Saturday, March 21, 2015

Why A Bigger Etsy Isn't A Better One

Early this month, my eyebrows raised a little when I read that Etsy filed paperwork for an initial public offering.  I'm not really sure what that emotion I felt was other than acknowledging a significant Main Street-Wall Street dichotomy.

The ethos of Etsy, as described by its CEO Chad Dickerson, is "at the end of every transaction, you get something real from a real person."  It's a marketplace created for the creators; a storefront to the world for people to sell what they personally have made. The site fostered deeper connections between merchants and customers, a distinction that strongly differentiated the brand from other online marketplaces.  Etsy had standards; it was not the place to go to buy a used napkin.  

However, the definition of selling "something with meaning" is a bit more obscure than it used to be.  Goods sold on Etsy used to mean they were made by hand by the seller.  That's no longer the case since Esty began allowing manufacturing partners.  This decision, perhaps well-intentioned at the time, actually signified a major shift in its purpose for existing - a signal that achieving scale is at least equally important as fostering commercial peer-to-peer connections.

Naturally, these dual-purposes are at is at odds with one another.  In order to continually grow the way Wall Street will demand it to, Etsy will need really need to generate more fees from merchants.  This can be accomplished in a combination of two ways; adding more of them or get them to sell more.  However, this is the path to eroding its brand difference.  

More troublesome, Etsy has a different problem on a micro level.  As a seller grows and becomes more successful, the less they need Etsy.  On the other hand, Etsy will need them and their large fees even more.  Eventually, the high volume sellers will scale to a point where a per transaction fee is more expensive than a percentage based fee, and that will be the time to host their storefront to someplace else.

It's never good to chase growth outside of your brand. In order to do so, marketers wrestle with and reshape exactly what their brand stands for, eventually losing the advantage they once had.  Etsy forgot that on Main Street, bigger isn't always better.  

As always, thank you for reading and for sharing. 

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