Is Etsy the Next Online Gold Rush?

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Is Etsy the Next Online Gold Rush? post image

The barrier to business ownership online is being lowered all the time. Over the last 10 years, marketplaces like Ebay, Amazon and Etsy have helped people to establish life-changing businesses with relative ease.

Today, I want to share why the Etsy platform is a smart way to start a profitable business from scratch, and how I’d approach this type of opportunity.

Why Etsy?

Etsy is an ecommerce site for unique products that are difficult to find on other platforms, like Ebay, Google Product search and Amazon. Etsy features items that would rarely ‘rank #1’ in a Google or Amazon search – and caters to consumers for exactly that reason. If you want mass produced products, you can go to Amazon. If you want unique products difficult to find elsewhere, perhaps you’d go to Etsy.

Why is this an opportunity?

Because, unlike Ebay, Google product search and Amazon (who all came before Etsy, and created many, many millionaires) Etsy has yet to be overrun by “Professional Sellers.”

Let’s define those:

Professional Seller: Unlike original adopters who tend to bring offline businesses onto these new platforms, Professional Sellers determine which products to sell by the mastery of the platform itself. A simple way to distinguish a Professional Seller from an average seller is whether they identify as a “marketing first” or a “product first” company. Professional Sellers know the most popular products for any given market segment. They understand the ideal prices to get most people to buy. They ‘somehow’ know your name when they email you during a sale. In short: they are data-driven machines that are constantly evolving the optimum way to win sales at a cost that is hard for the ‘average seller’ to compete against.

Etsy currently has a limited culture of Professional Sellers, making it a potentially massive opportunity for anyone reading this today.

Here’s the Story

My entrepreneurial journey started 10 years ago making physical products. We eventually sold that business, you can hear about it here.

These days, a question I get a lot is: ‘What would you differently today, if just starting out?’

One of the first things that comes to mind is, ‘figure out a way to NOT compete with Professional Sellers.’

If I could do it all over again, this is how I might start in 2017.

The New Me

A few weeks ago, while renovating my Ranchette, I was browsing for unique and innovative furniture and fixtures. My search started, like most others, by browsing on the internet. Although I had hoped to find the products I need to make my house a home, I ended up going down a rabbit hole.

My innocent search for ‘Bar Stools’, oddly enough, led me to writing down these thoughts while standing at my bar without stools.  So, before I got fed up being on my feet, I jotted down these observations.

Major marketplaces are contracting

1) The internet feels like it’s getting smaller, especially when accessed via Google. A quick Google search for ‘bar stools’ brings up the usual suspects. Overstock, Wayfair, Amazon, Target, Pier1, etc. These are some of the largest internet retailers.

Here is a snapshot of front page results from Google:

Screen Shot 2017-04-03 at 5.41.54 PM

If you look long enough at their offerings you’ll find, combined between them, a fairly limited selection – I’d say about 100 different stools on the first few pages. While a broader search of the internet would probably yield 1000s, many of the images or descriptions will not help you to buy more original products. This is not to say there aren’t more for sale, because there are, but it’s getting increasingly harder for independent manufacturers to be seen on Google, without great efforts and a large budget.

2) Amazon and Ebay are also flooded with Professional Sellers. Most of the products you see on the first page of the search results are dominated by these sellers.

Screen Shot 2017-04-03 at 9.58.15 PM

Here is a screenshot from the front page of Amazon. I searched for ‘BBQ Grill’. As you can see, 95% percent of the listings are sponsored, or paid, positions. There is only one listing that is a genuine ‘search result’.

When you compete with Professional Sellers, on Amazon especially, you have to pay to play by the rules. These companies have advertising budgets and expertise. Although not impossible to beat, on these marketplaces, the product offerings are also becoming harder to crack, in terms of visibility, for new products and companies without the expertise of a Professional Seller.

3) Etsy has not been overrun (yet) by Professional Sellers. It is possible to be a competitive seller without possessing the steep learning curve – and/or advertising budget – that is required to compete on other platforms. There are several $1M+ businesses hiding on Etsy.

