The Rise of Etsy: From humble handmade goods to billion dollar marketplace

Etsy, which started out as a humble handmade goods platform 16 years ago, has exploded into an ecommerce behemoth and recently became the second most popular ecommerce marketplace after Amazon.

The now ubiquitous marketplace was founded in 2005 by a group of school friends including amateur furniture maker, Robert Kalin, who wanted a better way to sell his products on the internet.

The business is now valued at an astonishing $22.5 billion and is more commonly searched for than Ebay, famous for being the market leader of the noughties.

Etsy is the go-to platform for over 39.4 million active buyers buying from 4.7 million merchants, selling everything you can think of from homemade candles to clothing to musical instruments.

Why has Etsy got so popular? Its well executed strategy appeals to both sellers and buyers who use the platform, according to CI&T’s retail industry lead Melissa Minkow.

“Etsy has a history of evolving with consumer behaviours, and it’s extremely well-organised and merchandised,” Minkow told Charged.

“It’s incredibly easy to navigate through to what you’re looking for, and shoppers don’t have to vet sellers’ credibility with as much effort as they do on other platforms.

“Additionally, the communication process between sellers and shoppers is seamless and speedy- so the customer service aspect is also a differentiator.”

Etsy was created by, Rob Kalin, Chris Maguire, and Haim Schoppik in an apartment in Brooklyn New York City in 2005.

Two years later the platform had nearly 450,000 active sellers and generated £26 million in annual sales. The company also managed to secure £3 million in funding.

READ MORE: Hands On with TikTok’s new shopping feature

Despite the company’s impressive ascendance, tension between the company’s founders began to emerge at the tail end of the 2000s.

According to Inc. Magazine‘s profile of Kalin in 2011, his colleagues were starting to think he was more of a dreamer than a do-er. Maguire and Schoppik left the company in 2008 after growing frustrated with the number of hours they were doing in comparison to their co-founder.

As a result of Maguire and Schoppik’s exits from the company, Kalin hired Chad Dickerson, who was at the time Yahoo’s senior director of product.

Dickerson became Etsy’s new chief technology officer and Kalin stepped down from the day-to-day running of his business, marking the start of Etsy’s rise to prominence.

The next five years saw Dickerson replace Kalin as the company’s chief executive, Etsy acquired Adtuitive and Trunkt (an ad platform and a artisanal goods marketplace), secured $40 million in a funding round and made its biggest shift in corporate values since its inception.

January 2013 saw Etsy complete the takeover of Lascaux Co, a company that develops smartphone applications.

Etsy then changed its most championed value. It decided to allow its sellers to sell manufactured goods at the same time as handmade items.

This proved to be a masterstroke by the company, seeing sales grow from $895 million to $1.34 billion in the same year.

The following year led to the hiring of Mike Grishaver, a former executive of music streaming site Pandora. Grishaver was hired to help Etsy grow its mobile app experience as more and more people were purchasing smartphones with better internet capabilities.

READ MORE: Twitter to allow businesses to showcase products on profile in major ecommerce push

The company’s total sales continued to grow and hit $1.93 billion that year.

While 2013 marked the biggest shift in the company’s corporate values since its inception, 2015 marked the biggest financial move it had made after seeing impressive year-on-year growth.

It filed for $100 million initial public offering (IPO) in March 2015 and was valued at $1.8 billion after raising $273 million in its IPO funding.

This was the first, and arguably the most important indicator of a company’s place amongst the biggest ecommerce companies in the world.

Some didn’t perceive it very well, they felt that the brand was moving away from what it stood for; small businesses.

However this proved to be the right move as the platform has continued its consistent and considerable growth ever since. It has since gone on to make several acquisitions in the years after its successful IPO including the purchase of popular circular fashion platform Depop in a deal worth $1.6 billion this year and musical instrumental Reverb for $275 million in 2019.

After its most recent acquisition of Depop, it has developed an impressive portfolio of platforms that fall in line with the artisanal value that Etsy customers treasure.

“Etsy has made it clear that there are intentions to expand the portfolio significantly,” Minkow explained.

“It was very strategic to start with retailers in adjacent spaces and markets, and I would guess that after a stride is hit with those two, there will be more vertical moves that bring Etsy closer to its sellers.”

READ MORE: Etsy sellers are leaving the app for Shopify

Etsy also benefitted massively from the pandemic and the increased number of side hustles that people were undertaking as a means of keeping a regular stream of income amid lockdowns and furlough schemes.

The platform saw the number of active sellers on its platform almost double as over two million people looked to selling goods online during the pandemic.

According to a study by Money.co.uk, the number of people that used Etsy’s platform to sell their handmade products rose from 2.69 million in 2019, pre pandemic, to 4.63 million in 2020 as the pandemic impacted people’s day jobs.

While Etsy has been a definite winner of the pandemic, it was a major success story beforehand.

Its development of a loyal customer base, an impressive portfolio of acquisitions and a unique offering has allowed it to differentiate itself from rivals like Ebay, Facebook Marketplace, Gumtree and Shpock and ultimately outgrow them.

 

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