On the other hand, some merchants who have tried to stay within Etsy's framework have suffered for it, as I learned when I called Ryan McAbery, the founder of Littleput Books. McAbery was the first entrepreneur featured in a series of blog posts that Etsy began running in 2007 called "Quit Your Day Job." "You've seen those big sellers on Etsy who seem to be making sales left and right," the introduction to the series read. "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?"
In 2006, McAbery, who had been selling journals made out of Scrabble boards at craft fairs in Portland, Oregon, started trying to figure out what to do with all her unused tiles. She glued colorful paper on the back of them and turned them into necklaces, listing them for $10 each. Over the next few months, she made improvements: a more attractive package, better photographs, and a higher price of $15. By the 2007 holiday season, she had four part-time employees and was selling more than 100 necklaces a day.
That year, McAbery sold $96,000 worth of merchandise, but she was miserable. "I was working 100 hours a week," she says. "There was a lot of pressure." She had chosen the life of a crafter because she wanted to be close to her 5-year-old son, but she felt as if she hadn't spent any meaningful time with him in months. The rational thing would have been to license her necklaces to a larger company or outsource the work, but neither occurred to McAbery. So, along with her regular run of $15 necklaces, she listed her business itself on Etsy. The sale price for one of the site's most successful businesses? Just $7,000.
McAbery's problems were related in part to her inexperience but also to the limitations inherent in Etsy's vision of commerce. 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 met seller after seller who told me, with a kind of resignation, that they figured to be paying themselves minimum wage or worse. For instance, Diana Chin of Red Lotus Designz told me glowingly about how materials for her $15 crocheted dolls cost only $4, leaving $11 in profit. When I asked her how long it took to make one, she said, matter-of-factly, "Two or three hours." Working for a few bucks an hour is fine if you like crocheting, but it hurts full-time sellers by creating the equivalent of a developing economy on the Internet.
Another source of price pressure: competition from actual developing economies. As Etsy has expanded internationally, adding foreign languages and currencies, so have complaints about low-cost knockoffs. In 2009, Aki Takada, the founder of New York City-based Oktak, made $45,000 selling handmade cotton coin purses for $22 to $45 each. The following year, a seller from Asia listed a similar purse for $12, and Takada's sales fell 40 percent. "I kind of had a monopoly before," she says. "But every year, tens of thousands of new sellers join who can price differently and can copy my style."
Kalin says many of the complaints about low-cost competition come from a minority of very vocal Etsy sellers, which is undoubtedly true. And the low prices offered by foreign sellers and hobbyists are part of what makes Etsy so appealing to consumers. But the complaints also raise uncomfortable questions about Etsy's ability to deliver on its marketing promises.
A few months after she had let her own company go for a song, McAbery created a new line of products—photos printed on blocks of wood—but rather than sell them exclusively on Etsy, she went back to the craft show circuit. "I believe that Rob has everybody's best interests at heart," she says. "But there are too many of us looking to make extra money." Then she asks me a favor. "If you know any entrepreneurs who want a designer, let me know," she says with a sheepish chuckle. "My real goal is a paycheck." So much for "Quit Your Day Job."
The continued struggles of Etsy sellers caused Kalin to turn his attentions back to Etsy, where he still had a board seat and a substantial equity stake. In late 2009, he urged the board to dismiss Thomas and reinstate him as CEO. He argued that Etsy had strayed from its core values in pursuit of growth and that it needed to focus more on the success of its sellers, its customer service, and improvements to its website. The board voted in his favor, and, at an all-hands meeting in late December, Kalin announced his return to Etsy.
"I'm here to restore a sense of wonder, a sense of poetry, and a sense of foolishness to Etsy," he told his staff. He recited a Yeats poem in a thick Irish accent, smashed a coffee mug, and then began reading from the Cluetrain Manifesto, a decade-old Internet marketing treatise about the power of communities. "The message was that things were going to get messier but that that was OK," says Wilson. "It was very powerful."
