The Politics of Perception in Etsy CEO Josh Silverman's Well Crafted Rhetoric
Is it Time for the Handcrafted Community to Join the Great Resignation?
After putting forth a general call to writers to submit a fellowship proposal about Andersen Design’s story, I am processing applying myself since that is the only certainty in play. In fact, it is the only option in play.
Now is the time to focus on the project. The date of the zoom call is only ten days away and then a month later is the deadline for presenting a proposal. However, I have never written anything like this before. To focus my mind on such a challenging project, I instinctually went to obtain a copy of the paper ROOTED IN MOVEMENT Aspects of Mobility in Bronze Age Europe, having read the introduction but not the paper.
I wrote to the author, Samantha Scott Reiter who is a Project Research Scientist at the National Museum of Denmark. She sent the paper right away and wished me well on my project, which made me feel like I am off to a good start.
This paper and others are part of a contemporary debate in archeological circles that asks whether the Bronze Age itinerate craftsmen were free agents or instruments of centralized power. The written word had not yet emerged during the Bronze Age and so scientists apply their methods to the objects made by craftsmen to understand the movements taking place between cultures.
The debate is focused on prestige objects. Prestige objects are often made of materials sourced in distant regions indicating complex social organization, which archeologists identify as systems of inequality. One might ask if the archeologist's questions are formed by their awareness of the present moment as during the time that the debate is gaining intensity in archeological circles, the wealth divide, and inequality have been intensifying in the contemporary world.
A description from the paper by Samantha Scott Reiter, written about the Bronze Age applies just as well to corporate Etsy and the Etsy makers and sellers:
In a similar vein, the clear economic exploitation of the periphery is an unusual scenario in deep history. Unequal exchange to the perceived advantage of the involved parties is more likely to have been sustained. In any case, it was the peripheries that depended on the centres for resources rather than the other way around (Rowlands 1987).
The small independent makers have long been on the periphery of economic development values. It is only when a large corporate entity steps in that the contribution made by the periphery players becomes significant in aggregate. The corporate entity holds power, or as is often said in the corporate world, everyone can be replaced.
Corporate Etsy ignored the Etsy seller’s strike except for publishing a statement in the Wall Street Journal by the CEO Josh Silverman, reiterating a justification for fee increases that the sellers argue to be false, but Silverman’s audience was not the Etsy sellers. Silverman is talking to investors.
Etsy CEO Josh Silverman Stands by Strategy of Competing With Amazon
Chief executive says revenue from recent fee increase would be used to attract new buyers: ‘You’ve got to do something different’
In an interview on Yahoo News Silverman claims that Etsy now has 90 million active buyers. And sales per seller grew by 23% last year alone.
It is hard to understand how Mr. Silverman arrives at figures when looking at the year-end report. Josh says that Etsy spent 500 million on marketing last year to bring in new buyers. The number of sellers increased by 72.3% while buyers increased by 17.6%. Silverman claims percentages of sales per seller increased by 23% but marketplace revenue increased by 34.0%. 34 divided by 1.723 is only a 19.73% increase per seller and that is an aggregate number. The figure labeled “services revenue” increased by 22.3%- can we round it off to 23%?
That assumes that “marketplace revenue” refers to sales revenue brought in through the Etsy Marketplace, which is below a figure called “revenue” that equals the amounts designated to “marketplace revenue” and “service revenue”, The latter may represent fees charged by the platform to the seller, but the report does not explain the three terms. Service revenues are equal to about 24.5% of the total revenue figure. The revenue that corporate Etsy brings in is what matters to investors. Does “sales per seller” mean “service revenues (fees) per seller”? Is this doublespeak? Is Silverman, speaking in code, admitting to exactly what the Etsy seller’s strike is protesting as he puts on a face of serving the interests of the Etsy sellers?
The very top row, above all the rest, is a row labeled GMS (1) and it is valued at $ 4,201,277 corresponding to the $4.2 billion figure that Yahoo News Interviewer, Julie Hyman, asks Silverman about, calling the figure “gross merchandise volume”.
