For Etsy, the internet’s best-known marketplace for all things artisanal, the past week has served up a heaping portion of unpleasant corporate reality.
After revealing a loss of nearly half a million dollars in the first quarter of 2017, Etsy said it would replace longtime chair and CEO Chad Dickerson. The company cut 8 percent of its workforce and said it wouldn’t provide guidance on future earnings until August, when it hoped to have a better grip on its longer-term prospects.
It’s a far cry from two years ago, when Etsy went public and saw shares surge 88 percent. Less than a year later, those shares had lost more than half of their value and never climbed back. That’s in spite of—or perhaps partly because of—a host of company initiatives, from launching a craft-supplies marketplace to opening new headquarters and spending liberally on advertising campaigns. At least one activist investor hasn’t been pleased: Black-and-White Capital LP, which owns about 2 percent of Etsy, released an open letter last week urging the company to reignite growth.
The problem with such exhortations is that Etsy isn’t just up against the clomping foot of Big E-Commerce. It’s up against itself. Etsy doesn’t just support DIY handcrafters and indie makers. It has tried to embody those same values. Public companies have a duty to return value to shareholders, which typically takes the form of growing and scaling. But Etsy’s core identity often means taking things slow—the diametric opposite of the demands of mass consumption on which the likes of Amazon and eBay thrive. In other words, to succeed in a corporate context could mean sacrificing exactly what makes Etsy Etsy—the values that give the company its value.
The online world has seen massive changes since Etsy first came online a dozen years ago. While Facebook was still catering to college students, Etsy quickly rose to fame as the handmade alternative to Amazon. It thrived on a sense of values shared between the platform and the buyers and sellers it served.
“The company has long positioned itself as serving the community, and with that comes the benefits of having an incredibly loyal community,” says James Cakmak, an equities analyst at Monness Crespi Hardt & Co.
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Cracks started to show in that sense of common purpose in the fall of 2013, when Etsy sought to redefine “handmade.” After much confusion and handwringing around what Etsy’s makers could and couldn’t sell, Dickerson led a change in policy that allowed sellers to hire outside staff and manufacturers to help produce their goods on a larger scale. “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 at the time. “We wanted to open that up to give sellers more freedom in their lives, not less.”
The change divided the Etsy community even as sellers began to gain a new kind of freedom thanks to the rise of social media platforms—the freedom to strike out on their own. Ironically, that temptation is likely strongest for sellers who succeed the most on Etsy. A bevy of options now exist that didn’t during Etsy’s early days for setting up your own e-commerce website, collecting payments and marketing yourself on social media platforms.
Today, Etsy depends more than ever on the draw of its name for both buyers and sellers drawn by the promise of a one-stop, all-inclusive service. “Marketing yourself online is really hard. “You have to have an email newsletter, an Instagram presence, SEO knowledge,” says Abby Glassenberg, an Etsy seller since 2005 who has stayed loyal to the company throughout the years. “Etsy provides a way out of that.”
Still, that loyalty depends in large part on ensuring those buyers and sellers also continue to see Etsy as a platform that shares their values—a dedication to craft and independence that runs against the grain of mass consumerism. Etsy supporters and detractors both agree that Dickerson had his heart in the right place when it came to the platform. It’s not a company plagued with scandal. The problem? “You can’t scale heart,” says Grace Dobush, a former Etsy seller who has criticized the company in the past.
That tension—between doing good and doing well—has stayed with Etsy, and in a sense is built into its corporate structure. Etsy is a B Corporation, a commitment to its customers, workers, and investors that it will meet a high bar of social and environmental performance while it pursues profitablity. The company prides itself on having a sustainable office building, running on solar power, and keeping tabs on its carbon footprint. In an industry where the record on diversity is positively dreary, women comprise more than half the company, compared to a tech industry average of about 30 percent. (Only one-fifth of Etsy’s engineers are women, but that figure is still on the top end for the tech industry.) When Etsy went public in 2014, Dickerson asserted that Etsy would not have to choose between profitability and social responsibility. It’s a commitment that has fostered loyalty among those who worked for him:
Such idealism wasn’t enough for those tasked with looking out for the interests of Etsy’s shareholders, and now the pressure to grow has never been greater for Etsy. But the Etsy name still carries a great deal of weight as a symbol representing values that go beyond shareholder returns. Those values remain at the core of Etsy’s identity, a value Etsy’s new leaders would do well not to squander.