Etsy’s Explosive Growth Took More than Just Masks (Cornell Tech @ Bloomberg)

Etsy CEO Josh Silverman woke up on the morning of Thursday, April 2, 2020 to find that the company’s sales had exploded. The uptick was the result of one particular item: face masks. The Centers for Disease Control and Prevention (CDC) had just reversed its guidance in the United States to recommend masks for prevention of COVID-19 transmission, and Etsy’s sellers were recognizing the sudden unmet demand for handmade masks. Until then, most of the masks purchased on the site were for Halloween or beautifying facial creams. Silverman saw an opportunity to not only make non-medical grade masks available to protect communities, but also to give Etsy sellers with the skills and materials to make masks a lifeline. He made a difficult judgement call to divert a sizable portion of Etsy’s workforce away from their roadmap to focus on enabling mask sales.

Etsy engineers tweaked the platform’s search engine to make it easier to find these kinds of masks. The marketing team looked for ways to encourage mask sellers. Etsy developed guidelines around how sellers can list their masks in order to provide customers with correct information about their use and efficacy, without making medical or health claims.

Within a few weeks, 20,000 sellers were offering face masks on Etsy. That number has now climbed to 120,000. Between April and July, revenue from mask sales reached $500 million. Etsy’s gamble to delay long-term planning paid off handsomely, and not only on the balance sheet. The frenzy for masks on Etsy served as a powerful reminder to shoppers that Etsy is still a great place to find meaningful products with style and personality. Etsy’s stock price rose 11.4 percent in July.

“It felt like masks were so emblematic of the Etsy brand that it made sense for us to embrace this moment,” says Silverman, who joined Bloomberg Television’s Scarlet Fu for an online talk on Wednesday, September 9, 2020 as part of the Cornell Tech @ Bloomberg Speaker Series. He told the story of Etsy’s mask ramp-up, and explained how it demonstrates why Etsy remains special to its shoppers and sellers, fifteen years on.

Silverman began his career in politics, in the office of U.S. Senator Bill Bradley (D-NJ), working on the hot-button issue of healthcare reform. He transitioned into management consulting and co-founded Evite in the late-90s. After a successful exit, he moved into ecommerce at eBay, and then served as CEO of Skype, where he helped to pivot the company toward video calling, which would lead to a sale to Microsoft. Before joining Etsy, he led consumer products and services at American Express.

Righting the Ship

In May 2017, Etsy announced Silverman’s appointment as CEO on the heels of a quarterly net loss and a round of layoffs that would cut eight percent of its workforce. In an ecommerce industry increasingly dominated by Amazon, Etsy was struggling to maintain relevance. Silverman was brought in to bring the marketplace back to its former glory. The company had long faced an existential challenge, with its quirky DIY sensibility and socially responsible ethos rubbing up against institutional shareholders like BlackRock and Goldman Sachs. 

“We had to really prove to the world that we deserved to exist as a standalone business and that meant making a lot of really tough choices,” says Silverman. 

It was a tumultuous start. Within his first few months, Etsy executed a huge restructuring, moving many employees to a new role, and cutting more than 60 percent of projects in the pipeline. Etsy has spent the intervening years recovering from this low point, but the company’s stock price has skyrocketed since March from $32 to $135. 

Although the company has dialed down its DIY sensibilities over the years, and it gave up its B Corp status in 2017, the mask win proved that many shoppers still prefer meaningful products from small businesses to disposable commodities from faceless retailers. And Etsy’s recent success is due to more than just masks–non-mask sales were up 93% in the second quarter, with growth in nearly all top categories as nesting trends took hold.

“We can leverage cottage industry to rise to the needs of everyday consumers, and in doing so let consumers support their fellow citizens,” says Silverman. “I think this is really what Etsy is in a nutshell.”

Silverman also cites innovation on the seller side that traditional retailers can’t match. “On Etsy people show up and just start typing in keywords for things that they’re interested in buying,” he says. “Sellers figure that out very quickly and start making those things, and within days, the supply is there. The dynamism and agility of the marketplace is quite astonishing.”

Mission-Critical Social Responsibility 

Because Etsy’s socially responsible ethos is baked into its brand proposition, it benefits the company to do good. 

“Being a great [corporate] citizen makes you a better business,” notes Silverman. Etsy has become a carbon neutral company, and the company has worked toward becoming more diverse and inclusive. Recently the company has focused on supporting the Black-owned businesses that sell on Etsy, hoping to build on its history of unlocking entrepreneurial opportunities for marginalized communities. For the past several years, Etsy has curated a list of Black-owned shops for Black History Month. This year, that list has been the most popular collection the company has curated. 

Customer Behavior Drives Product

When Silverman was running Evite, he initially suspected that the product’s most compelling aspect was that it allowed users to save time when making social plans. However, after talking with users, he found that people most valued that they could see who would be attending an upcoming gathering. Therefore, the company centered that aspect of the product within the user experience.

At Skype, Silverman similarly recognized that customers were not excited by the prospect of saving money with free phone calls. They loved Skype because it allowed them to spend time with faraway family and friends. This partially inspired Skype’s decision to pivot to video chat, which became the product’s defining feature. 

Silverman keeps his ear to the ground at Etsy as well, looking for vocal customers’ views on the product. Until recently, the site has intentionally foregone adopting a default free shipping policy, attempting to convince customers that there is “no such thing” as free shipping, since those costs are simply borne by the seller. Nevertheless, because online shoppers have become so accustomed to ubiquitous free shipping, Etsy has changed its stance. 

“What people don’t want is to be surprised at checkout with shipping or any expense that they weren’t expecting,” says Silverman. 

 

Levelling the Playing Field

Silverman recently made headlines speaking out against a proposed California consumer protection bill supported by Amazon that would have held online marketplaces liable for all the products sold on their sites, even those from independent sellers. While the proposal “will not advance in its present form by the legislative deadline,” according to the California Assembly member who introduced it, it would have  disproportionately hamstrung smaller online retailers with fewer resources like Etsy. Even though Etsy doesn’t warehouse products, fulfill orders, or deliver packages, it would have still been regulated alongside Amazon based on this proposed standard.

“I think the world is begging for alternatives to Amazon,” says Silverman, “so the fact that Amazon was pushing forward a bill like this at a time when there’s so much scrutiny about their market power was frankly a little bit shocking.”

Ecommerce remains a contentious battleground, and in the wake of a pandemic that promises to keep people indoors for a while longer, people need online retail more than ever. Etsy used face masks to stake their claim in the pandemic economy, and it proceeds to carve out territory in one of the world’s most competitive industries.

You can watch the entire discussion below: