The Fall of the House of Etsy
spy.com
spy.com
The problem is that operating a two sided marketplace connecting small makers to customers just really sucks as a business. Tons of churn, intractable problems with quality and fulfillment, having to pay for a lot of customer service agents who fundamentally can't solve any problems, since they don't actually work for the person who makes the stuff, and can only hit the "refund" button.
Etsy has every reason in the world to want to get away from small sellers and move to high volume manufacturers, (who have actual QA and customer service departments, which a guy hand carving chess pieces in his basement doesn't have) and nothing to stop them. So the obvious thing happens.
(Except then you're competing directly with Amazon in its area of greatest strength, which historically has been corporate suicide...)
Except Ebay and Amazon already existing.
Jeff Bezos used to say, "Your margin is my opportunity", but I'm not sure he even cares anymore.
• Re: fulfillment — why not ask Etsy sellers to pre-stock everything that's not made-to-order into fulfillment centers like Amazon's? And, in fact, to send anything that is made-to-order to a fulfillment center first, where it'll be inspected, re-wrapped and re-shipped by the fulfillment center — with the buyer's card only having a hold, not a charge, on it until the seller's goods are inspected by the fulfillment center as good? (In other words: turn the process into a goods-for-money mediated escrow.)
• Re: quality / drop-shipping — I feel like a lot of this could by solved just through simple semi-automated verification. Require for a product to be listed, for the seller to upload a video of themselves making the thing. Then pass those videos to MTurk workers to evaluate them for tricks.
> Etsy has every reason in the world to want to get away from small sellers and move to high volume manufacturers
Except that... that's their whole niche.
Specifically, 90% of Etsy's value at this point is in the market of buyers they have slowly marketed and engaged and cultivated brand recognition with over decades — and those buyers are people looking for low-volume goods. They don't want to buy high-volume goods from Etsy. That's not the association they've been painstakingly educated to have.
If Etsy wanted to get into Amazon's business, they'd have to create a new brand to do it with, because that's just not the business that people associate with the Etsy brand. And that would mean starting from scratch.
Of course, if things were constantly going out of stock, then you'd want to create a system to allow people to put down a hold on their card to reserve a copy of something, waiting in a virtual line to be the first to get it when it does come back in stock. (Which would actually work much better than Etsy does today, as it would give makers the ability to know how many of each thing to target making as a batch to attempt to satisfy upcoming demand — without money already captured forcing them to work to a potentially-impossible deadline.)
I’m sure it would work better for people who don’t do fairs, but we have decent farmer’s markets in my area and there’s a good number of artists who sell on Etsy or similar in addition to touring the regional in person events.
Because that costs money and most Etsy sellers sell very few things. We're not talking thousands or hundreds or even dozens per months. We're talking single digits per month. Per store. Not per item. With 7 million stores.
> Re: quality / drop-shipping — I feel like a lot of this could by solved just through simple semi-automated verification. Require for a product to be listed, for the seller to upload a video of themselves making the thing. Then pass those videos to MTurk workers to evaluate them for tricks.
See the previous point. No one would use Etsy if they had to make a whole video and go through an automated process for an item that might sell once per year.
edit: Amazon sells something like 350m products including the marketplace and 12 million directly. Etsy sells over 100m. Amazon has 40x the sales revenue. The economists are so different between them it's not even the same universe.
I am not entirely sure of this claim. My own experience with artisnal craftspersons is that they will tolerate higher levels of inefficiencies precisely because they are not operating at scale, and being artisnal makes their cost of revenue really really wonky.
>Because that costs money and most Etsy sellers sell very few things. We're not talking thousands or hundreds or even dozens per months. We're talking single digits per month. Per store. Not per item. With 7 million stores.
I agree with this though, and to direct this at the parent post, that is a LOT of operational overhead. Like, a mindboggling amount you will require Amazon's levels of profit and scale just to properly pull this off. Do not underestimate the sheer amount of labor it takes just to run even fairly simple operations that deal in the lot counts in the low hundreds. Doing this for tens of thousands of potential transactions a day across millions of sellers is asking for trouble. This is why Etsy has sellers outsource this to UPS, FedEX, and the Postal Systems.
