Is The Etsy Strike Worth It?

Your favorite Etsy sellers may be on strike this week. Some sellers may limit their strike to today only, Monday, April 11, while others will try to stay on strike for the entire week.

Maybe this is the first time you’ve heard about the Etsy Strike, so let’s dig into this a bit.

During Etsy’s last earnings report, the company announced it would raise seller fees 30% from 5% to 6.5%.

This resulted in a swift backlash by some sellers on social media that the company is getting too greedy and an Etsy Strike action was born out of this anger to start today, on the day the new fee would go into effect.

In a petition announcing the Etsy Strike, more than 45,000 signatures have been collected to date demanding Etsy work with sellers and cancel this seller fee increase and fix a number of other issues they feel Etsy needs to change on the platform.

What are some of the other issues?

Sellers have complained that most of them cannot opt out of a marketing program Etsy introduced in 2020 called Offsite Ads.

With this program, Etsy uses sellers’ listings to advertise on third-party platforms, such as Google and Facebook. When a sale is made through one of those ads, the company charges a much higher transaction fee of 12% or 15% depending on seller size.

The company claims that the majority of sales do not come from these ads. So, Etsy says the impact across all listings by each seller should be minimal as they are not charged for the advertising unless the item sells directly from the placement.

However, sellers feel they should have the option to leave the program if they do not want the added exposure as for some sellers these additional advertising fees are prohibitively expensive.

Small sellers do get that option to opt out of Offside Ads if they have annual sales of less than $10,000, but sellers above that threshold must participate in the program.

For years, many sellers have pointed out listings that clearly are not the unique handmade or vintage items the marketplace was supposed to be limited to, but thinly veiled mass-produced products.

Etsy sellers believe the company intentionally ignores this problem since Etsy receives a fee from every sale, and they believe some of the mass-produced items contribute significantly to the company’s revenues.

Customer support has also been an issue for some time. Sellers have complained that Etsy seems to mostly ignore their requests or is slow in responding to inquiries.

Etsy did acknowledge the company needs to improve this area and announced plans to invest $50 million in updating its support systems.

Another issue that some sellers complain about is Etsy favoring “Star Sellers,” in searches. These sellers earn a badge that highlights them because they are able to offer free shipping, fast customer service, and consistently receive 5-star ratings from buyers which can be difficult to achieve or maintain as solopreneur creators.

Sellers that are participating in this strike believe the company has strayed from its original goals of being a unique marketplace for creative individuals and artisans to one that places profits before principles.

Often, they blame that since the company went public in 2015 and installed Josh Silverman as CEO in 2017, Etsy no longer represents the values or interests of its creator sellers.

Etsy – Between a Rock and a Hard Place

There certainly is a lot of truth in that under Silverman’s reign Etsy has changed a lot. The company improved its technology to run the marketplace, developed more seller and buyer features, expanded internationally and also engaged in more brand awareness marketing.

In addition to upgrading the Etsy marketplace exposure and user experience, the company also had to manage through a rapid rise in online commerce in early 2020 with the Covid pandemic shifting buying behavior to favor online shopping.

Many sellers benefited from the pandemic’s early months as they were able to offer alternative solutions to consumer demands such as cloth masks when paper masks were in short supply.

But eCommerce has changed a lot as well, especially over the last decade. Much like eBay sellers complain about the marketplace pushing for free and fast shipping and liberal return policies, the same issues are creeping up on Etsy.

Amazon keeps upping the ante on this front, and most buyers don’t care. Unfortunately, that is a reality that many eBay sellers still struggle with as well as they have been pushed to be more competitive with Amazon.

Etsy is in a similar boat now. As it keeps growing the buyer base, many of its new buyers want the same buying experience on Etsy as they are accustomed to on Amazon.

Without the benefits of scale, it’s hard for small sellers to compete unless they can find ways to compete as close as possible to that level. Yet, despite that difficulty, Etsy has managed to grow its user base significantly.

At the end of 2021, Etsy reported 5.3 million active sellers and 96 million active buyers. For comparison, eBay reported 17 million active sellers and 147 million active buyers. Etsy is getting there!

The big difference between the two marketplaces is that over the past year, eBay’s user numbers have been dropping badly, while Etsy’s have been growing significantly.

Etsy is doing something right to bring new buyers and sellers to the platform and that is despite the marketplace still being much smaller when looking at the value of merchandise sold.

In 2021, Etsy reported $12.2 billion* of GMS (equivalent to GMV or General Merchandise Value) while eBay’s GMV hit $87 billion last year.

* Etsy.com only. Excludes Reverb, Depop, and Elo7 (they represent about an additional $1.3b in GMS

Obviously, with the growth in GMS by Etsy, its profits have grown as well. The company has taken some of that money and acquired smaller marketplaces like Reverb, Depop, and Elo7.

It is Etsy’s current intention to keep these strategically similar marketplaces independent and not integrate them into the Etsy.com core marketplace.

