The Degradation of Handmade: Etsy’s Fight with Itself

29 Oct The Degradation of Handmade: Etsy’s Fight with Itself

Etsy’s reputation as the darling of handmade is starting to crumble. It’s a strange place to be for Etsy; throughout its history, sellers and customers alike have been near-giddy about the company and the site. Etsy filled an important void in the online market – to celebrate handmade and enable personal interactions with sellers.

Etsy has skyrocketed in popularity in the last two years, tripling its user base. Ironically, this surge of interest has left the company on unstable ground in both reputation and seller happiness. Etsy is piling on fresh employees, trying desperately to scale and meet the increased demand.

The bigger struggle is for Etsy to reconcile two seemingly incompatible goals – keeping the handmade marketplace that put the company on the map thriving, while allowing sellers to expand their businesses. Etsy is struggling with its own success; in parallel, its star students are struggling to find a fit in the classroom.

Growing pains

Since taking over the reins as CEO in 2011, Chad Dickerson has focused on growth at Etsy. By most objective measures, the mission has been a success. Etsy jumped from 10 million registered users in 2011 to 30 million today. Etsy is poised this year to cross one million shops on the site and $1 billion in annual transactions – double the number from two years ago.

The explosive growth has left Etsy struggling to scale up its staff to meet the demand. Etsy’s Community Operations team, which handles customer support and forum moderation, grew from just 11 people to 30 earlier this year. The swelling of the ranks was much-needed, but it’s barely kept the support team’s head above water.

I spoke with established sellers who reported Etsy support taking days – if not weeks – to respond. Long support times are frustrating for casual questions and disastrous for urgent requests. The situation came to a head recently when a seller’s account was hijacked¹ and Etsy support didn’t respond for 12 hours; she posted desperately in the forums as the hijacker took control of her payments and demanded a ransom to release the account.

Another seller I talked to fell prey to an email phishing scam, logging into a malicious website designed to look like Etsy. She quickly realized her mistake and changed her password. The scammers hammered her account trying to log in with the stolen credentials; thanks to her quick action, they weren’t successful – but the attack locked her account for suspicious activity. It took over five days and several run-arounds from Etsy support to regain access to her account.

[quote]It appears that Etsy is woefully understaffed with regards to customer service and support personnel.[/quote]

In the face of increasing discontent, the Customer Support team recently posted a self-admonishing update² with a slight reprieve – the ability to mark a support request urgent. Its little comfort to the sellers already burned by lackluster support, but offers some hope for the future. The team also announced a hiring spree in Etsy’s Brooklyn and Dublin offices – the latter allowing them to expand the previously deficient banker’s hours for support. There are even murmurs that some form of live support, a long requested feature, could be coming in 2014³.

The rise of resellers

Customer Support isn’t the only team barely staying afloat amidst the barrage of new users; Etsy’s Marketplace Integrity and Trust & Safety (MITS) team is on the verge of losing control. The team, responsible for making sure shops on the site meet policies, has been increasingly under fire for the elephant in the room: resellers.

Resellers buy an item and sell it unchanged as if it were a handmade creation. Etsy was once too small and specialized to attract much attention, but the site’s rapid growth has led to a deluge of resellers looking to cash in on the popularity. Illegitimate sellers hocking mass-produced items from overseas are eager to exploit the higher price point buyers expect for handmade goods.

The MITS team reports in on Etsy’s blog at least once a year; if the posts are taken at face value, it paints a rosy picture. The team reviews every reported shop, regularly beefs up the SCRAM software system used to automatically detect rogue shops, and keeps in careful tune with the Etsy community.

The reality is much bleaker. As much as the MITS team may have improved, they seem to be fighting a losing battle. It’s depressingly easy to find hordes of resellers on the site within minutes. Take your pick of shops to order a silver bird necklace for pennies on the dollar. Shopping for a friendship bracelet offers some affordable choices at 20c each. These are easy to spot resellers that price their items absurdly low, often don’t take their own pictures and list 900 of an item available in their shop. Smarter resellers that price items appropriately are harder to pin down.

Resellers aren’t necessarily a problem across the board – sellers I spoke with pointed to some categories being worse than others. Jewelry, Etsy’s biggest category, is suffering the most – a jewelry seller told me the category “has become saturated with carbon copy jewelry.”

