A recent Etsy fee hike of 30% has led to a sellers’ strike, and the current headline is a microcosm of the issues that the e-commerce retail platform has faced in growing as a public company beyond its DIY creative entrepreneurial roots.
Etsy was among the start-ups to make the inaugural CNBC Disruptor 50 list in 2013 and was notable for being a B Corp. (a status since dropped) and for being a multi-billion-dollar IPO based in Brooklyn, New York.
Co-founder Chris Maguire tells CNBC of the company today, “It’s kind of more geared towards, ‘We’re selling stuff and we’re selling as much as possible, and that should be the driving goal.’ But it’s, you know, there’s not quite as much playfulness.”
Executives of Etsy applaud as they open the Nasdaq MarketSite ahead of Etsy’s initial public offering in New York, April 16, 2015.
Michael Nagle | Bloomberg | Getty Images
In this weekly series, CNBC takes a look at companies that made the inaugural Disruptor 50 list, 10 years later.
In 2005, Chris Maguire, Jared Tarbell, Rob Kalin and Haim Schoppik were sick of building websites for clients and wanted to build something of their own. Eventually they made a website for an online community called GetCrafty.com.
“It was mostly women who were crafting and sharing their tips and how to make things. And we thought it was really fun” says Chris Maguire, co-founder of Etsy and current shareholder. “They kept saying on the [GetCrafty] forums at the time, ‘I wish there was a place to sell things that I made, like eBay’s too expensive and unwieldy. And there’s not really a whole lot out there that, you know, caters to just us,'” he recalls.
That was what led Maguire and his co-founders to say, “We could build that.”
Etsy has grown from that idea into one of the largest e-commerce companies in the world. Approximately 95 million people used Etsy in 2021 to buy or sell items, according to the company’s 2021 annual investor presentation. Maguire said it is surreal how common the name Etsy has become, and is not something he and other founders ever expected.
But as Etsy has grown well beyond its original goal – to create a sustainable place for people to buy and sell the things they make – it has become more difficult to maintain its do–it-yourself ethos. Maguire says being emotionally involved with the crafting community made the founders want to build something that would suit their needs, and today, while Etsy still makes sure that there’s a buyer and seller connection that goes beyond a transaction, he has noticed that the company has become more like a machine for making sales.
“They had this playful aesthetic. And I don’t see that as much on Etsy now,” Maguire said. “It’s kind of more geared towards, ‘We’re selling stuff and we’re selling as much as possible, and that should be the driving goal.’ But it’s, you know, there’s not quite as much playfulness.”
Nowhere has this tension become more apparent than during the current furor among sellers after Etsy announced plans to increase its seller fees by 30%, from a total of 5% to 6.5% as of April 11.
The company’s management – which would only respond to requests for comment via email – has stressed the access it provides to over 95 million shoppers and says improvements it makes directly translate into more sales for its more than 5 million sellers.
Sellers remain unconvinced, and in the past week, in a sign of how some feel about the company, they eyed forming a union and went on selling strike. An online petition that was created and outlined sellers demands has garnered over 80,000 signatures.
“We’re kind of navigating uncharted territory,” Kristi Cassidy, the strike’s lead organizer, told CNBC.
Nicole Lewis, who has sold handmade crayons on Etsy for 15 years, told CNBC she doesn’t blame Etsy for hiking transaction fees. “I think a lot of the OG sellers that are upset with Etsy still see it as the Etsy of 2004, 2005, 2006,” Lewis said. “It’s not that anymore and it can’t be.”
Indeed, the e-commerce industry has changed in the decade since Etsy first appeared on CNBC’s inaugural Disruptor 50 list.
Maguire, who now owns and operates the Tubby Robot Ice Cream Factory in Philadelphia, a homemade ice cream shop and arcade, says that unlike ten to fifteen years ago, the industry is controlled by a few major players.
“When I was first getting interested in the internet, I thought it was amazing that anyone could make their own website, put up their own HTML and have their own domain, and they had full control over it. That’s amazing,” Maguire said. “And that’s something I think that we’ve lost over the past decade. Some of that individuality.”
At the time of Etsy’s IPO in 2015, which priced shares at $16, a $1.8 billion valuation, it had a little over one million sellers.
“The success of our business model is based on the success of our sellers,” then-Etsy CEO Chad Dickerson told the New York Times. “That means we don’t have to make a choice between people and profit.”
But that has become an increasingly harder line to walk as a public company with Wall Street on watch. The changes at Etsy go much deeper than the latest transaction fee increases.
In 2017, Dickerson, who had led the company since 2011, was ousted and board member Josh Silverman was brought in as CEO at time when private equity firms and hedge funds were amassing shares. The fears of a potential takeover were matched by fears about the company’s mission being lost.
A New York Times feature from 2017 noted that even as financials improved, in other respects, “Etsy is barely recognizable.”
Though Dickerson came to Etsy from Silicon Valley, the company was and remains based in Brooklyn, and its multi-billion-dollar IPO was a milestone for the New York City start-up world. It was also among the most notable start-ups and CNBC Disruptor 50 companies to go public as certified B Corp. (others include Warby Parker, Lemonade Insurance and Coursera), a rigorous certification process to prove a company is aligned with social goals, but dropped that status after Silverman took the reins of the company.
Etsy has also made a string of acquisitions under Silverman which have grown geographic markets and in size. His first deal in 2018 was a $35 acquisition of German retailer DaWanda. Last year, Etsy spent $1.6 billion to acquire resale retailer DePop.
“Depop might be for Etsy what Venmo was for PayPal: The choice of the next generation,” Silverman said in an interview with CNBC’s Jim Cramer.
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By some financial metrics, Etsy has shown impressive growth, especially during the pandemic, with sales growth topping 100% in 2020.
And it has continued to post strong numbers, with its most recent quarterly sales total coming in over $4 billion and its revenue topping $700 million. But it did forecast a slowdown in sales for the first quarter and the heady days of its pandemic-driven stock boom have ended. Etsy, which saw its market capitalization reach over $300 per share last year, has since seen two-thirds of that value erased as investors have run from the pandemic’s biggest winners.
Maguire holds out hope that while it’s hard to compete with the pricing and the convenience of the monolithic operators, at some point people will get tired of what e-commerce has become.
In a CNBC interview on IPO day in 2015, Dickerson, said, “We really think of Etsy as a marketplace for creative entrepreneurs to make, buy and sell unique goods. … We are only in our tenth year as a company and we want to operate for decades and decades.”
Lewis, the Etsy seller who isn’t on strike, seems doubtful there is any going back for e-commerce. Among her reasons for not joining the sellers’ strike, she told CNBC: “We compete with Amazon.”
—CNBC’s Annie Palmer contributed to this report.
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