Last fall Chad Dickerson stood in front of a small crowd of Etsy users and employees and made a big announcement. As he paced back in forth, the company’s CEO explained why they had gathered for an official town hall meeting: “Today we’re announcing you can hire whatever number of people you need,” Dickerson told the group.
With this announcement Dickerson was essentially telling Etsy sellers they could now hire outside staff and manufacturers to help produce their goods on a much larger scale. The audience remained quiet while Dickerson outlined some of the changes Etsy’s new policy would bring about, but for some Etsy sellers watching the town hall meeting online, this announcement signaled a fundamental change in the company’s DNA.
When Etsy was started in 2005, the company unbendingly positioned itself as a disciple of crafting and making. If handmade were a religion, Etsy would be a Texas mega-church. So to some, Dickerson’s announcement was sacrilege: If you could outsource your making process to factories, what makes Etsy any different than eBay or Walmart? For others though, this updated policy was a sigh of relief after years of feeling overwhelmed and uncertain of how they would keep up with the growing demand for their goods without outside help.
For Dickerson’s part, he hoped the new guidelines would clear up some longstanding confusion around what users could and couldn’t do. “We heard about a lot of sellers who were afraid to hire help or afraid to use any outside assistance because the policies weren’t clear,” he said. “We wanted to open that up to give sellers more freedom in their lives, not less.”
At its core though, the policy change is about more than simply clarifying the definition of handmade. By entering the world of manufacturing, Etsy has positioned itself to grow far beyond the modest cut and sew roots of its sellers. Etsy hopes that by doing so, they can impact the way we make and sell things.
“I think that our collective view of manufacturing is outdated,” Dickerson tells me one afternoon, sitting in his office at Etsy’s Brooklyn headquarters. Events like the Foxconn debacle and Bangladeshi garment factory fire have soured the public on manufacturing, and with good reason. But when Dickerson talks about manufacturing, he likes to steer the conversation towards Etsy users who have bootstrapped their own mini-factories, or craft-friendly communities like Manufacture NY, a 40,000 square-foot facility in Brooklyn that gives local designers space to manufacture their products.
As Dickerson says, the Etsy ethos may end with a transaction, but it actually begins with the design and manufacturing of a product. “We think Etsy can help change the face of manufacturing and make it more local and sustainable,” Dickerson says. “We want to change how things are made and produced in the world in a more human-centered way.” Dickerson admits that this all sounds like utopianism. But the meat of it lies in updated guidelines about what counts as an Etsy sell-able product. By widening that definition, the company hopes to reach a far larger swath of sellers and consumers.
Etsy's updated guidelines state that all Etsy users are eligible to use outside help, whether that be a clothing designer who outsources her sewing to a garment factory or a visual artist using Zazzle to print his work. The only stricture is that creative authorship has to rest with the seller.
>If you could outsource your making process to factories, what makes Etsy any different?
This isn’t a totally new idea; Since 2008, Etsy has allowed partial-production, a hazily defined phrase that allowed sellers to self-identify as “designers” rather than “makers." This meant sellers who wanted to make CNC-milled accessories didn’t necessarily have to own (or operate) a CNC machine; they simply needed to disclose that fact on their about page and prove they had an integral role in designing the product.
Back in the earlier days of Etsy, this policy wasn’t uniformly enforced, and it was only loosely understood by sellers. The members’ misunderstandings were only intensified by Etsy’s own confusion about what it considered to be handmade. Before the policy change, Etsy’s rules and guidelines outlining what counted as handmade were 14,000 words long; today they’re just over 900 words.
Etsy’s new policies are essentially a validation of its earlier partial-production rule. Boiled down, any sellers who want to hire a partner are required to fill out an application, outlining their personal role in the creation of a product and how they will be using outside manufacturing. Then Etsy's Marketplace Integrity, Trust & Safety team determines who is and isn’t granted the right to use outside help.
So far, more than 1,000 shops have applied for permission, with a third being granted, a third rejected and the other third still under consideration. “The main reasons we've turned down applications are that the applicant has not adequately demonstrated their role in the design and creation of their items, or they have not been able to (or willing to) take responsibility for how their items have been made,” explains Sara Cohen, Etsy’s director of communications.
Cohen says the Integrity team’s job extends beyond blindly stamping approval; more often than not, the team will dig deeper into requests in order to get a better understanding of a seller’s role in the design and her relationship with prospective manufacturing partners. But the company says it’s not responsible for vetting the actual manufacturers.
Instead, they're relying on sellers to make a judgment call on the type of manufactures they’ll employ, with hope that the Etsy ideology will prevail. That’s a big gamble for a company looking to build a better retail economy from the ground up, but Dickerson says so far more than 80 percent of sellers who have applied for outside manufacturing have opted to go with manufacturers in their own country. “When you build any sort of internet service in scale there will always been bad actors, people who don’t tell the truth or manipulate things,” he says. “But we trust our sellers to make the right decision.”
