Episode 92: The Etsy-sodes (part III): We Do The Math

Welcome to Clotheshorse, the podcast that has been so immersed in the world of Etsy, that last night i dreamed that i opened an Etsy store in my house.

I’m your host, Amanda!

This is episode 92, part three in our Etsy-sode series. And I promise, today we are really going to talk about Etsy! We will be picking up the story in 2008…you might be asking yourself…how are we only in 2008 after three episodes? WELCOME TO MY LIFE! Let’s just jump right in because I have a lot ot tell you!

2008 is a year that we talk about a lot around here at Clotheshorse world HQ..and by Clotheshorse world HQ, I mean my office/recording studio/faux fruit repository in my house in Bird In Hand, Pennsylvania. And by we, I mostly mean me, with occasional input from Dustin or Brenda.

Yes 2008 was a pivotal year for Ebay, as you learned in the last episode.

Yes 2008 was also a pivotal year for Etsy…which I’ll be discussing more today….

But 2008 was also the year of the global financial crisis and the recession that followed, which NOT ONLY lit the fuse under the bomb that was/is fast fashion, it also changed the way our economy works (hi, gig economy), the way we live our lives (uncertain, fearful about getting sick or losing our second job). That financial crisis will come in the fall of 2008–and spoiler: it will have an impact on Etsy.

But we are going to start today’s installment of the Etsy store in the very beginning of the year, January 2008.

If you recall from episode 90, Etsy experienced exponential growth in 2007, with a particularly wild holiday season. The expectation was that Etsy would become profitable that year…but it did not…which meant: it needed more money to keep running in 2008. Basically what this means is that despite about $26 million worth of merchandise being purchased from Etsy in 2007, the company was spending more money than it was making…it was at the end of its runway.

Runway is a great startup business term, and if you’re a small business owner, you’re probably thinking about your runway even if you don’t know what that term means. Runway refers to how many months your business can keep operating before it’s out of money….basically, how long can you stay in business with your current sales and expenses without either going into debt or taking on more investment. When you’re still in that runway phase of your business, it means you aren’t making any actual profit when you deduce the cost of what you’re selling and your overhead expenses from the money you’re bringing in from sales. It’s a scary place to be, especially for a small business. Any profit that you do make just adds a few more inches or feet to that runway (in reality days, weeks or months)…with the right balance, your runway begins to feel infinite becuase it’s constantly extending itself. That’s a profitable, healthy business! And if you aren’t making any profit, well, the runway just keeps getting shorter.

And to be fair here…your runway–even as an older, more established business–can really reveal the values and priorities of your business. Like if your runway is massively long, you could keep going as-is for years and years…it probably means a few things: either you’re marking up your product a ton (and it’s possibly low quality or kinda scammy) AND/OR you aren’t paying people enough or hiring enough people. Your staff is underpaid and doing the jobs of several people. Or it’s just you doing all the work…and it’s time for you to get yourself some help! Because you’re going to burn yourself out.

If your business has been around for a long time and your runway is always *this close* to running out…well, you’re probably spending TOO MUCH money, either on inventory that isn’t selling, on marketing that’s not bringing a lot of repeat customers, or on staffing–your team is too big…a rarity in 2021, but definitely a common issue in early startup culture.

Nasty Gal ultimately ran out of runway and filed for bankruptcy due to several of these issues:

The company was spending wayyyyyy too much on customer acquisition. Spending more than $100 to acquire each new customer, but that customer only shopped the site once, spent about $50, and then never came back again.

Carrying too much inventory and never cleaning it out, revisiting the inventory strategy. When I started working there some of my categories had enough inventory in stock, that it would take more than a year to sell out of it, even if we never added anything new.

Spending too much money on things that weren’t making an impact on the business from a revenue perspective, but were definitely shortening that runway: a big fancy office in DTLA filled with very expensive furniture, a huge store in Santa Monica that wasn’t really doing well, massive sample and travel budgets for design…that kind of thing.

