What happened to Etsy?

Etsy used to be the place to shop for quirky, handmade items from independent crafters all over the world.

Now, it’s flooded with mass-produced products.

Today, On Point: What happened to Etsy?

Ann Gehan, e-commerce, retail, and consumer brands reporter at The Information.

Ranjay Gulati, professor of business administration at Harvard Business School. Wrote a case study of Etsy for the Harvard Business review in 2021.

Grace Dobush, freelance business reporter who writes about the craft industry. Ran a small bookbinding and printmaking craft business from 2002 to 2016. Former Etsy seller.

Kelly Clausen, vice president and head of global comms and community at Etsy.

Chris Maguire, Etsy co-founder. He left the company in 2008. He now owns Tubby Robot Ice Cream Factory in Philadelphia.

Part I

MEGHNA CHAKRABARTI: You're looking for that special something. That unique, handmade gift that really means something. You turn to Etsy, and Grampa T's Woodshop.

DEAN THORNBERRY: I've been selling my cribbage boards, jewelry boxes, and gift boxes on Etsy for about ten years.

CHAKRABARTI: Dean Thornberry is the grandpa of Grampa T's. He lives in Battle Ground, Washington, and he's a retired firefighter who now makes many of his hand carved items out of wood salvaged from firewood piles or fallen trees.

He's made more than 4,300 sales on Etsy, but lately he's noticed a shift.

THORNBERRY: I've seen big changes in Etsy, where when I started, it was a place where you could find artisans selling their goods, handcrafted goods. To a place that is selling a lot of mass produced items from foreign countries at a cut rate price that I can't compete with.

At the same time, they've changed their policy, their fee structure to such where I'm paying out a lot more just to get my items up on their site. And I'm certainly looking for another place to sell.

CHAKRABARTI: Now, in the minds of most shoppers, artisan and mass produced don't really go in the same sentence, let alone go with the spirit of what Etsy is supposed to be, that one platform that celebrated craft over crass consumption.

ADAM FIELDSON: I make paracord bull whips. So Indiana Jones, Catwoman, bull whips. It's a very --

CHAKRABARTI: Adam Fieldson in Minneapolis has had his Etsy store for around eight years and one of Adam's bullwhips, appropriately called the Indy, looks just like the one Harrison Ford carries in the Indiana Jones movies and costs about $270.

Adam says he's also seen Etsy change.

FIELDSON: I am now getting message, a lot of messages from overseas sellers of like mass produced whip products that they want me to sell on my shop, because I guess I get enough traffic that they think I'd be a good fit for their product, but I mean I'm not, because my focus is high quality handmade products. Which I have noticed as a buyer on Etsy, it's harder to come by handmade products as distinct from the mass produced products that you see a lot of these days.

CHAKRABARTI: Or as the Grail Knight says in what is still my favorite Indiana Jones movie, 'You must choose, but choose wisely.' But Indy trying to spot the real Holy Grail among a gallery of fakes, Etsy now feels like a place where shoppers have to choose wisely to find that unique handmade gift amongst a flood of mass-produced knockoffs. Many long-time sellers are fed up, and so are some shoppers like Ashley Pratt in Roanoke, Virginia.

ASHLEY PRATT: Recently, I purchased an item that I thought was handcrafted and handmade. But when I received it, it was actually from a fulfillment center.

The item was very cheaply mass produced. There was a tag on it and a barcode, and it was clearly not the handcrafted item that I had paid for.

CHAKRABARTI: I'm Meghna Chakrabarti and this is On Point. So what happened to Etsy? And what does the company's transformation say about the conflict between that search for authenticity that we say we value these days, and the demands of keeping a business afloat in the world of globalized mass market consumerism.

That's what we're going to look at today. And we're going to start with Ann Gehan. She's a reporter at The Information, where she covers e-commerce, retail, and consumer brands. Ann, welcome to On Point.

ANN GEHAN: Hi, Meghna. Thank you for having me.

CHAKRABARTI: So to drag out the tortured Indiana Jones metaphor a little bit more, a couple of months ago I was looking for handmade salvage wood shelves for one of my walls.

It did feel like somewhat of a face melting exercise to try and find ones that I could be confident weren't made in some giant factory overseas. Am I imagining it or has it actually become harder?

