Etsy CEO reveals the company's plan to shift away from price wars and focus on its artisan heritage.

• Etsy is revising its policies to clarify which products are allowed on its platform for both sellers and buyers.
• Etsy is under pressure to compete with Amazon and other emerging e-commerce players such as Temu and Shein.
• CEO Josh Silverman stated in an interview that Etsy is focusing on meeting the demand for authentic products and genuine people by emphasizing the unique features that set Etsy apart.

Launched nearly two decades ago, Etsy attracted artisans and craft makers who could finally sell their unique products online and reach a vast audience. However, in recent years, the site has been overwhelmed with mass-produced, generic items from resellers who have mastered manipulating the platform to push out handcrafted products.

Etsy CEO Josh Silverman wants the company to return to its mission of keeping commerce human.

On Tuesday, the company is introducing a significant update to its policies to enhance transparency for shoppers, as stated by Silverman in an interview with CNBC. The modifications include new labels on the website and app to indicate how each seller made a specific product.

Silverman stated that Etsy is focusing on meeting the demand for authentic products and genuine interactions by emphasizing the unique aspects of the platform.

Etsy is introducing a new marketing campaign for its policy changes, featuring a TV commercial showcasing ceramicists, clothing makers, and other artists, followed by a smashed robotic arm. The platform's new guidelines mandate that all items must incorporate a "human touch" as outlined in its creativity standards. Each product must fall under 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 aims to retain its customer base and sellers amidst the growing competition from established players like Amazon and newcomers such as Temu and Shein, which offer fast and affordable delivery of goods to customers' doorsteps. The market is massive, with eMarketer predicting that the global e-commerce market will surpass $6 trillion this year.

"Silverman stated that there is a race to the bottom in commoditized commerce, with almost everyone in e-commerce trying to sell the same product at a lower price or with faster shipping."

Etsy has faced challenges in adjusting to shifting market conditions. In its most recent quarter, gross merchandise sales decreased by 3.7% from the previous year to $3 billion. The stock has lost over 80% of its value since its peak in late 2021. It has fallen 32% in 2024, while the Nasdaq has risen 23% over that period and reached a new record on Monday.

In December, Etsy announced job cuts affecting 11% of its employees, with Silverman attributing the layoffs to the "difficult economic and competitive landscape."

Etsy is facing pressure from activist investor Elliott Management, which owns about 13% of the company and has appointed Marc Steinberg to its board in February.

Etsy's public listing in 2015 forced the company to prioritize growth, shifting away from its socially conscious culture and feel-good vibe.

During the pandemic, Etsy experienced explosive growth, driven by a surge in demand for masks. The stock price quadrupled in 2020, and the number of businesses on the platform more than doubled to 9 million between 2020 and 2023.

Etsy enforced its "house rules" to regulate the platform. The central policy was that "all items sold on Etsy must be handmade, vintage, or craft supplies." Resellers were not allowed.

The new rules are more specific and updated to reflect today's realities. For example, a 3D-printed sculpture is considered "made by a seller." It's forbidden for a seller to add a single sticker to a commercially available face mask and pass it off as handcrafted. Regarding artificial intelligence-generated content, the policies note that "seller-prompted AI art," such as a dog dressed in regalia, qualifies as "designed by a seller," but a digital download of "over 5000 ChatGPT prompts" isn't allowed.

The challenge of growth

Etsy has long struggled to maintain its reputation as a marketplace for distinctive, handmade products while simultaneously expanding its product offerings to compete with larger competitors. This has been met with mixed reactions from early sellers like Ashley Smith.

In 2011, Smith started selling custom wedding handkerchiefs on Etsy through her business, The Polka Dotted Bee. Smith stated that Etsy was then a platform where one could search for unique handmade items, but has since become more focused on generic products.

In 2013, Etsy introduced a significant change by allowing sellers to collaborate with production partners. Instead of creating products themselves, sellers could seek assistance from contract manufacturers.

Abby Glassenberg praised the move as it allowed her to create a pattern only once and sell "infinite copies," reducing her workload. As a result, her Etsy shop transitioned from a hobby business to a full-time career.

Etsy consumers still desire the handcrafted experience, and Glassenberg recognizes the tension that comes with it.

"Because it's handmade, we like it," she said. "That's why human beings prefer it."

A handmade fork, forged and cut by humans, was given as an example by Glassenberg.

"She said she would pay $120 for it and cherish it forever."

Although competing on a larger platform presents challenges, Smith believes that the widespread preference for inexpensive and speedy products poses a significant obstacle for both sellers and Etsy.

In recent years, Temu and Shein have expanded their presence in the U.S., attracting American customers with discounted clothing, jewelry, home goods, and other products. Silverman has acknowledged that the sites are taking a share from everyone.

The company is now making it clear to both sellers and customers that they will compete on their own terms.

Silverman stated that the solution to the Etsy issue is not to engage in that game.

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