When you imagine Etsy hitting the end of its runway, it’s a slightly different scenario. For one, Etsy doesn’t sell stuff, right? So it’s not like maybe they have too much inventory or the stuff they are selling isn’t profitable enough or maybe they could just have a big clearance sale to generate some more cashflow and extend that runway. As a person who has worked in the startup area, the big ole clearance sale to extend the runway is a classic move! And there’s nothing sketchy or anything about it…often if you are the business of selling stuff and you run out of runway, it can mean that you have too much inventory, so clearing it out can put your business back in line.

But Etsy couldn’t do that right? Because what they were doing was taking a commission on what other people were selling! So sure, I guess they could have tried really hard to bring on a lot of sellers really fast, in the hopes that those sellers would sell a ton of stuff…but even as I’m saying that out loud, that’s not a great plan when you’re literally running out of money. Too many variables, too many what-ifs to ensure success there.

Clearly Etsy’s expenses were exceeding its revenue…and that’s because salaries, rent on their offices, marketing, tech infrastructure stuff, or all of its cool community programs…it was all adding up.

So Etsy needed to bring in more money via investment. Which mean, once again, venture capital. I’m sure you’re growing tired of hearing me say this, but I’m going to remind you once again that venture capital comes with some serious strings attached. And those strings are really more like ropes, like the kinds of rope that hold a cruise ship at a dock, and those strings are exponential growth and profitability.

Even at this point, Etsy couldn’t be like “well, we had a big year last year, we’ve grown a lot, we’re gonna just sit tight here at this level of sales, so could you give us some money to keep going?”

Of course not right? Any investor who gave Etsy some money was thinking “this is the next Ebay.” And at this point in 2008, investors would know that ebay had brought in $750 million in revenue the previous year…Etsy’s $26 million was measly in comparison, but investors would be assuming that it was on i’s way to $750 million/year.

So Etsy raised another $27 million in investor funding in January of 2008. That’s a ton of money, but Etsy was also valued at $90 million at this point. This round of funding was lead by Jim Breyer–a venture capitalist and board member at Facebook and Walmart–and leading this round of funding earned him a seat on the board of Etsy. This marked a major shift in the strategy and operations of Etsy…and sellers were not thrilled about the Walmart connection. In 2008, we weren’t living in the depressing, frightening world of Amazon…so Walmart was the most evil company any one could think of…and to be fair, sometimes I get angry that Amazon has made people forget just how terrible Walmart is for both small businesses and workers all over the world. What would this mean for the community that Etsy had created and nurtured?

To quote Vox writer Kaitlyn Tiffany, “Suddenly, a better life for crafters could not be the company’s only goal. It also had to make serious money for some people who are pretty serious about their money.”

To be clear: I don’t think anyone on the Etsy team, including its CEO and founder Rob Kalin, took this decision to accept this venture capital money lightly. Imagine what you would do in this situation: would you lay off a bunch of workers to conserve your runway? Would you just let Etsy go under, meaning that not only the would all of the employees lose their jobs, all of the sellers whose livelihood depended on Etsy would also be affected. Where would they go?

Jim Breyer (that venture capitalist who was on the board of Facebook and Walmart…and now Etsy) told CNN that he received around 60 e-mails from concerned Etsy sellers immediately after the announcement. He said, “It is possible to be the lead independent director of Wal-Mart and be absolutely passionate about art and crafted goods. Over time Etsy sellers, as well as Etsy shareholders, can do very well if we stay true to our mission.”

I really do believe that Rob Kalin truly had this utopian vision of Etsy as a community, as an organization that could have an amazing impact on the world…and I think he really did want to both protect and support the makers on the platform.

In the Etsy blog post announcing this round of funding, he said, “This means that we now have the resources to extend Etsy’s reach in this world, to enable so many more people to make a living making things. We want Etsy to exist for hundreds of years. Our goal is for Etsy to be an independent, publicly traded company, focused on all things handmade.”

