{"id":14001,"date":"2021-02-23T23:23:00","date_gmt":"2021-02-24T04:23:00","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/esty-a-one-stop-shop-to-shop-small-online\/"},"modified":"2021-02-23T23:23:00","modified_gmt":"2021-02-24T04:23:00","slug":"esty-a-one-stop-shop-to-shop-small-online","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/esty-a-one-stop-shop-to-shop-small-online\/","title":{"rendered":"Esty: A one stop shop to shop small online"},"content":{"rendered":"

Etsy connects sellers of handmade and customized products to seeking buyers. Etsy\u2019s unique positioning for crafty small businesses has allowed it to carve out a distinctive part of the sizable $100B1<\/sup> specialty goods e-commerce market. However, while this strategy gives Etsy staying power as a platform, it begs the question if they have pigeonholed themselves for scalability.<\/p>\n

After an IPO in April 20152<\/sup>, Etsy has seen steady growth, but notably due to the COVID-19 pandemic saw its stock price appreciate from $31.90 on March 30, 2020 to a high of $233.86 on February 2, 20213<\/sup>. As COVID-19 drew retail sales online, Etsy\u2019s revenue growth accelerated. Additionally, the trend to \u201cbuy small\u201d to support small businesses who were hit especially hard by the pandemic also contributed to Esty\u2019s recent showstopper success.<\/p>\n

Etsy is often the sole distribution channel for many of its sellers, so the value to sellers goes beyond just connections to customers, but is critical to their business operations, especially for payments processing and online retailing.<\/p>\n

Etsy\u2019s primary competitor is Shopify, a software designed to provide an off-the-shelf \u201conline store\u201d for customers4<\/sup>. Shopify provides the backbones of a seller\u2019s standalone website whereas Etsy aggregates many sellers into one platform. This provides value to sellers by acting as additional advertising \u2013 customers do not need to know they want a product from this specific seller, just that they want a product this seller offers and they know they can find that on Etsy. While this does create a competitive market place for sellers, the network effects are meaningful.<\/p>\n

Compared to Amazon Handmade, Etsy\u2019s other major competitor, Etsy provides value to sellers by charging significantly lower fees and imposing significantly fewer restrictions on their sellers. While Esty charges a $0.20 listing fee per item and a 5% commission fee, Amazon Handmade charges as $1 minimum on a 15% commission fee on top of a $39.99 monthly membership fee5<\/sup>. For many small businesses, these fees are cost prohibitive, but on top of that Amazon has more restrictions on the way sellers produce and the size of their business that sellers do not have to worry about on Etsy5<\/sup>.<\/p>\n

For buyers, Etsy is extremely reliable because it aggregates many different sellers into one seamless shopping platform. It acts as an intermediary to purchasing that makes customers feel safe shopping online. It also provides valuable \u00a0customer reviews, including pictures of customized items, to allow customers to make an informed shopping decision.<\/p>\n

The Esty platform, having carved out a niche segment, is very sustainable. Platform sustainability depends on network effects, network clustering, risks of disintermediation, and vulnerability of multi-homing6<\/sup>.<\/p>\n