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Etsy offers a new seller service, Pattern, to customize online stores

April 5, 2016 12:23 PM
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(Bloomberg)—Etsy Inc., the online marketplace known for handmade and vintage goods, unveiled its fourth seller service in less than five years, giving vendors more control over their creative brands and as the company seeks fresh sources of revenue.

The new service, called Pattern, provides customized online stores that let merchants sell their goods outside Etsy’s marketplace. The product—the company’s first subscription revenue generator—is integrated with the sellers’ Etsy shops, so they can manage their inventory and data analytics in one place, CEO Chad Dickerson said.

The new service is free for the first month and costs $15 a month after. Only sellers who use the direct checkout product, which allows buyers to pay using a variety of methods including credit cards and PayPal, can use Pattern. The websites are designed to suit all devices, including smartphones and desktop computers, an extension of Etsy’s focus on driving more mobile traffic.

“What this means is Etsy is really a platform, where Etsy.com is really one channel, Pattern is one channel,” Dickerson said. “In this case, the shop is where you control your own brand—that’s your own shop, and that’s really important to sellers.”

Etsy in February announced its forecast for three years and its projection for gross merchandise sales growth exceeded analysts’ expectations. The new Pattern product will add to Etsy’s total GMS, Dickerson said. That’s because sales made on the stores created using the service will count toward the metric, and sellers will still pay Etsy a cut on each transaction just as they would on the marketplace, he said. 

Growth concerns

The stock has traded below its April 2015 IPO price of $16, as investors questioned whether the company could continue to increase active sellers and buyers and reach international expansion goals. Analysts have cited slowing growth of GMS and active buyers and sellers as areas of concern. One of Etsy’s major areas of focus is in boosting revenue from seller services, which has been the fastest growing area for the company, and provides a “symbiotic” relationship with marketplace sales, Dickerson said.

In the fourth quarter of 2015, seller services exceeded transaction fees from marketplace sales as the largest revenue generator for Brooklyn, New York-based Etsy. When developing new services, the company considers whether it’s cost-effective, whether the service will make it significantly easier for sellers to run their business, and whether it will generate revenue and profit opportunities for Etsy, Dickerson said.

All seller services are designed to “drive more activity to the marketplace,” he said. “More and more as the sellers grow on Etsy, they need new services to make it easier, help them scale, help them brand and market their merchandise, so we expect seller services growth to continue nicely.”

About a third of Etsy’s sellers said they would be interested in setting up their own online stores if there was a simple tool available, and that’s the initial target group for the new product, Dickerson said. Half the company’s sellers already sell on channels other than Etsy, though the marketplace is still the biggest source of sales for them, he said.

 

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