He said that Etsy was almost at the “break even” point…which means, not making a profit, but not losing money either…but being “almost” at the break even point means LOSING MONEY.

But he also felt that this round of funding would enable the company to get to that next level where it would be self sustaining. The $27 million would be used to

—Buy $5 million worth of hardware and hosting over the next two years.

—Support more currencies and languages other than the U.S. Dollar and English. This was something that frustrated and alienated international customers.

—Fix the checkout system (because at that point there wasn’t one… every buyer had to pay every seller on an individual basis. There was no Etsy payment system that works across all sellers. This is actually a major upgrade)

—Fix search–shoppers were very vocal about how horrible the search function was. (just going to go ahead and say here that search is still something that causes a lot of retailers stress because it’s expensive and no one has completely nailed it yet! I think Etsy still has a long way to go here…)

—Provide a cushion in case of a recession. (Important because when you’re in a “short runway” situation with your business, even one month of lower than usual sales can begin the process of going out of business)

—Offer customer service…apparently Etsy didn’t have that yet.

—Provide competitive wages and take care of Etsy’s employees.

These are all very good uses of that money!

P.S. This also the same that Kalin posted the video to the Etsy blog of him reading the children’s book about Swimmy. In that same post he said,””We do not want Etsy itself to be a big tuna fish. Those tuna are the big companies that all us small businesses are teaming up against.”

Once again…I really like to think that he believed everything he said!

In February…just weeks after Etsy finished that round of funding…things were getting weird over at Ebay. If you recall from the previous episode, Meg Whitman had just left Ebay to pursue a political career after ten years in the role. And the new CEO, John Donahoe instituted a lot of new policies at Ebay that sellers did not like. They felt very pro-customer, anti-seller. Which is an interesting way of looking at it all…because one could argue that without its sellers, Ebay had no business. And sellers were also customers of Ebay because they literally paid Ebay for its services…But ebays new policy were drawing a line in the sand: the company would prioritize the happiness of shoppers over that of the sellers in the hopes that each shopper would shop as much as possible, as often as possible on ebay. I promise that this is not the last time you will hear this logic in this series!

The archives of the internet are filled with articles from this period debating the merits of Etsy versus Ebay as more and more sellers–specifically vintage sellers–began to consider leaving Ebay. Etsy was super US-centric and the site was slow. Ebay had a faster site, better search function, and more international customers…but then again, Etsy seemed to value it’s sellers a lot more than eBay. And ultimately, a lot of sellers moved on over to Etsy!

Etsy wasn’t perfect…as this point grumbling from its sellers began to seep out of its forums and into the rest of the internet. Sellers shops were being suspended because of one customer complaint. Or for no reason at all. And sellers found little to no support from Etsy when they tried to remedy these problems.

But despite all of this, that mass exodus of Ebay sellers to Etsy…along with a massive influx of Martha Stewarts fans….

Oh wait, let’s talk about Martha Stewart for a second here…

In March of 2008, Kalin made an appearance on the Martha Stewart show, where he famously said to the audience, ““anyone here—if you’re in school or out of school, or if you’re any age—can start a business from home.” He was a hit and for a few months there were rumors that Martha was going to buy Etsy. That didn’t happen…but what did happen is tons of Martha fans became either Etsy shoppers or sellers.

Thanks to the influx of Ebay sellers and Marth fans, by the end of the year, Etsy had more than tripled its previous years’ sales…we’ll talk about that a bit more later..

Despite this “success” things at Etsy headquarters were not great. I stumbled upon a 2011 profile of Etsy (and Kalin) from business publication Inc…and to call this article critical of Kalin would be an understatement. But it also reveals a lot of the sort of ethical and logical disconnects at work at Etsy at this time.

The writer of this piece–Max Chafkin–seems to think that Kalin is full of idealistic hot air AND is mostly unqualified for his job…which to be fair, in 2008 I want to say Kalin was 28. But Fred Wilson, an early investor in Etsy (and the first VC investor in Twiiter told Chafkin, “Rob is an accidental businessperson. He’s actually a pretty good businessperson, but he thinks of himself as an artist.”