It used to be my belief that Etsy was for single artists and craftsman. While this may still be the case, to some degree, after speaking directly with a few makers there, and seeing the information that is Etsy publishes about its sellers, there’s clearly potential for enough sales to build thriving businesses. There is still opportunity for new sellers and products to be seen without a high barrier to entry.

The first product I ordered from Etsy…

…was a reclaimed island top and shelves. When they arrived, slightly off specification, I had a conference call with the owner and their designer. On the call they told me they’d been in business for about 3 years, supporting a wood shop full-time. Surprisingly, Etsy makes it easy to estimate how big an organization is.

workers

According to their company page they have four shop employees. To most buyers this type of information is satisfying, because it seems as if you have a group of professionals working to make your products. To an entrepreneur, or someone interested in entering the market, this is big, fat validation that there is money to be made.

IMG_9219 2

Etsy also shows company sales. This particular company has sold 645 items since 2012. Product prices range from about $185 – $3,000, with most items being between $1,000 – $2,500. Looking through their 154 reviews, I can see that they changed their product line in 2015 from chalk boards to reclaimed wood items. Looks like they found a niche!

sales

With a little math, it wouldn’t be hard to figure out average transaction values, and yearly sales, by looking at reviews and total time in business. Simply put, Etsy makes it easy for you to judge market size with information that is publicly available. This is great for those considering starting a business. Information like this is used by Professional Sellers all the time to make decisions. On other platforms, like Amazon, it’s not readily available and is most often accessed using paid tools like JungleScout. Eventually, the proliferation of this information will make for a very competitive landscape, which will be filled with Professional Sellers.

The DIY Lighting Niche

The company I bought my wood top from weren’t Professional Sellers, but there were other barriers to entry – they clearly had expensive machinery and specific woodworking knowledge. Good for other wood shop owners reading this article as validation, but not an opportunity for me with my limited resources.

So what product can you create overnight without the cost and infrastructure of, say, a wood shop?

I would start with pre-manufactured, off the shelf, parts that can be assembled in a way to create something new.

laundry light

Not for everyone’s taste, but this is the light I selected for my remodeled laundry room.

A quick search brought up 1000s of lamp parts available for purchase, on various corners of the internet. Most of the products are standardized, meaning they fit together easily. So, with a selection of 1000s of parts, it’s possible to make endless combinations to serve many different lighting niches and designs.

Screen Shot 2017-04-04 at 12.25.42 PM

Although I have never made a light before, when I saw Etsy sellers offering a similar model for $185, I was curious about how hard it would be to assemble. So, I spent the next three hours looking at close-up product photos. I was flipped back and forth between different lamp supply stores, learning all of the correct terms for lamp parts and Etsy product pages. Eventually I figured out what I thought would be required and drew a sketch.

Screen Shot 2017-04-03 at 10.57.26 AM

I could, perhaps, have done this faster had I ordered the light from the maker on Etsy and disassembled it. But because it was easy to see detailed photos, I just matched up the parts with the lamp supplier and ordered them.

Fast forward a week, and my parts arrived. Despite my messy work area, assembly was easy and without surprises.

lamp parts

Other Benefits to Selling a Product on Etsy

If I was 10 years younger, or just starting on my entrepreneurial journey, I would be jumping up and down right now. There are ways to make and sell products without competing with Professional Sellers or going to a trade show :)

You can validate a physical product for less than a $100. Take product photos with an iPhone, put up an Etsy store and start learning. For $1000 you can make 5-10 products and have a full-blown store. And, because Etsy markets itself as a ‘maker’s marketplace’, my belief is that customers are willing to wait while you hand-craft their products — I know as a customer I was. Meaning – you don’t have to keep inventory if you can’t afford it. Order the parts and assemble as needed, and keep overhead low. I can’t think of a cheaper way to start any business, let alone a physical product business in 2017.

