Etsy is an e-commerce website that focuses on handmade or vintage items and unique factory-manufactured products. These items cover a wide range of product types, including jewelry, furniture, housewares, kitchen gadgets, clothing, knick-knacks, and art. The site resembles an open craft fair, where sellers (mostly small merchants and local artisans) set up Etsy stores and sell their products to buyers, who are people who want unique, mostly handmade products from small/local producers. Etsy launched in 2005. As of late 2017, Etsy had 54 million users registered as members, including 19.8 million active buyers and 1.7 million active sellers.

History

The idea for Etsy originated in a woodworking shop. Rob Kalin, who earned a college degree in the classics, bypassed the traditional job market to focus on his woodworking talents. He created a unique product, a computer encased in wood, but couldn’t find a marketplace to sell it. So he, along with Chris Maguire, Jared Tarbell, and Haim Schoppik, launched Etsy, an online marketplace for crafts where hobbyists and artisans could connect with people interested in buying handmade goods.

From the beginning, Etsy championed the idea of community. The company saw itself as an advocate of small merchants and artisans. It also took steps to engage its community and empower its sellers. Every Monday evening Etsy sponsored craft night, where 50 to 80 people came to its office in Brooklyn to make crafts. The company also sponsored employee craft nights where its employees would hone their craft-making talents. At the same time, Kalin started holding virtual town hall meetings with Etsy sellers to provide tips to them on how to increase their sales. All this was done in part to build community, but there was a broader purpose. Kalin and his team knew that Etsy’s financial success hinged on how much commerce flowed through its site.

Since it launched in 2005, Etsy has grown steadily. It currently employs 685 people in the United States and abroad and facilitates transactions in nearly 200 countries. Etsy remained a private company for 10 years. It went public on April 16, 2015, and trades on the NASDAQ under the ticker symbol ETSY. The company was valued at $1.8 billion at the time of its IPO. In 2016, Etsy generated $2.7 billion in sales.

Discussion Questions

How does Etsy create, deliver, and capture value for its shareholders?

Is Etsy’s business model a standard or a disruptive business model? Explain your answer.

How is Etsy’s business model different from eBay’s business model for the makers of handmade goods?

In your judgment, what is the most serious challenge facing Etsy? To what extent does the challenge threaten Etsy’s business model? How should Etsy confront the challenge?