But the site has also come under fire by some in the seller community for allowing vendors — who may not be as small and unique as they claim — to sell on Etsy. Recently, some users criticized the site for highlighting a “featured seller” on its blog who appeared to be in violation of some of Etsy’s policies because it was unclear if the seller was actually making all of her wares herself.
But Etsy’s largest stumbling block for future growth may be its overwhelmingly wide variety of products. It is one of the reasons many shoppers keep coming back, but it turns others away, says Wharton’s Kahn, who has conducted research on the effect of product placement and promotion in physical stores. She notes that a simple search on blue purses, for instance, comes back with more than 45,000 items. “To some people that’s a good thing, but to many that’s extreme. If you’re very sophisticated and know exactly what you want, you can probably find it, but overall the site is not very well structured,” she says. “You can refine your search based on relevance and price, but those are pretty crude.”
The bigger issue, adds Kahn, is that in the age of Facebook and Pinterest, where social media users are accustomed to a more guided online experience, shopping on Etsy is cumbersome and chaotic. “All the artisans hold their own inventory; Etsy is just putting it out there,” she states. “Etsy is not doing a good job at curating, and at creating the story around the item. It has featured sellers, but beyond that, it’s hard to parse through.”
Etsy has several possible paths forward. The company has raised many rounds of venture funding — including a $20 million installment in 2010 — and it is said to be mulling a potential public offering within the next couple of years. It could also be snapped up by a bigger company. Given Etsy’s distaste of the mainstream marketplace, however, these options run the risk of alienating both customers and shopkeepers. Etsy’s stated mission is to “empower people to change the way the global economy works.” To Etsy’s tight-knit community of shop owners and customers, a Wall Street IPO or a sale to a big shopping or media conglomerate would be anathema.
There is always the concern that once a company is bought or goes public, it will lose a lot of “what made it so appealing in the first place,” according to David Bell, professor of marketing at Wharton and an expert in e-commerce. “This is particularly true of an e-commerce site like Etsy that has a segment of its existing client base that is anti-corporate.”
Facebook’s recent acquisition of Instagram, the quirky picture-sharing app, for $1 billion is a case in point. To a certain segment of Instagram users, Facebook — which made $4.27 billion in revenue last year, according to research firm Emarketer — was viewed under a cloud of suspicion. The company’s purchase of Instagram, which is not small (it has more than 30 million users) but perhaps felt that way to its faithful, incited a hostile response. “Already there’s been a backlash with some customers quitting the service,” notes Bell. “Loyal customers are worried that it’s going to go too corporate.”
Even if Etsy remains an independent company, future growth is contingent on the site staying true to its roots. Bonanza, an e-commerce company founded in 2007, was an early rival to Etsy and eBay. It started as a craft-focused site, but now sells a lot of mass-produced items. Compared with Etsy’s sleekly designed homepage, Bonana’s homepage resembles generic circular ads for middle-market clothing chains.
Staying true to its roots should not be difficult, says Wharton’s Lodish. Etsy is a powerful juggernaut in the crafts world, which is enough to scare off potential competitors. “There is a big barrier of entry,” he notes. “For another website to come along and try to convince millions of customers to look at it [as opposed to Etsy] for handcrafted stuff, is going to cost a lot of money.
“As long as Etsy is doing well by its artists and continues to delight its customers, why would anybody leave?”
Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.