The Business of Handmade

Etsy’s Muddled Interests

I posted the following long comment on Etsy’s forums, explaining why I’ve opened a second shop – on Big Cartel.

I called my comment “Etsy’s Conflict of Interest” but realized afterwards that I should have said “muddled interests” because what I meant was not that Etsy has a conflict in a legal / ethical sense, but that it has different strategies that appear to be working at cross-purposes.

Later I’ll post some of the interesting responses I received.

– – – – – – – – –

“Watching the changes rolled out by Etsy over the past few months and the comments here in the forum, I’ve come to believe that Etsy’s bottom line as a corporation is not entirely the same as Etsy sellers’ individual bottom lines. More and more, I feel there may be a conflict of interest between Etsy and its sellers.

Etsy profits from a number of revenue streams, only one of which is a percentage of sellers’ sales revenue. There is some synergy, to be sure – the more individuals sellers sell, the greater Etsy’s cut. So it is in Etsy’s interest to improve the site in ways that increase sellers’ bottom line.

But that synergy is limited. Etsy also profits from the fees we sellers expend as we try to generate sales, whether its through listing new items, renewals, showcases or search ads. The more we spend, the more it decreases our profit margin – but Etsy’s profit margin only increases.

The money we sellers spend on external promotion also benefits Etsy’s bottom line. We spend money bringing in customers to Etsy – customers Etsy increasingly seeks to circulate away from our destination shops and into the general Etsy community. As individual sellers, we profit only when the customer we brought in purchases from our own shop. If they purchase elsewhere, it is our loss. But Etsy profits no matter which shop they purchase in.

It is true that as an individual seller you have to invest money in product and promotion in order to turn a profit, and that you would have to spend that money no matter which selling platform you use, including your own stand-alone website.

What is irksome about Etsy is that the company positions itself as a partner to the seller, but that is a half-truth. It is sometimes a partner, and sometimes an exploiter. Etsy knows just how lucrative a source of income sellers are, which is why so much emphasis has been placed on attracting new sellers, with next to no effort put into attracting new buyers. It is clear that Etsy’s corporate strategy is to make most — not all, but most — of its money off of sellers rather than sales.

Furthermore, the more desperate we sellers become, the more some of us will spend on fee-based services like search ads (at least in the short term) – which pits our interests directly against those of Etsy. As sellers run out of funds and our shops fail, we will stop paying those fees… but Etsy is striving to ensure that new sellers will take our place.

I am not leaving Etsy, though I have in the last few days opened a shop on another platform – one that is more straightforward and gives me more control over my shop’s appearance. All external promotion I do (facebook, blog blog ads) from this point forward I will now direct to my other shop.

At the other site I pay a flat monthly fee. There is no cross traffic from other shops – which is a down side – but then again traffic here isn’t bringing me any sales. On the plus side, new people I bring in won’t be distracted by the many “trap doors” Etsy is setting up. And I won’t have to *directly* compete with resellers and counterfeiters (or at least I won’t have to *see* them)!”

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