Dear Friends of Etsy,
According to the lunar zodiac, the Year of the Ox, 2009, will be a “year of resilience.” Feng Shui experts have expressed sentiments that despite (or perhaps because of) the current economic turbulence the Year of the Ox will bring respite because the ox is patient, persevering and tireless. The ox symbolizes prosperity through fortitude and hard work.
Perseverance and hard work are principles we are taking to heart at Etsy in 2009. We are building the world’s most vibrant handmade marketplace, one that gives more meaning to buying and one that can be an amazing breath of fresh air for millions of people who want to discover something unique, like Sarah Faber’s (Blackeyedsuzie.etsy.com) incredible handmade dolls, or to connect someone inspirational and whimsical, like Boudoir Queen, Dawn Younger-Smith.
A Word About 2008
2008 marked a transition year at Etsy: two of Etsy’s founders moved on, and Rob Kalin moved from the CEO role to that of Chief Creative Officer (CCO). Rob is less involved with Etsy day-to-day but he remains very committed to our mission and is regularly weighing in both as CCO and as an Etsy Board member on major strategic and product-related decisions.
In late January, Rob was in Davos, Switzerland for the World Economic Forum (WEF). The WEF nominated Etsy as one of its 2009 Technology Pioneers. Rob will be sharing more of his experiences from Davos in a Storque article.
Etsy continued to grow rapidly over the course of 2008. Gross merchandise sales grew 230% from roughly $26.5 million in 2007 to roughly $87.5 in 2008. Of course, Etsy’s share of that gross merchandise sales number is substantially smaller. Etsy is still a young company and we need to invest in human resources and technical infrastructure to help deliver against our mission. We’re working towards becoming financially self-sustaining. We’ve set an important goal for the company to reach cash flow break-even before the end of 2009 and believe that goal is within reach. In any case, Etsy is fortunate to have a strong balance sheet and capital to carry us through our start-up years as well as any unexpected downturns in demand due to the volatility of the current economic climate.
Like gross merchandise sales, our unique buyer and seller bases experienced triple-digit growth in 2008 with year-over-year growth in unique buyers outpacing year-over-year growth in unique sellers by nearly 30%. Growth in Etsy membership is perhaps the most compelling signal of the strength of Etsy’s core value proposition:
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Site Launch: 06/18/05 = 3 members
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Approx Three Years Later: 06/10/08 = 1,000,000 members
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Approx Nine and a Half Months Later: 03/31/09 (estimated) = 2,000,000 members
It took three years to attract our first one million members and about nine and a half months to reach the second million. In economics, this type of growth is often referred to as the “network effect,” meaning the [generally positive] effect that one user of a good or service has on the value of that product to other people. As more and more members join Etsy, the Etsy marketplace is more valuable to both buyers and sellers.
Thank you, Etsy members, for an amazing year.
Operational Updates
In my first installment of Talking Shop, I listed our project/product priorities for the past three to four months. Etsy delivered as planned on several of those projects. We also delivered a couple of products ahead of plan, while still others have been put on hold or overtaken by new priorities. We are committed to delivering against our customer promises and to letting you know why we’ve chosen to reorder our list if and when that happens.
I’ve asked various staff – Chad Dickerson, Sara Hicks, Matt Stinchcomb and others – to offer a series of more detailed technical, product and marketing updates to all of you in the next few weeks and on a more regular basis. They will do so through a series of separate posts. In addition, and in an effort to better communicate with all of you, we recently created an “Admin only” (“admin” means Etsy staff) Announcement Forum at the top of the Forums page. This is a dedicated area for important announcements from Etsy.
Here is a quick sneak peek on a few things:
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Earlier this month we introduced in beta form the Etsy Developer Community. Our CTO, Chad, has already written about this and will be following up soon with an update. I’m looking forward to seeing the creativity that will undoubtedly be unleashed from this new API release and I believe Etsy sellers and buyers will benefit. Etsy blog editor, Vanessa Bertozzi, shares more about the forthcoming API here.
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You will see clarifications and improvements to the Etsy checkout process in March and throughout 2009. We understand that the messaging we use to guide buyers through Etsy’s checkout process can be confusing, causing some buyers to believe they’ve paid before they have actually completed the transaction. In the next few weeks, we will be clarifying messaging in the checkout process, and in the coming months we will be working to better clarify the functional elements of the overall process.
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In March, we will begin beta testing functionality to allow sellers to pay Etsy fees with PayPal. Barring unforeseen issues that may arise from beta testing, we expect a full rollout shortly thereafter. You’ll be hearing more about this soon. We’ve also evaluated our collection policies for Etsy seller fees. The result of this evaluation was announced in December and will go into effect in March.
As I mentioned above, the Etsy Product and Engineering Teams will be providing these updates in the future. Briefly, I will say that 2009 is a time to keep our heads down, replenish the soil and focus on improving the basic building blocks of the site. As we move toward the second quarter of the year, the following are our product-related priority areas:
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Search
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Payments
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Checkout
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Registration
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Safety, security, trust
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Seller tools
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Showcase
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Site performance
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Favorites
Stay tuned for additional updates from the team on these and more projects.