To make a video that a human can recognize as showing local craftwork and cannot be replicated at a workshop in China for $50 is a ton of work. Like a ton. Many of these are multi-day or multi-week projects that involve numerous steps. Do they all need to be shown? Or just snippets? How many? How do you ensure that all the snippets are in the same location? Do you need to do this for every product or every product type? If you sell 400 variants per item do you need to cover all of them (if not someone will have a $1000 variation that is hand made and a $10 one that isn't)? Do you pay money for experts to review each video? If not then how do you know it's this seller's cutting board being made and not another, almost identical to most people, cutting board?
Maybe the key difference in our viewpoints is that I very much know that drop shippers aren't stupid or without resources. Their job and "passion" is to know Etsy and it's processes. Actual craftspeoples' job and passion is to make things. The more bureaucracy you add the more the drop shippers benefit because they know how to work through the bureaucracy better than non drop shippers. It's their sole job after all.
The thing about bureaucracy, is that it has a few tricks up its sleeve: things that are easy for real people to do once, but incredibly expensive to do twice, or to fake from whole cloth. The clearest one of these is identity verification. (Which is why it's at the core of so many other kinds of verification flows today, e.g. dating-site onboarding.)
So, consider this verification flow (c/o an Etsy mobile app):
1. On account registration, require the artisan to go through KYC photo identity verification (= "kyc-verify" API call to third-party KYC service that gets the user to securely upload passport/ID through a popover webview; KYC service verifies that it's a real passport/ID, that it's not already associated with any other account for that service; and then returns the name, country of residence, and photo extracted from the ID in the API call); and then store the name and coutry of residence, and extract the person's face metrics from their ID photo.
2. Guide the artisan to film a high-quality "verification video" of themselves saying some random thing. Auto-verify many extracted frames of this video against the extracted ID face metrics, and then MTurk-verify that the video is of what you requested.
And then this per-product-listing flow:
3. Guide the artisan to film a "process video" as a time-lapse from a single static position in their workshop, showing as much of the workshop as possible; tell them to stand with face and raw materials visible at the beginning of the video, and to stand with face and final product visible at the end. They can do whatever in between — even leave the room, as long as the workpiece does not leave the room at any point. (Compare/contrast: the kind of twitch-stream footage required to verify a speedrun as a world record.)
4. MTurk-verify this process video — tell the MTurk worker examining the video to visually verify that the person seen in the product video is the person from the extracted frames of the verification video; that the person in the video in fact is making the thing (whether with assistance from others or not); that the workpiece does not leave the room; and that the final product is the "same in kind and in quality" as the one in the product listing photo.
5. Allow the artisan to check a box to let people watch this process video right from the product listing page. Give more ranking juice to product listings that do this, and tell artisans that you are doing so.
(And optional bonus step:)
6. If the artisan has verified their ownership of a YouTube channel where they produce fancy edited process videos — which a lot of artisans already do! — then allow them to select a video on said channel to be displayed in place of the raw process video. (But still allow the raw process video to be accessed, through some text-only link, for public-auditing purposes. Also, don't allow any videos on the listing page except for the raw process video or the edited process video subsuming it.) And MTurk-verify this video too (having the MTurk worker watch both the edited and raw videos) — verifying that most shown footage of the process comes from the raw process video, and that the edited video is not misleading the viewer about what was seen to happen in the raw footage video.
This simple flow would cover most product categories on Etsy, as most product categories on Etsy can be made in situ in a single room (if perhaps a large room, across several machines.) This would then therefore eliminate most of the problem. Etsy could stop there, not even requiring verification for more-complex product categories, and the site would still be better off than it is today.
