Etsy's Growth Strategy: Challenges, Opportunities, and Success Stories

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The clock ticked by, each second counting down the time CEO Josh Silverman had left. In one week he was to deliver his pitch to the board of directors on his innovative strategy and implementation plan for continuing Etsy’s growth. He scrolled through the Etsy website, admiring the unique handcrafted goods thousands of artists sold through his company’s platform. As he contemplated the situation at hand, he thought of Milk and Honey Luxuries, a recent Etsy success story. 
Founder Sarah Parker started Mile and Honey Luxuries in 2011 to sell customized handmade silverware, coffee mugs, and cutting boards. It was originally a side project while Parker completed her undergraduate degree towards becoming an anesthesiologist, but Milk and Honey Luxuries quickly 
became so successful that she and her husband continued with the business full-time. Since then, Milk and Honey Luxuries had been featured nationwide in Nordstrom, People Magazine, and on the Ellen DeGeneres Show. With more than 81,000 sales since 2011, Milk and Honey Luxuries was nothing short of a major success. With this success story in mind, Silverman’s mind wandered to the problems at hand and the situation Etsy was currently facing. 

Etsy was one of the world’s leading global marketplaces for handmade and manufactured goods. It was known as the champion for entrepreneurs, operating as a peer-to-peer (P2P) online platform for entrepreneurs, artists, and artisans to sell goods to a vast audience of nearly 40 million active buyers. Sellers could add an item for just 20 cents, and buyers could find an item with a click of the search button. Etsy prided itself on connecting sellers and buyers for all occasions (see Exhibit 1). As a relatively young company, founded in 2005, Etsy had successfully grown at a rapid pace. However, with quick success came challenges. 
Within its niche marketplace of P2P platforms for handmade items, Etsy had experienced much success due to its forward-thinking abilities and often being a first or early mover. For example, Etsy was one of the first platforms of its kind to launch back in 2005. Due to the few competitors at the time, Etsy was able to gain a large customer base very quickly. Relating to this, Etsy invested early in improving its mobile capabilities, meaning by the time the majority of the population was making purchases on their phones, Etsy was already one of the industry leaders in this category. As an early mover, Etsy saw its revenue increase year-over-year (see Exhibit 2).  
However, given the success of Etsy and the low barriers to entry, the industry was becoming saturated with competition. A quick Google search revealed more than twenty viable competitors. A few of the larger sites included Shopify, Big Cartel, eBay, and Amazon Handmade. These competitors often competed with Etsy by catering to one specific niche of the marketplace instead of to all types of artisans and artists as Etsy did.i Etsy was experiencing in the P2P e-commerce industry what Blue Apron and Ipsy had experienced in the subscription box industry. While they previously had the largest shares of the industry due to being early movers, their success and the ease of entry caused a plethora of competitors to enter leading to an over-crowded marketplace.ii  
Etsy had reached a key point in its strategy development. The company’s financials had never looked better and were expected to continue positive growth both domestically and internationally. In 2018, Etsy earned its largest gross merchandise sales to date of $3.93 billion, contributed by its 39.4 million active buyers and 2.1 million active sellers. However, Etsy had always been a differentiator and an early mover, and it was poised to look for the “next big thing.”iii Silverman contemplated this and how he could develop a strategy that addressed all of the issues at hand. He thought of Etsy’s history and pondered if anything in Etsy’s past could help him with the problem at hand.  

Etsy’s humble beginnings started in 2005 when Rob Kalin, Chris Maguire, and Haim Schoppik cofounded Etsy in a Brooklyn apartment. They noted the staying power of the internet and the growing presence of e-commerce and thus established their goal: create an online platform for artists and craftsmen to gain exposure and sell their goods. The name Etsy came from the Italian word, “etsi,” which people often said to mean “oh, yes.” Kalin stated, "I wanted a nonsense word because I wanted to build the brand from scratch.”iv By 2007, Etsy was well on its way to becoming the powerhouse it is known as today. It had recruited nearly 450,000 registered sellers garnering $26 million in sales. By its second birthday, Etsy had achieved its one-millionth sale and raised more than $3 million in venture funding. However, the dream trio of cofounders Kalin, Maguire, and Schoppik was short-lived.