Amazon Taking A Shot At Etsy

Amazon and Jeff Bezos have been known to throw as many ideas at the wall and see what sticks. Recently, they may have found one a sticky one.

According to a Wall Street Journal report, Amazon (AMZN) is widening its e-commerce breadth by taking on Etsy (ETSY) with its own handmade brand called…well, Handmade. Etsy-based artisans have received emails from Amazon inviting them to sell their handcrafted goods under 11 different categories, including apparel, baby, kitchen, jewelry and pet supplies.

There isn’t much more information as of yet, and Amazon has declined to comment. But the idea seems to have some traction. Some of the people who received emails told the Journal:

“Amazon has such huge traffic numbers on their website already, it’s pretty appealing,” said Dar Garfield, a handmade jewelry seller. “I am probably going to do it.”

Monica Estrada, a Manila, Philippines-based seller, likes the idea of diversifying her business across both sites: “It’s a good idea not to put all your eggs in one basket, and joining another handmade marketplace would make me feel like I’m not so dependent on Etsy for income,” she said in an email.

So what could go wrong?

What could go wrong

Etsy charges a 3.5% commission and a 20-cent listing fee to its sellers. Amazon, on the other hand, currently charges sellers a 15% fee on the price of every sale they make. Though the e-commerce giant — famous for undercutting competitors on prices — will likely try to compete with Etsy’s fee policy, how will it affect the bottom line? Will it be worth it? Or will this simply be another loss project in a long line of loss projects?

Additionally, Amazon isn’t necessarily the most likely company to play nice if sellers have an issue. The company and book publisher Hachette had a major dispute last year when Amazon was accused of being unfair regarding e-book pricing and splitting revenue. It took months to resolve the affair. If individual Etsy sellers have an issue with fee or policy changes, it directly affects their business and there isn’t much they can do about it.

Why it’s still a good idea

The handmade e-commerce industry is largely untapped. While there are many other alternatives to Etsy on the market, few or none of them are big enough to have the same type of brand recognition.

The company, which went public on April 16, has 20.8 million active buyers, a large increase from 15.3 million a year ago. But that number pales in comparison to Amazon’s 278 million active accounts. So while Etsy sellers may or may not earn more at Etsy, they will have a much wider reach on Amazon, giving them an opportunity to scale their business far beyond what they’re able to on Etsy. Ms. Garfield has around 1,300 products at any given time on her Etsy store. Considering the opportunity that Amazon’s marketplace offers to her and other big-time sellers on Etsy, it sounds like a no-brainer.

Things that would have to change

In order to make things work with its new Handmade brand, Amazon would need to change a couple things. First, the commission: Considering that Etsy sellers make everything by hand, a 15% commission isn’t going to cut it for all that hard work. Second, shipping: Amazon is getting more and more creative with its shipping offerings, paring down from two days with Amazon prime to under one hour with Prime Now. Since Etsy sellers mostly make their goods on demand, they likely wouldn’t meet Amazon’s stringent shipping deadlines. Third, a seller-friendly feel. Amazon is very customer-centric and Etsy makes sellers feel like they have their very own online shop. In order to compete, Amazon needs to give sellers a personal touch that allow them to showcase their store without it feeling like just another Amazon page.

Conclusion

Amazon is continuing to spread its tentacles across the internet to gain market share. A few months ago, it launched a food-ordering service to compete with GrubHub, and even more recently it introduced its Home Services site to compete with Angie’s List. Handmade is just another tentacle shooting across the internet to take market share in another way. It definitely has a lot of upside potential, but Amazon will need to be careful not to alienate artisan sellers by treating them the same way it does sellers on its main site.