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Counterfeits Could Impact Etsy Growth, Says Analyst

Etsy is receiving a lot of attention today, but not in a good way. A new Wall Street report called into question the ability of the Etsy to deal with the problem of fakes and trademark infringement.

Counterfeits are a problem for all online marketplaces that invite sellers to list items for sale without a careful vetting process in place, and eBay and Amazon have faced their share of PR and legal challenges as a result.

Now that Etsy is a public company, Wall Street analysts are taking a closer look at the opportunities and the risks involved in owning the stock. According to multiple reports, a Wedbush analyst downgraded Etsy’s stock due to what it saw as a problem of fakes.

StreetInsider quoted the report which said that while it expects near-term growth, “our analysis and discussions with IP lawyers lead us to believe questionable seller practices may draw increased scrutiny, eventually limiting volume growth.”

And what has sellers buzzing is an estimate of the problem: “The firm’s research indicates as many as 2 million items on Etsy ( > 5% of all merchandise) may potentially be either counterfeit or constitute trademark or copyright infringement,” the publication said, and stating that the analyst report called Etsy a “go-to destination for counterfeits.”

Wedbush said that if brands begin to monitor Etsy for illegitimate sellers, it could “materially reduce” listing and commission fees, according to Forbes.

Bloomberg also covered the Wedbush report, but also noted reports from Goldman Sachs and Morgan Stanley – “both gave the firm a “neutral” rating with price targets of $20. Their reasoning was simply that a lot of the success is already priced in.”

Sellers have long complained about the problem of competing with counterfeit goods on eBay, Amazon, Etsy, and other marketplaces, and today they’re discussing the Wedbush report – and its negative impact on Etsy’s stock price – with great interest.

We asked Etsy about the report and have not heard back by press time.

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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.