Etsy is Reimagining Commerce in Ways that Build a More Fulfilling and Lasting World

Etsy is a global marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods

Etsy LogoEtsy successfully operates a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods.  Etsy’s values are integral to everything they do and the Company believes that it is creating a new economy, which it calls the Etsy Economy, where creative entrepreneurs find meaningful work and both global and local markets for their goods, and where thoughtful consumers discover and buy unique goods and build relationships with the people who sell them.

Etsy has built an innovative, technology-based platform that connects over 50 million members, including nearly 2 million active sellers and 20 million active buyers in nearly every country in the world.  Etsy’s business model is based on shared success: the Company makes money when Etsy sellers make money.  Etsy’s revenue is diversified, generated from a mix of marketplace activities and the services provided for Etsy sellers to help them create and grow their businesses.

Etsy CollagheMarketplace Revenue: Consists of the 3.5% fee that an Etsy seller pays for each completed transaction on the Etsy  platform.  It also consists of a listing fee of $0.20 per item that the seller lists (up to four months).

Seller Services Revenue:  Includes fees an Etsy seller pays for services such as prominent placement in search results via Promoted Listings (cost-per-click), payment processing via Direct Checkout (3% – 4% of item’s total sale price plus a flat fee) and purchases of shipping labels through the Shipping Labels platform.

Other Revenue: Includes the fees Etsy receives from a third-party payment processor.

Etsy operates a truly unique and authentic marketplace unlocking latent supply and demand for handmade goodsEtsy office

Etsy’s operating model facilitates a two-sided marketplace where Etsy focuses on connecting buyers and sellers.  Etsy does not hold inventory – sellers ship goods directly to the buyer and Etsy offers support to facilitate this transaction and helps address any issues, but is not directly involved in the processing of the transaction or shipment of physical goods.  Items sold on the site do not have SKUs and cannot be found elsewhere, and therefore, sellers offering goods on the site must meet strict standards confirming that the goods are handmade and not available in large, commercial quantities.  The Company powers a sophisticated platform with innovative technology that enables millions of sellers and buyers to interact and transact.  The technology infrastructure which facilitates this extensive platform, as well as the engineers who run this system are thought to be some of the best in the market and give Etsy a strong competitive advantage.  Technology ultimately brings the community together, driving transactions across borders, languages and devices.

The technology team at Etsy, made up of industry-leading engineers, solves the challenge of searching across 30 million unique goods to connect the right buyer to the right seller with the right product.  The products have no SKUs or structured data which makes big data a core strength for Etsy as they successfully and seamlessly support this marketplace.  Engineers employ continuous site deployments which enable thousands of site updates every year.

Etsy has an incredible opportunity to reimagine commerce worldwide with a strong technology-driven operating platform that facilitates a solid business model which continues to experience strong growth every year.  Etsy is known for crafts but it has now grown to be part of a much larger retail ecosystem.  The Company’s values emphasize craft, community, fun and long-term thinking which are consistent in the way they run their day-to-day operations.  Etsy hires people who are smart and passionate about making a difference in the world, and who embody the values of the company – which is representative in the community you instantly feel when you walk through Etsy’s headquarters in Brooklyn, NY.  Etsy is transparent and consistent in the way they operate which has created high loyalty and engagement across the platform that then ultimately drives consistent retention in its community.  The operating model supports sellers through every component of the transaction: from creating an Etsy shop, listing an item, facilitating the transaction to providing shipping services.  Etsy Nasdaq Inside

Etsy went public in April 2015, and though has had mixed results from investors, continues to operate a successful, seller-aligned, profitable business model that will continue to do well because it is ultimately built around a passionate, engaged and loyal community.   The Company will prosper because it is using advanced technology, with a focus on community, to take advantage of several converging macroeconomic trends in online and mobile commerce, consumption and manufacturing.

The integration of Etsy’s operating and business models has been successful because it combines vision and execution with values and community.  The resources that the incredible technology platform provide to sellers is aligned well with the Company’s model of shared success – Etsy makes money when the sellers make money.  As Etsy continues to scale and become more profitable, it can use this capital to invest in the growth of the business, and the Company’s increased visibility will help elevate Etsy sellers and attract more buyers, which creates opportunities for everyone.

Etsy supplies  Etsy DoodleEtsy product clock Sources:

http://www.etsy.com

Company Filings and Initial Public Offering Prospectus

http://www.usatoday.com/story/tech/2015/11/26/etsy-ceo-strategy-holidays-mobile-overseas-chad-dickerson/76387698/

http://fortune.com/2015/11/13/etsy-marketplace-that-could/

http://www.wsj.com/articles/etsys-unique-ipo-crafts-a-stock-swoon-1432249972

http://www.wsj.com/articles/even-etsys-initial-public-offering-process-is-artisanal-1428596586

 

 

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3 thoughts on “Etsy is Reimagining Commerce in Ways that Build a More Fulfilling and Lasting World

  1. Great post! As I was reading this, I couldn’t help but think about our accounting case on Alibaba and the similarity between its two-sided market place and Etsy’s. It is often times difficult to manage both parties and build trust between them, and it seems that Etsy has been able to do this successfully. What I question about Etsy is the strength of its community. Loyal, committed sellers and buyers are the engines for Etsy’s continual growth and should either side back away, the company may cease to exist. Do you think there are enough passionate, engaged members of the Etsy community for the company to maintain its relevance among the saturated market of retail e-commerce sites (Amazon, Jet, E-bay, Spring, etc.)? Does Etsy have a “niche” enough business model to attract new customers and maintain its existing base? Another question I had was related to its process of innovation and product quality. How does Etsy decide which designs to list on its site and which not to? How does it ensure top quality given it is simply the middleman between the two parties?

  2. Nice post! It’s interesting to think about scaling a business whose differentiator is its products’ uniqueness and/or small quantity. I’m also reminded of the two-tiered pricing strategy we saw in Cox Automotive’s Autotrader site. I wonder if there’s any similar negative sentiment about monetarily promoted products on Etsy? Or if there are alternative to generate other Seller Services-based revenue? I’m also curious what kinds of additional pressures and/or constraints the company will face now that it’s public. I’m sure there are other revenue streams available (off-line, retail partnerships etc.) but these would drastically shift the operating model you detailed, and seem out of step with the global focus of the company.

  3. Thanks for sharing Andrew! I love Etsy. The way that they were able to combine a small offline community of creators into an online marketplace is so impressive. What do you think about the opportunity to scale beyond the small entrepreneurs? As you know, now that the company has gone public, investors will be expecting Etsy to take advantage of potential growth opportunities, including those that may be outside of their core business. Having a passionate, engaged and loyal community means little to investors if that community does not grow. I will be interested in seeing Etsy’s strategy moving forward as they become more accustomed to life as a public company.

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