Etsy case study by EllaY

ETSY CASE STUDY

1 Part I

Etsy pioneered a global online marketplace of unique handmade and vintage goods, creating a previously undeveloped platform that directly connects artists and collectors with customers. Etsy provides an invaluable link between local, artisanal craft and modern global consumers within the retail’s incredibly profitable but saturated marketplace. In order to examine Etsy’s partnership with Macy’s, one must first examine each company individually. The following SWOT analysis of the Etsy and Macy’s partnership draws on data from SWOT analyses of each individual company (see Table 1 and Table 2). Internal SWOT Analysis Strengths

Weaknesses

Market – Multi-generational customer bases, Etsy brings younger customers to Macy’s and Macy’s exposes older buyers to Etsy; Large audiences (Increased exposure for local designers, increased sales and profit for both the seller and Etsy) Omni-channel – In-store and online sales Exclusivity – Unique products offered only instores, encourages sales in other sectors; Already high foot traffic to Macy’s Herald Square (because of location in NYC) increased with the exclusive pop-up destination Branding – Makes Macy’s cool; Makes Etsy accessible Marketing – Increase awareness of Etsy Manufacturing – Local, domestic; No high international shipping costs; Ethically produced in transparent process; Increased production numbers for wholesale decreases unit cost; Etsy Manufacturing and Wholesale partnerships encourage successful sellers to stay on Etsy Location –NYC is a metropolitan hub and tourist destination; Herald Square is visited by 20 million people each year Product/Offerings – Handmade products are new to Macy’s current inventory

Location – Currently only one pop-up exists; Pop-up found in “One Below” separate from the rest of Macy’s shopping Market – Disparity in customer bases: Etsy customers are not interested in Macy’s mass-market products, and Macy’s customers do not desire handmade goods Temporality – One-year time limit of Herald Square pop-up store Marketing – Little advertisement from either company about partnership Expansion – Difficulty scaling up; Complicated partnership for small-scale production Negative Response – Etsy is selling out to big business; Disinterest in “One Below” Cost – Designers sell at lower wholesale costs Product/Offerings – In-store/online redundancy

ETSY CASE STUDY

2 External SWOT Analysis

Opportunities

Threats

Expansion – Open Etsy shops in Macy’s locations worldwide; Increase number of Etsy sellers; Integrate Etsy products into all parts of Macy’s stores (e.g. display Etsy necklaces in jewelry department); Target the childbearing millennial demographic Successful Etsy sellers continue wholesale partnership with Macy’s Exclusivity – Offer separate products unique to the Macy’s/Etsy pop up; feature collaboration pieces on Macy’s website Marketing – Host events (meet designers, craft focused) which appeal to the millennial experience seeker (Schlossberg, 2016); Recruit influential bloggers to produce positive social media about the partnership; Increase advertisement

Economy – Some products sold in the pop-up are non-essential goods; A downturn in national economy could curtail customers’ “extra” spending Social/Trends – Continued disinterest in department store shopping (Schlossberg, 2016); Partnership does not capture interest of shoppers; This demographic might seek to find brands that are more brand recognizable products; The height of the handmade fad will pass eventually Branding – Etsy loses customers who negatively view its partnership with a large corporations

Next, one must assess Etsy’s and Macy’s respective current customers. One can then tailor the collaborative shop offering to gain a new joint customer base and convert casual shoppers into loyal buyers. Currently, the average age of the Macy’s customer is 51 (Kaplan, 2016). In order to combat the general sales decline (Wahba, 2016), Macy’s wants to expand into new markets, which is why the company partnered with Etsy. Etsy’s current customer is an adult woman, between 2534 years old (Westervin, 2012). Macy’s hopes the partnership will bring the highly profitable millennial customer base to its stores. Millennials are the general target customer for the Etsy Macy’s partnership shops, but in order to capture this age group, one must first break down the millennial category and identify a specific end-use customer. The millennial generation is a disputed age range (Wells, 2015). For the sake of this study, millennials are defined as individuals born between 1980 and 2000. Companies seek millennial attention, not only because it is the biggest age group in American history at 80 million (Stein,

