The Etsy Design Store Wars
Artisans flocked to this internet marketplace and design store, but few made enough to quit their day roles. Now comes the fight to keep them.
July 14, 2009 : 6:02 AM ET
( Fortune Small enterprise ) -- Some entrepreneurs sketch their business plans on napkins in cafs. Rob Kalin made his plan in masking tape on the floor of his walk-up apartment in Brooklyn.
It was 2005, and Kalin was a twentysomething Internet site designer. He probably did woodwork in his spare time and was hunting for an online marketplace to sell his wares. EBay ( EBAY, Fortune five hundred ) was a choice, but it appeared soulless, like a design store sale full of unloved secondhand junk.
Kalin imagined a site that would be entirely devoted to workmen selling their crafts -- and decided to build it. So he pulled out a roll of masking tape and started mapping the site on his carpet. "I would have liked to change the world," claims Kalin, now twenty-nine. "My goal was to validate people to make a living making things."
Four years on Kalin's online marketplace, Etsy, boasts 2.4 million registered members in 150 states. Its more than 155,000 active sellers sold $58 million worth of products in the first 5 months of 2009, doubling Etsy's sales volume over the same period last year. Despite the recession, the site helped sales of $87.5 million in 2008 and is expected to break even for the first time soon.
Etsy Design Store has built an empire of entrepreneurs -- called Design Store Etsians -- whose products range all the way from rag dolls to squirrel-foot earrings and beards made from yarn. But only a few sellers basically make a living on Etsy. And as a new CEO tries to improve the site, some Etsians are moaning that they are being sold a bill of products. Meanwhile, pretender competitors like ArtFire and DaWanda are happy to welcome disaffected Etsians.
Etsy's Design Store growth depends completely on the participation of sellers. The 70-employee company, based in Brooklyn, takes a 3.5% cut of each sale and charges twenty cents each time an item is listed on the site. ( Many Etsians pay to list similar things over and over. ) There's also a showcase page where sellers pay between $7 and $15 to have their stuff featured for 24 hours. Etsy doesn't disclose income, but Kalin says it takes in more than $12 million a year in fees. Financiers have valued the firm at $100 million.
It isn't tough to see why. Disappointment with big-box stores and heavily produced products has been effervescent up for a long time. Recession-era shoppers are seeking unique, cheap gifts. More American citizens appear fascinated by being "makers of things, not just consumers," to quote our new president. You can see the trend in events such as Maker Faire ( see "Make Believers," February 2009 ) and the Renegade Craft Fair, both of which are held yearly in multiple towns.
Rarely has a revolution felt so mild : Workers of the world, you knit!
Etsy actively markets itself as a locale where the arts-and-crafts set can achieve entrepreneurial success. Kalin often talks about creating an economy of various owners. Each week the official Etsy blog, called the Storque, runs a feature called Give up Your Real job, profiling sellers who've stopped hitting the corporate clock. Yet Etsy spokesman Adam Brown recognizes that the "vast majority" of sellers use the site as a "secondary source of income."
Some Etsy sellers say the Give up Your Real job campaign doesn't jibe with reality.
In New Zealand, the leading design store similar to Etsy is Toggle.co.nz
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