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Etsy Success Story – Journey of a Niche Online Marketplace

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Etsy, a brand name synonymous with distinctive and creative goods, has successfully leveraged a unique and potent business model to find success.  A 10 million strong seller base and a net value of $2 billion net worth in 2020 bears testimony to Etsy’s stature. 

The niche marketplace has provided a platform for millions of artists, makers, creators, and artisans to sell their products in an eCommerce ecosystem that offers features and functionalities curated specifically for them.

The multi-supplier store has successfully leveraged an environment on its platform that enables creative minds to start with their business. In fact, Etsy identifies itself as a niche marketplace for independent vendors selling creative handmade artifacts and their supplies, and not big businesses selling mass-produced goods.

The success story started from a Brooklyn apartment in 2005, registered as an IPO in 2015, and reached annual revenue of $1725.63 million in 2020. The online marketplace continues to register strong growth. Etsy’s fascinating journey provides for a case study of a business plan, conceptualized and implemented to perfection.

In this blog, read more about the intriguing success story of Etsy right from the vision that led to its formation, to all the strategies that aided its rise.

The Phenomenon That is Etsy

According to Statista, the handmade marketplace had around 4.3 million active sellers by the end of 2020 and these sellers were from across 234 countries around the world. These sellers sell to a customer base of 89.1 million.

If data from the last six months is analyzed, Etsy gets 2.17 million visits per day! 

As expected, these numbers depict a steady increase in revenue till 2019, with 2020 proving to be positively productive for the multi-supplier store. The annual revenue of Etsy was $74.6 million in 2012 and went up to $725.63million in 2020. The revenue doubled from 2019 to 2020 and increased 10 fold, if the period between 2012 to 2020 is considered.

Annual Revenue Report of Etsy


Etsy has a global presence, with operations in 83 countries worldwide. The US and UK contribute to the bulk of its revenue, Canada, Australia, Germany, France, and others are also major contributors.

These statistics illustrate the global phenomenon that Etsy has risen to be, in the 15+years of its operation.

The Etsy Success Story 

Chapter 1: The idea that gave rise to Etsy

Before starting with Etsy, the founders of Etsy were freelance website developers. While working on a website project for crafters, they gained valuable business insight into the problems faced by a select group of sellers.

These sellers were selling handmade products and handicrafts on eBay. The eCommerce website was a well-established online marketplace and one of the most preferred option for sellers to conduct their business. But based on a horizontal business model, eBay is a platform for sellers of all categories of products. 

So these sellers faced crucial pain points while using eBay as a platform to sell their products. High commission fees and lack of support for their merchandise were some of the reasons they found eBay less suitable for their online business. 

From the information that the founders of Etsy had accrued from the project, they identified problems faced by the handicraft sellers and felt that there is scope to launch an online marketplace that sells only handicrafts and similar items. 

They thought about building a multi-seller platform based on a vertical marketplace business model. It would focus on a specific niche of handmade handicrafts and similar products. All features and functionalities needed to sell such products would be offered on it.

Thus, the niche marketplace was conceived to be a solution to the problems faced by the sellers. So, by giving the right answers to practical problems faced by the vendors Etsy gave them a reason to onboard the marketplace.

Chapter 2:  From the idea to launch (…and beyond)

To seize the opportunity and get started with the operations, Etsy launched the marketplace sans payments. This move would bring in the following benefits for the startup.

  • Without asking for any payments, Etsy was able to reach out to the sellers that found eBay’s commissions excessive.
  • The founders were able to ascertain the pragmatism in the business plan at an early stage of development.
  • They were able to launch the marketplace as early as possible, cashing in on the opportunity before there was any change in the dynamics of the market.

After the marketplace was launched, Etsy went about marketing the website using interesting marketing strategies that were appropriate considering the genre of the target market.

Chapter 3: Successfully reaching out to onboard sellers 

The founders marketed their project by following a distinctive and measured approach. They partnered with online forums such as Craftster and Get Crafty. Both these forums had an audience that Etsy had identified as the target vendor profile. 

The partnership was symbiotic for both Etsy and the forums. The marketplace could reach out to its target audience and the forums could add value to their members via Etsy’s unique business proposition.  

