I was never aware that Etsy had explicit rules about things being handmade or "vintage." I just assumed that the Etsy had that niche and that its community liked things that way, and perhaps that Etsy purposefully highlighted merchants that fit that description.
Given that it is an explicit rule, I really wonder how there can be a clear way to distinguish between compliant and infringing merchants. Even the word "handmade" is tricky, despite having a seemingly clear definition. I once purchased some plastic coasters with laser-engraved mathematical symbols on them. By all appearances, it was a single person designing, cutting, and mailing these out, and it seemed to me like a perfectly appropriate product for Etsy, but it doesn't fit the most obvious definition of "handmade," and the manufacturing process could be trivially ramped up a few orders of magnitude if so desired.
I agree. Handmade is such a silly buzzword. As it turns out, Chinese sweatshops make a whole lot of handmade stuff! c: There's nothing inherently wrong with machine-made stuff.
The problem with "artisanal" is it's not a protected word, whereas "handmade" is. By which I mean you can't slap a "handmade" sticker on any old product - you need to be able to demonstrate that it is substantially made by hand. But "artisanal" isn't quite the same. I could have "artisanal fruit loops".
Even an iPhone is hand made when you get down to it, the Model T Ford was handmade too. Things that are not 'handmade' are usually made somewhere in the Far East by lots of hands in such a way that things appear 'bought' rather than 'handmade'.
The thing that Etsy is really selling is "credibility" and "authenticity". It's some sort of post-Barthes effort to try and tie a product to the lifestyle of the person (usually a woman) producing it. The product itself is just a marker on which symbolism can be hung. Etsy is hardly unique in this, it's just that they're tied to "handmade" as a brand value.
I would guess that "handmade" in this context doesn't mean "no machines were involved", but rather "produced on a small scale and without processing the product in a factory".
Still, however you look at this rule, there are a lot of gray areas, and policing those must be challenging. I'd also guess that with an IPO on the horizon, the Etsy shareholders probably favor high volumes on their website, rather than kicking out shops that peddle non-handmade merch. A pity, that, because It's sorta the opposite of what Etsy was supposed to be.
Agreed. Reminds me a lot of what Fab was, before it tried to compete with Amazon -- unique, 'quirky' goods that felt like they weren't just mindlessly mass-produced (even if they were).
Both, I guess. An item can be produced in a mass-production manner even if only a few ever end up coming off the line. This also applies to items that are produced on assembly lines but sufficiently customizable that no two are identical.
Similarly, you can hire 10,000 people in china or Bangladesh to use hand crafting techniques to produce millions of essentially indistinguishable items in bulk, working out of their own homes. Those items are still mass produced IMO. I think part of the issue here is that the seller is a middleman -- Etsy is about buying something from the person who created it with their own hands.
It's fairly impossible to know. Also, a creation could be made locally by someone, and still copied (whether from reverse engineering or an available template) and mass produced by someone else. This happens in any industry where duplication is easily (or not) possible and where there are people looking to make money - which is most industry.
This is perhaps a cynical take on the controversy, but it's hard reading this and similar articles not to conclude that when Etsy critics say they want to preserve the "handmade" or "artisanal" character of products on the site, what they really mean is "not made by asian people"
It seems like having a factory or workshop with hundreds of people making an identical item violates the spirit of the rule.
I don't see why you'd assume they don't like Asian people doing it. I'm sure people would be just as annoyed if it was people in Africa or South America or somewhere in Europe or even the US. When you have a factory dedicated to making a good, it's no longer fair to call it 'artisinal' and compare it to a guy who makes 3 chairs a month in his workshop.
I've seen reference to Alibaba and China in a lot of these kinds of articles about Etsy. Seems like a bit of a dog-whistle thing to me, though I concede I could be totally off base.
I bet "My Grandma back in Malaysia has been doing these crafts for years, here are her pieces" goes better than "I pay a bunch of high-school kids in Springfield, Kansas to glue those together for some pocket money"
> Though the site still loses money because of high development costs, it is booming, with gross merchandise sales reaching $1.93 billion last year. The fees Etsy collected on items listed and sold, as well as on services like the promoted placement of goods, reached $196 million.
This reads to me as though Etsy has spent more than $196 million on development in the last year. Am I reading it right? If so, that's insane.
If they aren't capable of making a profit with $196 million in revenue, when what they operate is a website, it seems unlikely to me that they will ever make a profit. The problem is compounded by their model (as highlighted in the article), which prevents any individual seller from scaling up very far. So how will they ever make money?
Same questions here. Obviously there are costs involved with the business, but basically $150 million (minus taxes they pay) revenue after development costs. Where does it all go?
They do more than just operate a website. They are in the hardware market as well. You can accept credit cards from your phone and it will run through Etsy, which is handy for sellers rep on Etsy. I'm not sure what else they do, but it's not just running a website.
"When what they operate is a website" - you mean like eBay, AirBnB, and others? From their S1:
1. 122 million is cost of revenue, which means their support staff cost, server/bandwidth costs, and transaction fees (e.g. credit card fees).
2. 40 million marketing, I'm guessing mostly paid search.