ETSY CASE STUDY

2013) but also for its estimated $65 billion spending power for products at Macy’s price level (Lutz, 2012). In a self-distributed survey, responses to questions about shopping habits were collected from fifty millennials ranging 16-36 (born 1980-2000), with a mean age of 24 (slightly below the 26 median). Twenty of the fifty identified as male (40%), and thirty identify as female (60%). Figure 1 visualizes how millennials shop. 72% of respondents shop in-store, and 62% shop online. Of the 17 who responded they shop via both methods, 65% were female had a mean age of 27. This means the most likely people to shop in-store and online are mid/older millennial women. Men are more likely to shop only online. 40% of surveyed millennials shop at Macy’s, 80% are female and have an average age of 29. 80% shop in-store and they do so primarily for general shopping needs. Of the 30 respondents who don’t shop at Macy’s, 10% never considered it. The top reasons for not shopping at Macy’s included: branding (association with an older generation), product offering (they style and selection of items, especially clothing, do not appeal to millennials), and price-point. The take away is that older millennial women shop at Macy’s and primarily in-store. Comparatively 58% of people surveyed shop at Etsy. Similarly 80% were women, but averaged at 25 in age. The main reason people shop on Etsy is for gifts. A third of the people who do not shop at Etsy either did not know about the company or had never thought to shop there. The main reason the other respondents do not shop at Etsy is because they are not interested in its products. Figure 2 breaks down millennial shopping habits at these two stores. Perhaps most interesting is the contrast of shoppers who frequent both stores and shoppers who frequent neither. 28% of respondents do not shop at either Macy’s or Etsy, 72% of who were male and had an average age of 19. Alternatively, 26% of people shop at both Etsy and Macy’s, 92% of who are women, with an average age of 31. In summary, younger male millennials do not

ETSY CASE STUDY

shop at Etsy or Macy’s, and older millennial women shop at both. When asked if they would more likely consider shopping at Macy’s if it sold handmade goods, responses were generally positive (Figure 3). More significantly, when asked if they would be more likely to shop at Etsy if products were sold in a physical store, respondents were largely in favor, 84% responding yes or maybe. See Figure 4 for breakdown of interest in physical Etsy store. Women are more receptive to both changes. Upon analyzing the survey data, one can see that not all millennials are alike in their shopping habits. The Etsy Macy’s partnership should target older millennial (ages 26-36) women because they shop more than men and younger millennials, both an in-store and online and specifically at Etsy and Macy’s. Older millennials are “50% more likely than average to purchase handmade items for themselves or others” (Mintel, 2016). Additionally older millennials are a wealthier age group. A 36-year-old adult with a job will have more shopping money than a 16 year-old student. According to the US Census Bureau data, millennials are taking over as parents. One in five moms is a millennial, which accounts for approximately 9 million people (Weber Shandwick, 2013). Additionally, 90 percent of the 1.5 million new mothers in 2015 are millennials (Schweitzer, 2016). Childrens’ wear is one of the most lucrative segments in the global apparel industry, demonstrating market growth and immunity to economic fluctuations (Ozbay, 2014). The market is estimated to reach a $173.6 billion value by the end of this year. Babywear is essential clothing (general shopping) but also highly giftable, meeting the two most common reasons for shopping at Macy’s and Etsy.