GEHAN: I think that's something that now just generally, as we've seen e-commerce explode over the last couple of years.

I think that's something that a lot of shoppers feel is really a big issue these days. Is just, there's so much stuff online that you can buy, and it's really hard to sift through the different items, different marketplaces and figure out, okay, what is it exactly that I'm looking for?

What can I be confident in? And what can I be sure that the products that I think I'm buying is actually what's going to show up at my doorstep.

CHAKRABARTI: So what evidence do we have in terms of actual numbers, that the volume of mass market or mass produced, I should say, items has risen on Etsy?

GEHAN: If you look at Etsy sales, particularly during 2020 and 2021, exploded. The company's sales, even this year, are about three times larger than they were prior to the pandemic when everyone stuck at home is bored and buying stuff online. So just the sheer number of sales on Etsy has gone through the roof.

And if you look at a lot of those items, the newer sellers that are signing up for shops on Etsy, a lot of those items, it's easier to see very similar, if not the exact same items on other marketplaces like Temu, Shein, and AliExpress.

CHAKRABARTI: Okay. So the key thing there regarding what's on Etsy is during that pandemic time, which I presume that was a lot of people were at home, maybe looking around saying, I want to make my living space more welcoming to me, because I've spent a lot of time in here.

So I want a human element. So that explains a lot of that 2020 to 2021 boom, in number of sales. But also, was it at the same time where we had this explosion in the number of actual sellers on Etsy?

GEHAN: Yeah. I think you see now there have been some different research analysts that have done analysis of the listings on Etsy and particularly in the past year, they found that more and more of these items are not only listed on Etsy, but listed for sale other places.

CHAKRABARTI: Okay but that, I guess what I'm trying to understand is, and I'm leaning on your expertise here as an e-commerce reporter. Is it naive of me to think that some of those multiple listings could simply just be really hardworking individual sellers who are just listing in multiple places, or is that not what that indicates?

GEHAN: Yeah, I think you see now, just going back to that explosion in e-commerce, there are these sellers where it's become so much easier now, not only because of different sites like Shein and Temu, it's just easier, easier now more than ever, for them to list products online and send them directly from where they're being produced to shoppers.

And so that has become a lot easier in recent years. And so I think that's what's driving a lot of some of these sales or new listings that are cropping up. Where it's similar products listed on every single online marketplace.

CHAKRABARTI: Okay. Ann, you said something really important there, which actually I hadn't recalled until you said it.

The difference is some of these other sites, some of these other e-commerce sites, they're from the producers, mostly in China, right? Is that what you're saying?

GEHAN: Yes.

CHAKRABARTI: Okay, and it's those items that you're also seeing on Etsy as well.

GEHAN: Mhm. Yes. Because those items are being sold directly by the manufacturer or someone, who has a direct connection to where they're being produced.

And so they're not only listing those items on Etsy, they're listing them on Shein and Temu and AliExpress and Amazon. And there are just a lot of changes in e-commerce that have taken place that make it easier than ever for those sellers to package up products, right where they're being produced and stick them on an airplane and send them directly to shoppers in the U.S.

CHAKRABARTI: I got it. Okay, so while maybe some of Etsy's shoppers are miffed by this, because they just really want to find that authentic thing made by an artisan. Does Etsy have a problem with this? I'm seeing that last year they had an annual revenue north of $2.5 billion.

GEHAN: Yeah, I think, like I said before, their sales have continued to be just dramatically larger than they were even just a couple of years ago.

But I think that does translate to shoppers feeling like there's too much stuff. It's hard to sort through. I can't find what I'm looking for. I can't find those unique products that I think I'm coming to Etsy for. But in the eyes of the sellers, they just see Etsy as just another place they can list their items and they don't necessarily value it the same way that a shopper would, for that place to find those really unique handmade items.

CHAKRABARTI: Okay, so how different is the feel and the experience of shopping on Etsy now from what its original vision was back in, what, 2005 when it was first founded?

GEHAN: Yeah, I think the original vision for Etsy was this very curated, artisan driven marketplace where it really is the people that are handcrafting these items, listing them for sale.

