So if you are a seller on Etsy and have never taken a look at Etsy’s Investor Relations portal, it might be eye opening.
I‘m a member of the Etsy Wholesale Sellers group on Facebook and lately the discussion has revolved a lot around the state and future of Etsy Wholesale. Prior to the new CEO, Josh Silverman, taking over from Chad Dickerson Etsy Wholesale was a vibrant community with a regularly updated homepage, and several events to help promote the wholesale lines. Lately, however, the events have dried up, the Instagram was shut down, and the homepage hasn’t changed in months. Needless to say it has a lot of sellers, who rely on the platform for their wholesale business, understandably nervous.
I knew from my experience with the startup community that Etsy has had to make a lot of information about the inner workings of their business available as investor documents once they went public, so I went in search of information on the percentage of Etsy revenue derived from Etsy Wholesale.
Etsy’s Strategy by the Numbers
When Etsy reports on its revenue it breaks it down into two main categories – Marketplace revenue and Seller Services revenue. Marketplace revenue, according to their documents includes the 3.5% transaction fee (charged to both Retail and Wholesale sales) as well as the $0.20 listing fee charged to retail. Seller Services revenue includes everything else that Etsy charges you for, or wants to, including shipping labels, Etsy Payments, promoted listings and other on-site advertisements, and Pattern by Etsy. They also make a (small) amount of revenue from commercial partnerships which they do not spell out in their financials but is honestly a very small percentage (around 2%) of their total revenue.
Sadly, Etsy does not separate out Etsy Wholesale fees from the rest of the fees collected from the retail side of their revenue, and it’s highly likely this is because it makes up such a small percentage of the total revenue. That being said, there are a few nuggets of information we can derive from what we do have. 2017 Market revenue made up approximately 40% ($179M) of their total gross revenue, while Seller Services made up almost the entire remaining 60% ($258M). If you look back over the financials (of which I could find detailed information about Market versus Seller Services back to 2014) this percentage has changed dramatically. In fact, the percentages for Market and Seller Services revenue from 2017 to 2014 literally are the opposite of one another.
In the context of our greater discussion on the emphasis that is being placed on maintaining EW… well, frankly it doesn’t look good. From looking at the Etsy Wholesale site there are currently 10,195 wholesale sellers and according to their 2017 SEC filing there are 1.9M active sellers within the Etsy ecosystem. Assuming that number includes both wholesale and retail sellers that makes Etsy Wholesale sellers roughly 0.52% of the total active seller ecosystem. Now that percentage is probably not accurate because all 10k Etsy Wholesale sellers probably don’t count as active sellers (made a sale within the last 12 months) but that’s the closest we’re going to get.
Bottom Line: Etsy Wholesale just doesn’t make Etsy enough money
You might be saying “But Adrianne, the average sale per EW seller is higher so even though they are a smaller percentage of total sellers they will have a larger contribution per seller to the Marketplace revenue” and you would be correct…. but it doesn’t matter. Even IF (and that’s a big fat IF) the average gross sales per EW seller was $12,500 a year it still only amounts to roughly 2.5% of the total Marketplace revenue and just about 1% of the Etsy’s total revenue in 2017. And I believe that average annual gross sale amount I just quoted to at least 6X higher than the actual average gross annual sales per seller for the platform.
I think it is safe assumption that EW only makes up a small percentage of that 40% pie of Market revenue, and considering they do not integrate EW with any of their other (major) revenue driving Seller Services outside of checkout it’s really no wonder we’ve seen it wither on the vine (on a side note why Shipping Labels was never integrated is really baffling to me so if anyone has any inside information I would love to know). It’s not even discussed in their Q4 2017 presentation, despite their emphasis improving the seller’s experience.
Honestly, if I were hired as a consultant to give my opinion to Josh Silverman I would tell him to cut it loose because it’s just not worth the time investment of maintaining it. At the moment it appears that the working strategy is to make EW revenue neutral – which would explain why the homepage is never updated, why the EW-specific support staff was reassigned or let go, and why the technical issues like the listings randomly being converted to private has yet to be fixed in over 3 months.
So, what should sellers do now?
Efforts to bring the importance of the service to the CEO’s attention are really wonderful and I have offered my support to them – however this CEO has demonstrated that his focus first and foremost is on improving the bottom line. Considering he didn’t outright cut it (like Etsy Studio or Manufacturing), I think he recognizes that it’s a valuable tool to the sellers who use it, but he’s also not going to spend any more money on it than he has to.
So, that being said, what do I think we as sellers should be doing to future proof our business? Diversify! If you haven’t started contemplating a new wholesale home now is the time to start thinking about it – before you show up to a “locked door” (metaphorically speaking) in case the winds change. Many sellers are moving to Shopify or WordPress, looking into services like Indigo Fair or Hubba, or simply making a non-interactive linesheet with Canva and processing invoices through Paypal, Quickbooks, or Wave. Oh, and this is a great time to revisit your pricing, if you haven’t already, to make sure you can afford an alternative solution!
If you’ve read any of my other stuff or talked to me in the Facebook group you know I’m also a coder, so I’ve personally considered looking into what it would take to build a wholesale site network for sellers to easily set up their own wholesale websites that would have a lot of the same functionality that EW currently has and maybe more. If that sounds like something you would potentially be interested in helping guide the development of with your feedback, think its a terrible idea, or even just have some questions about it please leave a comment below or reach out to be me directly. I would love to hear from the community about it, so don’t be shy!
Due to the extreme amount of interest in the idea of an alternative platform, please allow me to introduce Stockabl which is now accepting applications for both buyers and sellers and will be launching soon.I was blown away by the enthusiasm of the community for this project and look forward to working with everyone to build something amazing!