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Friday, March 6, 2015

Etsy Online Retail Going Public

A decade ago, Etsy launched as a way for crafters and people that enjoy DIY (do it yourself) projects to sell their handmade goods online. Among other things, the platform sells clothing, shoes, jewelry, and fashion accessories.  Now the New York-based e-commerce site has filed for an initial public offering.

Now it has been decided that the company is going public.  If you don’t believe me, you can read the Etsy is going public filing with the SEC.

Etsy operates a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods.   Handmade goods are the foundation of their marketplace.  Whether crafted by an Etsy seller herself, with the assistance of her team or with an outside manufacturer in small batches, handmade goods spring from the imagination and creativity of an Etsy seller and embody authorship, responsibility and transparency.  They believe they are creating a new economy, which they call the Etsy Economy, where creative entrepreneurs find meaningful work and both global and local markets for their goods, and where thoughtful consumers discover and buy unique goods and build relationships with the people who sell them.

Etsy was founded in June 2005 in Brooklyn, New York as a marketplace for handmade goods and craft supplies.  From those beginnings, they have built an innovative, technology-based platform that, as of December 31, 2014, connected 54.0 million members, including 1.4 million active sellers and 19.8 million active buyers, in nearly every country in the world.  In 2014, Etsy sellers generated GMS of $1.93 billion, of which 36.1% came from purchases made on mobile devices and 30.9% came from an Etsy seller or an Etsy buyer outside of the United States.

The community of active users is the heart and soul of Etsy.  Their community is made up of creative entrepreneurs who sell on their platform, thoughtful consumers looking to buy unique goods in their marketplace, responsible manufacturers who help Etsy sellers grow their businesses and Etsy employees who maintain our platform and nurture their ecosystem.

Their business model is based on shared success: they make money when Etsy sellers make money.  Their revenue is diversified, generated from a mix of marketplace activities and the services they provide Etsy sellers to help them create and grow their businesses.  Marketplace revenue includes the fee an Etsy seller pays for each completed transaction and the listing fee an Etsy seller pays for each item he or she lists.  Seller Services revenue includes fees an Etsy seller pays for services such as prominent placement in search results via Promoted Listings, payment processing via Direct Checkout and purchases of shipping labels through their platform via Shipping Labels.  Other revenue includes the fees they receive from a third-party payment processor.

In 2014, Etsy sellers generated GMS of $1.93 billion, up 43.3% over 2013.  In 2014, they generated revenue of $195.6 million, up 56.4% over 2013.  In 2014, they generated a net loss of $15.2 million and Adjusted EBITDA of $23.1 million compared to a net loss of $0.8 million and Adjusted EBITDA of $16.9 million in 2013.  See “Selected Consolidated Financial and Other Data—Non-GAAP Financial Measures” for more information and for a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP.

They operate at the center of several converging macroeconomic trends in online and mobile commerce, employment, consumption and manufacturing.  The company believes that in combination these trends will benefit millions of people in their ecosystem around the world.

Etsy sellers engaging in their creative passion, working for themselves and defining success on their own terms.

Etsy buyers accessing a diverse, global marketplace of goods that have historically been found in highly fragmented markets; and, increasingly, responsible manufacturers using modern tools to craft goods in partnership with Etsy sellers.

Trends in Online and Mobile Commerce.  Etsy sellers offer goods in dozens of online retail categories, including jewelry, stationery, clothing, home goods, craft supplies and vintage items.  Euromonitor, a consumer market research company, estimated that the global online retail market was $695 billion in 2013, up from $280 billion in 2008, representing a compound annual growth rate, or CAGR, of 19.9%. This growth is expected to continue, with the global online retail market becoming a significantly larger portion of the total retail market, reaching $1.5 trillion by 2018, implying a 16.6% CAGR from 2013. Mobile commerce is also increasingly important in online retail. comScore estimated that since the first quarter of 2013, consumers visiting online commerce sites spent more than half of their browsing time on mobile devices; however, online commerce spending via mobile devices represented only 11% of total online commerce dollars in the third quarter of 2014.

Trends in Employment.  Whether motivated by economic necessity or personal preference, a growing number of people are turning to self-employment for their livelihoods.  In a 2012 survey of middle-class households in the United States by the Pew Research Center, 85% said that it was more difficult to maintain their living standards today than it was ten years ago.  A study commissioned in July 2014 by the Freelancers Union and Elance-oDesk estimated that 53 million Americans are working as freelancers. Women are also contributing to the trend towards self-employment. World Bank research shows that, in certain developing nations, over half of the women in the labor force are self-employed. We believe that many of these people have creative skills that could provide a foundation for entrepreneurship, but that they often have little or no experience running their own businesses, and they typically lack the marketing resources, the technological expertise and the manufacturing and logistics capabilities to turn their creativity into a business.  The creative self-employed can use the Etsy platform to help sell their unique product.

Trends in Consumption.  Most large retailers today follow the same formula, emphasizing efficiency and scale and pressuring their suppliers to reduce their costs in order to serve mass-produced goods at the lowest-possible prices.  Etsy believes that many consumers want to purchase goods that are unique and that reflect their personality and style, not simply mass-produced, generic goods.  Some consumers want their purchases to reflect their values; they want to support retailers and suppliers that have responsible and sustainable policies toward their employees, their communities and the environment. Finding these goods can be difficult, as markets for such goods have historically been highly fragmented across boutiques, consignment stores and other venues and marketplaces.

Trends in Manufacturing.  Because of advances in manufacturing technologies, individuals and small businesses now have the ability to manufacture goods in their homes and studios using tools such as computer-assisted design, 3D printers (learn about 3D printed fashion), computer-controlled routers and other machines at a fraction of the historical cost.  Etsy believe the decrease in the size and the cost of these tools will make it easier for creative entrepreneurs to start new businesses.  They also believe that small-batch manufacturers will be able to use these new technologies to provide high-quality manufacturing services so that creative entrepreneurs can scale their own businesses.

Have you used Etsy to buy or sell clothing, footwear, or fashion accessories?  Please share your thoughts about this shopping service in the comments section below.

Learn more about clothing retailers both online and offline here on Apparel Search.  If you are interested specifically in learning more about the online companies, you can check the online retailer section for more information.

For those of you that enjoy crafty and fashionable accessories, you may want to check out our previous blog post about Rosyemme Handcrafted Accessories. The article goes back to 2013, but they really had nice items.

Thank you for taking the time to read our fashion blog post. We hope that you have found this news to be informative. If you have comments or questions, please add your thoughts in the discussion area below.

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