And you still see that kind of reflected in Etsy's policies about what you are allowed to sell on the site. It's only handmade or vintage items. Or stuff related to crafting, or things like that. And I think you see Etsy has tried to set these guardrails around what can be listed on their site, but I think you've just seen, especially over the last couple of years, as not only e-commerce in general, but the number of sellers that it's just become harder and harder for them to keep a handle on enforcing these policies.

CHAKRABARTI: Huh. Is there, has there been enough online or public expressions of unhappiness about this, that Etsy wants to react to it?

GEHAN: I think so, for sure. I think you see them trying to reclaim a little bit of their brand and double down on what they originally became known for and became popular for.

This year, they ran a Super Bowl ad emphasizing their new gifting tool and really emphasizing that, hey, Etsy is where you go to find the thing that you can't find anywhere else. And we have all these really wonderful, unique handmade products that would be the perfect gift for whatever occasion you're looking for.

And so they have developed some new tools to try to highlight those items a little bit more.

CHAKRABARTI: Okay. So we're going to talk about that a little bit later in the show. And we spoke with a spokesperson from Etsy who told us amongst other things, it's really important to keep zooming out and looking at Etsy's mission to keep commerce human.

'And at our core, we've always been about enabling human creativity and making space for people to express themselves and quote keeping commerce human.' That's the question. Is it possible in the internet of 2023? We'll be back. This is On Point.

Part II

CHAKRABARTI: Today we're taking a close look at the e-commerce website Etsy. It's long been known to be the home of wonderful artisan items, handcrafted unique pieces that you really can't find anywhere else. It celebrated the human and the small and the crafted. But, of recent years, it feels like Etsy has changed a little bit.

It's turned into a place where it's harder to find those artisan made items and instead much, much easier to find mass produced stuff. And so we're asking, what does that change in Etsy say about the fundamental conflict between authenticity and commerce on the internet these days. DJ Lee in Plainville, Massachusetts says they think it's crazy that manufactured items are ending up on Etsy.

DJ LEE: I've got just some beautiful items from them that's unique. You won't find it in the store. You won't find it anywhere else. And that's the beauty of Etsy. So it's crazy that they let other manufacturers in. Or if the auto manufacturer is sneaking, get past the algorithm. I don't know, but Etsy is for the uniqueness that it brings.

That's how it should remain.

CHAKRABARTI: And Natalie Rickman in Bowling Green, Kentucky, tells us that Etsy has actually been great for her dad, who's been a potter since the early '80s.

NATALIE RICKMAN: He's like a real artist curmudgeon. I think we all know the type. It was hard for him to keep a studio space for retail, like outside of his workspace, which is dusty, messy, broken pottery, always has hundreds of mugs in production.

So in 2020, when the world shut down and tourism stopped, he lost a ton of his wholesale account. I was fresh out of college. I was working for him part time, decided to try him on Etsy. Now it is one of his major sources of income. He can sell his work retail there, and he doesn't necessarily have to keep up with the storefront.

CHAKRABARTI: So good news for Natalie's dad there in Bowling Green, Kentucky. It's a different story for Lisa Schwartz, who's been an Etsy seller for about 14 years from Bend, Oregon.

LISA SCHWARTZ: In the last year or so, I've noticed that people are selling mass produced items from China. My sales as a handmade clothing designer, I make everything custom to order, have dropped about 80% and it seems to be getting worse.

My business that has been supporting me and my family for the last 14 years is pretty much gone in the toilet.

CHAKRABARTI: So just a few of the many people who reached out to us with their experiences on Etsy. We'll hear from more listeners throughout the show. We're joined today by Ann Gehan, she's e-commerce, retail, and consumer brands reporter for The Information.

And Ann, hang on here for a second because we all want to hear in more detail the firsthand experiences from a knowledgeable Etsy seller. This is Grace Dobush, and she actually was selling crafts online even before Etsy.

GRACE DOBUSH: I started selling handmade books and cards online in 2003, maybe via my own website and told people to mail me a cashier, like a money order if they wanted to order something.

CHAKRABARTI: Grace remembers being excited to join Etsy in 2006, less than a year after it launched.

DOBUSH: Some of my friends had already joined it. Friends of mine from the craft community, people I know from craft shows around the Midwest, the site was just absolutely vibrant and full of individuals and small businesses making super interesting things.

