It’s been a turbulent week for Etsy, the ecommerce site that specialises in handmade goods. Following first quarter profits being far below expectations, investor pressure has forced the company to make significant personnel changes and change strategy. Following the announcement of the poor first quarter performance, shares in Etsy Inc rapidly dropped 17 percent in after hours trading.
It’s quite a downturn from two years ago when the Brooklyn based online retailer was at the time the largest ever certified and socially responsible company to go public in the United States of America. However, since its first day of trading which saw its stock surge by 88%, it’s been tough trading for the company, resulting in the poor results that have been posted this week. The valuation of the business has, over the last two years lost 30% thanks to increasing competition from websites such as Amazon and eBay. There’s also been talk of some major disagreements with at least one major investor having lost patience with the business.
This week has seen therefore a major corporate shakeup that has seen its longterm chief executive officer Chad Dickerson announce that he is stepping down. Replacing him will be Etsy board member and the former chief executive of Skype Josh Silverman. Dickerson will also relinquish his position as board chairman to be replaced by Fred Wilson, who co-founded Union Square Ventures, the venture capitalist firm that was an early investor in Etsy. Speaking about the appointment of Josh Silverman, Fred Wilson said:
“In the six months that Josh has been on our board, we have gotten to know him well and he has gotten to know us well. That will make for an easier transition and faster execution.”
As well as the changes at the top of its corporate structure, there are plans as well to get rid of 10% of its entire workforce which represents about 80 members of staff.
Why Has Etsy Struggled?
Etsy has struggled in the modern marketplace for a number of reasons. They have acknowledged that they have not adapted to the increasing use of smartphones to shop online but there biggest drawback has been their identity. Known for its homely, DIY feel, it is hard to balance this with the needs to cater for and cope with the increasing needs of mass consumerism as well as making it a viable and profitable business for its investors. This tension has one that it has yet been able to engage with to help drive business growth. As a public company however, its obligations are not just to its customers but to its shareholders too, which means that to scale the operation and more importantly make it profitable, some of their current customer base may need to be alienated as it moves towards a more viable platform whilst still trying to remain true to its original feel and values.