Etsy Seeks Scale Without Losing Its ‘Street Fair’ Aesthetic

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A hand-embroidered cocktail dress with a flouncy tulle skirt the color of a pink Necco wafer for $64; a 1967 auto repair manual with authentic grease smudges and coffee stains for $28; a spoon rest fashioned out of a melted and flattened Rolling Rock beer bottle for $12; and a 16-inch ottoman with a washable slipcover made to look like butter cream frosting for $169. These are some of the weird and wonderful wares for sale recently on Etsy, the online marketplace for handmade and vintage items.

Founded in 2005, Etsy started as a ragtag website for artists and craftspeople to sell their wares. Today, it has evolved into a funky online bazaar with more than 800,000 “stores” selling 13 million different items. It is also a surprisingly big business: According to recent figures, the site gets more than 39 million unique visitors every month, and last year rung in sales of $525.6 million.

Its influence as a tastemaker is growing: A study earlier this year by RJ Metrics, the business intelligence company, found that Etsy is the most “pinned” site on Pinterest, the popular social network. Some perspective: Martha Stewart is the sixth most pinned website, Amazon is the 14th most pinned site, and Anthropologie, the boho-chic clothing shop, is the 16th most pinned site.

“Etsy is kind of like a very well run, high-quality street fair,” says Barbara Kahn, a Wharton marketing professor, adding that in the era of monotonous chain stores and cookie-cutter strip malls, Etsy’s allure lies in its inventory of unique items. “You find things that are new and novel — things that you wouldn’t see in a department store. The attraction for shoppers is the serendipity of finding exactly what you want after combing through the possibilities.”

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While online shopping kismet is appealing for some, it is also one of the biggest hindrances to Etsy’s continued success, she notes. The site is so vast that for the uninitiated, Etsy can seem less like an eclectic online boutique and more like a jumbled tag sale. Given its meteoric growth, Etsy needs to come up with new ways to help customers find exactly what they’re looking for, all the while ensuring that sellers are visible and not lost in the shuffle, experts note. As the company mulls a public offering, it also must be careful not to alienate its faithful shop owners and customers by going too commercial and straying from its independent, artsy roots, or by becoming bogged down in privacy and credibility concerns.

Delighting Customers

The story of Etsy begins with its founder, Rob Kalin, a high school dropout with a classics degree from New York University. As company lore has it, seven years ago, Kalin — then a 25-year-old amateur carpenter and photographer living in a cramped Brooklyn apartment — was trying to eke out a living hawking his handiwork online. After having difficulty finding the right Internet outlet, he came up with an idea: Create a marketplace on the web for artists and craftspeople to sell their work directly to customers. With $50,000 of seed money from an angel investor and the help of some technically minded friends, he launched Etsy. In its first year in business, the company’s sales totaled $175,000.

Today, Etsy remains headquartered in Brooklyn, N.Y. Last year, Kalin stepped down as Etsy’s chief executive, which many observers said was a sign that top leadership recognized that Kalin was not the best person to manage the needs of a rapidly scaling business enterprise. (Chad Dickerson, the company’s former chief technology officer, has taken over.) The company gets 1.4 billion monthly page views and does business in 150 countries. Its sales last year increased 67% over sales in 2010. (Etsy charges its virtual shopkeepers a listing fee of 20 cents an item and takes a transaction fee of 3.5% of the item price for every sale.)

“Now that Etsy is successful, clearly its biggest asset is that it is big,” says Gregg Fairbrothers, professor of business administration at Dartmouth’s Tuck School of Business and director of the Dartmouth Entrepreneurial Network. “If you are an artist and you want to be seen by a lot of people, you sell on Etsy. If you are a customer looking for crafts, you shop on Etsy.” As an e-commerce company, Etsy cultivates a self-consciously offbeat and eccentric vibe. Its tone is high-minded: Etsy’s mission statement, for instance, says that the company aims to bring “heart to commerce” and make the world “more fair, more sustainable, and more fun.”

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The company is most definitely geared toward female customers. (Of the respondents to Etsy’s 2010 survey of its blog readership, 97% were women.) Even those run the gamut, however. Its eye-catching color-coordinated homepage seems like it is trying to appeal to young urban hipsters who read online shelter magazines. But Etsy also has a sizeable inventory of homey products such as needlepoint pillows of sleeping cats and crocheted toilet paper covers.

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