CHAKRABARTI: Etsy really felt like a community to Grace in the early days. But by late 2014, when she closed her Etsy store, Grace says it was already struggling with growing pains. Wow, so this is about a decade ago. The more sellers that joined, the harder it became to keep that sense of community. And even back then, Grace says, people were selling things they hadn't made by hand.

DOBUSH: Etsy doesn't actually vouch for anything being sold on the site. From the handmade origins, people might assume that there's some type of jurying or curation that's happening and there's none at all.

CHAKRABARTI: For crafters who want to sell on Etsy now, Grace says they'll pay $0.20 per item to list it and then a 6.5% transaction fee and a payment processing fee once that item sells.

DOBUSH: If you are selling a $100 product on Etsy, your payout after the fees is just about $90. On Amazon, your payout is about $84. On eBay, it's about $86, the new Michaels marketplace, which is a web project from the craft store, Michaels, your payout there is $92 to $94. So the fees have risen. But they're still totally in line with other options.

CHAKRABARTI: Grace says it still makes her sad that Etsy seems to have, in her view, strayed so far from its origins.

DOBUSH: It was built in the garage by people who were in the scene, felt really organic and homey, but as it grew, it just became less focused on handmade. They started allowing vintage, they started allowing third party manufacturing, as it's become harder to find stuff on the site, crafters are asking, like why do I need to be here if it's so hard to get attention?

It's just become something other than what we all wanted it to be at the beginning.

CHAKRABARTI: That's Grace Dobush, freelance business journalist and a former Etsy seller. Ann Gehan, help me understand here. We focused on the consumer or the shopper experience in the first part of the show, but it seems like small scale sellers are really feeling a difference as well.

First of all, even just in the fee structure as Grace described. What more can you tell us about that?

GEHAN: Yeah, I think you see that with a lot of e-commerce businesses now, particularly as their sales growth has slowed down in the last couple of years. They're trying to offset some of the declines in sales growth by adding some of those other fees that she was talking about, whether that's different advertising fees.

Etsy recently introduced a new fee, if you're a new seller getting set up on the site, to hopefully introduce a little bit more friction to the onboarding and set up process. And another, that's another push to try to make sure that the sellers that are setting up shops really are real sellers that want to list their items, not just a bot or a seller that's trying to list items on every single online marketplace that's out there.

CHAKRABARTI: Oh, so the increased fees are supposed to dissuade the bots? I'm afraid I didn't understand quite how that's supposed to work, Ann.

GEHAN: Sure. I think that, I think the thinking is that if you're a real seller, a $15 set up fee.

That's a good trade off to ensure that you're a real seller. Who really wants to list on the site and that if you're a bad actor that's going against these policies, or the sellers that they're hoping to attract. That's enough to deter you from setting up a shop on the site.

CHAKRABARTI: I see. Okay. So I want to just keep trying to understand more deeply this original vision of human centered commerce, essentially, which is keeping commerce human, which is what the Etsy spokesperson told us, that that's still at the core of their mission. How does Etsy even define these days what human made, or handmade items might even be. That seems to be a little tougher to define than maybe it was 10 or 20 years ago.

GEHAN: For sure. And yeah, like Grace was saying, they've gradually expanded the fence a little bit about what is allowed to be listed on their site.

So it originally went from just handmade items to now you can also list vintage items. You can also list crafting items and supplies, and you can use outside, they call them production partners. You can use outside kind of collaborators or third parties to help you make your items. Etsy just requires that you note that in the product description.

So they definitely have expanded as the company has grown and the marketplace has grown. They've definitely expanded what they allow to be listed on the site.

CHAKRABARTI: When you said the word vintage, that seems to be spiritually in line with what Etsy was supposed to be about, after in its founding.

But of course, as you just said, vintage wasn't necessarily made by the seller. So there are ways to expand Etsy's reach and the number of items that it hosts on its site that stay in line with its vision, but I still don't quite understand then, why they felt the need to make it okay. Because let me put it this way. These are business and technological decisions that allow bot-based listings to get put on a site, right? Is it fair to say that they allowed that to happen to begin with?

GEHAN: I wouldn't say that Etsy explicitly, I don't think anybody who works at Etsy was sitting there saying, Oh, there are all these new sellers, we need to open the door for them to list on our site. I think, just truly, as e-commerce has exploded these sellers, they're pretty creative. They're pretty crafty. They are looking for more ways to get their products in front of shoppers. And so I think they saw that Etsy was this large marketplace that has a ton of shoppers and that was just another channel they could use to get their items in front of more people.

