Amazon's Foray Into Handmade Goods Takes Direct Aim at Etsy

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  • Etsy has more inventory than Amazon, fewer customers
  • Shares of Etsy drop, extending decline from April IPO Inc. added homemade jewelry, home decor and other tchotchkes made by artisans to its Web store, encroaching into a market where Etsy Inc. and EBay Inc. have taken the lead against the online retailer.

Shoppers on Amazon’s new Handmade store will be able to find handcrafted earrings alongside party platters made out of wine bottles among the 80,000 items listed from 60 countries, the Seattle-based e-commerce company said in a statement Thursday.

Amazon Handmade Screenshot

Unsurprisingly, Etsy shares slipped. The stock fell 4.3 percent to $13.57 in New York, leaving it down 15 percent from an April initial public offering. EBay shares slumped 6 percent to $24.15.

Etsy's Stock Performance

Amazon Handmade is the company’s latest effort to branch out into new sources of revenue. The Internet retailer has also introduced a home services site that connects customers with plumbers, electricians and other professionals, a restaurant delivery service and is said to be considering an online pay-TV service.

Etsy, based in Brooklyn, New York, has an inventory of merchandise that eclipses that of Amazon Handmade. The Web store, which debuted in 2005, offers 32 million arts-and-crafts items from 1.5 million merchants. Analysts project that Etsy, which has a market value of about $1.5 billion, will have $274.3 million in revenue for 2015.

Customer Loyalty

While Etsy may have an edge in terms of size and selection, many sellers on the website will shift some of their merchandise to Amazon in search of a larger pool of customers, according to Gil Luria, an analyst at Wedbush Securities Inc., which surveyed 30 Etsy sellers in advance of the Amazon Handmade debut. Etsy has 21.7 million active buyers, while Amazon had 265 million shoppers in the second quarter.

“Sellers may value Etsy as a sales channel, but many of them lack a sense of loyalty to the marketplace,” Luria wrote in the report.

EBay, which split off from its payments division PayPal in July, has been struggling to recover from sluggish sales and user growth after a data breach last year forced customers to change passwords, as well as a decline in traffic after Google Inc. altered its search engine. EBay’s same-store sales rose 1.1 percent in September, while Amazon grew at 19 percent, according to Channel Advisor.