The Etsy Initial Public Offering (IPO), aside from the financial machinations, is exciting because it represents just how far Etsy and its independent artisans can grow. The Etsy business model has
created demand that people didn't know existed, similar to eBay in the beginning. Etsy has proven that finding unique products and craftsmanship need not be relegated to local garage sales or craft
fairs. Instead, those unique product experiences can happen anytime and come from anyone. The stories and the people present ethos in a way that is compelling. Although there is stunning diversity in
the Etsy marketplace, the craftsmanship and passion for the product is what’s so uniquely consistent.
Holding sellers to a decent photographic quality opens a world of possibility for
consumers, who may not be in the mood to make a purchase, yet can't resist the artistry in their search. Maintaining their ability to capture taste and craftsmanship without compromise may prove
challenging in the midst of public financial market scrutiny.
Driving demand and profit growth, however, will become their daily grind. And, it should. People and institutions don’t
invest their money into what feels or looks good. They invest to make money. This business has so much more scale. With 80% repeat business, they’re getting the return on invested capital, but
without substantial new customer growth, those returns will begin to wane. It will take branding dollars and marketing investment beyond the $40 million spent in 2014 to get there. As long as they
don’t compromise their core -- craftsmanship, locale, quality, service -- they know that, once hooked, customers love them.
No doubt, the pressure of being a public company will push merchant fees higher, and they’re likely to force small to medium lot manufacturing
to their high-volume retailers, which will shake their operating principles. Consumers will be forgiving and understanding without compromising their loyalty. They can’t pull this off like
Facebook has by asking for forgiveness. They have to maintain their integrity and authenticity, and turn their customers into advocates and zealots by asking for input. Starbucks has done a superb job
of this. So has Zappos. But, unlike Uber or Mark Cuban’s latest investment, Ocho, they don’t have a technology engine that can push global reach at greatly reduced customer acquisition
cost. They need service and differentiators to stay at the forefront to keep their position and continue to tell their story.