When asked what was happening behind the scenes at Etsy, Wilson said”It was chaos—there was no management. It was all creative energy of the founders and just a bunch of people hanging around that, trying to keep things going.”

In the beginning, this was fine…and to be honest, this kind of chaos is not unusual in start ups, especially startups started by young people with a great idea, but not a lot of business or management experience. This area of the late aughts and early aughties was filled with the “legend” if you will of young CEO visionaries who were going to change the world. Their youth and inexperience would be THE REASON their businesses would succeed because they saw things in a different way and they weren’t hung up on the old ways of thinking. What we saw years later, was that it turns out yes, new ideas and a fresh way of thinking are super important (still are), so is experience in business and management. Otherwise you run out of money, the work environment becomes exhausting, and then toxic…or the overwhelmed inexperienced CEO just does something really foolish and destructive that destroys the business.

If you recall from our first Etsy episode, Kalin started Etsy with the help of two other friends: Chris Maguire and Haim Schoppik.

I’m going to read directly from this Inc profile (which I’ll be linking in the show notes) because I think it really paints a good picture of what was happening at Etsy:

“As Maguire and Schoppik worked day and night trying to keep the website from crashing, Kalin was spending his time dreaming up new features. One day, Maguire recalls, Kalin proposed creating a system whereby sellers could broadcast live video feeds from their workshops. Another day, he was pitching his co-founders on creating a modern-day version of guilds. “There would be a brand-new idea every day,” Maguire says. “Usually it’d be something that didn’t even make sense. How are you supposed to teach blacksmithing over the Internet?” By the end of 2008, Maguire and Schoppik left the company. Working at Etsy, he says, “was like being in an abusive relationship.””

Yes, that’s right…Maguire and Schoppik, Kalin’s cofounders and friends left the company of August of that year.

Things were chaotic and messy at Etsy. A future Vox article would describe Etsy as “like a child who’d too quickly outgrown his pants: thriving, healthy, and a little bit ungainly.” Kalin was wondering—as were plenty of other members on the team and investors as well–if he was the best person to lead the company. He told Inc, “I’m always skeptical of whether I’m the best CEO for the company.”

In June 2008, Kalin demoted himself to chief creative officer, and the company’s COO, Maria Thomas, became CEO. She had a lot of experience, working for both NPR and Amazon in the past. There was a lot of speculation about this change in the business media…many thought that Thomas had been brought in at investors’ request to sort of babysit and maybe teach Kalin. It’s hard to say. But a month later, Kalin left daily operations entirely. Regarding his decision to walk away from they day to day running of the business, he told INc”I’m a hands-on guy “I need to be building things to feel like I’m making a meaningful contribution, and I didn’t want to sit around as some kind of wall decoration-slash-mascot for culture.”

So I found a fucking hilarious little writeup about Kalin’s step down from CEO in the New York Times called “Start-Up Status Gone With the Skate Ramp.” And the article begins this way: When is a fledgling company no longer a start-up? Once the skateboard ramp disappears, says Rob Kalin, the founder of Etsy Inc., an online emporium of handmade goods based in Brooklyn.

And while Etsy is only three years old, Mr. Kalin got rid of the ramp six months ago.”

He admitted to the New York Times “We hit a point in growth that we needed people who have done this before.” Which to me as a person who reads a lot of this business stuff says…investors demanded an experienced CEO.

Anyway, that’s not he funniest part of this piece and I’m just going to have to read this verbatim,” Mr. Kalin said he informed his company of his changing status “by calling an all-hands meeting. I put on bright coral nail polish. I told them: ‘As everyone knows, a male C.E.O. can’t wear nail polish. So I’m not C.E.O. anymore.’ ”

UM WHAT?