ETSY CASE STUDY

Part II

Introducing Snapdragon Designs, Brooklyn-based, unique babywear (0-6 months) For millennial women of child rearing age, Snapdragon produces innovative and accessible, locally made baby clothing; offering unique prints and customizable, adaptive silhouettes both online and instore. Snapdragon utilizes Etsy Manufacturing to print artists’ textile designs, along with small-scale local manufacturing; thus, supporting local handmade and enabling production growth. The name Snapdragon is gender neutral, as is the collection, referring to both the flower and mythical creature, appealing to millennial respect for non-binary gender identity (Urbaneer Creative, 2015). Snapdragon also refers to the snaps used in the garments for closures and attachments. Appealing to childbearing millennials (the target customer identified in Part I), Snapdragon partners unique design successful on Etsy with the prosperous babywear market. Babywear is purchased year round. Its sales are not seasonal or trend-based. To Macy’s, Snapdragon’s cute prints and playful silhouettes add a creative alternative to a conservative babywear inventory. Cute prints and shapes are not new to Etsy, but Snapdragon’s customizable snap-on features set it apart. The snap-on panels allow for easy changing, mess prevention, and dress-up. Additional panels are sold separately in easily giftable packs. For additional shopping ease, Snapdragon will be added to the Macy’s gift registry, so that the expecting can share with friends and parents (current Macy’s customers). Our baby clothing and gift pods will easily integrate into Macy’s if the wholesale collaboration continues. For the Etsy Macy’s Popup Shop in Herald Square, Snapdragon offers an exclusive store-only print collection. #EtsyMacysCollab can travel to all future Etsy Macy’s Shops, teaming with Etsy artists in each city for a location-specific design (i.e. in an LA Etsy Macy’s Shop, Snapdragon will feature LA-exclusive garments with print design by an LA artist). Giving customers local designs that reflect individual communities supports Etsy’s ethos of connection and Macy’s national accessibility.

ETSY CASE STUDY

APPENDIX

Table 1: Macy’s SWOT Analysis •

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Strengths Branding – Leader in department stores; Iconic brand name recognition (Macy’s Day Parade, Miracle on 34th Street) Size – $28 billion revenue in 2015; Employs 170,00 people; 850 stores in 45 states (MarketLine, 2016) Customer Service – Accountability; return policy Product Offering – Variety of goods, all-inone department store; Exclusive Macy’s brand offerings (manufacture themselves and thus have full control of product, lower cost at large scale) Omni-Channel Presence – Physical stores and online Rewards Program – Strong customer loyalty; Macy’s credit cards Registries – Special occasion hotspot Location – Strategically placed in malls to encourage foot traffic Opportunities Partnerships – Concessionaries expand product offerings and reach target markets (Loeb, 2016) Store Redesign – Organize and modernize retail stores with the latest technology; Improve quality of retail staff Marketing – Increase online and social media presence; Target specific markets with special occasion in-store events (e.g. prom outfit styling evening, college gear and discussion, sports tailgate outfitting) Expansion – Target a younger market, offer experiential sales (e.g. fashion shows, cooking classes, in-store events with products, celebrity collaborations); Global expansion (increase international presence, thus decrease dependence on domestic market) Product Offering – Adjust products for location specificity

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Weaknesses Trends – Inability to offer trendy products because of scale Concentrated geographic presence Branding – Outdated, seen as “special event shopping with mom/grandma”; Impersonal big company feel Product Offering – Generic and massproduced Physical Stores - Disorganized; Lack luster store management; Aging, outdated infrastructure Size – Slow to adapt to trends; Too broad to appeal to local markets Price – Competitors offer lower prices

Threats Competition – Online retailers (e.g. Amazon) and fast-fashion, mass-market retailers (e.g. Zara) Economy – Increased labor wages Trends – Continued trend of online shopping and moving away from department stores and malls; Inability to offer trendy products Market – Dying customer base

ETSY CASE STUDY

APPENDIX

Table 2: Etsy SWOT Analysis Strengths • • • •

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B-Corporation – Social and environmental consciousness gives positive impression; Publically traded E-commerce – Global marketplace connects buyers and sellers around the world; Integration with mobile technology (tech savvy) Design/Presentation – Easy-to-use interface for both buyers and sellers; Clean, stylish web design Community – Directly connecting makers with buyers; Artist/shop profiles allow likes and favorites and encourage conversations; Inspires dialogue between sellers and provides educations resources Growth Rate – $2.38 billion annual gross sale; Raised $x in funding; Sellers in 150+ countries; Employs over 921 people; 1.7 million sellers; 26.1 buyers (Etsy, 2016) Branding – Acknowledged as first online handmade marketplace Transaction – Secure payment (PayPal) Cost – Free account for buyers, low cost to sellers (20 cents per listed item and 3.5% of transaction) lower than competitors (Perez, 2015) Marketing – Top five within organic search (Dobush, 2015), organic channels 88% of traffic (Brown, 2015); Individual seller promotion brings buyers to site; Online presence reflects reach of primary target market Product Offering – unique/one-of-a-kind, customizable products Low customer acquisition cost and high repeat buyer rate (Brown, 2015)

