstream retail economy, including a pilot
program that will soon bring Etsy goods to
the shelves of nationwide home-design chain
West Elm (owned by Williams Sonoma).
“
according to
ETSY
way: Can a marketplace that made
its name as a righteous alternative
to business as usual go pro without
losing its soul?
Etsy was launched by a small group
of twentysomething techies who had
drifted into the orbit of GetCrafty.
com, a forum-driven site that had
become a hub of the DIY community.
Foremost among the founders was
Rob Kalin, then 25. As the company’s
CEO, Kalin was disconcertingly charismatic, harboring no doubts about
his ability to bend the world to his
vision. Invaluable as such conviction
can be to a startup, Kalin often came
across as less interested in business than in ideology. “I see Etsy as
an art project,” he told me in a 2007
interview for The New York Times
Magazine. “I speak to people in the
business world and the technology
world, but I don’t admire them,” he
later told Inc. magazine (allegedly
while pointing an 8-inch combat
knife at the reporter). Kalin saw Etsy
as a cultural movement that could
revive the power and voice of the individual against the depersonalized
landscape of big-box retail.
Kalin’s idiosyncrasies didn’t thwart
the growth of his business, though.
By 2011 Etsy had swelled to more than 160
employees, moved to spacious new digs in
Brooklyn’s Dumbo neighborhood, and had
more than 400,000 sellers using the site.
Kalin appeared on Martha Stewart’s television show (as did, in time, many Etsy sellers). “He was very principled,” says Matthew
Stinchcomb, the company’s first nonfounding
employee and now its VP of branding and so-
On June 18, 2005, Etsy was first
launched. Over the next six years, it
conquered the handmade market.
2005
Iospace, a small company composed of
Robert Kalin, Chris Maguire, and Haim
Schoppik officially launch etsy.com. Kalin
said he named the site Etsy because he
“wanted a nonsense word because I
wanted to build the brand from scratch.”
2007
In February Etsy Labs, the company’s
headquarters, opens in Brooklyn,
NY. Set-up as a creative community
space, it hosts a variety of public
programming from hands-on events
to tech talks to business development
workshops and beyond.
Last year the board decided to replace Kalin; Fred Wilson of Union Square Ventures
(an early investor in Etsy) characterized the
move as a case of a founder’s vision clashing with the realities of a growing business.
(Kalin declined to comment for this story.)
Their choice for the new CEO: then-CTO
Chad Dickerson, who had come from Yahoo
Etsy doesn’t want its successful sellers
to arrive at the inevitable point: ‘And
then I started a real business.’
While many of these changes have not been
formally implemented or even announced to
the Etsy community, there’s already handwringing in some quarters about Etsy losing
its core values. The question becomes: Can
Etsy loosen its ideological vise to accommodate the Terri Johnsons of the world without
alienating the handcrafters who made it popular in the first place? Or, to put it another
cial responsibility. But at times that meant
“he would not focus on what was best for the
sellers if it meant compromising his personal
ideology.” Kalin positioned himself as the living, breathing incarnation of the Etsy brand.
“I am actually trying to curate my entire life
pretty much with handmade stuff,” he told
TechCrunch founder Michael Arrington in an
interview at Davos in 2009.
”
in 2008. Dickerson, 40, quickly concluded
that some major changes were in order.
First, Etsy couldn’t keep losing ambitious
sellers and forgoing future revenue. Dickerson saw a solution in improving the basic
UI—making it easier for sellers to sell. In
his three-year tenure, he’d already more
than quadrupled the size of the tech team
with that in mind.
Other shifts may sound like semantics but
could have a profound impact on the community. For example, Etsy has decided to allow
sellers to self-identify as “designers”—meaning they can outsource some of their production work. Rules that once limited working
with outside vendors or employees are being
systematically reconsidered. “We’ve missed
out on a whole piece of creativity,” says Lauren Engelhardt, who oversees policy matters for the company, “which is people who
design something but maybe don’t have the
means to produce it themselves—things
that need specialized equipment or a lot of
people with specialized skills.”
The changes are a work in progress—
”We’re still figuring out how to express it
in policy language,” Dickerson says—but
the immediate upshot is an effort to resolve
borderline cases in ways that keep successful sellers on the site. The front line of enforcement is the community itself, users who
flag a given shop for insufficiently handmade
behavior. But if the shop’s practices are
deemed to be “in the spirit of Etsy,” as Dickerson puts it, the sellers can work with the
Volunteers at Etsy
Labs, the company’s
headquarters
in Brooklyn and
creative community
space prepare for a
“Craft Night.”
“Marketplace Integrity and Trust & Safety”
department (which recently doubled in size)
that helps shopkeepers preserve the spirit
of Etsy as they grow. For instance, a seller
who shapes wooden kitchen implements can
have custom patterns laser-cut by a vendor, but should divulge the process on their
shop’s About page.