CHAKRABARTI: Now, Etsy did tell us that they invested $50 million back in 2023. So last year in our trust and safety efforts, they say, and then quote in particular, 'We remove four times the number of items for violating our handmade policy versus 2022,' end quote. Now we did, we were able to speak with Etsy's vice president and head of global communications and community, it's Kelly Clausen, and we asked her what the company's doing about all those mass produced items ending up on the site.

KELLY CLAUSEN: We actually have over 100 million items in our marketplace. The incredible breadth and depth of our inventory is one of the greatest things about Etsy. But it also means that keeping our marketplace safe and special is a complex and always-on job. And in the last few years in particular, it's an area where we've really ramped up our investments and our resources, particularly when it comes to identifying and removing items that violate our handmade policies.

Last year in 2023, we actually removed four times the number of listings that violated our handmade policies compared to 2022.

CHAKRABARTI: Ann, respond to that.

GEHAN: I think she's right. I think you do see the company kind of turning its attention to really cracking down on this problem, but also, as the number of listings has exploded.

There are more listings that go against the policy. So I think she is right. Someone described this task to me as a game of whack a mole. It's not something you can just crack down on one time and take down all the sellers that are in violation and then be done with it.

It is this constant monitoring that needs to happen. And 100 million listings is a lot of listings. That's not something that any team of people can sit there and sift through. So you do see Etsy turning its attention to building more tools, trying to figure out how they can use technology to help them keep up with this game of whack a mole.

And make sure that what is being shown to shoppers on the site is those higher quality handmade items that they originally set out to highlight.

CHAKRABARTI: One thing though that we need to talk about here for a second about what might be driving this expanded group of listings, a.k.a. all the mass produced items on Etsy that people find now, is the fact that it is a publicly traded company, right? It has shareholders that it has to respond to or serve essentially. And not that long ago Etsy co-founder Chris Maguire told CNBC that the company now is more geared towards we're selling stuff and we're selling as much as possible.

And that should be the driving goal, but there's not as much playfulness. What do you think about that, Ann?

GEHAN: I think you do see Etsy, like you said, the company was founded in 2005. It's nearly 20 years old and they are publicly traded. They do have investors and shareholders that are looking every quarter to see, did sales grow, did revenue grow, what other streams are you tapping to keep the company growing and keep the share high.

And so I think it partially is probably a consequence of that. That's something that every publicly traded company has to deal with. But also as the company grows, it's always looking for kind of, okay, what is the next story that we can sell beyond, or that kind of builds on the original vision of this handmade marketplace.

CHAKRABARTI: Let me bring another voice into the conversation. Now, Ranjay Gulati joins us. He's a professor of business administration at Harvard Business School and wrote a case study of Etsy for the Harvard Business Review in 2021. Professor Gulati, welcome.

RANJAY GULATI: Thank you, Meghna. My pleasure to be here with you today.

CHAKRABARTI: So what is it about Etsy that made you think it's worthy of an HBS case study?

GULATI: One thing interesting to me about Etsy is it was a marketplace in transition. It had started with a very strong social purpose, but was not making money. Minor detail. So there was a tension between kind of an economic objective and a social objective of the business.

At the same time, there was another kind of tension in the system, which was, it was very seller focused because it was started for sellers by seller, by a seller, by a crafts person. And buyers were not happy there. And a marketplace doesn't work when you don't have buyers happy as much as sellers also.

So you had a context in which you had a new CEO coming in saying we need to transform, and the world is changing. A) were a business, publicly listed business. We have shareholders too. And so they had to walk this line about becoming a profitable business that remained true to its mission and also being a marketplace that was very good to its sellers, but also really fair and good to its buyers at the same time, as well.

CHAKRABARTI: Okay, so that, I think you're getting to the core tension that I want to understand deeply in this hour, whether those two things can actually live contemporaneously or live at peace in the modern internet. Do you think that given the especially post pandemic increase in, let's say, discontent that we've been hearing from Etsy shoppers and some of the small scale or a lot of the small scale sellers, that conflict has not been resolved.

