10 ms·

Etsy’s Success Raises Problems of Credibility and Scale

baddox 12y ago
I was never aware that Etsy had explicit rules about things being handmade or "vintage." I just assumed that the Etsy had that niche and that its community liked things that way, and perhaps that Etsy purposefully highlighted merchants that fit that description. Given that it is an explicit rule, I really wonder how there can be a clear way to distinguish between compliant and infringing merchants. Even the word "handmade" is tricky, despite having a seemingly clear definition. I once purchased some plastic coasters with laser-engraved mathematical symbols on them. By all appearances, it was a single person designing, cutting, and mailing these out, and it seemed to me like a perfectly appropriate product for Etsy, but it doesn't fit the most obvious definition of "handmade," and the manufacturing process could be trivially ramped up a few orders of magnitude if so desired.
- Red_Tarsius 12y ago
  I agree. Handmade is such a silly buzzword. As it turns out, Chinese sweatshops make a whole lot of handmade stuff! c: There's nothing inherently wrong with machine-made stuff.
  - maratd 12y ago
    Please feel free to invent a word denoting an object was manufactured by someone with extensive expertise and specialized experience.
    - vinceguidry 12y ago
      Artisanal sounds like the one to use, if a bit on the cheesy side.
      - objclxt 12y ago
        The problem with "artisanal" is it's not a protected word, whereas "handmade" is. By which I mean you can't slap a "handmade" sticker on any old product - you need to be able to demonstrate that it is substantially made by hand. But "artisanal" isn't quite the same. I could have "artisanal fruit loops".
- Theodores 12y ago
  Even an iPhone is hand made when you get down to it, the Model T Ford was handmade too. Things that are not 'handmade' are usually made somewhere in the Far East by lots of hands in such a way that things appear 'bought' rather than 'handmade'.
- pjc50 12y ago
  The thing that Etsy is really selling is "credibility" and "authenticity". It's some sort of post-Barthes effort to try and tie a product to the lifestyle of the person (usually a woman) producing it. The product itself is just a marker on which symbolism can be hung. Etsy is hardly unique in this, it's just that they're tied to "handmade" as a brand value.
- thomax 12y ago
  I would guess that "handmade" in this context doesn't mean "no machines were involved", but rather "produced on a small scale and without processing the product in a factory". Still, however you look at this rule, there are a lot of gray areas, and policing those must be challenging. I'd also guess that with an IPO on the horizon, the Etsy shareholders probably favor high volumes on their website, rather than kicking out shops that peddle non-handmade merch. A pity, that, because It's sorta the opposite of what Etsy was supposed to be.
- cauterized 12y ago
  I think Etsy buyers are looking for a certain level of unique-ness. "Not mass produced" seems like a good rule of thumb to me.
  - beau85 12y ago
    Agreed. Reminds me a lot of what Fab was, before it tried to compete with Amazon -- unique, 'quirky' goods that felt like they weren't just mindlessly mass-produced (even if they were).
  - baddox 12y ago
    In your proposal, does "mass produced" refer to the physical production techniques, or merely the total quantity of identical items produced?
    - cauterized 12y ago
      Both, I guess. An item can be produced in a mass-production manner even if only a few ever end up coming off the line. This also applies to items that are produced on assembly lines but sufficiently customizable that no two are identical. Similarly, you can hire 10,000 people in china or Bangladesh to use hand crafting techniques to produce millions of essentially indistinguishable items in bulk, working out of their own homes. Those items are still mass produced IMO. I think part of the issue here is that the seller is a middleman -- Etsy is about buying something from the person who created it with their own hands.
- loceng 12y ago
