eCommerce: C2C Marketplace

Etsy Business Strategy: Key Insights

• Covid Accelerated Sales Growth: Etsy's online C2C marketplace grew particularly strong during the pandemic, with GMV and user numbers reaching new levels.

• Distinct Business Strategy: With its launch in 2005, Etsy shaped a previously untapped market for crafted and vintage goods. Since then, Etsy has expanded its product selection, and its wide range of individual sellers continues to set the brand apart.

• Focus on One-Person, Female-Led Enterprises: Almost all Etsy sellers run their shops out of their homes, most are female and sell alone. But recent developments have called into question Etsy's user handling and authenticity.

Etsy is a C2C (consumer-to-consumer) online marketplace that provides a platform for sellers to offer their products to a wide range of shoppers around the world. Etsy originally started as an eCommerce marketplace for handmade products, but has since broadened its scope to include all kinds of categories. 

Founded in 2005, Etsy’s platform transactions and user numbers have grown specifically in recent years, suggesting a potential for future expansion. Etsy is also part of our list depicting the top 10 most valuable eCommerce companies by market capitalization in 2024.

Etsy: GMV Increased During Pandemic

Etsy’s gross merchandise volume (GMV) spiked during the pandemic, and the platform has managed to stay at high levels ever since. GMV measures the value of transactions on a marketplace during a given time frame and is thus used as a metric to gauge marketplace activity.

Before the pandemic, in 2019, transactions on Etsy totaled US$4.7 billion, a figure only slightly higher than in the previous years. With the pandemic restrictions and the subsequent shift to online, activity on Etsy surged, first reaching US$9.4 billion in 2020 and then US$12.2 billion in 2021. As a result, pandemic growth rates indicate that GMV doubled in 2020 and increased by 29.5% in 2021.

Transactions on Etsy declined in the years after, but only modestly. As the necessity to shop online decreased, so did consumer demand for online marketplaces, which in the case of Etsy quickly recovered. Therefore, GMV returned to its 2021 peak of US$12.2 billion in 2023 and is forecast to continue growing to US$12.6 billion by 2024. 

The numbers of buyers and sellers reflect this trend.

Etsy Sellers Are at 7.5 Million Since 2021

The number of global Etsy sellers has spiked during Covid, growing from around 2 million before 2020 to 4.37 million in 2020 and 7.52 million in 2021. This represents growth rates of 61.9% in 2020 and 72.1% in 2021.

The most recent seller statistics available from Etsy refer to 2022, when the number of sellers diminished to 7.47 million, following the same pattern as GMV. As such, the number of sellers is expected to grow in line with GMV in 2023 and 2024.

Etsy Buyers Surpassed 95 Million in 2021

Etsy’s buyer numbers follow a similar pattern, with one small difference: The bulk of the pandemic spike occurred in 2020, when numbers jumped from 46.4 million buyers to 81.9 million, a 76.7% increase. From 2020 to 2021, the number of buyers grew at a more moderate rate of 17.6%, reaching 96.3 million.

It is reasonable to assume that the number of buyers will follow the patterns discussed above, having recovered from a slight decline to 95.1 million in 2022 and resuming growth in the years thereafter. 

The ratio of buyers to sellers has decreased over time when comparing the numbers. While there were 17 buyers per seller before the pandemic, the ratio dropped to around 13 buyers per seller after 2021.

The decrease in the ratio of buyers to sellers shows that while both numbers increased significantly during the pandemic, competition on the platform also increased. As a result, sellers need to differentiate themselves from other sellers because there are now fewer buyers available per listing.

But what does the profile of a typical seller on Etsy look like?

Typical Etsy Sellers: Home-Based, Women-Led, One-Person Enterprises

Etsy’s unique selling point is tied to its connection to the small businesses and individuals that characterize the brand as the accessible platform with original offerings for which it is known. 

According to Etsy’s annual seller report, 97% of vendors on the platform run the Etsy businesses from their homes.