GULATI: I think when you're a market person, place per se, you're a middle person, middleman, middle person per se. You are always dealing with two disparate stakeholders who don't always have convergent interests. And that's part of what you're trying to resolve as a market, is you want to be a market that is in some way able to clear the market.

So the buyers need to feel like they are getting what they want. And the sellers are feeling that they are getting what they also, there has to be value in it. Otherwise, the sellers will say, I'll go direct. There's no need for a marketplace. I just need to work directly then. So markets have to always show value.

So if you look at what Etsy has been trying to do, the whole idea of saying, can we leverage technology to create a better buying experience, whether it is searching for gifts, search is a huge problem in marketplaces. You're inundated, choices are so many and so many that to the point where you're confused.

So if I can find a way to do intelligent search, reduce your search costs and get you to what you want. As quickly as possible. That's a real value add over there.

Part III

CHAKRABARTI: I just want to give voice to a couple more of the many listeners who called in about this. Will Cervarich runs a business out of Portland, Oregon. It's called Betsy and Aya, and the company designs and makes jewelry and has been in business since 2008.

Will is not on Etsy anymore. He's got his own website and two brick and mortar stores. But Will says in the early days, for about five years, Etsy was a big part of Betsy and Aya's revenue.

WILL CERVARICH: It was great. It was a great way for new customers to find us and have a first order that went well and then to reorder from us.

Many of the customers that discovered us on Etsy have followed us to our website. But I would say one of the biggest disappointments was that ability to reach a new customer that went away when, in my opinion, customers started pulling back from Etsy because of the lack of policing of actually handmade goods.

CHAKRABARTI: That was Will Cervarich in Portland, Oregon. In Seattle, Washington, Andrea Harrington told us she's been buying stuff on Etsy for about a dozen years, but lately it's been a disappointment. This week I was looking for a handmade wood frame for a friend, for a gift. One unique frame popped up from many manufacturers or sellers.

I did a similar search for a wood frame on Amazon, and that same unique frame was popping up from many sellers. For about $5.99.

CHAKRABARTI: That's Andrea Harrington in Seattle, Washington. I'm joined today by Ann Gehan. She works as a reporter on e-commerce for The Information. And Ranjay Gulati is also with us.

He's a professor of business administration at Harvard Business School. And Ann and Professor Gulati, just listen along with us for another couple of minutes here because we did actually have a chance to speak with one of Etsy's original founders. And here's why. Because companies, they basically always do evolve away from founders' visions.

In most cases, I'd say that's a sign of normal maturation and growth for a company. But in Etsy's case, the change has been so dramatic that we were wondering, is the company unrecognizable to one of the people who created it?

CHRIS MAGUIRE: Right now, there are so many big entities that just drown out everything else, and Etsy's one of those giant entities now, and that's not how it was back then when I was there, it's trying to be huge, right? And that it just wants growth, that at all costs. And that's not necessarily something that's interesting to me anymore.

CHAKRABARTI: This is Chris Maguire. He co-founded Etsy back in 2005. Now, just as a reminder, the company went public in 2015.

MAGUIRE: There's shareholders to be beholden to, of which I am one of.

I'm of two minds about everything now. There's the part of me that, this was my baby growing up and I love that it's unique and quirky and weird. And then as the shareholder, I'm yeah, but I would like to see better numbers all the time.

CHAKRABARTI: And therein lies the conflict, or at least the tension, right?

Back when he was part of the company, Chris was the director of software development and responsible for much of the code that kept the site running. He left Etsy pre-IPO, and he did that in 2008. And Chris, like Grace Dobush, who we heard from earlier, says back then he loved the sense of community that Etsy created.

MAGUIRE: I loved being in that community and like commenting on the forums and then making new friends and like I would love it when crafters and sellers would come to the office and you'd get to meet these interesting people who all had weird, wildly divergent backgrounds and they'd bring in their weird stuff and that was awesome.

CHAKRABARTI: That quirkiness extended to Etsy's web design. One example Chris points to is a little interface from Etsy's early days called the color picker.

MAGUIRE: It was animated. Basically this white grid of colors, and as you dragged your mouse across it, a trail of rainbow like blotches would come out. And wherever you clicked on the prism of color, it would pull up squares, animated, spinning, of item photos that match that color.