The partnership bore results. The sellers saw their major pain points being addressed and signed up on Etsy 

Another approach that the founders of Etsy took to bolster was reaching out to the sellers personally. They attended trade fairs where the sellers were also present. The founders presented the business proposition to the power brokers in their market by inviting them to dinner and presenting them the business proposal in the meeting. 

Etsy also reached out to the bloggers in their space who promoted handmade artifacts through their blog. These bloggers further helped to spread the word about Etsy.

Etsy’s marketing approach was appropriate to the vendor profile that the marketplace was targeting.

Chapter 4:  Etsy, the art of getting better with time

The success achieved at the start gave Etsy the necessary impetus. The niche marketplace followed it up with innovative business practices and continuously worked at improving.

It has continuously strived to add value to the business of the sellers via its services. In addition, Etsy has been good at ironing out the deficiencies or pain points that may have hampered their business. Some noteworthy initiatives taken are as follows. 

In the first year itself, Etsy offered innovative features such as Adobe-Flash supported visual elements, and the ability to list products with searchable tags. 

They implemented many marketing initiatives to enhance appeal to the target market. Organized craft workshops for new sellers at their Brooklyn workspace. 

Due to increased traffic on its website, Etsy was getting feedback of being slower than its competitors. Moreover, an increased seller base also increased the number of product listings, which meant the marketplace had to handle more data and still perform well. To address this pain point, Etsy invested in attaining machine learning capabilities. 

In September 2016 Etsy took a step further in this direction by acquiring Blackbird Technologies. A company that helped them deliver better search results and recommendations on the marketplace.

Chapter 5: Etsy’s growth during the pandemic

The pandemic ushered in unprecedented times and slowed global economic growth. But with people confined to their homes, the digital revolution stirred up and the eCommerce sector grew rapidly. Favorable business circumstances saw Etsy double its annual revenue in 2020 than the year before it.

The platform’s conduciveness for startups to start new ventures and nifty steps taken were major reasons behind this strong growth.

One such step was well-timed and wise. The pandemic has required people to wear masks to stop the spread of the virus. The sudden onset of the pandemic brought upon a surge in the demand for face masks. The demand superseded the supply creating a shortage of face masks in the market. 

Some of Etsy’s sellers had the infrastructure to produce custom cloth items. The eCommerce marketplace urged this seller base to manufacture cloth masks to meet the demand.

This move reaped significant benefits for Etsy. The handicraft marketplace reported that within 2 weeks 20,000 sellers made and sold face masks on the marketplace. Face masks accounted for 13% of overall gross merchandise sales for Etsy in the second quarter of 2020. Etsy reported $346 million of sales globally specifically for face masks.

Etsy was thus able to involve a good number of sellers in selling face masks and generate good revenue from it. Moreover, the marketplace was able to offer a product that was of value to a large number of customers resulting in additional traffic.

The increased traffic benefitted all sellers and is one of the reasons for increased revenue of Etsy.

Etsy’s unique platform is also one of the reasons behind its remarkable growth during the pandemic. The marketplace has a business model that promotes and invites entrepreneurs to start their online businesses. It provides further assistance for startups to set shop. 

The sluggish global economic growth during the pandemic and an uncertain job market prompted more sellers to transition to eCommerce. The eCommerce sector has been a silver lining on the global economic front.

With Etsy provisioning a conducive climate, these startups have preferred to start selling online on its platform. Etsy disclosed that 44% of the sellers who started selling online on Etsy in 2020 did so because of the COVID-19 impact. 

Etsy’s story of success to reach 10 million sellers has a plethora of business strategies. Some of those strategies are discussed hereunder.

Successful Strategies that Etsy Adopted 

Entrepreneurs looking forward to starting their eCommerce business can take inspiration from the strategies successfully implemented by Etsy. By analyzing its journey to 10 Million sellers the following can be inferred.

Etsy’s business practices implemented over a longer period of time

1. Revenue generation through alternate sources

Implementing revenue generation from alternate resources can be beneficial for any business in myriad ways. Some of these benefits are 

  • There can be an increase in gross revenue of the business
  • It reduces the dependency on the main source of revenue of the business. 
  • The alternate methods add up to the business value of the firm. Since they are related to the main business proposition, they offer additional benefits to the buyer, bolstering the venture’s value proposition.   

One such method of alternate revenue generation source for Etsy is the seller services they provide to the vendors. The marketplace assists entrepreneurs and startups in kick-starting their business on its online platform. They aid sellers in starting, scaling, and managing their businesses. They also support the sellers in shipping and advertising their products. 

