Etsy has a huge problem that could lead to its downfall
The brand's shares are crashing after the company reported a net loss in the most recent quarter.
Analysts say that counterfeit goods are bringing down the business and causing quality sellers to flee the store.This problem threatens Etsy's business as real artisans find other websites.
One seller, Grace Dobush, started selling handmade cards and journals on the site in 2006, shortly after Etsy opened, she writes in an essay on Wired.
But now, she say that Etsy has "alienated" the crafting community by allowing people to sell cheap wholesale goods purchased from countries like India and China.
As a result, crafters are increasingly moving to other platforms like Shopify.
While Etsy started as a way for artisans to reach a broader market, it's become too big to scale, she writes.
"In practical terms, scaling the handmade economy is an impossibility," Dobush writes. "So while Etsy maintains a hipster façade, they lost their indie cred years ago."Dobush also calls out the story of Alicia Shaffer, the woman who is Etsy's biggest seller and makes a rumored $1 million a year.
Many of Shaffer's hats and scarves are made wholesale imported from other countries.
"Sellers have been dissatisfied with Etsy's policing of mass-manufactured items posing as handmade for a long time, but the site hasn't seemed receptive to their concerns," Dobush writes. "Having sellers who are able to move nearly a million dollars of product a year is great for Etsy's bottom line."
It's estimated that Etsy makes $47 million a year in fees from sellers.
It's the fifth most-visited marketplace in the world, after Amazon, eBay, Best Buy, and Wal-Mart.