Etsy Inc—Written evidence (OPL0063)

About Etsy

Etsy is a marketplace where people around the world connect, both online and offline, to make, sell and buy unique goods. Handmade goods are the foundation of the Etsy marketplace. Artists, designers, and collectors use the platform to sell handmade and vintage goods to buyers around the world. Etsy was founded in 2005 in the US, and has offices in London, Dublin, Paris and Berlin as well as Canada and Australia. As of December 2014, Etsy hosted 1.4 million active Etsy sellers worldwide, who together grossed over $1.93 billion in 2014.

The UK Etsy Community

Together with the RSA, Etsy initiated the ‘Power of Small’ project in 2013 to explore the recent boom in micro-businesses and self-employment. The project examines personal motivations for becoming self-employed, the impact of these trends on individuals and the broader UK economy, and opportunities to better support micro-businesses. As part of the project, the RSA conducted a survey in 2014 of UK-based Etsy sellers and published a detailed report, Breaking the mould: How Etsy and online craft marketplaces are changing the nature of business, demonstrating the positive impact that online platforms like Etsy have on individuals, small businesses and the broader economy. The following data is based on these survey results.

The vast majority (91%) of UK-based Etsy sellers are women, and 61% are under 45. This is in spite of the typical entrepreneur in the UK being male and in his late forties. Most (95%) run their creative businesses out of their home and very few (less than 1%) required a bank loan. A substantial minority of Etsy sellers are low-income - roughly a third have annual household incomes that are less that the £23,000 UK median average.

Income earned on Etsy matters to our sellers. 23% of sellers describe their creative business – both on or off Etsy - as their full-time occupation. Although 65% would prefer to grow their business to a size they can manage themselves; many hope to expand their business over the next 3-5 years; 77% agree that it is likely that they will substantially increase their sales.

Etsy sellers report high levels of satisfaction with their working lives – the majority agree they have more opportunity to be creative (96%), that the work is more meaningful (92%) and they have more freedom than if they were working for somebody else (88%).

In many ways, Etsy provides a low-cost means to experiment with creative entrepreneurship. For 43% of UK sellers, Etsy was the first place they sold their goods, while 36% said they would not have been able to start were it not for a platform like Etsy. Most of the money earned on Etsy stays with local artisans—Etsy charges just $0.20 USD to list an item, and takes only 3.5% of every transaction. In this way, the Etsy platform drives local micro-business growth and sustainable economic development.

Etsy Supports the Digital Single Market Strategy

We welcome the European Commission’s efforts to establish a true digital single market in Europe. In particular, we believe many of the initiatives within the Digital Single Market strategy will help the micro-businesses who sell on Etsy grow and thrive. Efforts to harmonize the rules around the sale of physical and digital goods across borders, simplify VAT collection and remittance, establish consistent de minimis customs and duties exemptions, and improve the affordability and reliability of small parcel delivery would significantly reduce the barriers our sellers face. We also applaud efforts to expand the opportunities of the digital economy to women and underserved populations through improved training and education, as well as increasing access to broadband.

Diversity Among Platforms Calls for a Nuanced Approach Regulation

The Digital Single Market strategy also anticipates new potential regulations for online platforms. While specifics are not yet available, we urge policy makers to ensure any new proposals are sufficiently flexible and targeted to accommodate the existing diversity of business models in this space, as well as those that have yet to be developed. The Committee’s Call for Evidence specifies eleven different types of online platforms that are subject to its inquiry, ranging from online marketplaces to music streaming services. These platforms play very different roles vis-a-vis their users, and operate under diverse business models. The appropriate regulatory approach for a social network, an online marketplace, and a search engine will necessarily differ.

For that reason, we believe the proposed definition of online platform is overly broad, particularly if it is intended as a basis for future regulations. Proposing a single set of regulations for all online platforms will unnecessarily burden or harm some platforms, for whom the regulations were not intended. If such platforms cannot operate in Europe as a result of such regulations, the European startup economy will suffer, as will the consumers and micro-businesses who stand to benefit the most from the opportunities these platforms provide. Instead, we propose that the Committee address any concerns on a platform-by-platform basis.

Establishing a trusted environment for transactions to occur is essential for the success of two-sided marketplaces

The European Commission outlines several concerns about online platforms, particularly with regard to competition, data protection and consumer protection. Several of these issues are not particularly relevant for Etsy. For example, the e-commerce market is very competitive, and Etsy already has local and international competitors who provide marketplaces for handmade and vintage goods. Etsy sellers already use multiple venues to market and sell their wares, both online and offline. Overall, both sellers and consumers have plenty of choices in the market. Regarding user data, Etsy does not sell user data, nor allow outside advertising on our site.

As a two-sided marketplace, we do, however, spend considerable resources to ensure that both the buyers and sellers who use our platform are adequately protected. In this, the market is likely more powerful than any proposed regulation, since two-sided marketplaces will fail if they are unable to establish a trusted environment for transactions to occur between buyers and sellers.

Etsy is an intermediary. It helps buyers and sellers find each other and facilitates transactions, but it does not make any products, hold any inventory, or ship any goods to consumers. Further, Etsy is not a curated or juried marketplace, which means that Etsy does not choose the items that Etsy sellers list for sale. Given this context, Etsy uses several strategies to establish trust within the marketplace.

First, consumer reviews provide an important and transparent feedback mechanism for potential buyers. After making a purchase on Etsy, buyers are encouraged to leave a review about their experience with the seller, delivery time, and the quality of the products they received. Sellers know that buyer reviews impact their sales, and so work hard to maintain positive ratings, devoting considerable time to customer service.

We also have policies and guidelines about the type of items that belong on Etsy, and we work hard to enforce those policies and to make them clear for our members.  We recently relaunched our “House Rules” which make our policies and Terms of Use available to members in plain language, a simple, user-friendly format, and multiple languages.

Etsy’s policies require that goods listed in our marketplace be handmade, vintage items or craft supplies. Even if an item fits into one of those three categories, it must not fall into one of our prohibited categories, such as weapons or items that violate our intellectual property policies. When opening a shop or listing an item, Etsy sellers agree to comply with our policies as well as local and national laws. Most of the time, Etsy members understand and follow our policies. Sometimes members do post items that don’t meet our guidelines or that are explicitly prohibited. We have several teams in place to address violations to our policies and resolve member disputes.

Etsy’s Legal Support team removes items and sellers from the marketplace based on accusations of intellectual property (IP) infringement. Etsy’s Trust and Safety team reviews and removes items and member accounts (including sellers) that violate our policies. The Trust and Safety team also mediates disputes between Etsy buyers and sellers. These usually come in the form of non-delivery or not-as-described cases filed by buyers through Etsy’s Case System. For example, if a buyer does not receive an item or believes the item they received is not as described based on the listing, the buyer can open a case. If they do not reach a resolution with the seller, the case can be escalated for Etsy to review. Depending on the circumstances, Etsy may issue a refund on the seller’s behalf.

Last year, Etsy published a Transparency Report outlining our approach to these issues and summarizing 2014 statistics regarding actions taken by our Trust and Safety and Legal Support teams. The report is available here.

Conclusion

We applaud the European Commission for taking steps to create a truly integrated digital single market in Europe. We believe that doing so will unlock incredible opportunities for both consumers and micro-businesses. However, regulators should not take a one-size-fits-all approach to regulating online platforms, nor depend too heavily on old regulatory approaches to regulate new business models. We welcome the opportunity to answer any questions that may arise from this submission. Thank you for the opportunity to share our experiences and recommendations and Etsy looks forward to seeing how the committee’s inquiry develops hereonout and indeed the committee’s final report.

30 October 2015