Artisanal Manufacturing – Etsy and the Matter of Scale

Artisanal Manufacturing

This essay is continues a series on Artisanal Manufacturing. For the purposes of this series of essays, “Artisanal Manufacturing” refers to businesses that produce tangible products, usually employing 10 or fewer people, counting everybody involved. Artisanal manufacturers often differentiate their product offerings on qualities such as “custom”, “designer”, “uniqueness”, “handmade”, “local” or “natural”. [1]

Etsy’s Contribution

Etsy.com provides a global on-line marketplace especially for artisanal manufacturers. Etsy’s website provides some interesting figures on an important and rapidly growing group of artisanal manufacturers:

Number of Sellers (2013):                                     1.3 million

Number of Products Offered (2013):                     26 million

Gross Revenues from Products Sold (2013):        US$ 1.35 billion

Revenues Increase (2012 > 2013):                        About 50% (from US$ 895 million)

Most Etsy sellers are female (~ 88%). About 83% of Etsy sellers consist of one person businesses. Almost all operate from their homes. Only about 18% operate their business as their primary livelihood. Mean revenues per seller (business entity) are close to $1,000 annually (US$ 1.35 billion / 1.3 million sellers). Revenues per seller likely approximate Pareto’s 80:20 rule — a few sellers generate nearly US$ 1 million, while many produce a few hundred, at best. Of course, many Etsy sellers also sell through other channels, digital and otherwise. [2]

Growing the Business

91% of Etsy sellers say that they want their revenues to grow in the future. For almost any business, growth involves confronting a continuing series of constraints to growth:

Time | Talent | Suppliers | Production | Distribution | Sales | Money

 For most Etsy sellers, there are several steps on their growth ladder:

Step #1: Increase supplemental income:

For very small businesses with access to global markets, as Etsy sellers are, on-line sales can be expected to increase with time due to repeat business and referrals. Additional products can be introduced and other sales channels can be utilized (e.g. craft shows, Amazon, private website).

Over time, the constraint to growth will shift. Perhaps the constraint to further growth becomes access to enough t money to finance growing working capital needs. Or the personal time necessary to work in the business and on the business as it grows becomes limiting. Or the production capacity needed to reliably produce enough goods in a timely manner.

Step #2: Confront the vast chasm between a supplemental income business and a livelihood – [3]

Quitting one’s day job is a very big deal. In doing so, revenues from the business must grow quickly enough to cover living expenses, as well as to provide the cash needed to meet the increase in working capital and production capabilities that the increased revenues require. In most cases, careful planning and contingency resources are necessary.

Step #3: Grow from a one person business to a Company of two or more, and/or relocation to a designated place of business.

To become a stand – alone business that provides two or more livelihoods usually requires a well thought out business model and a formal business plan. The business model should be scalable, meaning that aggregate costs should grow at a slower rate than throughput (revenues), without meaningful upper limit.

In preparing the business plan, leverage through outsourcing, partnering with other firms or outside financing should be considered. Fixed costs become much more significant, so contingency resources are even more important. Unless the principals in the business are very experienced, it is prudent to make use of outside expertise when preparing the business plan. [4]

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Chuck - France 2012-4Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S: Contact me when your organization is serious about growing and prospering in the 21st century. … CH

This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published weekly.


[1] There are other groups of artisanal manufacturers, such custom molders, custom machine shops, make to measure cabinet makers and many more.

[2] The figures quoted in this paragraph are from Etsy’s website, especially from Redefining Entrepreneurship: Etsy Seller’s Economic Impact, one of several reports available at www.etsy.com/press

[3] For an example of Step #2 planning, see Green Soul – Confronting the Chasm, this blog, http://jerasustainabledevelopment.com/2014/09/04/green-soul-confronting-the-chasm/

[4] Here in the U.S., your local office of the Small Business Administration (SBA) can provide serious assistance. To  learn more, see Why Not Take Advantage?, this blog, http://jerasustainabledevelopment.com/2013/11/27/why-not-take-advantage-2/