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Etsy Goes B2B with Wholesale Initiative

How can you grow a marketplace past a certain size when a big part of your business requires sellers to hand-make each item they list for sale? The answer in Etsy’s case is to relax the rules (Phase One) and enter the Business-to-Business (B2B) arena (Phase 2).

In January, Etsy announced a new policy in which sellers listing in the handmade category could begin to use outside manufacturers and in-house assistants to help them make their products.

Now that sellers can ramp up production, they can achieve greater efficiencies and cost savings, allowing them to sell in bulk quantities at the lower prices required of wholesale selling.

On Tuesday, Etsy announced its wholesale platform would launch out of beta in August. The platform connects Etsy sellers with retailers who wish to order products at wholesale prices to resell in their own stores. Typically retailers are looking to buy in quantities greater than one or two, and since they need to mark up the price in order to make a profit, they’re looking for prices lower than Etsy.com retail prices.

Etsy spokesperson Dayna Isom told EcommerceBytes a new pricing structure for the Wholesale platform would take effect in late summer. “New vendors (sellers) will pay a one-time joining fee of $100 and Etsy will take a transaction fee of 3.5% for every completed purchase order in the wholesale marketplace.”

In addition to facilitating orders between sellers and independent boutiques, Etsy has partnered with large retailers such as Nordstrom, West Elm and Indigo. Etsy also sponsors events at tradeshows such as Capsule, American Craft Council and the National Stationery Show. Etsy will host a launch event in August catering to top lifestyle and home boutiques, will enter into new retail partnerships, and it will run marketing campaigns. “These buyer-facing initiatives will give Etsy sellers access to the country’s top boutiques, bringing more value, and more success to our growing independent designer community.”

When asked if sellers of vintage items were allowed to sell on the wholesale platform, Isom said, “There are no vintage sellers right now.” EcommerceBytes discussed the issue of vintage as part of Etsy Wholesale in this article from last year.

Sellers who list a handmade item for $100 on Etsy’s marketplace would have to offer a wholesale discount to give retailers a chance to mark it up for a profit. A 35% wholesale discount, for example, would drop the price to $65; add in Etsy’s 3.5% commission ($2.28 in this case), and the seller sees $62.73. It’s a far cry from the $100 they could get retail, but offers the potential of getting more orders and potentially boosting their brand, so determining costs becomes even more crucial when dealing with wholesale.

Etsy doesn’t explain if it requires wholesale sellers to accept the return of unsold products from retailers or if it is their prerogative to set such policies. The Etsy Wholesale User Agreement is not published on the public pages. Update 4/16/14: Etsy Wholesale follows the same policies as the traditional Etsy marketplace. Prices are determined by the sellers, and all terms are decided between the seller and the retailer.

Etsy restricts the Wholesale platform to retail business buyers and wholesale sellers, since it wouldn’t want regular consumer shoppers to see the lower wholesale prices. In fact, Isom said Etsy is currently restricting journalists from accessing the platform. She referred to Etsy Wholesale as a “juried marketplace” – sellers must go through an application process and become approved before participating in the program.

On its website, Etsy Wholesale explains that items listed on the private platform must meet one of the following criteria: “entirely made by the vendor; or wholly designed by the vendor, and produced in part or in full by a third-party.”

The full announcement is found on the Etsy blog, and information about applying for the program is available on this Etsy Wholesale page.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.