Etsy is trying to get bigger, and it's pushing away small sellers

Last December, Jessica Luu thanked her customers for keeping her jewelry store in the top 1 percent of Etsy shops for yet another year, according to rankings from a third-party analytics service. What she didn't mention was that, despite being among the biggest shops on Etsy, her sales had fallen to half of what they had been at their peak four years earlier, as changes to Etsy's search results made it harder for her store to stand out. Still, she had managed to make the platform work - but after Etsy announced yet another mandatory change last month, Luu said she's had enough. She's going to leave, for good.

"I feel strongly that the writing is on the wall, and I need to get out before it gets worse," Luu told The Verge.

Late last month, Etsy announced that it would start automatically advertising on sellers' behalf - and charging them when it led to a sale. Most sellers will have to pay Etsy a 15 percent cut of sales generated through this automated advertising, though they'll be allowed to opt out. Etsy's top sellers, the ones who earn $10,000 per year or more, will be charged just 12 percent, but they'll be required to take part in the program. There's no way to turn it off.

"My customers aren't stupid."

For top sellers like Luu, that means not knowing how their sales will increase, nor how often a sale might bring in 12 percent less in revenue. Etsy emailed sellers with an estimate of how many sales the program will drive to their shops, but sellers say that until the program goes into full effect, they're not sure how much of an impact it'll really have and how they ought to respond.

"Unforeseen costs are exactly what you try to plan for," Jen Wofford, whose jewelry store minusOne has been on Etsy for more than a decade, told The Verge. "Twelve percent is a pretty high unforeseen cost for a small business."

Many sellers have grown increasingly frustrated with Etsy in recent years. The company has made a number of changes designed to boost sales, but they've often come in ways that seem to help Etsy's bottom line while making business trickier for sellers.

Some of the biggest changes have come in the years since Etsy went public. When Etsy hit the stock market in 2015, investors were excited by the potential for the platform - and its sellers - to bring in more and more money. But that growth didn't escalate as fast as expected, and in 2017, the company's CEO was ousted.

Etsy investors demanded growth, and Etsy's CEO has made it happen

The board member who replaced him, Josh Silverman, has been more comfortable making changes that juice the company's revenue. In 2018, Etsy raised its fee on sellers for the first time ever, from 3.5 percent to 5 percent, and it started taking a cut from shipping fees, too. A year later, Etsy required all stores to use its own payment system, where it can also take transaction fees, instead of letting them go through PayPal.

The major change that every seller brings up is free shipping: last summer, Etsy told sellers that if they didn't offer free shipping on orders over $35, their products would get dinged in search and ads.

The free shipping change meant that sellers often had to raise prices to compensate, or else eat the extra cost. As small businesses, that wasn't easy: Wofford said shipping her small items in the US can cost more than $3 if she's mailing something from her home in New York to a customer in California. Because her products only cost $20 or so, she didn't feel comfortable raising prices. Instead, she absorbs the shipping fee and just makes a smaller profit.

Another seller said she refused to implement free shipping because she didn't want to raise prices on her customers. "How much of a jerk would I look like if I started to offer 'free shipping,' yet they see my price went up 3 dollars?," Noelle Short, who makes charms at CharmedandDangerousS, wrote in an email to The Verge. "My customers aren't stupid."Short says her sales from Etsy search "plummeted" as a result.

"To tell you the truth I am actively looking for another place to sell."

In many ways, the changes seem to be working. Etsy's full year 2019 revenue was nearly double what it brought in during all of 2017. But Etsy investors are still on edge. When, in October, it turned out that sellers hadn't raised their prices as much as expected in response to the free shipping push - thus bringing in less money for Etsy to take a cut of - it contributed to the steepest decline in four years for Etsy's stock.

Etsy sellers have been blunt in how they feel about the new automatic advertising program. On Etsy's forums, sellers called it "outrageous," "unconscionable," and "absolutely absurd." In conversations with The Verge, many said the same things - though several also asked for anonymity due to concerns about criticizing the platform on which their businesses rely. "I really don't trust the people who run Etsy not to find a way to punish shops who speak out," another handmade jewelry seller said. "To tell you the truth I am actively looking for another place to sell."

In an email to The Verge, an Etsy spokesperson shared positive feedback the company had received about the advertising change, including sellers who called it "amazing," "welcome news," and "the absolute right direction." The spokesperson said, "While we understand that changes like these can be an initial cause of concern, we're confident that once Offsite Ads launches sellers will see the benefits of this powerful new marketing tool."

In the past, sellers could set a budget, and Etsy would take that money and put it toward advertisements on Google. It meant that sellers had to pay upfront for ads, but they knew how much they were spending - Etsy didn't take a referral fee. Under the new program, Etsy will pay to promote sellers' products on major sites like Google, Pinterest, and Facebook. Sellers don't have control over what gets advertised, where, or how often. It's all controlled by Etsy. In exchange, they only pay when the ad leads to a sale.

At least, that's the only time they pay in theory. There's concern among sellers about how Etsy will determine when it deserves a cut of their money. Wofford said that, in the past, she's seen advertising analytics from another platform display information that's wildly inaccurate. If Etsy similarly credits itself for purchases that it doesn't truly deserve credit for, sellers could end up paying more than they ought to without the increase in sales. "There is no transparency with this new proposal. If Etsy says you owe, you pay. There's no way for small sellers to track any of this stuff," Kevin Miller, who makes and sells wooden brooms at AmericanBroomShop, wrote in an email to The Verge.

Some sellers are open to the changes, since it means less money upfront. Shena Jenkins, who runs the sign shop CraftyMamaGifts with her husband, says she's "not at all concerned" and that the fee they'll have to pay is comparable to what's taken away by Amazon, where she also sells. "A smaller percent of a sale is worth more than 100% of a sale that doesn't occur because I'm not being found," Jenkins told The Verge.

Etsy complaints have persisted for years

Google ads have been unsuccessful for Jenkins in the past, so she's happy for Etsy to handle promotion without her having to front the money. Still, Jenkins said she likes to have control over how much she's spending on ads, and she preferred an earlier Etsy advertising system that gave her that option. Etsy's spokesperson said the new ad program offers "more control with less risk" because sellers don't "pay any fees unless they make a successful sale."

Complaints about Etsy selling out and leaving its original audience behind are nothing new. Wired wrote in 2015 that Etsy had "lost its soul." In 2017, The New York Times reportedthat some of Silverman's changes made the site "barely recognizable." Bloomberg said that Etsy was "alienating sellers" in 2018. Particularly now that the site has to grow and answer to investors, the tension between supporting small businesses and making Etsy into a bigger business seems to be an endless battle.

The problem for sellers is they often have no other place to go. They can sell through their own online stores, advertise on Instagram, or take a crack at Amazon Handmade and eBay. But Etsy remains the go-to place for shoppers looking for crafty goods, and many have built their businesses around the platform. If Etsy makes a change, they often have no choice but to go along for the ride.

"Etsy has been wonderful to work with," since signing up in 2012, writes Miller. "But we don't want to work for them."