If you want to eliminate 100% of the problem, though, then you would have to require the product's creation process to be described with a component-production-flow graph (where components that go through multiple "passes" in different locations are considered distinct components before/after the "pass"); and then require the producer of each component — if not all the same person — to register as a user, go through KYC, and then upload a video showing the production of that component. The goal would be for each distinct component's process video to be able to be, again, a one-person, one-place, single-shot time-lapse job where the workpiece does not leave the shot.
Most things that aren't one component, would still only be two or three, so this wouldn't have to be too taxing. For products with variants that share early steps but then branch in later steps, you could even reuse the already-verified process steps, and so not have to film those again.
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Also, as a bonus anti-drop-shipping measure: require the shipping origin for products to match the country of residence from the KYC'ed ID of the maker responsible for the final step in the production flow (who is also, presumably, the seller.)
Require the seller to submit a shipment tracking number to the site before the buyer gets charged... and if that tracking number's country of origin doesn't match, then the transaction doesn't happen and the seller gets a strike against their account.
And also, show the production-flow graph to the user on the listing page, with the country of origin of each component shown prominently under the component. And let users filter listings (positively/negatively) for having components made in a specified country, or for being entirely made in a specified country.
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> If not then how do you know it's this seller's cutting board being made and not another, almost identical to most people, cutting board?
You don't. But if the seller can prove that they can make an identical cutting board themselves, in a low-volume process... then they're much less likely to be drop-shipping you a cutting board when you order one for yourself.
As much as it could in theory be economical for someone to "scale" low-volume production using drop-shipping... people just don't actually do that in practice. Making things is a skillset; (making a profit while) drop-shipping is also a skillset; and these skillsets aren't often found in the same person.
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And — bit of a tangent here — even if a real artisan were "scaling production" by drop-shipping you a cutting board... would that matter? We've actually pushed past the point of solving the problem, here.
Most people ordering from Etsy don't actually care about provenance for its own sake.
Consider: the provenance of an iPhone isn't any different than the provenance of a Samsung phone, or even a shitty off-brand AliExpress phone: all three can and have come from the same Foxconn plant. But those three were produced under very different requested tolerances and use very different quality control processes. You want the iPhone or Samsung phone, and not the off-brand one, because Apple and Samsung both put their own checks and balances into the process to ensure quality in the result.
Likewise, an Etsy buyer who cares about getting "artisanal goods", is almost never looking for something made in a specific place. They might be just fine buying something directly from an artisan in China. And they might even be fine ordering something from an importer in America who's buying from an artisan in China. They just don't want to buy something from a factory, regardless of location. Most factories happen to be in China — but that's not the rule they really want to be using.
In short, Etsy buyers care about two things:
• They care about not being lied to about provenance (whether they then rely on that information to make choices or not.) I.e., they care about ordering something nice, and being shipped what they ordered — not some failed attempt to duplicate a stolen product image.
• And they care about the requested tolerances and quality control processes that are implied by the seller's listing. I.e., they care about the product being made how the listing said it would be made — rather than being done by some scammy job-shop without the unique skill required to replicate the original artisan's work.
This means that, for at least some (most?) buyers, there's actually nothing wrong with an "artisan" relying on having goods produced for them by a factory somewhere, but to their specifications — this is known as "private label" production. As long as the artisan can receive and inspect those goods themselves to impose their own quality standards on them, then the work can be considered to be "the artisan's" work. (In this situation, the factory isn't any different than an apprentice working under a master artisan: the master still examines, fixes, and signs off on the their apprentices' work.)
And there's even nothing fundamentally wrong with an artisan relying on a factory to do its own quality-control to their specified standard, and then directly ship the resulting items to customers. As long as an artisan can actually ensure that that's happening!
That's hard, though — it requires a lot of OpEx to be able to afford to regularly fly to China to inspect factory processes, and/or employ a local auditing partner, and/or anonymously sample your own drop-shipped product stream to verify the quality that's going out to real customers. It's too hard for the sort of people who exist on Etsy. If you can do this, then you are now a high-volume manufacturer in truth, and your products don't belong on Etsy.