Etsy relies partially on users to report shops violating the site’s policies. The MITS team says reviews of reported shops are “usually complete” within three weeks⁴ – an alarming amount of time for a reseller to dig into your business to begin with. The experienced sellers I spoke with have given up reporting shops; shops with clear policy violations stay open for months, if not indefinitely – clocking in thousands of sales and dominating search results. Etsy admits that only a minuscule fraction of sellers report shops – one-fifth of 1% of the active sellers on the site. The reporting system is caving in on itself as confidence wanes and sellers give up hope.

The most prescient example of seller discontent with resellers found an unlikely venue – the comments on a business profile of Etsy CEO Chad Dickerson. Pages of vitriolic comments reached such a fever pitch that Dickerson himself popped into the comments in an attempt to dampen the flames.

It’s easy to lump blame on Etsy’s MITS team for falling down on the job, but in reality they’re tasked with a nearly impossible and time-consuming mission – to prove definitively that a shop is reselling before shutting it down.

Etsy contacts questionable sellers, asking for photo evidence of them creating the handmade items from their shop. The tactic can weed out the laziest of resellers, but it’s not hard to imagine a reseller deconstructing a mass-produced item and “assembling” it for the camera – or even buying a few props to spruce up their “workshop” in the process. Disproving this simple act of subterfuge takes a domain expert in the craft to ask the right questions. Etsy’s MITS team has recruited such experts in their hiring – even so, conclusive photo evidence of misconduct is hard to come by.

[quote]Time will tell, but one thing I am sure of is that whatever vetting process is used will have to evolve alongside any reselling, keeping ahead of the players.[/quote]

The MITS team also can’t make any assumptions from seeing a seller’s items on another site. Etsy doesn’t require that you list exclusively on the site; there are many genuine sellers who list items on Etsy, eBay and even their own website.

Reseller accusations fly furiously when a seller’s item is listed on Alibaba, a site for contracting mass-produced items from overseas manufacturers. If there were ever damning evidence of reselling, it’s seeing the exact same photo listed for an item with a minimum order of 500 – or so you’d think. It turns out this is exactly backward in many cases. The overseas manufacturers are experts at taking any remotely-popular design and duplicating it – and have repeatedly been caught doing so with the designs of Etsy sellers. It’s become so commonplace and flagrant that there’s an AlibabaRep Etsy account to field all the complaints.

The sellers I spoke with wanted to see even more in-depth investigation from the MITS team. Caroline from Peaseblossom Studio suggested video or phone chats, where sellers would need to think on their feet. It would be a joy for a bona fide seller to discuss their craft – resellers would undoubtedly fare poorly. The idea has merit, but would also require even more of the MITS team’s scarce resources.

Policy changes

Shutting down shops on Etsy has proven challenging for the MITS team, but they always had an ace in the hole – Etsy’s policies. The lengthy DOs and DON’Ts offered a few lines in the sand that, when crossed, made evicting a seller a no-brainer. Granted, there weren’t many lines – Etsy has long had a difficult time pinning down the definition of handmade.

It’s easy to agree that soaps made from raw ingredients – perhaps even grown on your own farm – are handmade. What about stringing a pendant on a chain? An artist selling prints of their illustrations? A knitter selling digital patterns that they created? These are all allowed on Etsy as handmade. The DOs and DON’Ts had provisions to include “hand-assembled” or “hand-altered” that infuriated handmade purists. It’s unreasonable to demand every seller make their items entirely from scratch, but that also makes it difficult to draw a line.

Still, the MITS team had a few hard lines. Drop shipping was strictly prohibited. Selling hundreds of handmade items a day? Not likely. Items not made in your shop? Don’t let the door hit you on the way out. Production assistance was allowed for “intermediary tasks” – assistants under direct supervision of the seller could aid in the process. Third-party vendors could be enlisted so long as it didn’t comprise a “majority share” of a handmade item’s creation. The line was weak, but it was there.

The hard lines are gone. Etsy rocked the handmade world earlier this month by announcing policy changes to broaden the definition of handmade. The DOs and DON’Ts are gone. Starting in 2014, sellers will be able to hire staff, drop ship and make their goods entirely with outside manufacturing.

It’s hard not to see the policy change as betrayal – throwing open the doors for manufactured goods to undercut handmade sellers that made the site what it is today. Etsy has worked diligently since the announcement to sugar-coat the new policies as a boon to handmade sellers that were struggling to stay on the site.

