I am by no means a stock analyst or claim to know anything about Etsy’s financial future. However, my eCommerce marketing agency manages accounts for Etsy sellers, and we’ve seen a fundament shift Etsy over the past year…Competition!
Over the past few years, many online retailers have shifted from thinking of Etsy as a marketplace for low volume seller to a marketplace where real money can be made. The gold rush kicked into high gear when morning shows and big media outlets broke stories about Etsy sellers like Three Bird Nest and how they gross $70,000 to $80,000 per month. After those stories, larger online retailers and eCommerce entrepreneurs began jumping onto Etsy.
I’m sure some of you thought that Etsy was just for handcrafted items. You may have even thought that all sellers were handcrafting these items one by one in a little shop or basement. That is not the case. In fact, Etsy now allows sellers to “partner” with a manufacturer to produce the products. Also, many sellers buy premade items, add a button, and now it is handmade. In some cases, the manufactured items and premade items hurt small sellers, because the high volume sellers can sell items at lower price and/or higher margin, which allows for higher bids on Etsy’s promoted listings, which is Etsy’s name for their ads. However, I would argue that it ultimately is good for consumers…items do not run out of stock, lower prices, potentially larger selection and in some cases higher quality.
What does all this mean for Etsy long term? I have no clue. However, in the short term, there are more and more reports of Etsy sellers making serious money and an increasing number of large eCommerce companies getting on Etsy. As new retailers get on Etsy, their first step is to run promoted listings. The experienced sellers making money do not want to see sales go down, so they respond by increasing their bids. This is what the stock market is missing…the rapid rise of competition within Etsy.
We have two clients on Etsy that have successful eCommerce sites prior to starting on Etsy, and they both signed up about mid-summer to fall 2014 to “try it out and see what happens”. After slow starts and slowly working up their ad budgets, one currently averaged $22,000 in sales per month and the other over $10,000 per month. Over the past 90 days, the first seller has spent over $13,000 in ad cost and the second has spent over $5,600. The 90 days previous to that period, they spend 60% to 80% less…they were just getting started. A year ago, they were not on Etsy. I assume there are many more sellers with a very similar story.
What does this competition mean to Etsy? I believe it has led to a dramatic rise in minimum bids for promoted listings, which is likely their largest contributor to Seller Service revenue. Here is an example…one product previously needed a bid of $0.75 to show up in one of the top three spots for a specific keyword, then competition over the past few months pushed bids up to $1.15, and now Etsy recommends bids around $2.22 to stay competitive. Other sellers are seeing the same rise in recommended bids, and I’d expect bids to go even higher as black Friday approaches. This increase in bids only means more money for Etsy. I think the stock analysts are missing this key fact, and we will see a strong holiday season for Etsy. I’m a believer in Etsy, and I think the higher revenue will help Etsy innovate and build a stronger marketplace. Happy Selling! Tweet at @EastonDigital to share your thoughts.