3. 37 million product development.
4. 50 million "general and admistrative"
Point being, they could probably easily be profitable if they wanted, but at this stage they are trying to invest for growth. As you point out, though, that growth will be difficult if they have this inherent limit on production capacity.
>> but at this stage they are trying to invest for growth.
I think we know how a lot of startups recently have taken this approach and its failed miserably. Groupon is the first that comes to mind. I'm wondering how many more companies have to fail before they realize growth is good, but doing it at a loss is not the way to sustain your business.
More like everyone has investors who demand a large return. That's the problem with taking VC cash - you're at their beck and call. You could build a perfectly good sustainable business, but VCs want hockey stick growth and an IPO.
I think you're simplifying it too much. It's easy to come to that conclusion in the current market with so much cash floating around, but if the growth rate is there, then it can make a lot of sense to continue spending for that growth.
Brad Feld had an interesting post as kind of a back of the envelope for what your finances should look like (http://feld.com/archives/2015/02/rule-40-healthy-saas-compan...). Of course it's intended for companies 'at scale', or around $1M MRR for a SaaS company.
There are plenty of examples of companies that operate like this that you probably wouldn't consider reckless with their spending. HubSpot comes to mind.
Another trend I've seen is for small shops to effectively replicate their entire store on Etsy, because that's where the buyers are. So a small commercial print shop may have an Etsy site, in addition to their "real" web site, and the Etsy shop may not even sell anything except have placeholder "deposits" that users can buy.
The biggest issue with the IPO that I can see is that marketing spend is ramping much higher than revenue spend (120% vs 30%, respectively), and they don't have a lot of experience with direct marketing dollars at that scale. In addition, they're now relying on the direct spend to achieve scale, and they used to rely entirely on organic. If they get it right - awesome. But there is a risk that growing direct marketing that fast at that scale will have a learning curve that will bite them.
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[ 2.7 ms ] story [ 70.8 ms ] threadGiven that it is an explicit rule, I really wonder how there can be a clear way to distinguish between compliant and infringing merchants. Even the word "handmade" is tricky, despite having a seemingly clear definition. I once purchased some plastic coasters with laser-engraved mathematical symbols on them. By all appearances, it was a single person designing, cutting, and mailing these out, and it seemed to me like a perfectly appropriate product for Etsy, but it doesn't fit the most obvious definition of "handmade," and the manufacturing process could be trivially ramped up a few orders of magnitude if so desired.
Still, however you look at this rule, there are a lot of gray areas, and policing those must be challenging. I'd also guess that with an IPO on the horizon, the Etsy shareholders probably favor high volumes on their website, rather than kicking out shops that peddle non-handmade merch. A pity, that, because It's sorta the opposite of what Etsy was supposed to be.
Similarly, you can hire 10,000 people in china or Bangladesh to use hand crafting techniques to produce millions of essentially indistinguishable items in bulk, working out of their own homes. Those items are still mass produced IMO. I think part of the issue here is that the seller is a middleman -- Etsy is about buying something from the person who created it with their own hands.
It seems like having a factory or workshop with hundreds of people making an identical item violates the spirit of the rule.
I don't see why you'd assume they don't like Asian people doing it. I'm sure people would be just as annoyed if it was people in Africa or South America or somewhere in Europe or even the US. When you have a factory dedicated to making a good, it's no longer fair to call it 'artisinal' and compare it to a guy who makes 3 chairs a month in his workshop.
This reads to me as though Etsy has spent more than $196 million on development in the last year. Am I reading it right? If so, that's insane.
If they aren't capable of making a profit with $196 million in revenue, when what they operate is a website, it seems unlikely to me that they will ever make a profit. The problem is compounded by their model (as highlighted in the article), which prevents any individual seller from scaling up very far. So how will they ever make money?
I don't really know what a "normal" distribution would look like (why does the article attribute the loss to the development costs?)
They do more than just operate a website. They are in the hardware market as well. You can accept credit cards from your phone and it will run through Etsy, which is handy for sellers rep on Etsy. I'm not sure what else they do, but it's not just running a website.
1. 122 million is cost of revenue, which means their support staff cost, server/bandwidth costs, and transaction fees (e.g. credit card fees). 2. 40 million marketing, I'm guessing mostly paid search. 3. 37 million product development. 4. 50 million "general and admistrative"
Point being, they could probably easily be profitable if they wanted, but at this stage they are trying to invest for growth. As you point out, though, that growth will be difficult if they have this inherent limit on production capacity.
I think we know how a lot of startups recently have taken this approach and its failed miserably. Groupon is the first that comes to mind. I'm wondering how many more companies have to fail before they realize growth is good, but doing it at a loss is not the way to sustain your business.
I guess everybody thinks they're Amazon?
Brad Feld had an interesting post as kind of a back of the envelope for what your finances should look like (http://feld.com/archives/2015/02/rule-40-healthy-saas-compan...). Of course it's intended for companies 'at scale', or around $1M MRR for a SaaS company.
There are plenty of examples of companies that operate like this that you probably wouldn't consider reckless with their spending. HubSpot comes to mind.