Establishing a Small Business Niche: A Look at Etsy
By Austin Graf on April 1, 2019
Establishing a Niche: A Look at Etsy
Etsy. Yeah, let’s talk Etsy.
We know you have heard of it. We know you love it. Don’t pretend that you haven’t purchased questionable amounts of self-indulgent smelly good candles that are poetically named “Hemingway” and scented like pipe tobacco and bourbon. You love it, or if you don’t? Someone you know does. Why? Because Etsy has built a platform that they know you will love. They know you’ll indulge. Because the very second that you open that homepage, you are welcomed into a community of artisans creating trendy products that you feel the need to support. Getting cool products? That’s just a bonus, right? Etsy makes you want to buy because they understand the power of their niche.
- Etsy. Yeah, let’s talk Etsy.
WHAT is Etsy?
Esty is an E-Commerce marketplace that functions similarly to Amazon. Etsy produces income on a commission structure. It provides the platform for artisans to set up a virtual shop to sell their handmade products. Etsy collects a fee for every item sold and listed. Artisans make their products, craft their listing, produce their product image. Etsy drives traffic to sellers without the difficultly of building a website or intense marketing strategies.
HOW Etsy Found Its Piece of the Pie:
When it comes to E-Commerce, I must admit that I am an avid fan of Etsy. Etsy is the perfect example of niche marketing. If you don’t understand niche markets, then honestly you’re a lost cause already. Alright, maybe you aren’t but let’s get you informed. Let’s start here… ask yourself this: “How did Etsy establish itself in the same marketplace as the giant, Amazon?”. This is a pretty common concern of many E-Commerce businesses. How on Earth can they survive when Amazon and other large sites commands so much traffic in that space. We all know in the E-Comm world Amazon is the king, so how does a platform like Etsy stay afloat? They define their niche, and they absolutely crush it.
Amazon is all things to everyone. If you need something, you can find it there. It’s great. I love it. They did an amazing job. High fives Jeff Bezos. But what about those moments when you’re craving something that you don’t even know you want…something less commercial? Imagine a GIANT craft fair filled with artisans from all over the country all showcasing handmade, wonderful gifts and goodies. Amazon isn’t exactly what you picture is it? Nah, not exactly. But there is a huge demographic of people that would absolutely love to experience that, right?
Enter Etsy. With the local movement booming, people adore having the opportunity to meet the exact person that will be reaping their benefits from their overspending. Sometimes that simply means just reading the “Bio” on the “About” page. People want to know. Consumers are demanding to be informed.
That’s why Etsy filled that niche.
WHAT is a Niche?
If you’re still unsure of what a niche is, let me explain it in terms that I know you’ll understand:
Imagine you decide to vacuum out your couch. You haven’t done it in months or maybe years, because let’s face it…. life is too short to clean under the couch cushions. BUT in a sudden burst of energy, you elect to prove to the world (and yourself) that you are, in fact, the most “put together” individual on this planet. You’re vacuuming and vacuuming, but no matter what you do? You can’t seem to get those crumbs and questionable weird things that are down in those hard to reach corners. You try, and you try, but no matter what? While you can get some of those crumbs, there is always going to be tons of crumbs in the corner. Or niche.
That’s a niche market.
Even amongst giants like Amazon (or in this case the vacuum), a niche survives and thrives with a healthy population of crumbs. Now, imagine the crumbs are web traffic, conversions, and sales. Sure, that vacuum can pull some of those crumbs away from your couch, but ultimately that niche remains strong with plenty of crumbs to spare.
Moral of the story, Etsy is in essence the hard to reach corners of the underbelly of your couch cushion. They have positioned themselves to provide a haven for the creative niche of people who want handmade and wonderful artisan goods such as this handmade soap that looks like sushi which everyone clearly needs to accent their bathroom. Obviously, they have secured their position in the couch (the world wide web).
Amazon started this way as well. Ever wonder why they initially started as a book platform? They wanted to establish themselves as the place for you to find that perfect book without ever leaving your steaming cup of tea and pajamas, and they used that as the base to launch a massive E-Commerce site.
A niche is great for the simple fact that it is so easy to market. Once you identify your company’s niche? It makes targeting and marketing to your intended audience that much easier.
The Difficulties of a Niche:
Your consumers WILL hold you accountable.
Esty established its position in the marketplace as a place to purchase handmade goods from real people and little businesses. There is an ethics card in this equation. Etsy built its brand from their own values. They loved supporting small businesses, and they wanted to provide a place for consumers to support those small entrepreneurs from the comfort of their own home. Etsy created a guilt-free, feel-good way to indulge in our commercial and materialistic world.
The problems started after their IPO. Turns out, having a company that focuses on being good to people, the environment, and the world in general…is a pretty difficult act to balance when you throw in the wild card that is investors. Etsy had a habit of wanting to do what was best for its sellers, its employees, and the world…no matter the cost. Something, that I personally believe is a great flaw to have, but investors weren’t exactly as enthusiastic.
Shockingly, the investors were more interested in profit margins than providing free yoga and meditation classes. Investor pressure prompted Etsy to makes some difficult decisions. They started allowing more manufactured products in their line-up to increase sales and profit margins. This, of course, received a great deal of push back. The brand was stepping outside its niche and people felt by doing so, the company was abandoning their values. Corporate sellouts. How can a marketplace dedicated to giving the little guy a fighting chance allow these big corporate manufacturers to sell in the same ring? Naturally, a bit of the Etsy brand identity was lost. Those additional profits? Well, say goodbye to those. People left the marketplace. People stopped shopping on Etsy. It was an issue of principle.
Finding the Right Balance:
Etsy is a thriving company. They have more than doubled annual revenues since their IPO date back in 2015, and their stock value has doubled as well. Their company is booming, and they are still operating within that same niche. The key? Finding that niche that allows for plenty of growth and potential.
Yes, Etsy struggled with pushback from sellers and consumers during their attempts to expand and allow manufactured goods to be listed among their handmade products, but they ultimately moved passed this. The niche they established prior to their IPO was ALL handmade and ALL vintage leaving no room for manufactured goods. They now sell all handmade and vintage items as well as “unique factory-manufactured items”. Notice the very subtle addition?
People still trust them. They still believe in the company. They love and respect their values. Why? Because these “unique factory-manufactured items” are not mainstream corporate products. They are unique, just like Etsy.
Etsy’s biggest mistake in terms of growth was establishing a niche that was just a little too small for them to grow and adopt a corporate business model, but that same niche also grew their company to millions in annual revenue prior to ever going public. Their choice to broaden their niche was purely to appease investors, and it has seen very positive results.
Ultimately identifying the correct niche and launching your brand to capture your share of the couch cushion crumbs, is entirely dependent on the goals and anticipated growth of your company. Think Goldilocks. Not to hot and not to cold. Just right. Not too broad of a niche. Not too narrow of a niche. You’re looking for just right. Depending on your goals you may prefer your porridge a bit hotter or cold, or your niche a bit broader or narrower. Regardless, make sure you know what niche you’re fulfilling.Back to the blog