Kalin would spend the next year running something called “Parachutes,” basically an academy run by Kalin that would develop Etsy sellers business skills and solve all their problems? I’m not really sure what he was thinking here, since what did he really know about being a maker? Basically he invited about half a dozen Etsy brands into his workshop, gave them free office space, and lead weekly workshops on how to grow a business. He told Inc, “There’s this really interesting shift that happens when you’re running an Etsy business, where you have to change your approach from ‘I make clothing’ to ‘I’m making a living making a business that makes clothing. A lot of people either can’t or don’t want to make the shift, because it means seeing things in a different light.”

Once again…a really weird thing for Kalin…who literally has no experience as a maker or a manufacturer or anything like that to be teaching this to Etsy sellers!!

But lest you were worried that Kalin was gone, lest you missed his quirky ways, his children’s books about fish and his coral nail polish, well…Spoiler here: Kalin isn’t gone, and he’ll be back for another round of foolishness!

In 2007, Etsy began running a series of blog posts called “Quit Your Day Job.” The introduction said, “ “You’ve seen those big sellers on Etsy who seem to be making sales left and right.You have to wonder how they’ve made it to where they are: Can they actually be FOR REAL? What’s their recipe for success?”

The blog posts are exactly what you would expect: Etsy sellers would tell the story of how they went from hobbyist maker to literally quitting their day job to run their full-time, lucrative business thanks to Etsy. It’s a tale as old as time…eBay sold the promise of “millionaire ebay sellers, “ MLMs like Lularoe sold thousand of women on the idea of being their own #girlboss while also being able to spend time with their families. And even today, Poshmark sells the promise of running your very own business selling secondhand clothing thanks to Poshmark.

The fact that these promises, these opportunities are appealing, that so many of us want to quit our day jobs and find success via these selling platforms…well, that doesn’t surprise me. Because we know that more and more, “day jobs” suck. They mean toxic workplaces, hustle culture ten hour work days, meetings that could have been an email, little-to-no upward mobility, the misery of sitting in a cubicle–or even worse, in an open floor plan office–day after day after day, with very little to show for all of that work. I get excited when I hear about this massive re-evaulation of work that’s happening right now, thanks to the pandemic, thanks to more than a year of jobelssness or working from home or realizing that your job treats you like you’re disposable…I’m excited that MAYBE something is about to change in terms of what it means to be a worker. The millennials were always supposed to be the ones who were going to change what work meant. We valued experiences and quality of life over stuff. We questioned the idea of paying ones dues, we started our own companies (like Rob Kalin, yes, he’s a millennial), but somewhere we got lost along the way, we got sucked into the false promises of hustle culture, and we all of our money on clothes and vacations. Okay, maybe not all of us did that…but I still like to believe millennials can and will change the state of work and working.

Rob Kalin told a studio audience of Martha Stewart that anyone could start a business on Etsy. Basically find a thing you like doing, list on it on Etsy, and soon you, yes YOU, the woman over there making little chickens out of pom poms and pipe cleaners….you will be quitting your day job to make pom pom chickens all day everyday.

By the summer of 2008, more and more Etsy sellers found themselves very frustrated. The site was slow and prone to crashing, its search function was terrible, the company didn’t seem to be spending any money on advertising, and support for both sellers and customers was lacking. And sellers were starting to blame Kalin and his team. They felt that there was no way the company was being run properly. In fact, they were excited to see him step down as CEO in July 2008. And they were very excited for Maria Thomas to be CEO…in fact, a new blog, literally hosted on blogger (remember blogger) had launched as a way of venting and sharing information about the platform outside of Etsy’s own heavily policed, possibly censored forums. This blog was called Etsy Bitch and it had a bone to pick with the seeming ineptitude of the companies leadership, the lack of customer service for anyone involved with the platform, and what it saw as obvious favoritism toward certain stores/sellers. How unexcited was Etsy about the arrival of Etsy Bitch? shortly after Etsy Bitch’s launch a thread on the Etsy forums discussing the site was shut down after just an hour of discussion!