CHAKRABARTI: Chris says it's harder to find that kind of character on the Etsy site now.

MAGUIRE: It's easy to point at, but it's true. Going public changes everything. And that is a course that was set the second we took venture capital money. And that was one of the root, actually, schisms in the founding team. Rob very much wanted to take money and grow really big and become this giant household entity.

I was not as interested in that. I wanted to get to a sustainable point where hey, maybe we're not pulling in tens of hundreds of millions of dollars, but we're keeping the lights on, we're growing, we're doing interesting things and that's something that we fought over for a long time.

CHAKRABARTI: Chris is referring to co founder Rob Kalin there, but while he mourns the loss of that homegrown feeling of Etsy's early years, nevertheless, Chris does not think that Etsy is going anywhere for now.

MAGUIRE: People have been saying the same thing about eBay for decades now. eBay arguably is no longer interesting but millions of people use it every single month. I still use it. If you want to find weird collectibles and parts for things that are outdated, like you probably are still going to eBay. I think Etsy similarly is in that scale where it'll be around.

People have tried to kill it for years and it still refuses to die.

CHAKRABARTI: Here's a question though that we asked Chris. Etsy is Big, but it's not Amazon big. So could it be possible for someone to build a new Etsy, a new, very community focused place where human crafters can connect and sell their wares?

MAGUIRE: I don't think it would ever work the same way, quite the same. The problem is the internet at large is so radically different now. Like, people don't go to websites anymore. That's not really a thing. You go to their social media presence and you just go to whatever Google shoves at you. Like I loved it when everyone, every nerd had their own website where they put up their own weird stuff and makers would put up their things.

And now the internet, I don't think, would support Etsy the way it was, as we built it.

CHAKRABARTI: It's Chris Maguire, one of Etsy's co-founders. He now owns an ice cream shop in Philadelphia called Tubby Robot. Professor Gulati, in terms of understanding what we can expect from e-commerce companies now. I want to go back to something Chris said about how even before IPO, when they first accepted venture capital money, there seemed to be a difference in vision, right?

So the instant that one founder wants to grow radically and the other just wants to retain the company's original feel, does that conflict inevitably produce a loss of, let's see, animating company culture.

GULATI: Absolutely, Meghna. And I think, the thing is, you have to understand, not to put it in crass economic terms, these two founders seem to have very different utility functions.

Right? One is trying to build a marketplace to create community and connection, and isn't really interested in the future of the marketplace as an entity in and of itself, only to be a matchmaker, saying, I'm just here to matchmake, and I want to do it at small subscale. Now, the challenge is when you want to grow scale and say, maybe I could have a bigger impact.

I could connect more sellers and buyers. But for me to do that, I need to invest in technology. I need to invest in growth. I need to hire marketing people who can bring my market to the attention of a larger number of people, at scale. So now I need resources. I need to invest in this marketplace to grow it.

Now the question is this marketplace a non-profit marketplace, an open-source place where it doesn't have to be an entity? But the moment you have another founder saying, but I have a vision. Now I do want to say one thing to Chris, is that there is something in Etsy, Etsy even today publishes a social impact report.

They have well defined metrics on which they want to have impact. So it is not like this residual. The DNA of wanting to be, make an impact or a positive difference in the world persists even in the Etsy we have today. So there are multiple issues over here at the table. One is, can you have a soul as a company with a human spirit as you grow up?

Another one is, does that encompass only serving shareholders, but does it also involve impact on the community and society at large? And the third one is, who's my customer, really? We heard from a seller and a buyer, and they had different perspectives. Who is your customer? Which is also a profound, fundamental question.

Every business has to ask, so who am I serving, is really the undercurrent over here, the question that loomed in Etsy's case from the very beginning, and has been a source of debate.

CHAKRABARTI: Ann, let me just turn to you about something else that Chris said. And that is, he doesn't think that an Etsy could be built today, one that really recaptures its initial founding mission. Just because the web is so different, or the internet is so different now. What did you think about that?

GEHAN: I think he's exactly right. I think the internet is completely different, you know, from the way it was in 2005. I think he's exactly right.

You're not necessarily sitting down on a laptop or a desktop to browse. You're going to social media on your phone. You're going to TikTok or Instagram. And I think that just the way that people browse for stuff online, the way that people browse, the way that they make purchases, the way that they look for and build community is just completely different than the way it was when Etsy was founded.