But Etsy.com has also grown and the company has invested to expand the brand and marketplace in important international markets like the UK and Germany. This opens the door to more cross-border trade for sellers globally and makes more unique products available across the globe.

There is no doubt that Etsy has grown up a lot under Silverman, and that growth has brought more opportunities for online sales of handmade products while also bringing some issues about fake goods and mass merchandise that may need to be addressed better by the company.

Are Seller Grievances Valid?

Long-time sellers are looking back at the early years, especially the pre-IPO years, when the marketplace was better aligned with their interests. Some may even see that as the “Golden Age” of Etsy, but was that business model sustainable?

As already mentioned, eCommerce has changed and buyer expectations have changed as well. What worked 10 years ago, may not be successful today.

And while many buyers may understand that Etsy is made up of millions of individual sellers, the typical buyer mentality today is that all sellers get lumped into one pot. If a buyer has a “bad” experience on Etsy with one seller, it impacts all sellers.

It’s not entirely clear if buyers are that upset that Etsy has more mass-produced items on the marketplace as otherwise, they wouldn’t be coming back.

The overall experience may matter more to buyers on Etsy than if the marketplace is 100% true to its unique products roots. Etsy may keep looking the other way a little as long as consumers keep coming back.

All big marketplaces emphasize “Amazon-like” service levels from shipping to customer support because that is what consumers want today and they expect sellers to provide that.

Certainly, some buyers understand that they are dealing with a solopreneur or artisan that only has so much time to manage an online store. But for a marketplace, they have to look at the bigger picture, meeting the expectations of the typical shopper, not the few that may understand.

It’s hard to imagine Etsy pulling back from its policies highlighting sellers that can meet a typical shopper’s expectation.

Brand marketing is not cheap either.

Etsy has been promoting brand awareness which has helped the company maintain its edge over Amazon Handmade as THE first place to look for unique products. Brand marketing is inherently expensive, and while some sellers may not feel this has a big value, again, overall for the marketplace this is important.

Is the way Etsy’s Offsite Ads program works fair? If too many sellers opted out, then the cost of placing those ads could become too expensive. So, there are two options, the performance-based system now or raise everyone’s fee again to cover that program.

Maybe the latter is the better option as this is a way for Etsy to highlight unique products through targeted keywords on other platforms.

Etsy has no excuse for its poor customer service record of late. That is unacceptable and needs to be fixed.

At the same time, sellers also need to realize that marketplaces will generally favor buyers in disputes as customer-friendly returns and dispute resolutions bring back buyers to the platform. Also, buyers always have the power of chargebacks on credit cards, so that becomes another consideration.

Has Etsy become more corporate and profit-driven as of late? Yes, that is definitely the case and the company is trying to build a portfolio of similar marketplace businesses to support the overall corporate goals.

That may seem like a strange concept for a small business owner, but for a company of the size of Etsy, it’s a good business practice to add strategically aligned businesses (profit centers) through expansion or acquisition to diversify the revenue stream.

Much of Etsy’s financial success has been of late as the company’s previous financial fortunes were gloomy.

Before going public, in its SEC S-1 filing, the company said “We have a history of operating losses and we may not achieve or maintain profitability in the future.”

The company also disclosed, “we had an accumulated deficit of $32.4 million” at the end of 2014 and incurred losses in 2012, 2013, and 2014. It wasn’t until 2017 that Etsy showed a profit, apparently the first one in its history!

Etsy needed a turn-around and Josh Silverman, the company’s CEO since 2017 has delivered that. It also secured Etsy as a profitable enterprise to continue to deliver a marketplace that gives sellers a place to sell unique products.

It’s not perfect, but the cost of going alone, using an eCommerce platform like Shopify or BigCommerce that would provide the freedom to set your own policies is not cheap.

It may only cost $30 a month to have a small store on a platform like that. But it will cost hundreds to thousands of dollars per month to drive traffic (shoppers) from Google or Facebook to a store, plus the credit card transaction fee on every sale.

And if a customer is not happy and doesn’t get the resolution with the store owner, they will just file a chargeback and the bank likely will do the same as most marketplaces, rule in the favor of the consumer.

The grass isn’t always greener on the other side and in most cases, it would be more expensive for sellers to go this independent route. Etsy knows that!

As far as the fee increase is concerned that was the impetus for this strike, Etsy feels confident from the 2018 fee increase that seller churn will be minimal.

The company also said the additional income will help it further invest in the platform and expand its marketing strategy to drive more sales to sellers.

Etsy Strike

Striking sellers hope their actions will bring awareness to their grievances and the Etsy Strike has gained some publicity in the financial world with features in Fortune and the Wall Street Journal.

But out of 5.3 million active sellers, as of today, there are less than 1,300 active users on the two social media channels (Reddit and Discord) strike organizers use to discuss the action.

That seems like a very small number and is that enough to make a difference?

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