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Etsy Struggles To Remain Cozy And Local Amid Global Expansion

During its Q3 investor call, Etsy revealed some growing pains as it evolves into a rapidly growing, publicly traded company.

Etsy Struggles To Remain Cozy And Local Amid Global Expansion
[Photo: via Etsy]

In its third-quarter earnings report, online craft marketplace Etsy said it had managed to meet expectations by bringing in revenues of $65.7 million, a growth of 23% year over year. The company, which went public earlier this year, also announced that it had grown its base of both active buyers and active sellers to 1.5 million and 22.6 million, respectively. Still, after trading hours Etsy shares dropped 8% to an all-time low of $10.21 a share–a 63% drop from when the shares went public in April.

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In a call with investors, CEO Chad Dickerson outlined Etsy’s plans for the coming months and years. Dickerson described ways that Etsy is trying to balance its new position as a publicly traded company with its identity as a cozy marketplace for handcrafted goods. The company’s main goals are “making Etsy an everyday experience, building local marketplaces globally, offering high-impact seller services, and expanding the ‘Etsy economy,'” Dickerson said on the call.

However, the company’s strategies for enabling Etsy to scale in some cases seem to undermine its identity as an intimate, local marketplace. For instance, Dickerson highlighted the company’s efforts to launch Etsy Manufacturing (announced in September), an online hub where sellers can connect with factory owners and other manufacturers to scale their businesses.

Dickerson emphasized that Etsy would be selective about working with only manufacturers who share the company’s values of craftsmanship and community; as an example, he pointed to Etsy’s partnership with the cool Brooklyn outfit Voodoo Manufacturing. Yet, no matter how trendy or local the factory, manufacturing at scale goes against Etsy’s original value proposition of offering handmade, one-of-a-kind items.

Etsy has continued to maintain its presence overseas, with 29% of its gross merchandise sales coming from foreign countries. However, it is clear that buyers around the world are drawn to the opportunity to connect with local sellers. Dickerson said that in the U.K. and Australia, in particular, internal data revealed that buyers show a strong preference for products made in their own countries. To respond to this trend, Etsy has begun testing a new search mechanism that ranks locally made items higher than those made overseas.

“We hope that making domestic shops more prominent in the results will generate more sales for our sellers in the U.K. and Australia and improve the buyer experience in those countries,” Dickerson said.

Now, Etsy is facing competition from another big marketplace–Amazon. Amazon recently announced that it is expanding into handmade products with the launch of Amazon Handmade. When asked how Etsy plans to deal with this challenge, Dickerson said that the company is not worried, since Etsy sellers have always sold their products on several platforms.

“We know our sellers well; we’ve been working with them for over a decade,” Dickerson said. “We believe that Etsy is the best platform for them to be creative entrepreneurs and to build businesses on their own terms. We also know that half of our sellers sell in multiple venues and that Etsy is the primary source of income for those sellers… so we have no reason to believe that any competitors are having any impact on our sellers’ business.”

About the author

Elizabeth Segran, Ph.D., is a staff writer at Fast Company. She lives in Cambridge, Massachusetts.

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