How to save Etsy.
Surprisingly, Facebook’s playbook has the answers
In August last year the Pope endorsed the Republican candidate Donald J. Trump for President. This happened around the same time as a turning point in the history of news, media and politics.
It was the point at which fake news outlets overtook mainstream media in engagement metrics on Facebook.
The story about the Pope’s thumbs up for Trump became wildly popular and was found to be patently false.
The Similarity between Fake News and Fake Goods
Both fake news and fake goods thrive on grey areas. While stories like the Pope’s endorsement of Trump were clearly fake news, a significant portion of fake news consists of outlets ‘repurposing’ old news or taking a factual starting point and extrapolating it into fantasyland. The quality of news deteriorates on a gradual scale rather than falling into two distinct buckets of ‘true’ and ‘false’. Hence, it can be a slippery slope to try to figure out what is just bad information vs outright fake news.
Like fake news, ‘fake’ goods also fall into a grey area. Goods and merchandise might be an even greyer area than news because the value or worth of a good is derived from a mix of consumer perception, availability and seller costs. Etsy is a marketplace that grew based on its reputation for selling handmade and vintage goods rather than mass-produced merchandise.
But what is the definition of a handmade good? What era can be called vintage? Are the 1970s considered vintage by everyone? When you look at mass produced products that have been modified in some way, do you think ‘that’s so creative’ or do you think ‘that’s easy, I could do it myself’?
The issue is that there is no binary ‘yes/no’ answer. It is a spectrum and people have different opinions that fall across the spectrum.
Companies can’t be arbiters of truth or value
The Pope’s supposed endorsement of now President Trump received nearly a million shares on Facebook. In the aftermath of this story and many more like it, the ‘fake news’ phenomenon received a lot of press. Fact checkers found that this “news” originated on a satirical website called WTOE 5 News and was made up of completely bogus statements. The ‘About Us’ section of WTOE 5 News stated that it is a “fantasy news website”. But by the time it had been taken and repurposed by other news websites, the trail was lost.
In response to the backlash against fake news CEO Mark Zuckerberg spoke about the issue —
“We need to be careful not to discourage sharing of opinions or to mistakenly restrict accurate content. We do not want to be arbiters of truth ourselves, but instead rely on our community and trusted third parties.”
And therein lies the problem for both Etsy and Facebook. If Etsy were to deal with the problem of generic goods on its platform, then how would it decide which products to keep out? There are many categories that Etsy needs to grapple with. If it only lists items that are 100% handmade with no other copy in the world, then it would be effectively taking the position that a modified version of a factory-made product is never unique. Or that a mass-manufactured product that is currently novel and new will never be liked by its user base.
Most importantly, how can Etsy find and penalise a mass-manufactured product that is objectively generic and commonplace? What would be the backlash if Etsy were to play judge, jury and executioner in the craft world?
A layperson’s perspective
A recent discussion on Hacker News shed light on the inherent issues in the handmade space. A user who organized a ‘maker fest’ had this to say about the handmade-ness of goods:
“A few years ago, I was involved in planning and running a maker “fest”…. A not-insignificant number of participants who wanted to sell things were just reselling things you could buy at Michaels, or buy online (in bulk) for cheap. Sometimes with just a little modification, or maybe a creative recombination, or repackaging.”
Then there is the issue with playing the decider in such a case which can be a damned if you do and damned if you don’t sort of situation. The same user goes on to state —
“The problem is that you basically have to examine every single item, and then personally decide if it qualifies as art or not.
That’s a lot harder than it sounds, and can quickly devolve into a judgemental mess that nobody wants to participate in (we wanted to encourage makers, not subject them to some “must be at least this cool” test, which is scary for people).”
This is the problem that Etsy faces but at a much larger scale, with thousands of sellers and millions of users. Which in turn brings us to the next problem — having gatekeepers and fact checkers.
An army of human gatekeepers isn’t affordable
Building an army of people to fact check user generated content isn’t easy. Fact checking websites like Snopes.com received as many as 300 e-mails an hour from users requesting for fact-checks during election season. Facebook fired its own human editorial team when it found that human-curation led to the ‘Trending News’ section being overwhelmingly liberal.