Couldn’t the laser cutter be an anonymous
factory in China, though? No, Dickerson says,
because that would violate “community standards.” That seems vague to the point of evasive. The bottom line is that Etsy is devoting
more time to what amounts to judgment calls
and resolving them in seller-friendly ways.
It’s an incremental process but a sweeping
one—even hard-and-fast Etsy no-no’s like
drop-shipping could be revisited.
That’s a startling departure from the company’s original stance, which was described
by Kalin in a 2007 Etsy forum post as expressly prohibiting a third party from manu-
2008
In July Kalin cedes the position of CEO
to Maria Thomas. Co-founders Haim
Schoppik and Chris Maguire also leave
the company in August. In September,
Etsy hires Chad Dickerson as CFO and
the company first acknowledged
concerns about vendors selling other
people’s work as their own.
2009
Thomas leaves Etsy after less than a
year and Kalin resumes his role as CEO
from December 2009 until July 2011.
2010
In March Kalin announces that the
company “plans to go public, though
not until at least next year.” By
December Etsy saw revenues increase
from $180 million to $314 million.
2011
Chad Dickerson replaces Kalin as CEO in
July and by November and Etsy sees an
increase of sales by 80%.
facturing and shipping the seller’s original
artwork: “The current policy,” he wrote, “allows for every kind of digital print except
for this one scenario: a third party service
provider prints and drop-ships your print directly to your buyer.” He went on: “We have
taken an issue with this because we feel it
distances the producer and the consumer …
this is an important goal of ours.”
Dickerson’s version of Etsy seeks to close
the gap between producer and consumer
too. It’s just that in his schema, the producer
doesn’t have to make
everything. Oh, and the
consumer could buy
the seller’s goods at
West Elm, in the mall.
In May, Dickerson
announced a $40 million round of funding.
Part of that sum is
earmarked for international expansion, but a
good chunk will bankroll efforts to make Etsy
more business-friendly.
“We’ve come to understand that many
Etsy sellers are businesspeople,” he says,
“and want to grow
their businesses.” One
example of the improved UI is the directcheckout payment option, released in June
and designed to work
more seamlessly on
mobile devices than
the old PayPal system.
(Mobile users already
account for 25 percent
of Etsy’s traffic.)
But in a much more
substantive move, Etsy
is also building a wholesale marketplace from a
platform called Trunkt (which it bought from
indie developer Dev Tandon) that will give sellers tools to get their products “into the world
in brick-and-mortar stores, catalogs, and other
online stores,” Tandon says. Does that mean
flash-sale sites like Gilt.com? Tandon says
that would be great. Mainstream retailers like
J.Crew? It could happen, he says.
West Elm is one place you will definitely
find Etsy products. “The customers want
this,” says West Elm president Jim Brett. And
though the full rollout has yet to happen, Etsy’s community seems to have cottoned to the
idea too. Those whose work has already appeared in West Elm catalogs as set decoration
proudly state so on their pages: “Featured in
West Elm, large abstract painting,” crows Etsy
shop laurenadamsart. By the 2012 holiday
shopping season, the chain—with 42 locations in such un-DIY places as Orlando’s Mall
at Millenia—will start featuring select seller
wares. The new Etsy era has begun.
her hit product line and returning to a more
art-oriented practice. She expresses no ill will
toward the company but seems ambivalent at
best about the idea of catering more to entrepreneurs than makers: “Do they really think
Etsy being bigger will help small artists?”
Stinchcomb, Etsy’s brand VP, insists the
answer is yes. “As we get bigger and have
more awareness, that helps every seller,” he
says. “If we want to try to do something like
To the handcrafters whose work made the change the economy, that takes scale.” He
site popular in the first place, framing these means scale for Etsy, of course, but for sellers
too: People who stick
around and use a more
entrepreneur-friendly
Etsy to build their businesses will ultimately
have more impact on
the marketplace. Ryan
McAbery may not be
interested in that, but
Etsy is betting that a
lot of other community
members are.
Maybe so. But scanning Etsy’s forums
reveals that plenty of
shopkeepers are troubled by the new bigbusiness bedfellows,
whether they be onsite
vendors or chains like
West Elm. To take one
example, seller BeaG
recently posted in the
Old Time Etsy forum
that instead of being a
safe haven for makers,
the site has become a
part of the problem. “I
miss the spirit of the
HANDMADE MOVEMENT,” she wrote. “You
Mandy Becker
know, Etsy as opposed
from Twillie and
to those big multimilTweedle buys
lion-dollar companies
faux taxidermy
that exploit their staff,
pieces in resin and
developments as what
pollute
the environment, and
handpaints them in
the community wants
disrespect
their own customany custom color.
seems a bit disingenuers, all for the sake of making
ous. “It sounds like it
even more money. Guess what:
benefits Etsy,” seller Ryan McAbery allows, Etsy became one of those. Talk about a radical
but emphasizing business-building will change for the worse!”
