IPO puts Etsy’s ethics under the spotlight
Arts and crafts marketplace lauded for its values, but some worry about lack of transparency
The online site Etsy has brought millions of customers in touch with small designers and helped to popularize a DIY esthetic that is as popular at craft sales as it is at Crate and Barrel.
But behind the glitter and the chevron and the endless iterations of mason jars beats the steady drum of a Wall Street ticker.
Since filing a prospectus for an initial public offering last week that is estimated to be worth $100 million, the Brooklynbased company has poised itself to become one of the first stand-alone public B Corporations. Reimagining commerce B Corporation is a label used for companies that maintain socially and environmentally responsible business practices.
There are only about 1,000 B Corporations worldwide — and each company has gone through a certification process to prove its ethical mettle, such as having women’s leadership programs in the office, volunteering company time to charity and composting office waste.
“B Corps are certified by the non-profit BLab to meet rigorous standards of social and environmental performance, accountability, and transparency,” reads a statement on the B Corporation website.
Etsy became a B Corporation in 2012, but it traces its social consciousness to 2005, when it was founded by Robert Kalin with some friends as a forum for crafters to sell their wares. But it remains to be seen if the company can balance Wall Street with warm-and-fuzzy.
“Going public is not necessarily what artists have in mind when they’re creating their craft, when they’re making art,” said Ryan Buell, who teaches about the connection between transparency and ecommerce at Harvard Business School.
CEO Chad Dickerson promised in the prospectus filed with the U.S. Securities and Exchange Commission that the IPO would not alter its “unconventional operating philosophy” and even promised to eschew quarterly guidance reports in order to avoid short-sightedness.
This tension between profit and values is nothing new.
In 2013, under the leadership of Dickerson, Etsy began allowing factory-made goods to be sold in its stores. In order to mesh this new practice with its promise to be “your place to buy and sell all things handmade,” it redefined the definition of handmade to include anyone who had commissioned goods to be made — whether those goods were made in an apartment or a factory in China.
Brick-and-mortar stores such as Zara have been selling knock-offs for decades. If a customer wants to buy a cheaper version of something — whether it’s a wedding dress or a throw pillow — why not let them?
But how does facilitating the sale of mass-produced products made in countries with questionable labour ethics square with its social mission? A hands-off handmade marketplace While Dickerson promised in his letter to “reimagine commerce,” Etsy maintains a consistently laissez-faire attitude toward the ethics of the people who actually sell on its website.
The company has long made it clear that when it comes to the content of its vendors’ stores, almost anything goes.
“Etsy is not a curated or juried marketplace, which means that anyone can list anything on the site at any time,” said company spokesperson Ariana Anthony. Although the site’s terms of use forbid copyright or trademark infringement, few small craftsman can afford to copyright their designs.
As part of its sellers’ guidelines, Etsy requires that stores disclose if they use manufacturers, and ask them to choose ethical partners. Despite its commitment to transparency, from a buyer’s perspec- tive, the site is anything but clear. It’s difficult to discern which vendors sell handmade goods and which ones sell products that are made overseas. A quick search of legwarmers shows multiple stores selling an identical pair of legwarmers at very low prices. Craft vs. kitsch Emily Laur started selling her cosy pillows, legwarmers and scarves through her Etsy shop Cabin fever Collective in the spring of 2014. “It’s great to have so many craft talents in one spot, it’s great to get inspired,” she said.
The 23-year-old from Southampton, Ont. has had a good experience with the site so far, especially its online tutorials on marketing and selling, although she still finds selling in real life to be more profitable.
“It seems like they want me to succeed, they have so many tutorials and whatnot, there’s a lot of resources there,” she said.
But while she loves being part of an online community of crafters, Laur said its tough selling handmade goods beside cheaper products made overseas.
“I found it hard to compete, the prices were so much lower than mine,” she said. One of her plaid pillow covers goes for between $25 and $40, while there are plenty to be had elsewhere on Etsy for under $20.
Virginia Smith, a 25-year-old Toronto jewelry designer, said she has decided to stay off Etsy because she’s tired of seeing people passing off products as handmade when they are simply finished by hand — like vendors who buy charms wholesale and put them on a chain, calling it a handmade necklace.
“Putting something on a string and calling it handmade is a little disingenuous and I don’t want to be associated with that,” Smith said.
In 2013, Elizabeth Dye, a Portland, Ore.based wedding gown designer who joined Etsy in 2007, told the New York Times how overseas factories were stealing her work.
Dye remembers Etsy when she joined as a real community of crafters and small designers. “It was great when I was building my business because it sort of instantly allowed me to access this huge international community,” she told the Star.
But over the years, she noticed overseas factories masquerading as small tailors move in. Some would even use her promotional photos to sell their knock-off versions of her designs. Seeing her own original photos used sell someone else’s work proved too much for the designer.
One day, out of frustration, Dye actually bought one of the knock offs shipping from China. What she received for $188 U.S. was nothing like her design, from the fabric to the cut.
“It actually looked like one of those cheapy flower-girl dresses you could see at the mall, but in full-grown woman size,” she said.
“The whole thing (selling knock offs) is fundamentally a lie, it’s all about tricking people into thinking that they’re going to get something that they’re not in fact going to get.” Under the public eye On the one hand, Etsy espouses itself as a company dedicated to social values such as gender diversity, buying local and environmental sustainability. Those values have instilled a certain degree of trust between the company and its vendors and customers.
But on the other hand, the company insists it bears no responsibility for the products sold in its marketplace, which has led to more and more mass-market goods sold on Etsy.
Buell, who teaches at Harvard Business School, said that Etsy will have to create value for shareholders without losing trust between vendors and customers.
“One possibility is to become a very transparent marketplace, to make it very clear to the customer where they’re buying from,” Buell said. One company that’s done that well is Etsy’s competitor, eBay, who early on built a robust customer feedback system.