The Etsy Strategy Story

If you don’t know about Etsy, it is the giant ecommerce marketplace that has become the premier destination for handmade, one-of-a-kind, and vintage goods on the internet, connecting artisans and craftsmen with consumers around the world. 

Etsy’s online platform and mobile application were designed to help sellers sell their handcrafted and one-of-a-kind items, and Etsy exclusively focuses on that niche. In fact, if you want to sell something on Etsy, it has to be handmade, vintage, or a craft supply, and it can't be on its list of prohibited items.

Kind of like an open craft fair, Etsy allows sellers to list their items for sale in a personal storefront where customers can find items in a wide range of categories like jewelry and accessories, clothing and shoes, home and living, weddings and parties, toys and entertainment, art and collectibles, and craft supplies.   

Etsy was founded in 2005 by construction worker and amateur furniture maker Rob Kalin in his Brooklyn apartment. Kalin and two friends, Chris Maguire and Haim Schoppik, started working on the idea of making an online marketplace where people could sell their unique, handmade goods. 

Friend and co-founder Jared Tarbell joined the founding team about a month later, and the group moved quickly, working on the first version of Etsy for two and a half months before launching the site. The site boosted traffic and drew sellers at a rapid pace throughout the first year, drawing the attention of investors. This gave the company more money to invest in boosting traffic and adding more resources and tools to help sellers gain exposure. 

Etsy has made it very easy for both buyers and sellers to use its site.

Sellers can register with Etsy and post their handmade goods, vintage wares, or craft supplies for sale in exchange for a small listing fee. Listings on Etsy cost $0.20 and are valid for four months, at which time they automatically renew.

Buyers can then use Etsy’s industry-leading search features to search the platform for items they are interested in. Buyers can browse listings, read reviews, and add items to their cart that they are interested in purchasing. To ”keep commerce human," Etsy also allows buyers to communicate with sellers and ask questions before making a purchase or just add the items to their cart. 

When buyers are ready to make a purchase, Etsy then facilitates the transaction and transfers the customer's payment (minus commissions and fees) to the seller’s bank account.

Once a purchase has been made, buyers are asked to leave feedback on the product and their experience with the seller. This instills the buyer in the community and is helpful for other buyers considering purchasing from the seller.

• June 2005: Etsy is founded by Rob Kalin, Chris Maguire, and Haim Schoppik
• August 2008: Founders Chris Maguire and Haim Schoppik leave the company; Chad Dickerson is brought on as Etsy’s new CTO.
• December 2009: Etsy acquires startup advertising platform Adtuitive, a contextual advertising service that helps connect retailers' inventory with relevant content websites.
• July 2011: Founder Rob Kalin steps down as CEO, being replaced by Chad Dickerson.
• May 2012: Etsy acquires Trunkt, a wholesale marketplace for artisans and craftsmen.
• January 2013: Etsy purchases Lascaux, makers of the photo-sharing app Mixel in an acquihire in order to gain the expertise of Mixel’s team. 
• April 2014: Etsy acquires Grand St., an indie marketplace for electronics and gadgets.
• June 2014: Etsy acquires startup A Little Market, a Paris, France-based marketplace for handmade goods.
• September 2015: Etsy launches Etsy Manufacturing to help “sellers find and connect directly with manufacturers to form responsible partnerships.”
• September 2016: Etsy acquires AI startup Blackbird Technologies for $32.5 million to begin adding AI capabilities to its search functions.
• April 2017: Etsy launches Etsy Studio, a marketplace to buy craft supplies.
• February 2018: Etsy closes Etsy Studio and Etsy Manufacturing to focus on their core business at Etsy.com.
• July 2019: Etsy acquires musical instrument marketplace Reverb.com for $275 million.
• June 2021: Etsy acquires the Brazilian online marketplace for handcrafted goods, Elo7, for $217 million, expanding its reach into the South and Central Americas.
• June 2021: Etsy makes its largest acquisition to date, acquiring global fashion resale marketplace Depop for $1.6 billion.

