Online craft marketplace Etsy (ETSY) shares surged 11% after reporting better-than-expected revenue on Tuesday. The company was one of the worst-performing IPOs of 2015 and shares are down 74% since going public last April. Now it’s hoping that a visible presence in an iconic New York department store might bring it some luck.
Etsy, founded in 2005 and headquartered in Brooklyn, New York, is known for its obscure, artisanal goods – 38 million are currently on the site -- like $15 bulldog glitter snowglobes or $32 Narwal hats.
Currently retailers like Whole Foods and West Elm showcase a handful of Etsy sellers, but in January, Etsy built a full-fledged pop-up store in Macy’s (M) Herald Square location, where eight New York-based sellers have their brands on display.
Yahoo Finance got an exclusive look at the space with Dana Mauriello, director of seller growth at Etsy. Currently, the theme of the store is New York, and three vendors have exclusive products that aren’t available on Etsy’s website and only sold at the Macy’s store. The theme will alternate every three to four months and Etsy has guaranteed the space until the end of the year.
One of the designers, Chilean designer Soledad Proaño of Sol del Sur, who makes jewelry from metals and textiles, says, “It’s a dream come true to see my stuff in Macy’s.”
Let’s get physical
How much can one physical store impact the overall business?
Wedbush Securities analyst Gil Luria says, “It’s a very nice, visible way to put the brand out there, but Etsy really doesn’t generate material amount of sale out of any of their brick and mortar locations.”
Fred Terry was browsing for a gift for his wife when he stumbled upon the Etsy shop. “I haven’t seen so many things like this where you can discover new brands and artists. Of course there’s online, but this is a much more personal experience,” he says.
Etsy’s foray into Macy’s is merely one example of the increasing movement of e-commerce brands to leave their brick and mortar footprint.
Amazon has made its foray into the personalized goods space with its new platform, “Handmade.” Since launching in October, customer traffic to Handmade has increased 30% month-over-month and sales have grown 150% month-over-month, according to Mike Miller, the head of Handmade at Amazon.
Cashing in on the crafty craze
Luria notes that Etsy’s target demographic is not your average consumer. “The Etsy shopper is so affluent and discerning that they are willing to spend money on an item that isn’t branded. This narrow market is willing to spend a premium for an item to be unique because of brand fatigue, which is a 1-percenter issue.”
Obtaining growth without losing the core ethos
Since it’s gone public, some suggest that Etsy’s growth moves are contrary to the company’s stated ethos. First and foremost, the site which once banned mass-produced items began selling them, which was “the biggest crisis and continues to be the biggest crisis,” according to Luria.
Etsy's director of seller category growth Dana Mauriello says, "Sellers can choose to work with values-aligned manufacturing partners. We want to humanize the production process and shine a light on who makes something and how they make it." The company currently has 5,000 sellers that have been approved to do so.
In the current partnership, there is no payment being issued from Etsy's to Macy's for real estate.
“The main reason for Etsy to do this isn’t about a lot of sales, but about goodwill. If these marketing efforts work out, they’ll get more sellers, higher volumes, But they continuously spend more and more to get less and less growth,” says Luria.
