Etsy at a Crossroads: Balancing Growth, Tradition, and Survival in the E-commerce Landscape
Etsy, the global e-commerce platform renowned for its unique and handmade goods, achieved a record annual revenue of $2.7 billion in 2023. Yet, this milestone belies a deeper struggle within the company. Gross merchandise sales (GMS)—the total value of goods sold on the platform before accounting for discounts and returns—declined for the second consecutive year, reflecting stagnation rather than sustained growth. Its stock price has plummeted more than 70% from its 2021 peak, and first-quarter 2024 earnings disappointed investors, with results falling short of expectations.
A Visionary Start
When Etsy launched in 2005, it was revolutionary. Founders created a platform where artisans and small-scale creators could connect directly with buyers worldwide. Rob Kalin, Etsy’s original CEO, envisioned an e-commerce marketplace that encouraged conscious consumerism and empowered creators to transition from hobbyists to professional sellers.
Early adopters celebrated the platform for its low transaction fees and its strong community focus. By 2012, Etsy achieved B Corporation certification and went public in 2015, raising its valuation to $1.8 billion. Despite its promise, financial cracks began to show. Etsy was unprofitable at the time of its IPO, and leadership changes, including Kalin’s departure in 2011, shifted the company’s focus from artisanship to profitability.
Challenges of Growth
As Etsy faced mounting competition, the company loosened its definition of "handmade," allowing creators to outsource production to manufacturers starting in 2013. While this broadened the marketplace, critics argue it diluted Etsy's artisanal ethos.
Josh Silverman’s appointment as CEO in 2017 marked a turning point. His cost-cutting measures, fee increases, and subscription-based seller programs helped Etsy achieve profitability. The pandemic further catalysed growth, with a surge in demand for face masks and other handmade goods. In 2020, GMS grew by over 100%, and the stock reached an all-time high in 2021.
Yet, as the pandemic-fueled boom subsided, cracks in Etsy’s foundation re-emerged. Declining buyer activity, missed earnings in 2023 and early 2024, and rising dissatisfaction among sellers highlighted the fragility of its growth trajectory.
Seller Backlash
Many of Etsy’s original sellers feel alienated by its increasing corporatisation. Fee hikes, stringent policies, and the prioritisation of mass-produced goods and AI-generated designs over handcrafted items have spurred frustration. Creators like Chiarra Lohr, who leads the Indie Sellers Guild, criticise programs like the "Star Seller" initiative for prioritising speed and efficiency over the authenticity of artisan-made goods.
In addition, the influx of dropshippers and mass-produced items has contributed to what critics term the "junk-ification" of Etsy. Viral posts from longtime sellers, like Nicole Aline Legault, expose top shops relying on outsourced production or generic AI designs, further eroding the platform's reputation.
The Public Company Dilemma
Etsy’s transformation into a public company has created a tension between shareholder demands and its founding mission. The company is under pressure to deliver consistent returns, prompting measures like a $15 fee for new sellers and increased focus on scaling operations. Activist investor Elliott Management's recent acquisition of a 13% stake could catalyse further changes, but the question remains: Can Etsy balance profitability with its identity as a haven for artisans?
Looking Ahead
Etsy faces an uphill battle in regaining trust among sellers while staying competitive with e-commerce giants like Amazon and eBay. The company has committed to clarifying its policies on handmade goods and cracking down on non-compliant listings. However, as buyer activity wanes—half of its customers shop only once a year—the future of Etsy hangs in the balance.
To survive, Etsy must innovate while preserving its artisanal roots. Sellers, the backbone of the platform, need to feel supported rather than burdened. Without their trust, Etsy risks losing its unique appeal, becoming indistinguishable from the mass-market giants it once sought to disrupt.