In 2013, Etsy raked in $1.35 billion in gross merchandise sales; this is after a $895 million year in 2012. The company makes its money through commissions, pocketing 3.5 percent of each item sold (the rest goes directly to the seller), charging a fee of 20 cents per listing, and a host of other revenue generators. Since 2005, the company has ballooned to more than 500 employees, one million sellers and 20 million items for sale and counting. All this to say Etsy is growing, and fast.
“We don’t grow, and we’re not successful unless the seller community is successful,” Dickerson explains. “So basically our success as a company is completely tied to the success of our sellers.” Problem was, some sellers were becoming too successful. As shops matured on the site, they began to outgrow the made-in-the-living room ethos that made the sellers sign up with Etsy in the first place.
Alexandra Ferguson is one of those sellers. Back in 2009 Ferguson was working in fashion and making felt applique pillows on the side. She started her Etsy shop with no real money—maybe “$1.60 in listing fees was my startup capital,” she laughs. But by the end of the year, Ferguson was so busy making pillows with sayings like "WTF" and "Kiss the Cook," she decided to quit her day job and work on her personal brand full-time. This past July she moved into a 4,000 square-foot space in Industry City, a warehouse neighborhood in Brooklyn’s Sunset Park that’s become a hub for small-scale makers who need to expand from their living room workshop arrangement.
These are the kind of sellers Etsy would love to see more of on the site, and the hope is that the new policies will encourage this sort of organic growth, not dampen it. Ferguson says right around the time of moving to Industry City, she was toying with the idea of leaving Etsy altogether. “We were flirting with graduation from Etsy,” she says. “The way the rules were set up before limited growth. As an entrepreneur, you want to grow and create a brand,” she continues. “But not so successful that now you can’t be on Etsy anymore. So it was like, ‘Yes, I want to grow, but not too much.’”
This was a recurring theme, says Dickerson, and a big part of why Etsy decided to revamp its policies. By expanding its guidelines, Etsy has allowed a seller like Ferguson to grow into a thriving small business—one that the company hopes will stick around for the foreseeable future. “What we’re really betting on are the sellers who helped Etsy grow over the years,” says Dickerson. “We want them to be able to continue to grow but in a way that’s in line with Etsy’s values and the world we want to create.”
>'The way the rules were set up before limited growth.'
Parallel to the new policy, are initiatives like Etsy Wholesale (currently in beta), which connects sellers to local boutiques and big name retailers like West Elm and Nordstrom and its Craft Entrepreneurship program, which teaches underserved communities the value of making. Initiatives like these are certainly good for business, but some Etsy sellers worry that allowing outside manufacturing has also opened up the floodgates for shops to sell more items at increasingly lower prices, ultimately shutting a lot of the smaller sellers who have to charge a premium for their handmade goods in order to stay afloat.
After the initial announcement, Etsy’s seller forums filled with people upset over the company’s new direction. “Manufacturing is manufacturing, a single artist is a single artist, that’s just how I look at it, says Tammy Allman, a painter who has been selling on Etsy since 2012. “And I think thats how a lot of sellers look at it."
Some, like Allman, threatened to leave altogether and move over to a smaller handmade site like Zibbet, which saw its users, revenue and number of items sold on the site double after the policy changes. (Allman still sells reprints of her watercolors on Etsy). Etsy says it’s seen no notable fluctuations in its sellers or items sold since the announcement, but Allman’s qualms bring up a good question: What is handmade anyway?
In the days following the policy changes, Dickerson was quoted describing some items as “handmade in spirit,” referring to computer-assisted design and 3-D printed goods. Utilizing new technology is one of the more benign thorns in Etsy’s side; handmade as a general idea is the tricky part.
The word’s definition is inherently blurry. Do you have to make your items with your actual hand? Can you use technology like computer-assisted designing and 3-D printing? Is handmade more of a mentality? “The thing that we’ve struggled with is, what is the definition of handmade in a world where the outside world is changing?” Dickerson says. “I think the challenge we have as we’ve gotten bigger is that there’s the emotional connection to the idea of handmade but then there’s the very practical part of enforcing a set of policies that define what handmade is.”
At this point, it’s unclear how Etsy’s policy changes will impact the company’s bottom line. Dickerson says they didn't do any business modeling prior to making the decision. “It’s something that would be very difficult to model,” he explains. “Frankly, there’s not a lot of data sources on that sort of thing.”
Instead Etsy is playing the long game, betting on the idea that an Etsy economy can grow alongside a new breed of seller. Of course, what it's really going to take is a shift in consumer mindset; weaning buyers off the instant gratification of cheap prices and showing them the rewards of buying something handmade, whatever that means in the future. There are hints that shift is happening, and that's something Etsy is willing to wait for. “This is like a 50 year plan,” Dickerson says. “We’re just getting started.”
