Etsy Opens To Manufacturing

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Taking another step away from being a marketplace known only for “handcrafted” goods to instead focus more broadly on enabling smaller sellers to scale their businesses, online marketplace Etsy announced today it’s launching a new program called Etsy Manufacturing. The service will connect sellers with Etsy-approved manufacturers to help them source production assistance as needed.

The move comes two years after Etsy revised its policies to allow sellers to work with manufacturers, provided they were transparent about the process with customers, and continued to maintain their authorship over their own products and designs.

At the time of that initial decision, the company explained that its prior policies had been confusing to sellers, some of whom thought any outside help would see them kicked off the site. Plus, narrowly limiting product listings to “handmade” items only didn’t fully encompass some of the production methods sellers used to create their items – like raising bees for the wax for their handmade candles or 3D printing jewelry – processes that often saw sellers working with outside companies.

Instead of trying to enforce rules around what constitutes “handmade,” Etsy redefined the term to mean “authorship, responsibility and transparency,” and invited sellers looking for production assistance to apply for the right to work with outside manufacturers.

If approved, the sellers had to list the information about their manufacturer on their shop’s About page, the company said.

Since then, Etsy says it has approved applications from around 5,000 sellers, creating 7,853 partnerships between sellers and manufacturers in the process. 85 percent of those relationships are within the same country, the company also notes, in response to some complaints about Etsy sellers using low-cost overseas manufacturing in order to mass-produce items.

But enabling sellers to scale their businesses wasn’t a decision that Etsy made only because it helped sellers sustainably grow to meet demand for their unique products – it was also a decision that was meant to help retain the site’s larger, more successful sellers from leaving Etsy for greener (literally, when you compare costs) pastures – like running their own online storefront via Shopify, for example.

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Now it seems that Etsy wants to make the process of manufacturing items even easier for its seller base. And by doing so, it could keep more of its sellers on the site going forward, as well.

The company says that it heard for those sellers who wanted to work with manufacturers that it was sometimes challenging to find the right partners. This is what Etsy Manufacturing is aiming to address. The idea is to create a marketplace where sellers can connect with small-scale manufacturers who have been vetted in advance by the company, after meeting select criteria. For example, manufacturers must also be transparent, detail to what extent they allow subcontracting, and specify their size. They must also agree to “a series of commitments on transparency, safe and just workplaces, and customer service,” explains Etsy.

For Etsy, this expansion also has the potential to increase the marketplace’s revenue. Currently, Etsy charges $0.20 to list an item, and a 3.5 percent transaction fee when the item sales. Obviously, allowing sellers to make more items to sell means Etsy will make more, too. And using the new marketplace won’t always be a free service, either, which will help the company financially.

Etsy has been struggling since its IPO this April, only beating expectations by a slim margin in Q2, citing issues with currency exchange rates as partly to blame. In addition, the company said that its revenue grow was going to slow while marketing spend would increase in the third quarter, causes shares to tumble following its Q2 earnings. The company’s stock now trades at around $14 per share, down from $30 at its IPO.

The new Manufacturing marketplace will launch into beta in late 2015, and will allow designers and manufacturers to transact in 2016. There will be no cost to find a manufacturer during the beta trials, but transactions via the site will have associated fees that will be announced at a later date.