JULIE HYMAN: Etsy reported after the close of trading last night. And the company, as you can see, came in above estimates. In particular, that revenue number is a 16% increase to $717 million. Also gross merchandise volumes rose by 17% to about $4.2 billion. The shares up by a little under 7% at the moment.
Mr. Siverman, introduced as the CEO of Etsy, never responds to the question or makes any mention of the $42 billion dollar figure that Ms. Hyman attributes to gross merchandise volumes of the company for which Mr. Silverman is there to speak (Etsy). Instead, Silverman, like a polished politician, totally ignores this figure which is not raised again by Ms. Hyman.
There is an explanation given for GMS (1) in the Etsy year end report
GMS (1) Consolidated GMS for the year ended December 31, 2021 includes Etsy.com GMS of $12.2 billion, Reverb GMS of $948.0 million, Depop GMS of $294.4 million, and Elo7 GMS of $32.0 million.
Why did Mr. Silverman ignore the question, rather than correct Ms. Hyman? What else is included to bring the GMS (1) total closer to the reported $4,201,277?
What Is Gross Merchandise Value (GMV)?
Gross merchandise value (GMV) is the total value of merchandise sold over a given period of time through a customer-to-customer (C2C) exchange site. It is a measure of the growth of the business or use of the site to sell merchandise owned by others.
Gross merchandise value (GMV) is often used to determine the health of an e-commerce site's business because its revenue will be a function of gross merchandise sold and fees charged.
Gross merchandise value is calculated prior to the deduction of any fees or expenses.
It is a measure of the growth of the business or use of the site to resell products owned by others through consignment.
GMV is not a true representation of a company's revenues, as a portion of the revenues goes to the original seller.
How Is GMV Calculated?
GMV is calculated by multiplying the total amount of goods sold by their sales price in a given period. GMV = Sales Price of Goods x Number of Goods Sold.
On these sites, a portion of the revenue has to go back to the seller that sold the goods; eBay and Etsy only keep the fees they charge, which is their actual revenue. investopedia.
Sales per seller on an e-commerce site are never distributed equitably but fees are applied equally as a percentage. Later in the interview, Mr. Silverman is asked what Etsy is doing in regards to Ukraine and he says ” In fact, we have some ceramic bowls that just arrived from a seller in the Ukraine” indicating that Etsy is purchasing products wholesale, and begs the question what percentage of the reported marketplace revenue is corporate Etsy’s own retail sales?
The marketing expenses that Mr. Silverman promotes as a benefit for the Etsy sellers is for marketing the Etsy brand. In a Wall Street Journal interview, Mr. Silverman says “Each of our sellers is a blade of grass in a tornado. They’re someone you haven’t heard of.” Josh Silverman says that Etsy spent 500 million on marketing last year. The Esty sellers complain that it is mandatory. They are given no choice and it makes it difficult to calculate a mase to order selling price. The increased fees go towards promoting Etsy, not the sellers.
And what is so different about competing with Amazon? The major platforms serving small entrepreneurs all define their objective as expanding until they subsume the entire field of their operations and then they look to expand upon the field of their operations. There is usually a point at the beginning when the platform serves its small entrepreneurs well, creating a community, but as the company grows larger the sense of community dissipates and the only way to bring it back, if it can be revived, is through individual user controls.
Amazon launched Amazon Handmade in 2015 and has not been able to gain dominance in the handcrafted market over Etsy. Is Amazon targeting Etsy for a buyout in the model of Whole Foods in Amazon’s goal of subsuming everything outside of itself and becoming the singular market for everything? Coincidentally, the merger of Amazon and Whole Foods implemented some of the same policies protested by Etsy vendors, such as involuntary sales discounts imposed on vendors by corporate.
Amazon has also imposed merchandising fees for suppliers in its stores for items that are on sale. On a rotating basis, Amazon offers a 10 percent Prime discount on select products. Whole Foods is now charging that 10 percent discount back to the vendor. How Amazon Changed Whole Foods
Under the corporate umbrella, central management prioritizes its own self-interest. Small entrepreneurs have control over their own business only to the degree that central management will allow.
Etsy reveals CEO (Josh Silverman) awarded $40M in pay after strike Crain’s New York Business
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Also published on Medium’s Data Driven Investor 5/24 2022