7 Noteworthy Points in Etsy’s IPO Filing

The mainstream jewelry industry has not always paid attention to online craft site Etsy. My colleague Jennifer Heebner has had designers tell her the site is “for bead stringers and wire-wrapped jewelry, not for fine designer lines.”

However, jewelry has long been the site’s number one category (though fine jewelry has not always done well), and savvy industry players have kept an eye on it. Nordstrom featured some Etsy items in 2013. Esther Fortunoff said that she wanted her new store to include the “maker culture that is now so popular with Etsy.” One designer spotlighted by JCK Marketplace got her start on the site. And it still spawns countless small-artisan success stories, such as this Harry Potter-inspired engagement ring.  

This week, Etsy filed for a $100 million IPO. Its submission to the Securities and Exchange Commission throws a spotlight on the impressive amount of business it does. Among the more notable facts:

– It claims 54 million members, 1.4 million active sellers, and 19.8 million active buyers. (Active is defined as having bought or sold at least one item in the past year.) 

– 11 percent of those active sellers have been on the site for over four years.

– 86 percent of its sellers are women.

– In 2014, it sold $1.93 billion worth of items (excluding shipping and refunds), up 43 percent from the prior year. 

– The site generated $195.6 million in revenue, up 56.4 percent from the prior year.

– And yet, it’s not profitable. Etsy is, in theory, just a platform, like eBay or Alibaba, that makes money from listing fees and commissions. But it has landed in the red for the last three years, incurring a $15.2 million loss in 2014. 

– It won’t announce quarterly earnings, as that could “incent us too heavily to seek near-term gains, which could diminish our ability to fulfill our larger mission over the long-term.” Not a bad model for other companies. 

That bring us to the filing’s extended description of the company’s values—which include maintaining a “sense of humor and joyfulness” and “keep[ing] it real, always.” (Surely, joyfulness doesn’t come up much in SEC filings.) Etsy is also the first company to go public as a B corporation (benefit corporation). The filing points out, for no particular reason, that its employees eat on compostable plates, and warns that adhering to its values—such as reducing its environmental footprint—may hurt the company financially.

Even so, Etsy’s journey from Brooklyn to Wall Street will likely exacerbate complaints that the company has gone corporate. The site was created in 2005 by Rob Kalin, a painter and carpenter who once called having to worry about shareholder value “ridiculous.” It’s long been a haven for small, passionate, Mom and Pop artisans, and its brand has become synonymous with the “maker” movement.

“We believe we are creating a new economy, which we call the Etsy Economy,” the filing says, “where creative entrepreneurs find meaningful work and both global and local markets for their goods, and where thoughtful consumers discover and buy unique goods and build relationships with the people who sell them.” 

Yet sellers have long complained about items on the site billed as handmade but mass-produced in China. (This even has a name: craftwashing.) In October 2013, the company angered some longtime acolytes by opening the gates to some manufactured—as opposed to strictly handmade—products. Revenues rose regardless; it soon launched a wholesale division. Yet the company’s base of little players has often fretted it will be elbowed out by the big. Recently, a moderately sized jewelry company appeared on an Etsy forum to inquire about advertising. Sellers threw a fit.

Even so, it’s hard to call the site a “sellout” in any meaningful sense: It was started as, and has always been, a business. But, as the IPO acknowledges, increasing profits while maintaining the site’s “authenticity” could pose a challenge.

“The problem Etsy will face as a public company is how to monetize artisans’ trust and have it too,” as the Huffington Post put it. “Convincing a tiny producer of handmade coasters that you are not a big corporation becomes a little harder when you are, in fact, a publicly listed company.”

It’s possible that’s too cynical. Or maybe it’s just keeping it real.

JCK News Director