Etsy’s Product Team successfully implemented earlier this year one project you cannot see on the Web site. It’s a usability lab at Etsy, and I am very excited about it. This is a place where we can invite actual users of Etsy.com (buyers, sellers and browsers) to use the site while we observe in another room. The setup allows us to see firsthand where users get stuck or have a hard time understanding how to move through an action on the Web site. Here’s a photo of the Etsy usability labs: 
In January, we conducted our first ever usability lab session in this new space and it focused on the seller listing process. We wanted to observe the issues sellers encounter when listing items on Etsy because improving this process is central to improving the quality of search on Etsy. The information gathered here will be combined with the feedback and suggestions many of you have already provided via the Etsy Forums and past surveys. In addition to in-person testing in Brooklyn, we are also planning to conduct remote testing to better engage with our users across the country and world. We’ll provide details on how to participate in those later in the year.
New Friends of Etsy
In my introductory post on Etsy’s blog, I said this:
“My current goals at Etsy are:
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People: seek deeper experience to lead Etsy through things we’ve never done before,
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Process: create a disciplined approach to planning and execution, and
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Product: build the best marketplace for connecting makers and buyers.”
People remain at the top of my list. I am spending at least half of my time identifying and recruiting talented and committed people to complement this awesome Etsy team. Work gets done through people, and people are profoundly affected by culture. I consider hiring and building a customer-focused culture among my top priorities at this stage of Etsy’s development.
I am thrilled to introduce to the Etsy community Sep Kamvar, one of the world’s brightest minds in personalized search, computational methods and data mining, and Lou Sagar, a recognized innovator in home interiors, artisan craft and lifestyle retailing.
Sep is an ex-Google engineer and also a friend and fan of Etsy. Sep is a technical advisor to Etsy on search and will be helping us think about how to craft Etsy search algorithms and present search results with buyers and browsers in mind.
There will be no “big bang” changes around search. We understand that tagging and search are critical parts of the overall selling process on Etsy, and we will communicate with you and offer you a chance to weigh in as we further shape our thinking in this area. We’re very lucky to have Sep’s brain and his pleasant spirit working with us.
Lou is known as the founder of Zona, a trendsetting home and lifestyle specialty store, which pioneered the art of product storytelling in a storefront setting. Lou is a consultant to Etsy helping to craft our merchandising strategies. Just a few days ago Etsy admin Mary Andrews published an update about our Merchandising efforts.
Beyond 325 Gold Street
Today, I am traveling to Boston and will meet with members of the Boston Etsy Team (“Boston Handmade”). This is the fifth Etsy Team I’ve met in the last few months. In my most recent meeting with the NewYork/NewJersey (“NewNew”) Etsy Team, I was again reminded of the incredibly powerful connections Etsy has created among many, many individuals. Thank you Etsy Team members for supporting Etsy and a handmade way of life.
Reaching out internationally, Etsy conducted a survey of its non-U.S. sellers in January 2009. The results and learnings were published here on Wednesday and immediately found their way to the New York Times via Marshall Kirkpatrick and the Read Write Web blog. Thank you to all who participated in this survey. As a follow-up to the survey, Liz Wald and I are planning a trip to Europe (U.K., France and Germany) in late March. In each of these countries, we will be meeting with Etsy sellers and possible Etsy partners. You will hear more from us about international product development after the trip. Canadian and Australian sellers: we hope to visit soon with you, too, either in person or via the Etsy Virtual Labs.
In other notable news, Etsy was recognized in the latest issue of “Fast Company” magazine as #44 on the Fast 50, its list of the most innovative companies (yes, that’s me in the photo, but honors go to all of you and to Etsy’s dedicated employees).
The Bigger Picture
I’d like to close with a question: what business do you think Etsy is in? Here’s a post from Zappos CEO, Tony Hsieh, to stir up your thinking. Zappos was formed about nine years ago. A few years into its life as a company, Zappos paused and asked itself what they’re really all about. I’m offering this quote as a conversation starter to a strategic question. I welcome any comments you may have about Etsy’s customer service, but my question is more about what’s special about Etsy and how that informs our long-term vision. Operationally, we at Etsy admire and are learning from Zappos’ commitment to customer service.
“Whatever vision you have for your business, there is a bigger vision that makes the [poker] table bigger. When Southwest Airlines first started, they didn’t see their target market as limited to just existing airline travelers, which is what all the other airlines did. Instead, they imagined their service as something that could potentially serve all the people that travelled by Greyhound bus or by train, and they designed their business around that. They offered short flights at cheap prices, instead of going with the more prevalent “hub and spoke” model that other airlines were using. They made it easy for customers to change flights without paying huge penalties. And they turned their planes around at airports as fast as possible.
At Zappos.com our original vision was to just to try to sell some shoes online. But after a few years, we realized that we wanted and needed a bigger vision. We decided to make our table bigger by envisioning the Zappos brand to be about the very best customer service and the very best customer experience. The customer service vision enabled us to expand beyond just selling shoes. In fact, today we also sell clothing, bags, housewares, electronics, and even kitchenware.
But because our vision is about building a brand around the best customer service, the future of our company isn’t even limited to just e-commerce. We’ve even had customers ask us if we would start an airline. We’re not going to do that anytime soon, but maybe 30 years from now, there will be a Zappos Airlines that’s just about delivering the very best customer service.”
From Zappos CEO, Tony Hsieh, http://blogs.zappos.com/blogs/ceo-and-coo-blog
So, what do you think? What has Etsy tapped into that’s bigger than creating a marketplace for handmade items, vintage goods and supplies? I will be curious to read your thoughts and will post again on this subject in April. Please join the discussion in this forum thread (we’ll close commenting here to consolidate dicussion in one thread).
Until then, courage and appreciation will be as important as ever as we step together into the wondrous Year of Ox.
Happy Day and Hung Hei Fat Choi,
Maria
