Etsy embraces manufacturing, in a hopeful sign for the holidays

Like most former liberal arts majors, I am deeply uncomfortable with the more commercial side of the holiday season. Christmas trees showing up before Halloween bother me, as does the incessant holiday music from November through December.

But what really gets my inner Grinch going is the ubiquity of corporate, prefab, consumer culture. Do we all need to be buying the same plastic toys manufactured in China and shipped across the sea to our local Walmart? For the good of our economy, I suppose so. But I always hold out hope that there might be something a little more personal and original, which is why I’m one of those people who buys a handmade wooden truck for my niece instead of the Bratz doll she probably really wants.

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(Sorry, Vivienne.)

That’s why I like to do at least some of my holiday shopping on Etsy, instead of Amazon.com. Sure, I’ll probably still buy plenty of presents for family members via the Seattle-based e-commerce giant, whose aggressively inexpensive and convenient shipping options, as well as its perceptive recommendation engine, make it hard to refuse when there’s two days left until the holiday, and I’m all out of ideas. But Etsy, for me, is more fun to shop. Its products are stamped with the personalities of their creators, and they’re more likely to be unique — or at least relatively unusual.

I’m not the only one who feels this way. According to Etsy chief executive Chad Dickerson, millions of people are flocking to his company’s website, and in so doing they’re forming the core of a new maker economy.

The figures are impressive — and they show what a good business Etsy itself has become.

Etsy processed $1.35 billion in sales in 2013. On each sale, 3.5 percent of the price goes to Etsy as a commission, plus Etsy collects 20 cents for each listing. While we don’t know how many listings Etsy posts each year, there are more than 26 million items currently listed for sale on the site. It’s safe to say that Etsy’s revenue from listings and commissions is well above $50 million annually.

But Etsy also makes money from its payment processing system (which is now used for 90 percent of the transactions on the site, Dickerson said), shipping services (such as printing postal service labels), search ads, and wholesale services. So its overall revenues are much higher than that. Dickerson wouldn’t tell me how much higher, exactly.

Etsy employs a bit more than 600 employees, mostly in Brooklyn, New York, where it has signed a lease for a 200,000-square-foot building scheduled to open in 2016. And it has recently hired away top executives from San Francisco tech icons like Yahoo and Pandora. Its culture is a mix of crafty/hipstery Brooklyn and techy Silicon Valley, Dickerson said.

“We’re doing all kinds of data science with Hadoop and things — and we’re also pickling and going to food trucks,” Dickerson said.

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While Etsy has raised $90 million in funding so far, with its last round in spring 2012, Dickerson said there are no plans for additional rounds.

“It’s been running sustainably for five years,” he said. “It’s a real business.”

The next step: evolving beyond a marketplace for just solo crafters into something that also supports small- and medium-scale, locally manufactured products. Or as Dickerson puts it, helping sellers to “scale responsibility.”

To that end, Etsy no longer requires sellers to be offering goods that they themselves have made with their own two hands. That opens the door to eBay-style reselling of vintage goods, of course, but it also enables sellers to use outside manufacturers.

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Is this just the first step towards the commodification of Etsy? Will I have to direct my liberal arts scorn at Etsy sellers of cheap plastic toys in the future? Dickerson hopes not. And in fact, Etsy requires sellers to disclose any manufacturers they use, which lends transparency to the market.

For example, Erin True started making wood furniture for sale on Etsy. Her shop, UrbanWoodGoods, is now a thriving small business: True employs eight people and rents an 11,500 square-foot warehouse in Chicago to create and store all her goods. But it’s not all made in True’s shop: UrbanWoodGoods now also employs metal manufacturers in Illinois and Texas, a fact it discloses on its Etsy page.

Dickerson claims that 86 percent of Etsy sellers who are using manufacturers do so in the same country — in other words, U.S. sellers use U.S. manufacturers, or Chinese sellers use Chinese manufacturers — which should alleviate some concern over Etsy sellers offshoring their production.

Is this a major part of Etsy’s business? Not yet. Of the more than one million sellers offering goods for sale on the site, only a few thousand use outside manufacturing. But the embrace of manufacturing and the company’s progress toward becoming a platform for smaller, locally sourced manufacturers is intriguing.

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Now I’m going to see if I can find some recycled fork jewelry for my wife.