  It's fairly impossible to know. Also, a creation could be made locally by someone, and still copied (whether from reverse engineering or an available template) and mass produced by someone else. This happens in any industry where duplication is easily (or not) possible and where there are people looking to make money - which is most industry.
- CPLX 12y ago
  This is perhaps a cynical take on the controversy, but it's hard reading this and similar articles not to conclude that when Etsy critics say they want to preserve the "handmade" or "artisanal" character of products on the site, what they really mean is "not made by asian people"
  - MBCook 12y ago
    Really? I don't see that. It seems like having a factory or workshop with hundreds of people making an identical item violates the spirit of the rule. I don't see why you'd assume they don't like Asian people doing it. I'm sure people would be just as annoyed if it was people in Africa or South America or somewhere in Europe or even the US. When you have a factory dedicated to making a good, it's no longer fair to call it 'artisinal' and compare it to a guy who makes 3 chairs a month in his workshop.
    - CPLX 12y ago
      I've seen reference to Alibaba and China in a lot of these kinds of articles about Etsy. Seems like a bit of a dog-whistle thing to me, though I concede I could be totally off base.
  - detaro 12y ago
    I bet "My Grandma back in Malaysia has been doing these crafts for years, here are her pieces" goes better than "I pay a bunch of high-school kids in Springfield, Kansas to glue those together for some pocket money"
- pbreit 12y ago
  Once again, nothing really "just happens". It takes a huge amount of energy and resources to cultivate.
Blahah 12y ago
> Though the site still loses money because of high development costs, it is booming, with gross merchandise sales reaching $1.93 billion last year. The fees Etsy collected on items listed and sold, as well as on services like the promoted placement of goods, reached $196 million. This reads to me as though Etsy has spent more than $196 million on development in the last year. Am I reading it right? If so, that's insane. If they aren't capable of making a profit with $196 million in revenue, when what they operate is a website, it seems unlikely to me that they will ever make a profit. The problem is compounded by their model (as highlighted in the article), which prevents any individual seller from scaling up very far. So how will they ever make money?
- detaro 12y ago
  No, they spent ~37 million on "product development" and made a loss of around 15 million. (per their S-1 filing) I don't really know what a "normal" distribution would look like (why does the article attribute the loss to the development costs?)
  - brador 12y ago
    What does "product development" mean here? Are they juicing the marketplace like kickstarter was alleged to have done/be doing?
  - sb8244 12y ago
    Same questions here. Obviously there are costs involved with the business, but basically $150 million (minus taxes they pay) revenue after development costs. Where does it all go?
- jasonlotito 12y ago
  > when what they operate is a website They do more than just operate a website. They are in the hardware market as well. You can accept credit cards from your phone and it will run through Etsy, which is handy for sellers rep on Etsy. I'm not sure what else they do, but it's not just running a website.
- adevine 12y ago
smackfu 12y ago
Another trend I've seen is for small shops to effectively replicate their entire store on Etsy, because that's where the buyers are. So a small commercial print shop may have an Etsy site, in addition to their "real" web site, and the Etsy shop may not even sell anything except have placeholder "deposits" that users can buy.
cm2012 12y ago
The biggest issue with the IPO that I can see is that marketing spend is ramping much higher than revenue spend (120% vs 30%, respectively), and they don't have a lot of experience with direct marketing dollars at that scale. In addition, they're now relying on the direct spend to achieve scale, and they used to rely entirely on organic. If they get it right - awesome. But there is a risk that growing direct marketing that fast at that scale will have a learning curve that will bite them.

