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Etsy Escapes the “Race to the Bottom” and Returns to Its Craft Roots
Josh Silverman, CEO of Etsy.
Adam Jeffery | CNBC
When Etsy Launched nearly two decades ago, the site attracted artisans and craft makers who finally had a place online where they could sell their niche products and reach a large audience. But in recent years, Etsy has found itself overrun with generic, mass-produced items from resellers who have learned to game the site and drive out handmade products.
Now, Etsy CEO Josh Silverman wants the company, whose declared mission is to “keep trade human”, to return to its roots.
The company on Tuesday is rolling out a major overhaul of the policies governing its site to make it “pretty clear” to shoppers which products belong on Etsy, Silverman said in an interview with CNBC. The changes include new labels on its site and app to show how each seller created a particular item.
“We’re positioning ourselves to answer the call for real products and real people by highlighting the things that make Etsy what it is,” Silverman said.
Etsy is launching a new marketing campaign around the policy changes, including a TV commercial that shows potters, clothing makers and other artists, followed by a crushed robotic arm. The platform’s new rules require that all items incorporate “a human touch,” as described by its creativity standards. Each product must fall into one of four categories: made by a seller (by hand or using automated tools), designed by a seller, handpicked by a seller or sourced by a seller.
With the changes, Etsy hopes it can bring buyers and sellers back to its site at a time when e-commerce is increasingly dominated by Amazonas and newcomers like China-linked Temu and Shein, which provide shoppers with cheap products delivered to their doors within days. The stakes are huge, as eMarketer Estimates the global e-commerce market is expected to surpass $6 trillion this year.
“I feel like there’s a race to the bottom in terms of commoditized commerce right now and almost everyone in e-commerce is playing that race,” Silverman said. “They’re selling the exact same product and they’re trying to sell it to you for 2 cents cheaper, or ship it two hours faster.”
Etsy has struggled to navigate changing market dynamics. In its most recent quarterGross merchandise sales, or the dollar value of items sold on its marketplace, fell 3.7% from a year earlier to $3 billion. The stock has lost more than 80% of its value since peaking in late 2021. It is down 32% in 2024, while the Nasdaq has gained 23% in that time and closed at a record high on Monday.
In December, Etsy fired 11% of its workforce, with Silverman citing the “very challenging macro and competitive environment” as reasons for the cuts.
The Etsy NYC headquarters building is seen in New York City. The online retailer recently announced that it will lay off 11% of its workforce as the company looks to restructure its business and streamline costs.
Michael M. Santiago | Getty Images News | Getty Images
The company is also Dealing with pressure of activist Elliott Management, which has amassed a roughly 13% stake in the company, making it Etsy’s largest investor. In February, Elliott partner Marc Steinberg joined Etsy frame.
The rollercoaster ride started earlier. Etsy went public in 2015, forcing the company to start responding to shareholders’ demands for growth, a contrast to its culture of well-being and social awareness.
Etsy’s business has exploded during the pandemic, spurred by a wave of mask buyers. Its stock price quadrupled in 2020, and the number of companies selling products on the site more than doubled to 9 million between 2020 and 2023.
So far, Etsy has used its “house rules” to police the site. The main policy was that “everything listed for sale on Etsy must be handmade, vintage, or a craft material.” Resellers were prohibited.
The new rules are more specific and updated to reflect today’s realities. For example, a 3D-printed sculpture is considered “seller-made.” It’s prohibited for a seller to add a single sticker to a commercially available face mask and pass it off as handmade. Regarding AI-generated content, the policies note that “seller-requested AI art,” such as a dog dressed in traditional costume, qualifies as “seller-designed,” but a digital download of “over 5,000 ChatGPT prompts” is not allowed.
The challenge of growth
Etsy has for years struggled to balance preserving its image as a place for unique, handmade goods with a push to beef up its selection of items to compete with its larger rivals. For pioneering sellers like Ashley Smith, the changes haven’t always been welcome.
Smith began selling custom wedding handkerchiefs on Etsy through her business, The Polka Dot Beein 2011. Smith said Etsy was once a place where you could “search endlessly for amazing things people were making,” and has morphed into a site increasingly dominated by generic products.
Ashley Smith has been selling her custom scarves on Etsy since 2011.
Ashley Smith
One of Etsy’s biggest changes came in 2013 when the company allowed sellers to use manufacturing partners. Instead of manufacturing products themselves, sellers could turn to contract manufacturers for help with their products.
Abby Glassenberg applauded the initiative. Glassenberg, who opened your handmade stuffed animal store on Etsy in 2005, she said it meant she only had to create a pattern once and could sell “endless copies,” reducing her workload. Her Etsy shop went from being a hobby business to a full-time career, she said.
However, Glassenberg understands the tension, as many Etsy consumers still want the handmade experience.
“Handmade doesn’t scale,” she said. “That’s why we like it, that’s why human beings like it.”
Glassenberg gave the example of a handcrafted fork that was forged and cut by human hands.
“I’m going to pay $120 for it, and I’m going to use it and love it forever,” she said. “There’s no way one person can make 100,000 of them a month, and that’s why we love it.”
Abby Glassenberg has been selling stuffed animals and sewing patterns on Etsy since 2005.
Lisa’s Neighbors
Competing on a larger stage is different, and Smith said the popular preference for cheap, fast products creates “an uphill battle for sellers and for Etsy.”
Temu and Shein have increased their presence in the U.S. in recent years, luring American shoppers with deep discounts on clothing, jewelry, home goods and other products. Silverman has previously acknowledged that the sites “are taking a little bit of share from everybody.”
Now he’s making it clear to vendors and customers that the company will compete on its own terms.
“The solution to this for Etsy is to not try to play that game,” Silverman said.