Etsy’s stance isn’t disingenuous. The site has a real problem – requiring items to be handmade introduces a manufacturing ceiling. Etsy hears regularly from sellers that are struggling to fit within the constraints of the policies, who have become successful enough that working their fingers to the bone barely keeps them afloat amidst a sea of orders. It’s a dagger through Etsy’s heart to nurture an artist from crafting in their spare time to running a full-fledged business – and then have to turn them away.

The story won’t make most Etsy sellers shed a tear; a handful of Etsy shops make a killing, but the profits drop off rapidly even within the top 100 sellers⁵. The overwhelming majority of shops on the site are making peanuts and struggling to sell their modest inventory. Etsy’s own numbers betray them in claiming that this is a boon – less than 0.01% of shops have applied to use manufacturing assistance since the announcement⁶. Yes, that decimal is in the right place – one hundredth of one percent.

Etsy has fallen to prey to listening to the vocal minority. The company has sacrificed the fabric of its being to bend over backwards for a handful of sellers. Etsy’s founder Rob Kalin must feel like someone walked over his grave. The founder and former CEO held so tightly to Etsy’s ideals that the board of directors showed him the door in the interests of explosive growth.

Widening policies weren’t the only option for Etsy to embrace its “graduates” – many sellers have pointed to rival site ArtFire, which hosts a Commercial category. The idea offers two benefits: a home for hugely successful sellers that have outgrown the handmade category, and somewhere for ArtFire’s own integrity team to shove suspected resellers until proven innocent. Etsy has acknowledged this option and shot it down numerous times without particularly compelling rationale.

So it goes for Etsy’s MITS team, which now has a more daunting task of policing the site with their policy teeth removed. There may be a silver lining – with looser policies, even fewer of the reported shops will be in violation. The vague hand-waving that Etsy deems fit to call handmade is so far removed from the word that the MITS team might as well be disbanded.

[quote]Etsy’s policing of the new guidelines will be paramount to the success of this change.[/quote]

Most sellers I spoke with expressed the same outrage and fear poured on Chad Dickerson’s business profile. A jewelry seller I spoke with is closing her shop and moving on to greener pastures rather than face a category “more saturated with mass-produced offerings.” The most optimistic among my interviewees were the successful sellers who can see both sides of the coin. It’s a difficult situation even for the elite; they stand to gain if they can transform their business with the policy change, but only with a heavy heart and fear of backlash from their peers.

The handmade market finds itself at an uncertain crossroad. It’s possible that Etsy is playing a long game, setting up infrastructure to make a sweep on resellers. The cards are certainly close to their chest if that’s true. Etsy’s growing pains and shocking left turn on policy have ruffled a lot of feathers and sent the company’s reputation spiraling downward.

Etsy sellers are in a tenuous position themselves. The changing winds aren’t enough to cause a mass exodus; most of the sellers I spoke with intend to ride out the change and see what happens. The fact that sellers aren’t eager to commit shop suicide just before the holiday season shouldn’t be misinterpreted as acceptance; I also heard a resounding sentiment of nervousness from sellers that have all their eggs in the Etsy basket. Concerned with Etsy’s future, many sellers are starting to take the company’s competitors more seriously.

Is there hope for handmade? Share your comments and stories – and be sure to subscribe for my upcoming article covering Etsy competitors. Where would you be if Etsy took a turn for the worse in the coming year?

[flickr]Cover image by Sarah on Flickr.[/flickr]

1. The hijacked account thread in the Etsy forums was closed several hours after posting, during which concerned sellers were flooding Etsy support and the forums. [↩]
2. Jeff Shah from Etsy’s Customer Support team posted the update; “As you may have noticed, our response times have not met our stated goals over the last couple of months.” [↩]
3. Etsy announced urgent phone support coming in November, but only for Direct Checkout and suspended accounts. The Customer Support update said Etsy is “working actively this fall to build out a real-time support team that will be available to members in early 2014.” [↩]
4. Etsy’s Corinne Pavlovic cited the three-week shop review time in a recent Etsy blog post. [↩]
5. Corrina Buchholtz of Piddix posted a brief analysis of how much many you can make on Etsy. She notes “your odds of making $10,000 per year are better than winning $10,000 through the PowerBall, though not by a ton.” [↩]
6. Etsy admin Kellan divulged the 0.01% manufacturing application statistic in the Oct. 24th Discussions with Admin. [↩]