Etsy Scandals Highlight Thin Line Between 'Handmade' And 'Factory Made'

Factory worker
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In January, e-commerce site banned Tracy Robertson from selling goods on its marketplace after discovering that she had outsourced some of her work.

"My business is completely crippled right now," Robertson, a model and fashion designer, wrote in an email to Etsy after the company pulled the plug on her account. "I moved my entire catalog over to Etsy and closed my personal Web site because I loved and trusted your platform so much."

Etsy, which promises shoppers handmade items, stood by its action. Robertson had delegated too much of her operation to other people, leading Etsy to flag her items as "factory made" and revoke her right to sell on the site.

When asked about the Robertson incident, Etsy declined to comment.

The company's closure of Robertson's shop is not an isolated incident. As 6-year-old Etsy has grown into the largest online crafts retailer in world, the prospect of eBay -style resellers invading the site and flooding it with mass-produced items has prompted the company to step up its policing of sellers.

This year, Etsy nearly doubled the size of its now 16-person detective staff whose sole job is to investigate if merchants are breaking its rules.

Those rules are not easy to understand and in certain areas are quite vague, much like the craft industry's definition of "handmade."

Etsy staff say the guidelines have changed considerably since the site started in 2005.

"Over time, as the marketplace grew and individual shops became more successful, we came to better understand the realities of Etsy shops as businesses," said Lauren Engelhardt, an Etsy policy manager, in a blog post on the company's blog.

"For some shops, remaining a one-person operation has been the right approach," Engelhardt added. "For other shops, the business opportunity grew to involve more people — either within the business or from outside. 'The seller' is now more accurately referred to as 'the shop,' meaning all the people within the business, not just a singular shop owner."

Etsy allows multiple individuals to sell wares on a single shop account under its rules as long as the majority share of their items' creation is done at one physical space where at least one Etsy account holder is supervising. That means an Etsy seller can pay a team of employees, so long as they all work together under one roof.

Sellers on Etsy can even employ "assistants" to do work on their items outside their place of business so long as the assistants' work does not collectively "comprise a majority share of a handmade item's creation."

Despite Etsy's attempts to clarify and better enforce its rules, some users still fear that Etsy's fast-growing marketplace will cease to serve as a haven for truly independent designers, ultimately hurting craftspeople who don't have the resources to scale up their operation.

"What I fear is this wonderful marketplace that is supported on a huge cloud of little people will leave us all behind as it goes to this next level," one commenter recently wrote in an Etsy forum. "We cannot compete with mass production when it's under that same banner."

"It now seems to me that Etsy wants to stretch its umbrella so as not to lose the companies that have outgrown it," another forum commenter noted.

The number of Etsy users and the value of sales that it facilitates have indeed grown by leaps and bounds in recent years. As of mid-April, the site reported 15 million members, a rise from 3.8 million in 2009. Last year, goods worth $537.6 million changed hands on the platform, a spike of 71 percent from 2010. That pace of growth has largely kept up this year. The value of goods sold on Etsy in March was $62.8 million, which is 41.5 percent higher than the value of goods sold last March.

Etsy charges sellers 20 cents to list an item for four months and takes a 3.5 percent commission on sales made through the site.

The company does not release its revenue figures to the public. But according to a TechCrunch analysis of Etsy's business model, the company generates revenue that is roughly 12 percent of the value of goods sold on its site. So if the company's sales in March are representative of the monthly average for this year, Etsy will generate an estimated $90 million in revenue in 2012.

As it has grown, Etsy has built a vocal community tracking its marketplace through the company's blog, which has also given rise to several other amateur Etsy blogs. Such engagement by users has at times magnified minor slipups by the company.

A series of online comments last week accused Etsy of featuring on its site a mass-produced brand of wooden furniture. Etsy issued an apology, noting that it had failed to include critical information in its original description of the seller, including the fact that the furniture maker was working with four other carpenters.

"We know that the lines we’re walking — to protect what makes Etsy special but allow our members’ businesses to flourish — are tricky," Engelhardt wrote on the company blog.