Another Amazon Takeover?
November 6th, 2015
Over the past few years, Amazon has become much more than an online marketplace for a variety of goods. The company expanded its services to include music and video streaming, ebook and audiobook libraries, food delivery and even a home services marketplace. Set on becoming a retail giant, Amazon has also introduced Handmade, a section of the website dedicated to selling artisan-created products. Handmade sells items in seven categories: jewelry, home décor, artwork, stationery and party supplies, kitchen and dining, furniture, and bedding.
Does the plethora of handmade goods remind you of anyone else? Etsy, who refers to itself as “the world’s most vibrant handmade marketplace,” has owned the artisanal selling space since 2005. However, other companies haven’t been able to survive Amazon’s onslaught. Will Etsy be able to persevere?
Amazon vs. Etsy
Let’s take a look to see how Amazon Handmade and Etsy compare.
Amazon has 244 million users and makes $75 billion a year in sales. Comparatively, Etsy has 22 million users with $2 billion a year in sales. Although Amazon blows Etsy out of the water in sales, Etsy has 1.48 million sellers, compared to the 5,000 sellers Amazon recruited to launch Handmade.
What is considered “handcrafted” differs between the two companies. Amazon is slightly stricter, only selling products that are made “entirely by hand, hand-altered, or hand assembled.” Outsourcing is not permitted, and to prevent this, Amazon requires sellers to provide details about their manufacturing process, including the tools and machines they use.
Etsy states, “Everything listed for sale on Etsy must be handmade, vintage, or a craft supply.” But, the company is a little more lenient than Amazon. In 2013, Etsy revised its policy, no longer requiring items to be exclusively handmade. Instead, Etsy allows sellers to recruit help from outside manufacturers. This led to a 29.4% increase of sellers between the second quarter of 2013 to the second quarter of 2015.
Right now, Etsy has a 20 cent listing fee, while Amazon does not charge sellers a listing fee. However, Etsy only collects 3.5% on each transaction, plus a 3% + $.25 payment processing fee. Amazon charges a 12% fee for each product sold with plans to increase that fee to 15-20% in August 2016. At that point, sellers will be charged a monthly fee of $39.99 to sell their items on Handmade.
Why Amazon Handmade may win
According to RetailDive, Amazon “has single handedly gobbled up market share of entire product categories like books and consumer electronics, giving Best Buy and Barnes & Noble major headaches, while helping to put Borders out of business. So attention must be paid whenever the e-tailer sets its sights on owning a business.”
Amazon has been successful in other areas because it has capabilities that smaller companies do not. It has global reach, marketing power, and the ability to offer items cheaper than small retailers and local businesses.
With such a wide consumer base and industry influence, artisan sellers may find it appealing to list their products on Amazon Handmade, as long as they can handle the substantially higher cut Amazon takes.
Why Etsy may survive
Some sellers are concerned about handing over too much control to Amazon. Joanne Nelson of Nelson Beads argues, “Amazon has made it possible for I-don’t-know-how-many people to create businesses or just bring in a little extra cash. But make no mistake: if you list on Amazon, you are essentially a drop shipper for them. You are selling to THEIR customers, not your own. Bottom line, don’t ever build your business on someone else’s platform.”
Etsy also prides itself on being a community for merchants and customers. Users don’t just go to Etsy to purchase items, but use the site for inspiration, much like Pinterest. Yory Wurmser, a retail analyst with eMarketer told RetailDive, “[Etsy] started as a small exchange for artisans and still maintains that mission of creating a community of buyers and sellers brought together around some common interest, whether it’s beaded jewelry or custom handbags. If it can stay competitive from a price perspective, it should be able to keep most of its artisans and customers.”
Lastly, there are some people who are very adamant that large corporations should stay out of the artisan industry. Like Shannon Whitehead’s opinion that “we don’t need the world’s largest retailer to control access to the ideas and designs of some of our most creative people. They [Amazon] already own enough of everything else.”
The other option
Then again, maybe Etsy sellers will simply supplement their income with Amazon Handmade. Maybe it’s possible for both companies to grow and bring more delicately crafted artisan products to consumers across the globe.
Although it is too early to tell if Etsy can hold its own against Amazon, TheStreet conducted a competition comparing Etsy products to Amazon Handmade products. It looks like Etsy came out on top.