An Examination of Etsy Shops as Online Micro-manufacturers

Micro-enterprises are organizations that have 5 or fewer employees including the working owner and make up 92% of 28 million U.S. companies in 2014 (a 5% increase from 2013). Micro-manufacturers represent a subset of these... [ view full abstract ]

Micro-enterprises are organizations that have 5 or fewer employees including the working owner and make up 92% of 28 million U.S. companies in 2014 (a 5% increase from 2013). Micro-manufacturers represent a subset of these micro-enterprises, defined as organizations that primarily focus on creating unique items for niche clientele. Micro-manufacturing examples include tailored clothing, handmade artisan goods, or made-to-order artwork digital artwork, among others. With limited resources and training, micro-manufacturers must identify their clientele and find markets for their products. Fortunately, the Internet has increased the reach of micro-manufacturers while also creating a thriving marketplace for customized products. As a result, prominent micro-manufacturing platforms like Etsy have seen significant growth in recent years. According to Etsy.com, as of 2015 they facilitated $2.39 billion in merchandise sales by supporting 1.7 million active sellers and 26.1 million active buyers. The rise of Etsy represents a significant opportunity for micro-manufacturing, yet hurdles remain for these organizations. Limited resources, digital platform choice and investment, and avenues for sustained competitive advantage are just a few of the challenges that these organizations face. Adding to the problem, little research exists that can inform the competitive actions taken by micro-manufacturers looking to compete in digital platforms like Etsy. 

This study aims to fill this gap. Using cross-selling platform marketing as a theoretical base, we examine data from Etsy as a way to examine real-world actions in support of theoretical propositions. Specifically, we answer two fundamental questions: “What are the characteristics that describe successful micro-manufacturing organizations?”, and “What micro-manufacturing actions are most associated with increased item sales price in online environments?”. In answering these questions, we collected data on all the actions taken by 1386 Etsy shops and their customers over a period of three months. Empirical analysis of this data is used to develop a framework meant to demonstrate how micro-manufacturers utilize the scaling opportunities of online marketplaces in order to increase their customer base and support their selling activities. Results of this study show that micro-manufacturing sales success is highly dependent on engaging in the right types of activities in the right amounts. 

Takeaways from the study will be of use to both research and consumer settings. The study adds to data analytics research by highlighting the knowledge developed through insights gained from mining digital data over a period of time. Today's consumers are becoming more comfortable with online commerce, which recently has begun to outpace traditional in-store shopping. Traditional retailers are being encouraged to innovate in their product offerings in order to differentiate themselves from competitors and gain a competitive advantage. Micro-manufacturers have much to learn (and teach) about how to carve out an online space in the increasingly crowded electronic marketplace.