I was never aware that Etsy had explicit rules about things being handmade or "vintage." I just assumed that the Etsy had that niche and that its community liked things that way, and perhaps that Etsy purposefully highlighted merchants that fit that description. Given that it is an explicit rule, I really wonder how there can be a clear way to distinguish between compliant and infringing merchants. Even the word "handmade" is tricky, despite having a seemingly clear definition. I once purchased some plastic coasters with laser-engraved mathematical symbols on them. By all appearances, it was a single person designing, cutting, and mailing these out, and it seemed to me like a perfectly appropriate product for Etsy, but it doesn't fit the most obvious definition of "handmade," and the manufacturing process could be trivially ramped up a few orders of magnitude if so desired.

Red_Tarsius 12y ago
I agree. Handmade is such a silly buzzword. As it turns out, Chinese sweatshops make a whole lot of handmade stuff! c: There's nothing inherently wrong with machine-made stuff.
- maratd 12y ago
  Please feel free to invent a word denoting an object was manufactured by someone with extensive expertise and specialized experience.
  - vinceguidry 12y ago
    Artisanal sounds like the one to use, if a bit on the cheesy side.
    - objclxt 12y ago
      The problem with "artisanal" is it's not a protected word, whereas "handmade" is. By which I mean you can't slap a "handmade" sticker on any old product - you need to be able to demonstrate that it is substantially made by hand. But "artisanal" isn't quite the same. I could have "artisanal fruit loops".
Theodores 12y ago
Even an iPhone is hand made when you get down to it, the Model T Ford was handmade too. Things that are not 'handmade' are usually made somewhere in the Far East by lots of hands in such a way that things appear 'bought' rather than 'handmade'.
pjc50 12y ago
The thing that Etsy is really selling is "credibility" and "authenticity". It's some sort of post-Barthes effort to try and tie a product to the lifestyle of the person (usually a woman) producing it. The product itself is just a marker on which symbolism can be hung. Etsy is hardly unique in this, it's just that they're tied to "handmade" as a brand value.
thomax 12y ago
I would guess that "handmade" in this context doesn't mean "no machines were involved", but rather "produced on a small scale and without processing the product in a factory". Still, however you look at this rule, there are a lot of gray areas, and policing those must be challenging. I'd also guess that with an IPO on the horizon, the Etsy shareholders probably favor high volumes on their website, rather than kicking out shops that peddle non-handmade merch. A pity, that, because It's sorta the opposite of what Etsy was supposed to be.
cauterized 12y ago
I think Etsy buyers are looking for a certain level of unique-ness. "Not mass produced" seems like a good rule of thumb to me.
- beau85 12y ago
  Agreed. Reminds me a lot of what Fab was, before it tried to compete with Amazon -- unique, 'quirky' goods that felt like they weren't just mindlessly mass-produced (even if they were).
- baddox 12y ago
  In your proposal, does "mass produced" refer to the physical production techniques, or merely the total quantity of identical items produced?
  - cauterized 12y ago
    Both, I guess. An item can be produced in a mass-production manner even if only a few ever end up coming off the line. This also applies to items that are produced on assembly lines but sufficiently customizable that no two are identical. Similarly, you can hire 10,000 people in china or Bangladesh to use hand crafting techniques to produce millions of essentially indistinguishable items in bulk, working out of their own homes. Those items are still mass produced IMO. I think part of the issue here is that the seller is a middleman -- Etsy is about buying something from the person who created it with their own hands.
loceng 12y ago
It's fairly impossible to know. Also, a creation could be made locally by someone, and still copied (whether from reverse engineering or an available template) and mass produced by someone else. This happens in any industry where duplication is easily (or not) possible and where there are people looking to make money - which is most industry.
CPLX 12y ago
This is perhaps a cynical take on the controversy, but it's hard reading this and similar articles not to conclude that when Etsy critics say they want to preserve the "handmade" or "artisanal" character of products on the site, what they really mean is "not made by asian people"
- MBCook 12y ago
  Really? I don't see that. It seems like having a factory or workshop with hundreds of people making an identical item violates the spirit of the rule. I don't see why you'd assume they don't like Asian people doing it. I'm sure people would be just as annoyed if it was people in Africa or South America or somewhere in Europe or even the US. When you have a factory dedicated to making a good, it's no longer fair to call it 'artisinal' and compare it to a guy who makes 3 chairs a month in his workshop.
  - CPLX 12y ago
    I've seen reference to Alibaba and China in a lot of these kinds of articles about Etsy. Seems like a bit of a dog-whistle thing to me, though I concede I could be totally off base.
- detaro 12y ago
  I bet "My Grandma back in Malaysia has been doing these crafts for years, here are her pieces" goes better than "I pay a bunch of high-school kids in Springfield, Kansas to glue those together for some pocket money"
pbreit 12y ago
Once again, nothing really "just happens". It takes a huge amount of energy and resources to cultivate.

Blahah 12y ago

> Though the site still loses money because of high development costs, it is booming, with gross merchandise sales reaching $1.93 billion last year. The fees Etsy collected on items listed and sold, as well as on services like the promoted placement of goods, reached $196 million. This reads to me as though Etsy has spent more than $196 million on development in the last year. Am I reading it right? If so, that's insane. If they aren't capable of making a profit with $196 million in revenue, when what they operate is a website, it seems unlikely to me that they will ever make a profit. The problem is compounded by their model (as highlighted in the article), which prevents any individual seller from scaling up very far. So how will they ever make money?

detaro 12y ago
No, they spent ~37 million on "product development" and made a loss of around 15 million. (per their S-1 filing) I don't really know what a "normal" distribution would look like (why does the article attribute the loss to the development costs?)
- brador 12y ago
  What does "product development" mean here? Are they juicing the marketplace like kickstarter was alleged to have done/be doing?
- sb8244 12y ago
  Same questions here. Obviously there are costs involved with the business, but basically $150 million (minus taxes they pay) revenue after development costs. Where does it all go?
jasonlotito 12y ago
> when what they operate is a website They do more than just operate a website. They are in the hardware market as well. You can accept credit cards from your phone and it will run through Etsy, which is handy for sellers rep on Etsy. I'm not sure what else they do, but it's not just running a website.
adevine 12y ago

smackfu 12y ago

Another trend I've seen is for small shops to effectively replicate their entire store on Etsy, because that's where the buyers are. So a small commercial print shop may have an Etsy site, in addition to their "real" web site, and the Etsy shop may not even sell anything except have placeholder "deposits" that users can buy.

cm2012 12y ago

The biggest issue with the IPO that I can see is that marketing spend is ramping much higher than revenue spend (120% vs 30%, respectively), and they don't have a lot of experience with direct marketing dollars at that scale. In addition, they're now relying on the direct spend to achieve scale, and they used to rely entirely on organic. If they get it right - awesome. But there is a risk that growing direct marketing that fast at that scale will have a learning curve that will bite them.