In late 2015, experts declared Etsy dead as Amazon launched Handmade, it\u2019s peer-to-peer marketplace for handmade products. It seemed to be the natural prediction \u2013 Amazon already had a massive network of buyers which made it very attractive for small businesses to join. These small businesses did not have enough time to manage their presence on multiple platforms, so they would likely not multihome on Etsy, which could lead to the long-time incumbent\u2019s demise. Additionally, the artisans and craftworkers who had originally made Etsy successful were increasingly being crowded out on the platform by larger sellers with cheaper, more mass-produced items. These artisans found a breath of fresh air in Handmade\u2019s stricter policies – items needed to be actually handmade as opposed to outsourced to industrial producers. And yet with all these factors in place to favor explosive growth, Handmade\u2019s performance has been underwhelming at best. Although the company is rather secretive about the numbers, as of early 2017 (a year into Handmade\u2019s launch), Amazon marketplace had above 2 million third-party sellers and 310 million active buyers, whereas Handmade had only 500,000 items listed for sale. For comparison, Etsy had 45 million items listed, around 2 million active sellers, 31 million active buyers, and a maturing presence in international markets. Why did Amazon marketplace\u2019s network effects not translate over into Handmade?<\/p>\n
Which side initiates the network effects? Buyers for marketplace, Sellers for Handmade —<\/em><\/strong><\/p>\n Amazon marketplace builds and maintains its network mainly through drawing in customers by offering cheaper, faster products. Medium to large business sellers can best cater to this demand pattern and so sell through the marketplace platform. However, the dynamics for artisan crafts business are quite different. Customers buy such products once in a while for a special occasion, and are not necessarily looking for faster, cheaper products \u2013 rather they have a higher willingness to pay and are more likely to be planning in advance. Thus, Amazon marketplace\u2019s core value propositions become much weaker in the case of Handmade. The best place to initiate the network, therefore, is through drawing sellers.<\/p>\n Amazon\u2019s model of doing business clashes directly with what sellers value<\/em><\/strong><\/p>\n Sellers essentially want two main things: visibility and money. Handmade\u2019s business model charges sellers $40\/month and a 15% commission per sale, which many sellers find outrageous compared to the 20 cents\/item listing fee and 3.5% commission charged by Etsy. Handmade\u2019s fee is deemed even more disproportionate given that sellers feel that they are not getting the visibility and customer base they would have gotten at Etsy. Those with experience on the platform mentioned that they felt rather invisible and it that it was hard for them to create their desired brand since the Handmade page is nested within the much larger Amazon website. Amazon also does not distinguish Handmade products in the search results, making it harder for customers to identify these craft products. On top of that, sellers complain that true to its nature, Amazon pushes them for fast delivery, which is very difficult for custom-made orders. And finally, whether or not an item is delivered quickly, if the customer complains, Amazon\u2019s customer-obsessed nature means it almost always sides with customers, which can prove very expensive to sellers of custom-made products. All in all, it seems that the value propositions that Amazon has worked so hard to build and that work so well for Marketplace are difficult to reconcile with the dynamics of selling handmade artisanal products.<\/p>\n Final Thoughts<\/em><\/strong><\/p>\n In the world of winner-takes-all scenarios, it\u2019s easy to jump to the conclusion that companies with the largest existing networks will likely kill other competition. Handmade is a great example of when network effects do not translate to different products on the same platform. Thus, even with the much larger network of buyers and sellers, a heavily integrated set of e-commerce platforms and deeper pockets, Amazon can only benefit with an integrated strategy and brand management between its platforms. Until then, it looks like Etsy will rule.<\/p>\n","protected":false},"excerpt":{"rendered":" In late 2015, experts declared Etsy dead as Amazon launched Handmade, it\u2019s peer-to-peer marketplace for handmade products. And yet with all the factors in place to favor explosive growth, Handmade\u2019s performance has been underwhelming at best. Where did Amazon miss the target?<\/p>\n","protected":false},"author":2524,"featured_media":6655,"comment_status":"open","ping_status":"closed","template":"","categories":[663,1200,1243,21,241,2001],"class_list":["post-6654","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-e-commerce","category-etsy","category-handmade","category-network-effects","category-platforms","category-sellers","hck-taxonomy-organization-amazon","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/growing-businesses-in-the-age-of-platforms-2018\/","yoast_head":"\n