Etsy's business model can be described as a peer-to-peer (P2P) ecommerce model, similar to eBay and Mercari. In the P2P ecommerce business model, the company acts as an online marketplace where private sellers can showcase their goods to interested buyers. It’s different from many other P2P online marketplaces in that it focuses on very narrow niches. This can be seen in the Etsy marketplace itself as well as in its acquisitions. 

Etsy was made to be a place to buy and sell things that were made by hand, and it has stayed focused on that niche market. The Etsy platform itself focuses on very specific categories of handmade items, vintage items, and craft supplies. 

Etsy primarily earns money by charging sellers fees and commissions for listing and selling products on its site. This is true on Etsy.com, as well as its portfolio sites Reverb.com, Depop, and Elo7. Etsy collects commissions and fees from sellers for a number of services. 

Here are the current fees Etsy.com lists on its site:

• Listing Fees: Listing fees of $0.20 apply for each item listed for sale on Etsy.com or the Etsy mobile apps. For multiples of the same item, a listing fee is charged when each item sells. Listings are valid for four months, at which time the listing is auto-renewed.
• Transaction Fees: In addition to listing fees, Etsy also charges a transaction fee for every sale. Transaction fees are 6.5% of the price you display for each listing plus the amount you charge for shipping and gift wrapping. 
• Payment Processing Fees: Etsy also charges sellers a payment processing fee, which varies by where you are located. In the US, Etsy’s payment processing fee is $0.25 per transaction plus 3%.
• Etsy Ads Fees: Advertising is determined by the seller. Sellers may elect to advertise through Etsy advertising and sponsored listings for your products on its site.
• Offsite Advertising Fees: Sellers can also elect to be included in Etsy’s off-site advertising program. If their product sells as a result of Etsy’s off-site advertising, sellers are charged a 15% advertising fee on the sale.
• Subscription Fees: Etsy offers advanced features and tools to Etsy sellers who subscribe to Etsy Plus. The Etsy Plus subscription currently costs $10 per month.
• Pattern Fees: Etsy also offers sellers the ability to create their own storefront through Etsy Pattern. An Etsy Pattern comes with a 30-day free trial, after which your subscription will auto-renew at $15 per month.

Etsy has grown to be the global giant it is today through its unique mix of marketing and growth strategies on its mission to create an online marketplace for artisans and craftsmen and “keep commerce human.”

Here are some of the core strategies that we believe helped Etsy grow into the uber-successful company that it is today:

One of the ways that Etsy has attracted customers is through its unique but effective marketing strategies. Etsy employs a marketing mix integrating digital campaigns, influencers, social media, and advertising. 

Etsy’s digital marketing campaigns focus on human connections and the uniqueness of the products that you can find on Etsy. These themes are clearly evident in recent campaigns such as “Give more than a gift” and “Why buy boring.”  

To spread its marketing message, Etsy often uses social media, influencers, and online and offline advertising. However, Etsy makes use of its mountains of data to segment and target customers with messaging both on and off the platform wherever it can. By knowing its niche so well, Etsy knows almost exactly where and how to effectively market to them.

Another strategy that has propelled Etsy’s sales and growth is its exceptional search results. Not only does Etsy allow sellers to control most of the factors in their listings’ search placements, but it is also constantly updating its algorithms to help buyers find what they’re looking for.

Handcrafted and one-of-a-kind merchandise can be incredibly difficult to describe and organize. In fact, in the early days, search results on Etsy were known to be pretty bad. However, over the years, Etsy has built and improved its search algorithms to make it easier for buyers to find exactly what they want.

Etsy uses a number of factors to determine how products appear in search. According to information the company provides on its website, these factors include:

• Tag And Title Relevancy
• Item Attribute Relevancy
• Listing Quality
• Customer & Market Experience
• Recency
• Shop & Buyer Location

Etsy’s advanced search features and algorithms allow Etsy to provide buyers with recommendations that are relevant to them, rather than simply organize search results by keywords.

