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Etsy Provides Small Businesses with a Booming E-Commerce Platform but Who Reaps the Benefits?

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2020 was a challenging year for many retailers. With most brick and mortar stores across the country subject to continuous lockdowns, and many local businesses struggling with the sudden pivot to e-commerce, it wasn’t a particularly promising time for entrepreneurs to establish themselves or main street retailers to grow. However, amid the chaos, American e-commerce website, Etsy, enjoyed a hugely successful 2020, crossing the billion-dollar (US) revenue mark for the first time in company history after a staggering year-over-year increase. 

According to data presented by Buyshares.co.za, Etsy experienced a 110.75% year-over-year increase in revenue in 2020 after setting a company record $1.7 billion in revenue — with Etsy’s marketplace earning $1.3 billion, amounting to 75.5% share of the platform’s total revenue and a 119.5% year-over-year increase from 2019.

Revenue from its services segment amounted to $422 million in 2020 which makes up the rest of its total revenue, an 88% year-over-year increase from 2019. A large portion of this increase is attributed to the growth of its on-site advertising revenue. 

In 2019, Etsy recorded 46.35 million active buyers on their site, a figure that grew by almost 77% in 2020 to 81.9 million. The number of sellers also grew by an impressive 61.7% year over year to 81.9 million in 2020.

Image of Etsy’s Marketplace. Photo: Etsy

The company believes this impressive influx of new customers and sellers was a direct result of the lockdowns imposed in many developed markets around the world, especially in North America. Additionally the trend towards shopping local and supporting small businesses has driven some to choose Etsy over alternative e-commerce platforms such as Amazon.  

With many different outlets such as Digital Main Street, Shopify, and social media selling tools like Instagram Shopping available for small businesses to seek help with the accelerated move to e-commerce, Etsy positions itself somewhat as a hybrid model — an e-commerce platform with an emphasis on community and support. 

The Etsy website reads, “In a time of increasing automation, it’s our mission to keep human connection at the heart of commerce. That’s why we built a place where creativity lives and thrives because it’s powered by people. We help our community of sellers turn their ideas into successful businesses. Our platform connects them with millions of buyers looking for an alternative — something special with a human touch, for those moments in life that deserve imagination”.

The e-commerce platform has also reported more than half of its sales coming from mobile devices — a staggering 51%. In 2020, that share had risen to 61%.

The Brooklyn-based e-commerce site was founded in June of 2005, years before having a digital presence was a must for most small businesses. The site specializes in handmade and vintage products, in addition to crafts and DIY supplies. Unlike a place like Amazon, everything on the site is made, collected, curated, and sold by its sellers. These independent business owners not only produce their own goods but manage their orders and inventory, too. Etsy acts as the middle-man, giving smaller, independent creators a platform to find and attract customers — an opportunity that, for some, would otherwise be out of reach. 

As we all know, however, the support local trend can often mean facing higher price points for items also found at discounted prices in places like Walmart and Amazon. In an attempt to compete against the retail giants of the world, in 2019 Etsy announced it would be encouraging sellers to offer free US shipping on all orders over $35. Or rather, it announced that sellers who didn’t offer free shipping would be de-prioritized by the site’s highly-competitive search algorithm. On a platform with more than 60 million things to buy, this can mean functional invisibility for brands unable to afford free shipping. Additionally, despite positioning itself as an affordable and accessible e-commerce platform, costing a mere $0.20 to list your first item, some sellers have found fault in Etsy’s transaction, payment processing, and offsite advertising fees saying that these inconspicuous costs make it difficult to grow amid a competitive market.

Despite the debate on who is really reaping the benefits of Etsy’s massive success, there is no denying the move toward supporting entrepreneurship and small businesses is the way forward, and as certain Canadian provinces continue to suffer the consequences of lockdowns, having an e-commerce marketplace for main street retailers is paramount.

Article Author

Jessica Finch
Jessica Finch
Jessica Finch is a writer and editor based in Toronto. She holds a BA in English and Psychology and is a graduate of Ryerson University’s Publishing program. She has extensive managerial experience in the food service industry, and is interested in exploring innovations within this sector and other retail environments.

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