“change the vibe.” McAbery is an interesting
She may have been referring to a recent
case: She joined Etsy in 2006 and became flap over Ecologica Malibu, a seller who
an early superstar seller, making Scrabble- made furniture from reclaimed wood and
tile pendants. She was featured in the “Quit was featured on an Etsy blog earlier this
Your Day Job” series Etsy runs on its blog. year. Critics accused the seller of being little
She was also working 80 to 100 hours a week. more than a distributor of products manuEventually she downsized herself, selling off factured in Indonesia. This kicked up quite
a fuss, and Etsy conducted
an investigation. It concluded that the real problem was a failure to clarify
that Ecologica Malibu was
not a one-woman operation
but a collective with a “local staff” of seven. “[The]
operation meets our standard for the marketplace,”
Dickerson wrote on the
Etsy News blog, and works
within “policies that have
been in place since 2009.”
Etsy’s community can be
extremely vocal—pretty
much any criticism of the
site that you can imagine,
large or small, can be found
animating a thread or 10 in
its chat forums—and critics in this case were not
mollified. Ultimately, Ecologica Malibu’s Etsy shop
simply disappeared.
But the real point seems
to have been lost in the kerfuffle: A seller
designing objects that others build is not an
Etsy aberration—it’s a crucial part of Etsy’s
envisioned future.
Will the site lose core enthusiasts over such
pivots in strategy? Probably. But that seems
to be less important to the new Etsy than
losing “graduated sellers” like Megan Auman, a 30-year-old metalsmith in Jonestown,
Pennsylvania, who started selling jewelry on
Etsy in 2007. The platform helped Auman
build a following, get publicity, and exhibit
at the New York International Gift Fair. “I’m
running a business,” she says. But the amateurish practices of Etsy’s early adopters,
coupled with the limited options for customizing a storefront, made it difficult to stand
out or project a high-end brand image. That’s
important stuff for entrepreneurial-minded
creators, Auman points out. She went on
to sell her goods wholesale to a network of
50 stores and moved her online shop to the
ecommerce platform Big Cartel. She has nice
things to say about Etsy, but she sees it as
more of a springboard.
Auman was one of several sellers who offered suggestions for keeping shops like
hers from jumping ship: Etsy should have
a “premium” option for more professional
shops; the ecommerce tools should be better; the seller policies should be clearer
about what is and is not allowed; and shoppers should be offered a more curated experience, like that offered by the popular
Jason Miller
sells bags
manufacutured
by OtwaCo, but
embellished with
his own handmade
medallians.
flash-sale retailer Fab.com. “I would like Etsy
to be less democratic,” Auman says.
For Dickerson, Auman’s story is a cautionary tale. Etsy, he agrees, needs to figure out
ways to give sellers more tools, more options,
and more control over their businesses. Letting them sell from their own domains—using Etsy’s storefront technology—instead of
forcing customers to click over to Etsy .com,
is one obvious step, he says. “In my mind
there’s not any debate about whether we
should do that; it’s when.”
Nothing, it turned out, prevented Terri Johnson from scaling up her Etsy business. She
hired seven employees and edited her About
page so it listed her as owner; she also displayed pictures and bios of the workers who
embroider, ship, and handle the shop’s customer service. The head of Etsy’s “seller education” department even reached out to see
how they might help. “They don’t want this
kind of business to leave,” Johnson says. She
did $60,000 in sales in July alone and is ready
for this holiday season’s salvo of orders.
To insiders like Stinchcomb, Johnson is a foot
soldier in the battle to revolutionize manufacturing: “The real opportunity for change:
collaborative production,” he says. “You get
a wholesale order and you have to make 100
sweaters. Could Etsy bring together 100 knitters in the community to produce those?”
Sure, but couldn’t that be loosely interpreted to
mean “hire 100 workers in a factory somewhere
to sew garments for you at a wholesale-friendly
price”? It’s a question that the community is
still wrestling with. In a forum on the Ecologica
Malibu topic, the proprietor of the kachinadesigns shop wrote in April 2012: “Soooo. A designer can design a shirt. And send the plans to
a SWEATSHOP in thailand and then SELL those
products here and call them handmade? I bet
Walmart will be happy to hear this news.”
At Etsy headquarters, Dickerson offers a different take on the company’s goals. Some purists may not like it, he explains, but the site
can’t just be a parallel universe where crafters
quibble over what is truly handmade. Sellers
have to think bigger if they are going to “change
the way retail works from the inside,” he says.
For her part, Johnson couldn’t be happier
with the site’s new direction. She’s not out
to wage a revolution—she just wants to
increase sales and use Etsy’s tools to grow.
Some Etsians, she concedes, think sellers like
her should move on. She doesn’t see it that
way: “If you grew it on Etsy, why go someplace else?” That’s precisely the attitude
Dickerson hopes will persevere, since it’s the
community, in the end, that will drive the future of Etsy’s business—and its soul.