A team of thousands can’t manually keep up with a crowd of millions.
Etsy has approximately 35 million products listed for sale. Neither can it afford to hire people to scrutinise all listed products, nor can it risk offending sellers and buyers with a rigid definition of ‘handmade’.
Etsy grew because it didn’t play arbiter
A recent Wired article argued that to keep its value, Etsy needs stay true to craft and stand against mass consumerism. I would actually argue that the reverse is true — Etsy’s dollar value grew because it understood that people’s values are their own.
Scaling past the sweet spot
Etsy might have started off as handcrafted haven but over the years, its deviation from purely handmade and artisanal goods hasn’t hurt the bottomline.
In 2014, Etsy updated its terms to allow sellers to list products manufactured by third parties and announced Etsy Wholesale, which allows retailers to buy products from Etsy sellers in bulk. In 2015 it started the Etsy Manufacturing program, which aimed to bring qualified manufacturers together with designers who wanted to scale their businesses.
These decision, though unpopular and confusing to users, have also helped Etsy grow. DaWanda, which is a German version of Etsy, is rumored to have a revenue of only $17.12 million, a fraction of Etsy’s revenue. Amazon Handmade also hasn’t been quite the Etsy-killer it was predicted to be with no mention of it being made in Amazon’s Q1 2017 filings.
Despite recent bad press, it is hard to argue that Etsy’s past decisions haven’t been crucial in helping it scale past its competitors. The issue now is how to balance this growth with customers’ unique and varied values.
The solution — a blend of people and technology
Backed up against a corner, Facebook has had to come up with solutions to its fake news problem. It is one that uses the strength of the Facebook community and technology to find a balance between curator and arbiter.
Facebook’s Information and Operations release last month emphasized a multi-pronged attack which includes ‘Building new products’ and ‘Helping people make informed decisions’. While their algorithms have long been useful in sieving out untrustworthy sources, the latter part is more difficult.
According to Facebook ‘helping people make more informed decisions’ means —
exploring ways to give people more context about stories so they can make more informed decisions about what to read, trust and share and ways to give people access to more perspectives about the topics that they’re reading.
That’s exactly what Etsy needs to do, but with products.
Informing and giving context to Etsy’s users
The key is in embracing a solution that involves community and artificial intelligence.
There is nothing inherently wrong with creating a mass produced product, modifying it and selling it. The issue comes when a product is passed off as something it is not. When a cheap, factory bracelet is given a cool backstory and an exorbitant mark-up for authenticity.
Empowering the community
Facebook now allows users to report fake news and provides educational tools to train people in spotting fake news; similarly, Etsy’s sellers and users should be provided with an easy way to report generic mass-produced goods and enough clues to help them spot generic goods or rip-offs. The current ‘Report this listing’ button is innocuous and offers no secondary information such as past infringements or % similarity to another listing. In enlisting and empowering the community to help, Etsy is further aided by the fact that sellers will have a tangible economic incentive to report generic listings.
As we have covered in previous articles, enforcement technology is catching up in retail. The key is in having effective product matching on Etsy listings and letting customers know when similar (and identical) products can also be found with other sellers. While it is not possible to have huge teams of people performing such tasks, AI-driven solutions are both scalable and accurate for large scale product matching across millions of listings. These products can then be tagged as ‘Original’, ‘Modified’ or ‘Generic’ with only a certain fraction being penalised or de-listed.
Etsy can make itself premium while not completely limiting itself but it’s going to take a very fine balance. And a rapid and decisive implementation of the latest in tech.
The question is not whether Etsy should go back to its older model but on whether it can implement its current one well.
In the end, Etsy can save a lot of time and heartache by studying the way Facebook has tackled similar problems in a different field.
As they say, a wise man learns from the mistakes of others.
If you’re interested in learning more about our AI-powered product matching solution, schedule a call with our consultants.
Published at: May 23, 2017