(editor’s note: updates with response from Etsy)
For Etsy, Black Friday took on a very different meaning last year.
Although nobody knew it at the time, rather than serving as the perennial kick-off of the busy holiday shopping season, the day after Thanksgiving would turn out to be the high watermark for the Brooklyn-based operator of the world’s largest marketplace for hand-crafted goods.
Since that day less than five months ago, shares of Etsy have undergone a major unraveling, shedding 60% — or roughly $20 billion of market value — as its faltering stock has plummeted to a 19-month low.
While Etsy will clearly be looking to restore investor confidence when it reports its first-quarter earnings results in early May, it is also currently contending with a different set of concerns coming from its legion of sellers. Specifically, a weeklong strike by thousands of its small, home-based artisans who are protesting and petitioning the company’s 30% transaction fee increase which took effect Monday April 11.
Outspoken sellers have said the new 6.5% cut that Etsy takes from their sales makes it harder for small entrepreneurs to make a living hawking their handmade crafts as it comes at a time when their own business and household expenses are already rising at levels not seen in generations.
The company has defended – and continues to defend – the fee hike as necessary, characterizing it as a business building move needed to offset the platform’s substantial COVID-era investments done to accommodate the site’s large increases in buyers, sellers and transactions.
“We’re in continuous dialogue with the sellers. We care deeply about their success,” CEO Josh Silverman said in a video interview done on the sidelines of a Wall Street Journal conference Tuesday, adding that Etsy doesn’t succeed if its sellers don’t succeed.
Silverman said the company had invested “tens of millions of dollars” during the pandemic to transition its platform technology to the cloud, calling it “the right thing to do” but also referring to it as a necessity in response to a seller base that’s grown from just over 2 million to well over 5 million in the past two years.
“We think that’s a testament to the good work we’ve done to try to make this a platform where many different people can succeed,” Silverman said in the 2-minute clip, saying that the fee increase and subsequent investment in people and equipment are aimed at enabling sellers to “have a better chance of being successful.”
“We think it’s really important that we listen, we’re in constant dialogue [with sellers], but importantly, judge us by the outcomes and by what happens to the success of the community over time,” Silverman added.
In an email to PYMNTS, Etsy’s Chief Operating Officer Raina Moskowitz reiterated the importance of sellers’ success, calling it a top priority.
“The new fee structure will enable us to increase our investments in areas outlined in the petition, including marketing, customer support, and removing listings [such as mass-produced merchandise] that don’t meet our policies,” Moskowitz said, stressing the company’s commitment to keep the marketplace trusted and thriving.
The Third Fight: Rivals
If Etsy’s challenges with investors and sellers weren’t challenging enough, the retail platform also has to contend with an ongoing fight against exponentially larger competitors — including Amazon and Shopify.
While Etsy’s revenues grew 35% to $2.3 billion last year, that is still less than half Shopify’s top line and less than 1% of Amazon’s reported sales.
For its part, Shopify makes no secret about its intention to bring over Etsy sellers to its platform, listing itself and 8 other sites as “Etsy Alternatives” in a November 2020 blog post.
“Etsy can only take your business so far. After all, it owns your customer list, so you’re limited in terms of branding, customer retention, and retargeting,” the Shopify blog claims, before adding that “Etsy also pits makers against each other” by recommending other vendors who offer similar items at the bottom of a product page.”
In defending its fee structure and the overall experience and opportunity Etsy offers compared to its rivals, Silverman called it a very fair value exchange.
“The majority of our sellers sell on multiple platforms. So they are already selling in many places, and yet, the majority of their sales come from Etsy,” Silverman said. “We focus on small sellers and we work hard to make sure that we meet their needs and build a business in which they can succeed.”