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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Max Chafkin on Etsy’s Dilemma



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I very much enjoyed Max Chafkin’s latest on Rob Kalin’s efforts to grow Etsy, and, rather more ambitiously, to use it as the engine of a flourishing DIY economy. Etsy began as an alternative for crafty types who wanted to maintain digital storefronts and sell their wares without paying eBay’s hefty prices. To that end, Chafkin explains, 

Etsy requires that all new products listed on the site be made by the people selling them—the use of mass production, that wonderful innovation of modern capitalism, is verboten. “Etsy has made it possible for a lot of small businesses to get off the ground,” says Dale Dougherty, co-founder of O’Reilly Media and the publisher of Make magazine, which covers the do-it-yourself economy. “But even the most successful crafters run up against the limits of their own labor. Handmade can be a limited idea.”

Indeed. There is a reason industrialization has led to an explosion of wealth: it allows us to specialize! To be sure, Etsy speaks to certain desires that emerge in an affluent urban society, e.g., an expressive desire for authenticity, for products that reflect our self-understanding and our desire for recognition as virtuous consumers, etc. But handmade products in an affluent urban society have to be very expensive indeed to account for the labor of the high human capital people inclined to make the products that have Veblenian cachet.

And as Chafkin writes, this has been a tremendous barrier to the rise of Etsy-as-platform for a new craft-oriented economy:

 

Etsy promises to bring entrepreneurial success through arts and crafts. “Anyone here—if you’re in school or out of school, or if you’re any age—can start a business from home,” he told the audience of The Martha Stewart Show in early 2008. This message—with its echoes of the “eBay millionaire” dream of years ago—has been extremely effective as a marketing strategy, attracting some 400,000 tiny companies to Etsy and helping create one of the largest, most chaotic flea markets the world has ever known. In 2010, Etsy sellers moved $314 million worth of merchandise—cuff links made from 19th-century shotgun shells ($50), knives forged by a master blacksmith in Albuquerque ($150), sweaters knit by a grandmother in Portugal ($225)—a 74 percent increase over the previous year. There is so much weird stuff on Etsy, in fact, that it has spawned a fan site, Regretsy.com(tag line: “Where DIY meets WTF”).

Three hundred and fourteen million dollars is an impressive sum, but it amounts to about $785 per seller after commissions—and before taxes. It seems fair to assume, using statistics the company has released, that there are fewer than 1,000 sellers who make $30,000 a year or more, and a mere handful who make more than $100,000. As one of the site’s top sellers wrote in a blog post in 2009: “Your odds of making $10,000 per year [on Etsy] are better than winning $10,000 through the Powerball, though not by a ton.” The only Etsy millionaires, it turns out, are Etsy shareholders.

Chafkin offers a number of illuminating examples of the limits of the Etsy model:

 

Erasing mass production makes for great marketing, but it isn’t a particularly good business plan for clothing designers or jewelry makers. Of the sellers who enrolled in Parachutes, Jones and Sherman were the only ones who didn’t return home when the program ended at the end of 2010.

Tellingly, they have succeeded, in part by distancing themselves from Kalin’s most radical ideals. “I admire Rob and his thought process,” Sherman says. “But we’re transitioning away from being an Etsy business.” He told me that if Ruffeo Hearts Lil Snotty gets substantial orders from a fashion buyer, it will probably use a factory, which will effectively disqualify it from Etsy, given that the company’s rules require that Etsy members personally make what they sell. “The irony is that if we ever became successful, we won’t be allowed to sell on Etsy,” he says.

So perhaps Etsy can content itself with enabling a large number of people to supplement their incomes with interesting, worthwhile creative projects and incubating more successful mini-brands that eventually “graduate” from their status as Etsy businesses. It’s not clear to me that this is a blockbuster business. A valuable niche, yes, but not a really transformative business.  

Or maybe not? I mean, it’s pretty clear that Rob Kalin knows something that Max and I don’t, so we’ll see how this story unfolds.



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