|Thu Dec 30 2010 09:51:56|
What Can Etsy Do to Avoid eBay's Missteps?
By: Ina Steiner
A number of readers forwarded me a New York Times article pointing out some of eBay's problems - to paraphrase, eBay has gone from resembling an overflowing garage sale to being something closer to Wal-Mart, and has alienated many of the smaller sellers that were once its lifeblood.
The article was actually about Etsy, and it had me wondering, not for the first time, whether Etsy will be able to avoid some of the mistakes eBay has made over the years. In the article, Etsy founder Rob Kalin says his company's focus on community and independent sellers will help it avoid eBay's missteps, and said eBay "looked to maximize profitability over community."
I can't help being skeptical that a company funded by Venture Capitalists to the tune of $52 million can be as altruistic as that. Etsy has seen GMV growth rates drop from triple digits in 2009 to double digits in 2010, despite a push for international expansion, and while Kalin's investors may be patient, they may not be so casual about profitability.
Over the summer, Kalin gave a somewhat contradictory answer to a question about taking Etsy public. When asked if Etsy would do an IPO (initial public offering) next year, Kalin talked about the importance of community and expressed distaste for Wall Street:
"To me, I like the idea of community ownership. I think that the company is part of the larger community - 5 million members. The only reason an IPO interests me at all is to be community owners. I have no interest in having people on Wall Street determining the value of my company."
But then he went on to discuss the timing of a IPO. "There is no way we are ready for an IPO next year. There's a lot more to do before I’m comfortable with that. Maybe three to four years. It's not something we have complete control over, either; the climate - it needs to be the right climate. We don't need to do it to raise money."
Early eBay users have heard that before. They have said they were promised shares in eBay, but were left out of eBay's IPO. And once eBay became a publicly traded company, maximizing shareholder value was placed above "community" needs.
eBay's explosive growth was aided by category expansion, going far beyond computers/electronics and toys/collectibles and into verticals such as Business & Industrial and Automotive. Etsy has locked itself into three categories: handmade, vintage and supplies. It has yet to demonstrate where sustained growth will come from.
The New York Times article quotes author Rachel Botsman, "Some people are more interested in buying an item or a good with a story behind it. There's a backlash against anonymous mass-produced goods, and eBay feels as though it's been taken over by mass-produced goods."
Yet Etsy itself is facing complaints by users that it is allowing mass-produced goods onto its site, and some report the company is not doing a good job of enforcing the policy that everything in the handmade category be made by the seller.
Readers who know eBay's history may be able to offer advice for Etsy, having lived through similar growing pains. What is Etsy doing right and wrong, and what can they do to avoid eBay's missteps?