One of Etsy Bitch’s first posts was open letter to Maria Thomas about the things that needed to change on the platform:

The site! Etsy Bitch said, “It needs to work. We don’t need all the fancy toys. We need a site that stores important information seamlessly and doesn’t constantly reset itself. We need a search function that works like Google.”

Next was engineers! Apparently every time something was updated or a new feature was added, the entire site would just crumble. In any other company, no one who was not an employee would have contact with outside world, but for some reason at Etsy, there was an engineer called Revolving Dork who interacted with sellers. Etsy Bitch wrote: “RevolvingDork is a liability. He treats others badly and automatically assumes that it’s the users fault, not that Etsy is having an issue, instead of the other way around. That is BAD Customer Service and a horrible attitude to have.”

Of course EtsyBitch also called for improvements in overall customer support saying, “Customer Support should be the most important position in the company. There should be phone support available, and the e-mail support is lacking. It should not take days for a first contact. EVERY e-mail should be responded to in some way, personally, to let the user know he/she has been heard. All customer support agents should have a customer support background.”

The letter went on to request that company actually advertise, fire employees who were shitty to sellers and customers, and just generally do a better job at being professional. And improve the quality of the blog!

The letter ended with this:

Contrary to popular thought, we do care about Etsy very, very much. We do believe in professionalism from the people we are paying money to. Many of our postings are dripping in sarcasm and frustration, but only because we’ve been pushed that far. There are those of us who are fed up and have no where else to go, and then there are those of us who have great ideas and wish we had a platform to express our thoughts. EtsyBitch is our platform.

You may wonder why we are anonymous. Well, we’ve seen many people punished on Etsy for things done off Etsy. It makes us wary, and unless there’s a personal guarantee, signed by Rob Kalin himself, notarized and copied in triplicate, we’re not going to reveal ourselves.

Let’s go back to this Quit Your Day Job idea…it was an enticing concept! But EtsyBitch (and the sellers who read and commented on it regularly) all agreed that it was a false promise, that the likelihood of actually making a living selling on Etsy was just so unlikely, it was hilarious. And there was a lot of bitterness around Etsy’s constant flow of blog posts arguing otherwise.

I found one great submission for a member of the Etsy Bitch community that really nailed it:

Just want to put in my $.02 about this Quit feature. I wish it were gone– it’s so depressing and misleading. The Quitter now is a woman who has sold 818 pieces– and they are nice, by the way– but by my estimated calculations, if her average sale price is $50, she has sold a little over $40,000 worth since Sept. 2007. That is gross, not net. How can someone quit their day job for a job that pays them much less than $20 grand a year and has zero benefits? People who take these profiles seriously will be setting their course for the poor house, and retarding them from truly being independant. She would qualify for social services with that income.

So who was right here? Were, as Etsy claimed, tons of makers quitting their day job and living their dreams thanks to Etsy? Or was the EtsyBitch community right with its assessment that the numbers just didn’t add up?

Let’s unpack some evidence here okay?

First off, let’s start with that Inc article that I’ve been citing like all day long here.:

Dale Dougherty, the publisher of Make magazine, told the writer Max Chafkin,””Etsy has made it possible for a lot of small businesses to get off the ground. But even the most successful crafters run up against the limits of their own labor. Handmade can be a limited idea.”

What is Dougherty saying here? Something that a lot of you makers already know all too well: There is a natural ceiling on how much you–a single maker–can make in a day, a week, a month, a year…and so naturally, there is a ceiling on how much your business can grow and how much money you can make. Even if you decided to work 7 days a week, and each item you make took two hours to make, let’s say you work 12 hours a day —which, please don’t do that to yourself–that’s a total of 42 units being made each week. And that’s working yourself to death. You will never be able to sell more units than that on your own, which limits the growth potential of your business. And that 42 units means you HAVE quit your day job, and you’ve kinda quit every other aspect of your life too. Now, you *could* grow your business and quit your day job and still live a life if you were able to sell enough stuff at enough profit to hire someone to help you. Or a few people to help you. Because in addition to making stuff, you also have to take the time to photograph and list it on etsy. You also need to pack and ship that stuff when it sells. You have to answer messages from customers, too. Order supplies. Use the bathroom, eat food, and sleep. When you start to look at it that way, there’s no way you’re making 42 units a week on your own. At best, you’re making 25 or 30. And that’s just not enough to pay the bills. And btw, if you’re only making $10 per each of these units after you deduct fees and materials, that $250- $300 per week. About $3 an hour. Less than $16,000 per year. Sure, you could increase the cost, double your profit…but you might be undersold by other sellers (oh we’ll get there I promise)