These seller services account for more than 50% of Etsy’s revenue.

2. Staying one step ahead of the competition

At the core of Etsy’s success is the utilization of technology to incorporate innovative eCommerce features into the marketplace, resulting in a unique experience for the buyer. Better buyer experience results in higher conversion rates for the e-business.

  • Etsy has always worked to improve the buyer experience on its platform. Their acquisition of Blackbird Technologies was a step in this direction. 
  • The eCommerce store has worked on improving search results for the buyer. Accurate search results catalyze revenue generation for any eCommerce business.
  • Since 2019 Etsy has also worked on the utilization of technologies like Augmented reality or AR in the marketplace.

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3. Taking the right steps towards business sustenance

A statement on Etsy’s website underlines its unwavering resolve to stay focused on its vision. “Etsy’s commitment is to create lasting change in the world.” 

Right from its inception, Etsy has ensured that the sellers on its marketplace adhere to the philosophy of selling handmade or vintage products by individual sellers.  In one such case in 2012, Regretsy, a popular blog conducted research and found some sellers to be erroneously purchasing items and selling on Etsy. The multi-vendor store’s terms and conditions specifically discourages this practice. Sellers on forums expressed concern over this matter. By June 2012 the seller was no longer active on the platform. 

The handmade items marketplace has gone beyond the business processes to offer more to the community. Since 2013 the company has helped its high valued sellers to scale by offering them to connect with manufacturers. Further, the company has also helped the sellers in reaching a larger consumer base by partnering retailers like Nordstroms, Macy’s, Wholefoods and more, to showcase the products of its vendors. 

Etsy has been proactive to pre-empt and address any loose ends that may appear in the business. The endeavor of employing better technologies has also helped them in handling increased traffic on the website.

4. Homogeneity in business practices to build the right brand image

Etsy has maintained an unswerving focus to tailor its approach according to the target audience. All business practices have been formulated to achieve that. 

For instance, the invites that the founders handed out to the sellers even before the marketplace was operative, were handcrafted. This subtle move communicated Etsy’s intent at delivering a marketplace that would be focused on the sellers’ needs. 

Etsy’s sustained efforts towards supporting startups and SMEs, its focus on adding sellers with creative products, and its effort in avoiding mass-market products on its platform have resulted in a very dynamic marketplace. 

These SMEs can adapt quickly to changes in market trends. Overall, this has meant that the unique shopping experience on Etsy is unparalleled and can’t be matched by marketplaces such as Amazon.  

Etsy’s focus on maintaining the ethos on which the marketplace has been built has yielded favorable results.  Etsy has a loyal customer base. According to a report disclosed by Etsy, nearly half of buyers with it in 2012 continued to shop with them till 2015.

5. Customer Centric Approach

One of the foremost reasons for the success of a business venture is customer satisfaction. 

Etsy offers a unique experience to the buyer. But apart from that, it provides its vendors with services that go beyond selling on the marketplace. 

The marketplace has a service called Pattern that helps sellers set up their customized website, outside of Etsy. 

This service also provides an alternate revenue stream for the marketplace.

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Competitors to Etsy 

Amazon Handmade, eBay, and Craigslist are the more popular competitors to Etsy. All of the three enable sellers that sell on Etsy to operate from their marketplace. 

But the direct competition to Etsy comes from marketplaces such as the ones listed below

Name of the MarketplaceCountry of OriginCurrent Evaluation
Bonanza IncUS$2.88 million/annum
Zibbet Holdings Pty Ltd.Australia$3.11 million/annum
Artfire LLCUS$0.3 million/annum
iCraftCanada$1.52 million/annum

Despite the competition, Etsy has managed to hold its own and achieve the feat of 10 million sellers.

Conclusion

Etsy’s journey started with identifying business concerns, conceptualizing a pertinent solution, and presenting it fittingly.

Moreover, Etsy’s relentless pursuit of carving out a niche for itself in the eCommerce ecosystem by implementing well thought out business strategies has resulted in its phenomenal success. 

This growth is underpinned by a deep understanding of business processes and a distinct approach towards them.

This success story can inspire a startup to achieve success in the competitive eCommerce sector. 

If you would like to add to any information shared in this blog, please feel free to use the comment section below to reach us.

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