Artisanal capitalism: The art and craft of business

Useful or beautiful?

WILLIAM MORRIS, the father of the Arts and Crafts movement that briefly flowered in the late 19th century, would have approved of Etsy. The Brooklyn company is home to a thriving online marketplace for around 1m jewellers, candlemakers, bag designers, woodcutters and other artists and craftspeople from around the world. Among current bestsellers are combat boots from Italy ($367), a snow-goose necklace from Raleigh, North Carolina ($29), and a minimalist stainless-steel toilet-roll holder from Portland, Oregon ($36). For $4 you can buy a fridge magnet bearing Morris’s dictum: “Have nothing in your house that you do not know to be useful or believe to be beautiful.”

Morris championed artisanship as an alternative to the mass production of his day, which he believed promoted shoddy design and dehumanised labour. Etsy too is on a mission to “humanise” work and commerce, says Chad Dickerson, its chief executive. As a business, it has just completed its best year since it was founded in 2005. In 2012 sales on Etsy totalled $895m; by October, before the busy holiday shopping season, they had already passed $1 billion for 2013. Although Etsy takes only a small fraction of that, charging 20 cents per item listed and 3.5% of every sale, it is said to be valued at more than $1 billion. There is speculation that it will sell shares to the public in 2014.

This has established Etsy as the leading business of the maker movement, the 21st-century heirs of Arts and Crafts. Morris’s followers were uncomfortable with modern technology, spending decades debating whether machines should play any part in production. Etsy and other maker firms have the same love of design and detail but, in contrast, have prospered by embracing technology wholeheartedly.

Etsy has borrowed from (the much larger) eBay the connection of small-scale sellers to millions of far-flung buyers, as well as reputation-building systems in which the two sides rate each other. It has added a social element that eBay has never mastered. It teaches Etsians, as sellers are known, about business, and facilitates online bulletin boards and offline meetings, especially in places, such as Brooklyn, San Francisco, London and Berlin, with high concentrations of Etsians.

More than a hobby

Other promising businesses serving makers include crowdfunding sites, such as Indiegogo and Kickstarter, and design sites, such as Quirky. Today’s artisans are also taking advantage of advances in 3D printing and computer-assisted design. In 2013 about 100,000 designs per month were uploaded to Shapeways, a 3D producer with a marketplace on which 13,500 designers have opened shops.

The maker movement can no longer be dismissed as just a bunch of tech-loving amateurs. In November Etsy published a study based on a survey of 5,500 of its American sellers, of whom 88% were women. Although 97% worked from home, 74% said they considered their Etsy shops to be businesses, not hobbies. Although most said they used Etsy to top up earnings from other work, 18% said that it was their full-time job. Mr Dickerson sees this as the start of a trend, particularly among women and under-30s, towards work with flexible hours, based on a personal interest and done at home.

Maybe. But the rise of Etsy may say more about consumers than about sellers. “People are getting tired of the same old big-box retail products,” says Mr Dickerson, adding that young adults in particular are attracted by the life stories of the sellers whose products they buy. Presumably with Amazon in mind, he says this “could not be more different than mass-produced items delivered to you by drone.”

Big retailers are prepared to test this claim. In 2013 Etsy convinced several of them, including Nordstrom, a posh department-store chain, to experiment by putting its products on their shelves. Etsians also give in-store demonstrations. Others are trying to do the same thing without Etsy. EBay recently started selling artisanal products selected by Martha Stewart, a lifestyle guru, branded American Made. Some analysts detect parallels with the early stages of the rise of organic and local foods, from farmers’ markets via specialist retailers such as Whole Foods Market to the shelves of Tesco and Walmart.

Whereas the Arts and Crafts movement was split over the role of machines, the maker movement is divided over outsourced supply chains. In November Etsy introduced new rules allowing sellers to have their products manufactured by other firms. Mr Dickerson says this was essential to allow its most successful sellers to expand their business and keep them from leaving the site (perhaps for eBay). As long as the seller “authors” the product and is open about who makes it, self-policing by Etsians will ensure that only small artisanal manufacturers are employed, not sweatshops in Shenzhen, he insists. It is “very important that Etsy stay true to the idea that you are buying from a person not a company, even if that person is getting help,” adds Fred Wilson of Union Square Ventures, an early investor in the firm.

Etsians are unconvinced, judging by claims on discussion boards that the firm is selling out true artisans, under pressure from investors hoping to profit from an initial public offering. Some have quit the site in protest. These fears first surfaced in July 2011, when the board replaced Rob Kalin, Etsy’s 30-year-old co-founder and chief executive, with the more conventionally businesslike Mr Dickerson.

Some Etsians take comfort in the fact that Etsy is a B Corp, a new corporate form designed to protect a firm with an explicit social mission from undue demands from shareholders. If it goes public, Etsy will provide an important test of whether such notions can withstand the short-term pressures of the stockmarket—assuming investors can be persuaded to buy these newfangled shares in the first place. Mr Wilson is convinced that they will, though the shares may fetch a lower price.

Morris’s movement ultimately failed because it tried to reject capitalism and return to an artisanal golden age that had never existed. Having embraced new technology and business models, Etsy and the rest of the maker movement may stand a better chance of supporting artisans.