Etsy Wants To Bring Its Handmade Wares To A Brick-And-Mortar Chain Store Near You

Selling their handmade wares in big, national stores is a logistical and financial challenge for small businesspeople on Etsy.

Etsy Wants To Bring Its Handmade Wares To A Brick-And-Mortar Chain Store Near You
[Photo: Flickr user Cameron Russell]

By the time Anthropologie placed an order for 10,000 of her screenprinted hand towels and napkins, Kristina Basgen had already been selling her designs on Etsy and at craft fairs for about three years. But this was different.

The order was so big that Basgen rented an additional storage space to hold it all before it shipped. She moved her operation, called Tina Produce, from an extra room in her apartment into a rented studio space. She and a new printing assistant made 200 towels per day, and a small team of packers arrived once a week to fold them into farmers market-inspired baskets adorned with twine bows. Meanwhile, Basgen struggled with the national retailer’s many requirements. “The shipping policies felt like a sixth-grade math problem,” she remembers. Anthropologie’s strict rules about box size and weight required all her boxes to be the same size, and its requirement that boxes be shipped on pallets proved to be a logistical challenge for the small businesswoman.

Making the leap from fulfilling individual customer orders on Etsy to managing enormous bulk orders for large retailers is often expensive. For small businesspeople, the learning curve during this process is steep. Nevertheless, it’s a transition that Etsy is hoping more of its sellers will make. Though Etsy is not yet profitable, the newly public company sold $1.93 billion worth of handmade merchandise last year, mostly through one-to-one transactions between individual buyers and Etsy sellers online. Now the company is trying to branch out into the wholesale market.

Despite the rise of e-commerce, U.S. shoppers still make more than 90% of their purchases offline. That explains why many e-commerce companies have opened physical stores. Instead of building its own stores, Etsy has decided to sell its sellers’ wares to existing brick-and-mortar stores–in August, the company launched a platform, Etsy Wholesale, for selling to brick-and-mortar retailers. The program allows retailers to shop in a closed section of the website that features sellers Etsy has screened to make sure they are, for instance, able to handle large orders. More than 2,500 sellers have signed up for this program, which requires a one-time $100 fee in addition to the 3.5% commission Etsy claims on all sellers’ sales. According to Etsy’s pre-IPO filing, as of December 31, the company had more than 6,500 local boutiques signed up as buyers for the platform–the types of stores sellers say had previously contacted them for wholesale orders through Etsy’s messaging function. While most of the brick-and-mortar stores using the new platform are small shops, a few big retailers–like Nordstrom and Whole Foods–are also participating in the program.

“Just as we’re providing access for independent retailers to shop designs on Etsy and bringing more unique items to local retail locations, we see that vision for large retailers too,” Etsy Wholesale Group Manager Rand Niederhoffer told Fast Company.

Relationships with this handful of national brands have begun with curated, cobranded Etsy displays. Nordstrom, for instance, hosted holiday items from Etsy sellers and has partnered with the service on jewelry trunk shows. Whole Foods recently installed a cobranded display of Etsy items in three of its New York City stores, and West Elm has hosted one-day pop-up shops with Etsy sellers.

And Etsy is expanding its cadre of big-brand retailers with an Open Call pitch event in July at which Etsy sellers can make their case to buyers from stores like the Land of Nod and Lou & Grey.

Promotions like these could operate as testing grounds for big retailers as they consider making Etsy products part of their regular inventory. They have already worked to some extent. After Nordstrom hosted its holiday Etsy shop, it continued to sell some of the products to add a local emphasis to its stores, buying prints of local maps from an Etsy store called Archie’s Press and Canadian-made products for the first Nordstrom store in Canada. Now 94 Nordstrom locations carry products from 36 Etsy sellers.

But one big challenge facing Etsy and its sellers as they pursue relationships with chain stores is that handmade goods do not typically have margins as large as mass-manufactured goods. This could make working with large retailers difficult for Etsy sellers because national brands often expect a particular markup or steep discounts for large orders. As Basgen puts it, “Most people are used to purchasing items that have costs and prices where it’s all globally manufactured and not [manufactured] one by one, by an American that needs to eat in America.” Another Etsy Wholesale seller, Christina Webber, has had a similar experience with her wholesale business, most of which she conducts independently from Etsy. “[Large retailers] need a bigger markup to cover their costs,” she says. “It just prices us out of the market. They need the price lower, and I just can’t do that. It almost becomes my cost.”

Niederhoffer says Etsy has negotiated with big retailers on behalf of its sellers, explaining that handmade items do not benefit from the same economies of scale as mass-manufactured items might. Etsy has also brought sellers to trade shows that would otherwise be too expensive for them to attend on their own.

And Etsy has, controversially, relaxed its definition of “handmade.” Since 2013, sellers have been allowed to hire workers and outsource production to manufacturers that meet a set of labor and ecological criteria, which makes it easier for them to scale their businesses. As of last year, Etsy had approved 3,000 shops for outsourced manufacturing.

Etsy is in a difficult spot. The most powerful tool Etsy has when it comes to persuading big retailers to carry products from its largest sellers is its “homemade” brand–but Etsy risks weakening that homemade brand by helping sellers scale in order to reach those big retailers.

That homemade aesthetic runs deep on Etsy, more strongly than on many other seller platforms. “I put some of my stuff on eBay,” says Archie Archambault, who designs the map prints for Nordstrom. “It’s the wrong medium for my brand because it doesn’t care that I’m handmade or that I’m interesting or unique. But Etsy does.” An Etsy product satisfies a craving for consumers who are looking to connect with the story behind their dish towel or specialty soap. And the big national retailers who have signed on to the Wholesale program understand the power of Etsy’s homemade brand. For example, Whole Foods displays its Etsy items under a large “Etsy + Whole Foods” sign (both Etsy and Whole Foods say Etsy doesn’t pay for this privilege).

“We’re trying to connect the consumer with the product and with the Etsy seller,” says Whole Foods Northeast Whole Body Coordinator Tanya Seber, who set up the Etsy partnership.

Nordstrom uses postcards on Etsy items to introduce customers to the artists who made the products. “It is absolutely visible that it is an Etsy product,” says Nordstom’s Lori Marten, who has been managing Etsy products for that brand. “Because we think that the fact it is Etsy is something that is really compelling to our customer. They love the fact they are buying something made in the United States. They love the story behind the artist.”

Basgen is hoping that means they’ll also be willing to pay more for it on a regular basis.

“Right now is a really trying time for my business,” she says. “There is a way to do it if you have a niche market with higher margins. But it’s like the only way to make it is if you do get a huge account.”

About the author

Sarah Kessler is a senior writer at Fast Company, where she writes about the on-demand/gig/sharing "economies" and the future of work.

More

Video

More Stories