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When Etsy launched nearly two decades ago, it became a haven for artisans and crafters to sell their niche products online. Recently, however, the platform has been inundated with mass-produced, generic items from resellers, overshadowing handcrafted goods.
Etsy CEO Josh Silverman aims to return the company to its roots. On Tuesday, Etsy announced a significant policy overhaul to clarify which products belong on its site. New labels on the website and app will indicate how each seller created their items.
“We’re positioning ourselves to answer the call for original goods and real people by dialing up the things that make Etsy, Etsy,” Silverman told CNBC.
Etsy’s new marketing campaign, including a TV spot featuring various artisans, highlights the platform’s renewed focus on handmade products. The updated rules require all items to incorporate “a human touch” and fall into one of four categories: made by a seller (either by hand or using automated tools), designed by a seller, handpicked by a seller, or sourced by a seller.
Etsy hopes these changes will attract both buyers and sellers amid competition from e-commerce giants like Amazon and fast-growing platforms like China-linked Temu and Shein, which offer cheap, fast-delivered goods. The global e-commerce market is expected to exceed $6 trillion this year, according to eMarketer.
“I feel like there’s a race to the bottom in terms of commoditized commerce right now and almost everyone in e-commerce is playing that race,” Silverman said. “They’re selling the exact same product and they’re trying to sell it to you for 2 cents cheaper, or ship it two hours faster.”
Etsy has struggled with market dynamics, seeing a 3.7% decline in gross merchandise sales in the most recent quarter, totaling $3 billion. The company’s stock has plummeted over 80% since its peak in late 2021 and is down 32% in 2024, despite a 23% rise in the Nasdaq.
In December, Etsy laid off 11% of its workforce due to the “very challenging macro and competitive environment,” Silverman said.
The company also faces pressure from activist investor Elliott Management, which holds a 13% stake, making it Etsy’s largest investor. Elliott partner Marc Steinberg joined Etsy’s board in February.
Etsy went public in 2015, which shifted its focus towards shareholder growth, contrasting with its socially conscious culture. The pandemic drove a surge in Etsy’s business, especially with mask sales, quadrupling its stock price in 2020. The number of sellers on the platform more than doubled to 9 million between 2020 and 2023.
Previously, Etsy used its “house rules” to police the site, requiring items to be handmade, vintage, or craft supplies, and banning resellers. The new, more specific rules reflect current realities. For example, a 3D-printed sculpture is now considered “made by a seller.” However, adding a single sticker to a commercially available face mask and passing it off as handcrafted is forbidden. AI-generated content also has new guidelines: “seller-prompted AI art” is acceptable, but digital downloads of bulk prompts are not.
Etsy has long struggled to balance its image as a marketplace for unique, handcrafted goods while expanding its selection to compete with larger rivals. Some early sellers have found these changes challenging. Ashley Smith, who began selling custom wedding handkerchiefs on Etsy in 2011, recalls when the site was filled with unique, handmade items but now sees it increasingly dominated by generic goods.
In 2013, Etsy allowed sellers to use production partners, enabling them to mass-produce items. Abby Glassenberg, who opened her handmade stuffed animal shop on Etsy in 2005, supported this move as it allowed her to scale her business. However, she acknowledges the tension, as many Etsy consumers still seek a handcrafted experience.
“Handmade doesn’t scale,” Glassenberg said. “That’s why we like it, that’s why human beings like it.”
Competing against giants like Temu and Shein, which attract shoppers with deep discounts, creates challenges for Etsy. Silverman acknowledges these competitors are taking market share but insists that Etsy will compete on its own terms.
“The solution to that for Etsy is not to try to play that game,” Silverman said.