GULATI: And just to build on that, I think it's not only that the way the human interaction with the internet has changed, you also have a landscape of competition that has changed. You have Temu, Shein, you have Amazon, you have really large scale players which are copying craft designs. And so now you've also got a situation where the craft designer saying, I made this unique object of beauty that I want to sell, is no longer unique.

And you can see Zara doing that to high fashion. So you have now fast followers, as we call them in business parlance. So that also puts pressure on the seller of these craft goods, which is no longer that unique anymore.

CHAKRABARTI: Yeah. And actually Ann had talked about that earlier in the show, which is a major part of the challenge that Etsy sellers face right now.

But again, going back to my core philosophical question about whether doing good and doing well can legitimately live in the same company these days. In your case study, Professor Gulati, you wrote about how not long after that 2015 IPO, Etsy essentially experienced something of a shareholder rebellion. Because it wasn't actually making significant money for shareholders, even while Etsy was saying we're creating this space for small scale craftspeople to show their goods.

I think in the case study, you even went so far as to say that the company didn't, they were more about yoga and fine dining and social impact efforts at that time that weren't going anywhere. So it's the shareholders that demanded a different kind of leadership.

GULATI: And there was two things going on in Etsy that time.

One is there was lots of good intentions that were not translating into action. So lots of discussions of social impact that were not even materializing into real impact, because nobody was measuring impact or social impact, at least. And the larger one was that shareholders were a kind of a side thing.

I think what I loved about the Etsy story when I wrote the case was, I was interested in finding companies that precisely understood that doing good and doing well can go together. There's too much of a polarization of this debate that doing good is a tax on business. It's okay, it's a tithe.

We're going to take away a tax from you for doing so. And I've come to realize that three benefits of actually trying to connect these two. First one is motivational. Employees show up differently. They want to feel proud of where they work. At least some of them do. They want to feel inspired by what they're doing.

So that's the first one. The second one is it creates connection to your customers who trust you more. The currency of trust unlocks. So if you are really a company with good intentions, it unlocks trust in the marketplace, and that is gold. And the third one is it creates alignment and common understanding.

Like, how do we deal with tradeoffs? The challenge for business today is life is all about trade offs. How much do I give to shareholders? How much do I give to customers? How much do I give to my employees? Etsy had skewed in the direction of employees. They talked about social impact, but it was really employees were the biggest beneficiaries there that time.

So how do you rebalance an organization to recognize that we have to serve shareholders as the starting point? But we also have to think about our impact in a broader way on other stakeholders. And in the marketplace case, it's sellers, buyers, and it's just messy. And the messiness of this pursuit is, I wrote an article called The Messy But Essential Pursuit of Purpose.

And it was all around this idea that tradeoffs are messy.

CHAKRABARTI: But I suppose in the last minute or so that we have, this gets down to a core question that you had asked earlier. Who is, who did Etsy think its customers were? And was it shoppers? Was it sellers? Was it something else?

I still don't know how doing good and doing well can actually cohabitate in the same corporation where when doing well for shareholders means something very easily defined, right? You want quarter on quarter growth or year on year growth, whatever, and you want it to be a pretty healthy percentage.

But then if your mission, your company mission is to serve at a human scale, right? There are only so many small-scale artisans out there that can support, whose sales can support the kind of growth that shareholders expect. It feels like it was inevitable that in order to do well for shareholders, they would have to have moved beyond artisan crafts and to those more mass-produced crafts. But then in that process, Professor, sorry, we've just got 30 seconds left here. They're sacrificing trust. Are they not?

GULATI: So this becomes a real question. How do we stay true to our past while looking into the future?

And sometimes when the world around us is changing, we have to reflect on that very intentionally. And I would even add that the question we have to ask is not who are we here to serve? It's why are we here? There was an original why question when this marketplace was created. Does that same why apply today?

And how do we then modernize it while not getting beholden and lost in the past? Many a great company have failed by holding on to their past. Kodak, Polaroid, Motorola, Nokia. I can go on and on the graveyard of iconic organizations that clung to their past. We want to hold, respect  the past, but also keep an eye into the future. That's the question every great business tries to answer for themselves.