So I think, in terms of results, as long as Etsy is prohibiting drop-shipping production flows, it doesn't have to do anything to prohibit private-label "import and quality-check" production flows. It just has to make those production flows transparent to the buyer. Which is a much easier task.
And even then, many people on Etsy sold antiques and vintage clothes. Maybe they even designed them and had them manufactured in small batches?
Auction houses manage it somehow.
Auction houses store items for a limited period of time before liquidating them. The time in storage is fixed and the fees are fairly high. It's a fundamentally different approach to an online retailer.
An auction house that has to store items for years, charge no more than a 10% fee and only charge it if an item sold would go bankrupt.
Why not take a hint from Darknet markets[0] and require escrow for all transactions[1], with funds only being released to the seller after the buyer has confirmed receipt of the goods as advertised, along with seller (and buyer) ratings as well as dispute resolution services?
In many ways, darknet markets are much better than the "legit" online marketplaces. And more's the pity -- because the "legit" players know better and should act accordingly.
[0] https://en.wikipedia.org/wiki/Darknet_market
[1] And since Etsy is a publicly traded corporation and their sellers are presumably "legit" (i.e., selling stuff that doesn't run afoul of nation-state dicta), an exit scam[2] is unlikely.
Also customer tend to game that to get free products which makers hate.
A fair point, although photos provided on the site, as well as seller reputation can (and mostly the latter on darknet sites, but both are useful) address that issue. What's more, an escrow system that requires the buyer to confirm receipt and quality for the seller to receive payment could have an even stronger impact on such issues.
>Also customer tend to game that to get free products which makers hate.
Which is why darknet sites have dispute resolution policies and processes, as well as ratings of sellers and buyers. Those buyers who try to take advantage are shunned pretty quickly as bad actors and unprofitable to boot.
You can't game a system that won't play with you.
I suggest you check out some darknet markets[0] -- not to purchase anything that might raise the hackles of your local government, but rather to see how a marketplace which doesn't have the sanction of law/government/the courts tries to ensure fairness and minimize rip offs and bad actors.
If you do, I think you'll find that many of the tools used in those environments would improve user satisfaction (on both sides) and create a much better marketplace. Even a "legitimate" marketplace like Etsy.
Edit: fixed grammar, added references.
[0] https://darknetmarketlist.com/darknet-market-list/ [1]
[1] Some of the listed markets have been seized/exit scammed/otherwise offline. As the old saw goes, 'caveat emptor'.
The thing is that the vast majority of buyers are perfectly happy with their drop shipped item.
That's the real difference, Darknet has very savvy buyers because the barrier to entry is fairly high and theres is little real competition. If you don't like Etsy then there's Ebay or Shopify stores or Amazon handmade or a local craft fair or just emailing a maker.
I think it's important in these situations, like many others, to not jump to a conclusion such as "legit marketplaces are idiots for not doing X" but rather "why doesn't X work for legit marketplaces but does work for non-legit ones."
Forcing fulfillment center usage would only benefit stores who do a lot of volume. They can afford to take the risk on producing a lot of inventory up front.
Etsy should also mandate the inclusion of a scan code in the package, which the customer can use to show they received the shipment but it wasn't as advertised. This would catch people lying about the contents, when the creators take a photo of the item & code in the box (and send it to Etsy before shipping.) Creators taking a photo and then changing the item will be caught because of the number of complaints, and customers can be refunded long after the transactions using the bond.
Etsy already charges fees, even just to LIST items, regardless of whether they sell or not.
I've been wanting to sell some of my 3D printed designs, but I'm not paying a buck a piece for a listing that will earn me 5 to 10 bucks if I manage to sell.
The listing fee on Etsy is 20¢ ($0.20).
https://help.etsy.com/hc/en-us/articles/115014483627-What-ar...
To be successful, they need a large consumer base, and a small seller base, who sell high quality goods (which is subjective, but mass drop shipping is certainly not what those consumers are expecting).
Of those, the hardest to attract is a larger consumer base. Sellers will ultimately go where the buyers are.