Similarly, 82% of Etsy shops are run by one person, whereas 80% identify as women. Almost as many, 79%, consider their Etsy shop a business. 

Fewer sellers, 54%, distribute their products through multiple channels outside of Etsy, implying that there are a substantial number of sellers whose only distribution channel is through Etsy. In keeping with the private nature of most shops on the platform, 44% of sellers use their Etsy earnings to cover household expenses like rent or groceries. 

Just over one-third of sellers (34%) identified their creative business as their sole occupation, while 25% live in rural areas, making the majority of Etsy sellers urban dwellers.

Etsy Business Model: Closing Thoughts

Etsy established its brand as a haven for users looking to buy or sell unique items from around the world, and while the concept has evolved since then, Etsy’s focus on small businesses and individual sellers still distinguishes the marketplace from larger household names like Amazon or Alibaba. 

Despite some criticism that Etsy allows its users to sell more products in bulk, recent seller statistics show that the vast majority of sellers are single-person, female-led businesses. This suggests that the strategy of allowing bulk sales is more of an empowerment move than anything else. 

However, the scandals of the past year could harm the platform. Allegations of items falsely labeled as handmade and Etsy's treatment of sellers, including withholding 75% of their earnings in response to protests over fee increases, raise doubts about Etsy’s viability. Particularly given Etsy’s IPO (initial public offering) and its position among the top 10 U.S. eCommerce companies by market capitalization, the repercussions of these scandals could have a significant impact on investor confidence and consumer trust in the platform's long-term sustainability.

In case you were wondering what factors are driving Etsy's success and how the platform generates revenue, here's our take on the FAQs:

Etsy: Success Factors

The factors that contribute to Etsy’s continued success enable sustained growth, increasing transactions and users on the platform. It has maintained relevance in a competitive market amid other online marketplaces vying for traffic and business.

• Market Positioning: Etsy began as an online marketplace for crafted and vintage goods, which was an untapped market back in 2005. Although the company has since expanded its product range, Etsy’s branding remains distinct from other generalist marketplaces such as Amazon and Alibaba.  

• Seller Network: Etsy offers small businesses and individual sellers the ability to create a personalized storefront that uses video to introduce themselves and the history of their products, build a network of like-minded sellers, and connect with a wide audience. 

• Customer Experience: The C2C marketplace recognized early on the importance of providing a satisfying user experience, which is achieved through personalized recommendations using algorithms, establishing easy communication with sellers around the world and creating a transparent review and rating system. 

• Ensuring Intermediary Relevance: By providing value-added services that leverage network effects, Etsy ensures that it is more profitable for buyers and sellers to use Etsy as an intermediary than to do business outside of the platform. This includes add-on features such as advertising, advanced technology for easy navigation and communication, strong security measures, and delivery services.

With increased engagement on the platform comes increased revenue. But how does Etsy get paid?

How Does Etsy Make Money?

Etsy generates revenue from a variety of sources, which diversifies its portfolio and insulates it from losses on a larger scale. For its services, Etsy charges

• Listing fees: A fee of US$0.2 is charged for each item that sellers list on the platform. 

• Transaction fees: Each sale results in a transaction fee that sellers pay to Etsy. The fee is 6.5% of the item price, including shipping and handling. 

• Advertising and promotion fees: There are two types of advertising fees: One is for advertising directly on Etsy’s platform, and the other is for off-site advertising, where sellers only pay if a sale is made through those ads. 

• Subscription fees: The company charges US$10 per month for Etsy Plus services, which include advanced editing options for sellers' stores and site credits. 

• Payment processing fees: For each transaction processed through Etsy Payments, Etsy charges a fixed fee as a percentage of the total sale price, including all applicable fees. 

• Pattern fees: Sellers have the option to use Etsy Pattern to create a personalized website that is connected to, but separate from, the Etsy storefront and operates under its own domain. Etsy Pattern sites are free from Etsy guidelines and cost US$15 per month.

BBC – Etsy: 1 2 – Harvard Digital Initiative – The Strategy Story