Weaknesses • • • •

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Opportunities • • •

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Partnerships – Continued wholesale partnerships with large retailers (e.g. Macy’s, West Elm) Acquisitions/Mergers – Eliminate competition; gain new sellers and markets Authenticity Guarantee – Verify that sellers are complying to definition of handmade and ethical manufacturing Physical Stores – Open curated brick-and-mortar store reflect individual communities Delivery – Offer guaranteed faster delivery methods Loyalty Program – Encourage repeat shopping by buyers and commitment to Etsy by sellers with discounts for membership length and number of transactions

Supply – Artists and small businesses can only produce in small, limited batches (Simon, 2015) Negative Reviews – Compromising ethos by including small-scale manufacturing in definition of handmade Marketing – Does not reach customers who are not active online or on social media Online Limitation – No physical presence; thus, cannot reach people without internet access (older and non-internet savvy markets) and customers cannot test out products Delivery – Added delivery costs, lengthy shipping time (cannot shop last minute) Product Offering – Too many items listed, degradation of quality Authenticity – Cannot guarantee quality; lack of verification of authentically handmade Customer Service – Negative reviews; No accountability for individual shops

Threats •

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Competition – Current and future competitors offering identical services (Amazon Handmade, DaWanda, Ebay “Homemade Section”) Seller Loyalty – Sellers use Etsy as a launch pad and leave the site once successful (Dobush, 2015); Dependence on small scale business units Market Trends – The handmade movement falls out of style Economy – Increase in U.S. economy, customers turn away from local production and shop abroad; alternatively, a downturn in the economy could curtail customers’

ETSY CASE STUDY •

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APPENDIX

Expansion – Global expansion (start Etsy Manufacturing in other countries); Expand target market (reach older and people without internet access by sending Etsy catalogues) Marketing – Develop a greater social media presence Customer Experience – Suggestions for similar products; Out-of-stock option; Integrate innovative technology such as 3D product experience (virtual reality) Community Engagement - Etsy Flea Markets, inperson gatherings to celebrate local communities; Makers classes taught by online sellers, engage millennial market desiring experiences (Schlossberg, 2016)

Figure 1

Figure 3

13 shopping; Increasing interest rates

Figure 2

Figure 4

ETSY CASE STUDY

APPENDIX

References BabyCenter. (2014, January). Millennial mom report. Retrieved from https://www.babycentersolutions.com/wpcontent/uploads/2015/12/BabyCenter_2014_Millennial _Mom_Report.pdf Bobila, M. (2016, January 28). Macy's opens 'the Etsy shop' in an effort to attract millennial shoppers. Retrieved October 31, 2016, from http://fashionista.com/2016/01/macys-etsy-shop Brown, M. (2015). Etsy: The story of Etsy's crafty growth to IPO and a $2 billion valuation. Retrieved October 31, 2016, from https://growthhackers.com/growth-studies/etsys-crafty-growth-to-ipoand-a-2-billion-valuation Dobush, G. (2015, February 19). How Etsy alienated its crafters and lost its soul. Wired. Retrieved from https://www.wired.com/2015/02/etsy-not-good-for-crafters/ Finley, K. (2015, September 15). Etsy embraces mass-manufacturing. Wired. Retrieved from https://www.wired.com/2015/09/etsy-embraces-mass-manufacturing/ Haider, Z. (2016, May). Online baby & infant apparel sales in the US (Report No. OD5098). Retrieved from http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=5098 Haider, Z. (2016, August). Children's & infants' clothing stores in the US (Report No. 44813). Retrieved from http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1068 Jones, S. (2016, February 12). Children's wear market growth immune to economic fluctuations. Retrieved October 31, 2016, from https://www.luxurydaily.com/childrens-wear-market-growthimmune-to-economic-fluctuations-report/ Kaplan, D. (2016, January 31). Macy's and Etsy partnership based on complimentary shopper appeal. Retrieved October 31, 2016, from http://www.geomarketing.com/macys-and-etsy-partnershipbased-on-complementary-shopper-appeal Larocca, A. (2016, April 4). Etsy wants to crochet its cake, and eat it too. New York Magazine. Retrieved from http://nymag.com/thecut/2016/04/etsy-capitalism-c-v-r.html Leinbach-Reyhle, N. (2016, January 31). Etsy launches first ever shop at Macy's in New York City. Retrieved October 31, 2016, from Forbes website: http://www.forbes.com/sites/nicoleleinbachreyhle/2016/01/31/etsy-launches-first-ever-shop-atmacys-in-new-york-city/#53250d29fad9 Loeb, W. (2016, September 9). Is Macyâ&#x20AC;&#x2122;s changing Macyâ&#x20AC;&#x2122;s? Retrieved October 31, 2016, from http://www.forbes.com/sites/walterloeb/2016/09/09/macys-needs-a-boldervision/#53e3a03624f0 Lutz, A. (2012, October 18). Macy's wants to dramatically change its core customer. Retrieved from http://www.businessinsider.com/macys-millennials-baby-boomers-2012-10 MarketLine. (2016, June). Macy's, Inc. Company Overview.