As I’m explaining this out loud to you, we all have the benefit as people who are not actually making stuff 12 hours a day/7 days a week to sell on Etsy to see that clearly that any etsy seller that truly wants to grow a business is going to have to hire people. And real talk: they are probably going to have to take out a business loan to rent a bigger space to work in (since they are probably working in their kitchen or living room), to pay additional employees, to hire an accountant, to buy enough materials and packaging to scale a business…but that’s going to involve writing a business plan, visiting banks, just generally doing a lot of things that the average Etsy seller doesn’t know how to do! And Etsy wasn’t really giving them the opportunity to do that . Some sellers did that. Most did not. And most sellers were kinda stuck. Even those that did take out loans and/or hired people and grew their business….most of them found themselves working round the clock for little payoff…and many burned themselves out and quit. I found that most of the “big” Etsy sellers of 2008/2009 that were featured in various articles and blogs were no longer in business. Supporting yourself via Etsy required more than most people could actually sustainably give.

That Inc article broke it down another way, using Etsy’s 2010 sales of $314 million to get to the actual number Etsy sellers might be making on average:

“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.”

You know…I encountered this comparison of the odds of making money on Etsy versus winning the lottery time and time again in my research.

One piece of advice I saw repeatedly as I read blogs posts, comments in forums and on blog posts, and articles and how-tos…i have been reading it all! This is the advice I found time and time again: If you truly want to quit your day job, you can’t just sell on etsy…you also have to sell at craft fairs and flea markets, wholesale to stores, work out consignment situations with other retailers…basically if you hustle, you might make it work! Etsy wasn’t telling that story.

Speaking of diversifying, of doing more than just selling on Etsy, Cynthia Gentry, an Etsy seller AND professional sociologist told Fortunae, “Sellers need to realize that. You might make it big on Etsy with a kick-ass product and lots of work. You might also win the lottery” See…more lottery references.

Another one of the problems with a lot of this Etsy selling? People weren’t charging enough money! For one, they didn’t have the experience or business education to understand the full cost of an item should include paying themselves for the time they spent making it. They often tried to make their pricing align with the prices of similar mass produced objects. So they were unintentionally underselling one another. One person might list a knitted hat at $20 because that’s how much they cost at Target..then everyone else would be forced to sell their hats for $20, too. One person might list theirs at $18 just to capture shoppers who were comparing prices…

In most cases, these prices might not even cover the materials required to make the item, much less enough to pay Etsy’s fees and pay a living wage to the seller!

That Inc article I’ve been citing? It said, “The vast majority of Etsy sellers are hobbyists who aren’t in it for the money and, consequently, end up charging rates for their labor that would make even a Walmart buyer blush.”

I mean…that’s a zinger.

A somewhat snarky Guardian assessment of Etsy (in 2008) sad,

“And since there are no retail markups, prices are generally low. Etsy

is clearly an outlet for professionals who have their own websites,

and some of the jewellery looks terrific, but 95% of the sellers are

women and many seem to love making what they make. They are pleased

to see their efforts appreciated. They’re not crocheting doll’s

clothes to get seriously rich.”

In general, sellers were devaluing their work. They might say “hey! This item costs $9 to make, I sell it for $20…and boom! $11 in profit.” OKay, yeah, but how long did it take you to make that item? Oh 2 hours…so you just paid yourself $5.50 an hour? That’s not sustainable! Once again, Etsy wasn’t prioritizing teaching sellers this because the didn’t really care how much a seller made. As long as Etsy got their cut and the customer was happy…that was the end of the story.