The only way a small seller base can support a large consumer base is if it's some form of mass manufacture. That more or less leads to drop shipping as the logical conclusion and optimization.
Make it too easy to sell but not have equal reduction in price penalty is how you get Etsy's current problem. Removing the dropshipped items will (hopefully) remove race-to-bottom conditions that in turn allow for small time creators to charge higher prices + profits and buyers to regain confidence that they are getting more perceived value despite the non-commodity prices. But so long as the dropshippers exist, that balance gets destroyed.
You can make all these same arguments about eBay, or credit card merchant fees. If you charge the seller more for access to rewards-card customers then they won’t join, right?
There is a point of balance, Amex or Diners Club do struggle for adoption, but the guy with the 3% visa or mastercard is actually hugely desirable even if it does cost an extra % or two to get access to that segment of the marketplace.
Unless your business is so entrenched that people are actively seeking you out, you have to go where the customers are. Even if that means accepting an unfavorable deal.
That’s the whole argument about the App Store, right? Android market is free (if you set up your own store etc). But people want access to the apple customer base, because they’ve got more money and tend to spend more money too. So it’s objectively a worse deal to write android apps even if the terms are more favorable, because the customers are less valuable.
etsy should vet their sellers, simple as
Amazon can't un-crappify themselves, it's not in their DNA.
Then a small maker can quickly establish a good reputation, and cautious buyers can only buy from such, while more adventurous might take a punt on someone new. The open market needs information to be efficient; it looks like lack of reliable information is the root of this.
What that means is that any artists/makers that are doing volumes that represent anything even close to a full time wage are totally shafted. If I were an artist selling stuff, I would strongly consider a switch to something like Shopify, especially as you then aren't on a storefront sitting next to a whole bunch of drop shipped garbage.
That seems to assume a very very unrealistic 100% of orders being from offsite ads. In reality it's probably 10% for most shops if even that many.
The fees are still astronomically high even without the ads program.
This is increasingly impossible under capitalism for fundamental reasons, which are illustrated most clearly in modern financialized capitalism by shareholder interests.
Your desires (and mine) will require a reorganization of society as we know it.
https://en.m.wikipedia.org/wiki/Tendency_of_the_rate_of_prof...
So far every attempt to do this has done the exact opposite.
Nobody said that. It’s just that I haven’t seen a better proposal to date.
Most of capitalism, historically and today, is about preserving capital and making a small return. High-growth ventures are a minority, despite how it feels in tech.
Inflation over the past 30 years (since 1995) is 105%--prices have doubled. Global wealth has doubled (inflation-adjusted) too. But these centi-billionaires are a whole new level.
Plenty of public companies promise low growth but decent returns. (Some promise wind-downs amidst payouts.)
They also pay low multiples. If you want a high multiple, you have to grow. Etsy’s saga isn’t a problem of public markets, it’s one of a company choosing a particular cohort of investors.
You can also see if your local arts centre/university/whatever has some kind of market. There's also usually different kinds of conventions for specific industries where people will set up booths.
Maybe it wasn’t obvious at the time but it certainly became so that your low-volume artisanal craft couldn’t sell alongside manufactured Chinese goods going for 10% the price.
Mind you, you can at least be sure that food items sold by such vendors are domestic (if not local per se), because of import restrictions.
It's pretty much the only way I can be assured they're not (exclusively) selling dropshipped items.
But for about ...30%, I'd say? of the vendors I engage with at these sorts of markets, they turn out to be running more of a family operation: either one partner is an introvert with a trade-skill while the other enjoys talking to (and selling to) people; or there's a retired adult who likes to putter around making stuff but doesn't have the energy to show up to fairs, and then there's their kids/grandkids, who've grown up admiring their work, handling that part for them. Either way, the artisan themselves isn't there to explain their work; you've just got their "sales representative" to talk to.
And in those cases, the partner/kids/etc can certainly describe the "outside view" of the creative process, any material sourcing they've helped with, etc... but they don't really have the introspective viewpoint on technique that the maker themselves will have.