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Mintel Group Ltd. (2016, January). The arts and crafts consumer, US. Ozbay, B. (2014, January 25). Children's wear sector is where the money is. Retrieved October 31, 2016, from Fashionbi website: https://fashionbi.com/insights/marketing-analysis/children-swear-sector-is-where-the-money-is Perez, S. (2015, September 14). Etsy opens to manufacturing. Retrieved October 31, 2016, from https://techcrunch.com/2015/09/14/etsy-opens-to-manufacturing/ Saito, M. (2015, October 6). Etsy doubles down on manufacturing as it faces off with Amazon. Retrieved October 31, 2016, from http://www.reuters.com/article/us-etsy-amazonidUSKCN0S021U20151006 Sarah. (2012, March 15). Who buys handmade? [Blog post]. Retrieved from http://www.westervin.com/blog/2012/03/15/etsy-survey-results/ Schlossberg, M. (2016, July 15). Millennnials only want to spend money on one thing - and it's killing Macy's. Retrieved October 31, 2016, from http://www.businessinsider.com/macys-trying-tosurvive-in-the-experience-econmy-2016-7 Schweitzer, K. (2016, August 21). 8 things you need to know about millennial moms. Retrieved October 31, 2016, from http://www.popsugar.com/moms/Signs-You-Millennial-Mom37484119#photo-37484119 Simon, R. (2015, November 26). Big retailers seek small-artist touch. Retrieved October 31, 2016, from The Wall Street Journal website: http://www.wsj.com/articles/big-retailers-seek-smallartist-touch-1448588044 Stein, J. (2013, May 20). Millennials: The me me me generations. Time. Retrieved from http://time.com/247/millennials-the-me-me-me-generation/ Tabuchi, H. (2015, September 13). Etsy welcomes manufacturers to artisanal fold. The New York Times. Retrieved from http://nyti.ms/1NqKS7T Urbaneer Creative. (2015, September 30). Blending genders: Millennials and the androgynous appeal. The G Brief. Retrieved from http://thegbrief.com/articles/blending-genders-millennials-andandrogynous-appeal-557 Wahba, P. (2016, January 29). Macy's is teaming up with Etsy to win over millennials. Retrieved October 31, 2016, from Fortune website: http://fortune.com/2016/01/2/macys-etsy-millennials/ Weber Shandwick. (2013, June). Digital women influencers: Millennial moms. Retrieved from https://www.webershandwick.com/uploads/news/files/MillennialMoms_ExecSummary.pdf Wells, N. (2015, February 22). Who are the millennials anyway? Retrieved October 31, 2016, from http://www.cnbc.com/2015/05/22/who-are-the-millennials-anyway.html