Etsy escapes the ‘race to the bottom’ and returns to its artisan roots

When Etsy Launched nearly two decades ago, the site attracted artisans and crafters, who finally had an online place to sell their niche products and reach a large audience. But in recent years, Etsy has found itself flooded with generic, mass-produced items from resellers who have learned to game the site and crowd out handmade products.

Now, Etsy CEO Josh Silverman wants the company, stated mission is to “maintain the humanity of commerce”, returning to its roots.

On Tuesday, the company will make a major overhaul of its site management policies to help shoppers “understand” which products belong on Etsy, Silverman said in an interview with CNBC. The changes include new labels on the company’s website and app to show how each seller created a particular item.

“We’re positioning ourselves to meet the demand for authentic goods and real people by focusing on the things that make Etsy, Etsy,” Silverman said.

Etsy is launching a new marketing campaign around the policy changes, including a TV commercial featuring ceramicists, dressmakers, and other artists, followed by a robotic arm being smashed. The platform’s new rules require all items to incorporate “a human touch,” as outlined in the platform’s creative standards. Each product must fall into one of four categories: made by the seller (by hand or using automated tools), designed by the seller, hand-picked by the seller, or offered by the seller.

With these changes, Etsy hopes to keep buyers and sellers coming back to its site at a time when e-commerce is increasingly dominated by Amazon and upstarts like Temu and Shein with ties to China, offering shoppers cheap goods delivered to their homes within days. The stakes are high, because eMarketer estimates The global e-commerce market is expected to surpass the $6 trillion mark this year.

“I feel like there’s a race to the bottom in terms of commodity commerce right now, and almost everyone in e-commerce is in that race,” Silverman said. “They’re selling the same product and they’re trying to sell it to you for two cents less or deliver it two hours faster.”

Etsy has struggled to navigate changing market dynamics. In most recent quarterGross sales, or the dollar value of items sold on the company’s marketplace, fell 3.7% year over year to $3 billion. The stock has lost more than 80% of its value since peaking in late 2021. The stock has fallen 32% in 2024, while the Nasdaq has gained 23% over that period and closed at a record on Monday.

In December, Etsy fired 11% of its workforce, with Silverman citing a “very challenging macro and competitive environment” as the reason for the cuts.

The company is also dealing with pressure from activist Elliott Management, which has amassed a roughly 13% stake in the company, making it Etsy’s largest investor. In February, Elliott partner Marc Steinberg joined Etsy Board.

The roller coaster ride started earlier. Etsy went public in 2015, forcing the company to start catering to shareholders’ demands for growth, as opposed to culturally friendly, socially conscious.

Etsy’s business has boomed during the pandemic, fueled by a wave of mask buyersThe stock price quadrupled in 2020 and the number of businesses selling on the site doubled to 9 million from 2020 to 2023.

So far, Etsy has used “Family rules” to police the site. The main policy is that “anything listed for sale on Etsy must be handmade, antique, or artisanal.” Resellers are prohibited.

The new rules are more specific and updated to reflect today’s realities. For example, a 3D-printed sculpture is considered “seller-made.” Sellers are prohibited from adding a single sticker to a commercial face mask and calling it handmade. As for AI-generated content, the policies note that “seller-suggested AI art,” such as a dog in a costume, qualifies as “seller-designed,” but digital downloads of “more than 5,000 ChatGPT prompts” are not allowed.

Smith started selling custom wedding handkerchiefs on Etsy through her business, Polka Dot Beein 2011. Smith says Etsy was then a place where you could “find endless amounts of cool stuff people were making” and has become a site increasingly dominated by generic items.

One of Etsy’s biggest changes came in 2013, when the company allowed sellers to use manufacturing partners. Instead of making their own products, sellers could use a contract manufacturer to help them with their products.

Abby Glassenberg welcomed the move. Glassenberg, who opened her handmade stuffed animal shop on Etsy in 2005, saying it meant she only had to create a pattern once and could sell “countless copies,” cutting down on her workload. She said her Etsy shop went from a hobby business to a full-time career.

Glassenberg understands this tension, however, because many Etsy consumers still want the handmade experience.

“Doing it by hand is not scalable,” she said. “That’s why we like it, that’s why people like it.”

Glassenberg gives the example of a handmade fork that is forged and cut by human hands.

“I would pay $120 for it, use it, and love it forever,” she said. “There’s no way a person can make $100,000 a month, and that’s why we love it.”

Competing on a larger stage is different, however, and Smith says people’s shared preference for fast, cheap goods makes for “an uphill battle for sellers and Etsy.”

Temu and Shein have been expanding their presence in the United States in recent years, luring American shoppers with deep discounts on clothing, jewelry, home goods and other products. Silverman has previously acknowledged that the sites are “taking a small slice of everyone’s market share.”

Now, he is making it clear to sellers and customers that the company will compete on its own terms.

“The solution for Etsy is not to try to play that game,” Silverman said.