Yet Etsy continued to peddle these “quit your day job” fantasies…and more and more sellers found themselves over at Etsy Bitch

So let’s talk about how those low low prices that definitely did not benefit sellers may have benefitted ETSY! Oh, you knew this was coming…

On Sept. 29, 2008 the stock market plunged, marking the beginning of a global financial crisis, and a recession that would change the way we shop, work, and live permanently.

Retirees–or people close to retirement–saw their 401Ks disappear. Some of them moved into RVs…that’s basically the premise of Nomadland (btw watch that movie)

Tons of people lost their jobs, and never had a good job again. For millennials who were just starting their careers, they struggled to find anything. This set up an entire generation who ended up with jobs in the gig economy, living paycheck to paycheck, forced to hold Gofundmes to pay medical bills, and never ever own a home .

On that day, Sept 29, 2008, Etsy, had record sales. November and December sales were essentially double the previous year, and by the end of the year, Etsy had hit almost $88 million in revenue, more than triple the previous year. Some Etsy sellers had such high sales that they had to shut down early because they didn’t have the time or materials to make more gifts

The recession made two things apparent: one, people wanted to give handmade gifts, either made by themselves or others, with the idea that if you had less money to spend on gifts, at least make them special gifts…with the extra bonus of knowing that buy buying a handmade gift, you would be helping someone–an actual person–get by. And two, people had less money, so they wanted everything to be less expensive. We know this is how fast fashion became the rule rather than the exception.

Because things were so cheap, so underpriced on Etsy, Etsy found itself at the exact intersection of the venn diagram of two circles. One was “special gift” and the other was “cheap gift.” There it was…Etsy!

Once again, Etsy wasn’t out there coaching its sellers to raise their prices since demand was so high. Etsy wasn’t advising that sellers pay themselves a living wage…because Etsy made a commission off every sale, both a listing fee and a percentage of the final sale…Etsy wanted its sellers so sell as many items as possible! Low prices guaranteed that, especially in a recession.

Does it feel a little bit like a conspiracy theory to say that Etsy wasn’t stepping in to coach its sellers about paying themselves because that would drive up prices, which could reduce sales and you know mean, less income for Etsy? Okay, no. As I’m saying it out loud…I know that the actual business professionals at Etsy knew that people were not paying themselves enough. They also knew that low prices =more sales for Etsy.

Remember: By accepting all of that VC money, Etsy had a made a promise to its investors: aggressive growth (let’s see..2008 sales were more than a 300% increase over the previous year….okay, check) and profitability…hmmm…oh yeah, did I mention that Etsy was about to turn a profit in a few months. So check and check. Etsy was delivering on its promises to investors, even if at the time they made those promises, they didn’t realize that it would mean offering up their sellers and their wellbeing as a sacrifice.

In 2019, Rob Kalin would confess to Vox that he had no idea what he was doing

when he accepted that venture capital money in 2008, or any of that previous funding, too. He didn’t understand the promises he was making to those investors. He didn’t know that profitability and aggressive growth were going to be prioritized over everything else. “I didn’t have enough awareness of the context of what was going on there, in terms of if we take this step will it compromise the values.”

He knows now…or least he did in 2019 that despite his promises, his wishes, his dreams, his goals…the average Etsy seller was never and would never make enough money to quit their day job. He said, “I have a lot of compassion for the people who are trying to run their businesses on Etsy and are being marginalized by these corporate decisions that clearly benefit the shareholders but not the stakeholders.”

That’s where I’m going to leave off today…in the next episode we’ll talk about what happened next: the return of Kalin as CEO (yep), how Etsy began gobbling up every competitor that arose, and I’ll be sharing some of your stories! It’s not too late to call the hotline to share your own story! Remember: the personal is the political and we’re all about that around here!

Thanks for listening to another episode of Clotheshorse, researched/written/recorded and edited by me, Amanda Lee McCarty

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