Etsy: Hand-stitching a Successful Online Marketplace

By Neha Kale | 25 Jul 2011

Etsy’s focus on community has taken it from fledgling startup to a high-growth online marketplace with seven million members and a global cult following.

When carpenter and photographer Rob Kalin couldn’t find a New York storefront to sell his wares, he could never have imagined the natural affinity between craft and e-commerce. Kalin’s do-it-yourself (DIY) philosophy and passion for all things handmade led him to form a fledgling online marketplace called Etsy, with a couple of college friends and next to no resources. That was back in 2005. Since then, Etsy has snowballed into one of the world’s most successful online marketplaces, a fact it owes to its dedicated community of members, just as much as a renewed interest in arts and crafts, and the ethics of mass production. Although Kalin may not have started out as a businessperson, his business model has drawn serious kudos – the company handled US$314 million in transactions last year and counted nearly seven million members according to The New York Times.

Although this might seem minute when compared the US$10 billion pulled in by eBay, Etsy has no intention of being compared to the online auction giant and focuses on offering an intimate and satisfying user experience instead.

“eBay is like a garage sale or flea market, where Etsy is more like a boutique,” says Adam Brown, Press Manager at Etsy. “At Etsy, we sell three product categories – handmade, vintage and supplies – we don’t allow big commercial firms to sell. We enable conversations between the buyer and the seller and there’s always a face behind the object.

“eBay allows larger companies to sell and takes a different approach. You have to go a little out of your way to find out who you’re dealing with.”

Although a business model that is more interested in relationships between buyers and sellers than transaction value may seem like odd logic for a high-growth online marketplace, this is precisely what gives Etsy its edge. The company employs about 200 staff and has garnered US$50 million from leading venture capitalists and is widely considered to be ideal IPO material. However, Etsy remains fiercely committed to the global community of artisans and crafters that have helped fuel its growth.

“Our success has everything to do with our community,” Brown explains.

“Etsy is a platform and a tool. It enables people to become entrepreneurs and to start businesses where they can make things that they enjoy and do what they want to do for a living, but it also serves as a community for creative people. Our growth has been very much tied into the growth of a community.”

Community is a buzzword that is often thrown around in the digital world, but Etsy restores this term to its original sense – a collective of likeminded people who share similar interests and values. Etsy’s website is rich with community-related content from stories on featured sellers to its highly trafficked blog. The site recorded over a billion page views in January this year.

Etsy’s obsession with community also translates offline, through its weekly Etsy Labs where members create everything from papier-mache sculptures to jewellery and button art. Etsy members can also organise themselves into ‘teams’ – groups of sellers based on location, interest or cause to make way for sharing of ideas and resources.

Authenticity is at the core of the Etsy community and this belief in genuine dialogue plays a major role in its success. This is also a self-fulfilling model – Etsy currently lists 10 million products and sales continue to grow in line with its member base.

“We might have created the tool, but the community grew itself. A lot of people throw around the word community, but at Etsy, it feels very real because it is real. It started out with just a few people and the major driver was word-of-mouth. We get plenty of traffic from social media but we don’t advertise – people largely find out about Etsy through other people,” Brown offers.

Etsy’s dedication to originality and DIY aesthetic penetrates every aspect of the business, including its technology.

“We do everything in-house. The culture of Etsy is very much DIY and the culture of our company and our site is the same way. We use very few off the shelf products in terms of software. Because of the way that Etsy works, the back-end is extremely complex and there are a lot of moving parts. We pretty much build our own tools because that works best for us,” Brown notes.

Etsy’s philosophy has achieved a global resonance. The company has recently opened an office in Berlin and features buyers and sellers from over 150 countries.

“Although the majority of our community is in the US, 30 percent of all transactions that take place on the site involve at least one party, either a buyer or a seller, from overseas – we’re focused on growing that community as well.”

Download the Power Retail Special Report on Leveraging Marketplaces for further insight on Etsy and other successful online marketplaces.


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