Which means that it would be entirely possible to come off as "the partner of an artisan" after just following a few Youtube channels from actual artisans in the field. (With the particular art content I consume, I could probably at least pull off sounding like the spouse of a person who makes vinyl-print stickers or cold-press soap.)
Mind you, if you've never been a creative person struggling through the creative process yourself — nor lived with a creative person and watched them struggle through the creative process — then your story might be missing "emotional veracity."
But I would imagine that most people who would decide to make a business of selling things at craft fairs — even if it's a "fake" business – are people who like crafts and being around creative people; and so who have either tried their hand at some creative hobby personally (but just failed to produce anything that would sell), or have at least dated someone who makes stuff. They're people who wish they could be selling their own stuff, but just don't have their own stuff to sell. For them (insofar as there are such people), it would likely be as much about "being a part of it" as it is about the money.
Or, to put that another way: nobody who's not already in the "crafting world" somehow, would ever come up with "sell Alibaba goods at a craft fair" as a get-rich-quick scheme. Because it's really, really not. :)
You can also chat to the person and see if they're knowledgable about their stuff. Depending on the craft, the person might actually be doing it in front of you (or customise their goods somehow).
Their popular Shop app does. It's search through Shopify stores
In my experience, on commission. Hire a carpenter or artist to make what you want and pay them for their materials up front and time on delivery.
When I saw "spy.com," I was hoping that Spy Magazine[0] had risen from the ashes.
No such luck. :'(
[0] https://en.wikipedia.org/wiki/Spy_(magazine) (It was the only dead-tree magazine that I have ever personally subscribed to).
Etsy used to be a place to check out artisanal craft goods. Not necessarily antiques, but the sort of small-batch stuff that was hard to find elsewhere on the internet. Exotic jewelry, one-off wooden carvings, semi-custom knives, etc.
Now it's a place to check out mass-produced Indian and Pakistani merchandise. It has become worse even than eBay in that regard. It's superficially the same stuff it has always been -- exotic jewelry, wooden carvings, knives, etc. -- but the quality is much lower and the value just isn't there. And it could well be that you buy something on Etsy only to see it later on Amazon.com.
Also I feel like prices on Etsy have risen in an unusual and remarkable way over the past few years. Could be because of higher platform costs to vendors & the forced advertising scheme mentioned in the article.
Whether you can turn that into a profitable public company... eh.
And there are certainly some blogspammy listings in all those venues (Amazon and AliExpress probably the worst for that), but good luck solving that without human curation - and then you're an even worse investment as a business.
Is there tons of non-customized stuff that's drop-shipped from somewhere else? Yes. But you can ignore if what you want is the old-school Etsy stuff. I'm sure some sellers have bailed as they've been edged out by big sellers. But for me, it's still a useful platform that I enjoy using.
2. Etsy also look to be charging 4% for currency conversion (which occurs if you view the Etsy site in a currency different to the currency the store issues its prices in). Esty I think are deliberately hiding this charge; it is listed _nowhere_ in the invoice or in billing. Furthermore, Etsy base their conversion choice on the country the bank card comes from, which is not correct for multi-currency cards, and so you can end up paying Etsy 4% and the 0.5% to the multi-currency FinTech as well (when you should be paying only the 0.5% to the FinTech).
That used to be called "pulling a Myspace". Myspace pioneered that way to screw up.
Can anyone name a company that went down this road and came back?
Someone should do a tracking site for companies which fail in this way. Something like "deadmalls.com", or "fuckedcompany.com".
YC idea: develop a LLM model to detect early signs of enshittification and generate sell signals.
> First, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.
Nowadays it's just used as a catch-all for "made worse".
- Businesses come in to exploit the users by flipping AliExpress crap at 10x margins, Etsy does nothing to stop this because $$$
- Etsy realizes they could make even more money off businesses by eg forcing them to buy ads from Etsy once their income exceeds $10k
- Now both users and businesses are pissed off and Etsy has entered a death spiral
Enshittification.
Next.