Acquihire is another strategy Etsy has used to build an expert team. An acquihire is when a company acquires another company — not necessarily to acquire the company or its technology, but to acquire the company’s talent. In fact, several of Etsy’s acquisitions have been acquihires. 

In January 2013, Etsy purchased Lascaux, makers of the mobile photo-sharing app Mixel, for an estimated $750,000 in order to acquire its startup team.

Etsy’s acquisition of Grand St. in 2014 also turned into an acquihire. Although Etsy originally had plans to continue to run Grand St.’s ecommerce site, it wasn’t long before the Grand St. team was assigned other projects and got too busy to work on Grand St.. The project was soon abandoned; however, the Grand St. team remained.

Over the past few years, Etsy has seen exponential growth, and it doesn’t appear that it has any plans to slow down. 

While we don’t know exactly what the company has planned, Etsy’s acquisitions over the past several years provide some clues as to where the company might look for future growth. 

Etsy’s acquisitions of A Little Market in 2014 and its recent acquisition of Elo7 in 2021 suggest that Etsy may continue looking to penetrate the global market by acquiring its foreign competitors. Although Etsy already has more than 93 million users in 200 countries around the world, 70% of its sellers are based in the United States. 

The Etsy acquisition of Elo7 gave them access to the company’s 1.9 million active buyers and 56,000 active sellers in the Brazilian market. Expect Etsy to continue to explore acquisitions where it can expand its market penetration on a global scale.

In addition to expanding its market share in the global handcrafted goods market, Etsy may also continue exploring other P2P ecommerce marketplaces. 

With the 2019 and 2021 purchases of Reverb and Depop, Etsy expanded its focus from handcrafted and vintage goods to musical instruments and clothing, two new markets for the ecommerce giant.

Whichever direction the company takes next, we expect it to continue innovating in order to help keep commerce human. 

There are a number of lessons that we can learn from Etsy when it comes to building a successful company. From its niche focus to earning the trust of its buyers and sellers, Etsy seems to be doing a lot of things right. Here are some key lessons that you can get begin working on in your business today:

One of the lessons that you can learn from Etsy is to focus on your niche. A business niche is a small, specific part of a larger market that your business focuses on serving. 

If you run a small business, finding your specialty is essential for sharpening your business's focus, building a dedicated customer base, and generating consistent income.

Some of the benefits of focusing on the niche that your business can serve best are:

• Easier to reach and market to your niche
• Increases visibility among your niche audience
• Helps establish you as a specialized expert in your domain
• Helps build loyal customer base
• Enhances customer relationships
• Increases buzz and word of mouth
• Reduces direct competition
• Fewer costs and resources
• Increase revenue and profits 

Every business owner wants to sell their products and services to “everybody.” But you don’t have to start off or even become the “Everything Store” like Amazon. Rather, find your niche- that subset of customers that your business can serve best- and focus on them.

Getting your customers to trust you is important if you want to build and maintain long-term relationships with them. Most customers hold companies to the same standards they would apply to people, and they establish relationships with those they feel they can trust. 

Gaining someone's trust is crucial to making a sale. Most consumers won't buy from you if they don’t trust you. According to the book “Persuade: The 4-Step Process to Influence People and Decisions,” earning someone’s trust is essential to building credibility, and this is the first step toward persuading someone to do business with you.

Etsy has excelled at earning its customers’ trust despite the difficulties of this in a P2P online marketplace. Etsy’s community provides them with a unique yet dedicated user base. However, in a P2P marketplace, just a few bad actors can erode trust and make customers feel unsure or unsafe. 

Etsy works hard to keep its marketplace safe and trustworthy by heavily investing in policy enforcement and letting members see how its content policies are being enforced, and how requests for member information or account actions and intellectual property takedowns are being handled.

When customers trust you, they are more likely to make a purchase, establish a relationship with your brand, take your recommendations, buy from you again, and tell their friends about you.