After finding the lighting niche, specifically the ‘brass modern lighting’ niche, I started looking for others. How many more of these are hiding on Etsy? I found quite a few. The lighting niches are not the only ones ripe for disruption. Etsy is a treasure trove of untapped products and markets. As you can see here, people are starting to catch on as I did. All of these products are made from a similar supplier that I found my lighting parts from.

ex1

 

ex2

 

ex3

A Final Note

Although the light I made resembled the one I found on Etsy, I’m not suggesting you rip off other people’s products. When I designed my light, I made the mount flexible so if attached to a  sloped ceiling, or uneven surface, the light would be perpendicular to the ground. Also, I added Edison style light bulbs which I thought looked better. For a lot of people they still look the same. Truth be told, there are very few lighting designs that haven’t been explored previously. As another example, the company I had make my wood island top did not invent wood island tops. They, like many other manufactures, use the same design and technique to develop similar products. We call this approach ‘Rip, Pivot, Jam’ and, a lot of times, real innovation is discovered within the organization during the process of design and not necessarily in the product itself.

In the case of their wood island tops, for example, the innovation came when they brought their business online. Previously, they were a struggling local wood manufacture trying to meet the basic needs of a small town. For some, this is what makes Etsy great right now, talented makers have the ability to sell their unique products around the globe.

Finally, most successful product experts will eventually become Professional Sellers. The next logical step can often be mass distribution once you have found efficiency in your product manufacturing. With our previous business, we became Professional Sellers in our niches. This allowed us to control our marketplaces in many ways, and was critical to finding our next niche, which leveraged both our product and marketing skills.

Of course, timing with any marketplace or niche counts. Some of what we accomplished in ecommerce was a series of happy accidents after we got in the game. The most important bit of timing is always starting today.

Ian

PS: Have you started an Etsy-based business using the methods above? Tell me your story, you can email me at ian @ tropicalmba.com

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Published on 04.04.17
  • http://www.citeworks.net Glen Thomson

    This is fascinating. Cheers for the thorough write up, my biz brain is whirring :)

  • http://technium.com.au Simon Pilkington

    A great read, and a great approach for anyone looking to get started. I wonder how many of these etsy type businesses we’ll hear about at DC Austin?

  • Ricardo P Aquino

    Love seeing that you are getting more comfortable calling it a Ranchette.

    I can see Etsy as the platform for an aspiring photographer to sell prints with a custom. reclaimed lumber frame or something like that. Looks like now is the time to join the fun. Great article.

  • TimHoyt

    Nicely done Ian

  • brad

    Very interesting. I previously did a little exploring, and found myself browsing the lighting niche thinking I could compete.

  • http://www.tropicalmba.com/ Dan Andrews

    niiice! perhaps you and bossman will lock horns! :D

  • http://www.tropicalmba.com/ Dan Andrews

    a regular Biz Bill Shakespeare

  • http://www.tropicalmba.com/ Dan Andrews

    finally! :D

  • http://www.tropicalmba.com/ Dan Andrews

    my guess is not many (or any) this year. ripe for somebody to build software tools!!!!

  • http://www.tropicalmba.com/ Dan Andrews

    :D

  • http://www.TropicalMBA.com/ Ian

    Thanks Tim

  • http://www.TropicalMBA.com/ Ian

    Do it!! Would be very interested to see how it turns out.

  • Steve Creasy

    I have two Etsy stores for over 3 years and volume is LOW (under 10% of my Amazon sales for the same SKUs). Etsy is not a gold rush by any means. They have an absolutely awful e-comm backend too – just a couple months ago did they allow sellers to use a SKU… lol… The top stores on Etsy are all Craft Supplies selling stuff for like $5-20 and its only popular for other things like Jewelry, apparel, vintage items, etc. Never in a million years will become the next Amazon.

  • http://schoberg.net/ Jesse Schoberg

    Biggest takeaway from the post. “Ranchette” is back. hahaha

  • Michael Haas

    I’d be curious what niche you’re in Steve – the fact that you have the same SKU’s on Amazon and Etsy makes me think that your product may just be more suited to Amazon. Ian isn’t arguing that Etsy will trounce Amazon, but that Etsy is a different market looking for different things that hasn’t yet been fully exploited in the way Amazon has.

  • Steve Creasy

    I’m in the jewelry category, so its a relatively popular category for Etsy but still low volume.

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