London - Who knew the world of home-made crafts could get so cut-throat? Okay, any market that Amazon chief executive Jeff Bezos wants a slice of is by default cut-throat, but still.
Kill or be killed has been the Amazon way from the moment Bezos left Wall Street. Not prepared to let any retail market go uncontested, Amazon has started its battle with Etsy, the online craft fair. There will be only one survivor.
Last week's launch of Handmade at Amazon, a new market for home-crafted wares, is a direct assault on Etsy's business. The online giant already has 5 000 artisan vendors in 60 countries lined up to take advantage of its distribution power, and a huge customer base (more than 10 times the number with Etsy).
Some vendors will stick with Etsy because it is cheaper, but most want to get their products in front of as many people as possible, so will take the bait. Amazon is presumably anathema to many people who sell on Etsy, but you can't blame it for wanting more potential customers.
You can, however, blame Etsy. It started off as a quirky little corner of the web and its founders and vendors would probably have remained perfectly happy for it to stay that way. But as soon as it went down the corporate route, it became just another company. The loyalty of people who make these home-crafted items has been stretched by Etsy becoming a corporation, beholden to Wall Street lenders and seeking profits above all else. It has always seemed like a decidedly uncomfortable arrangement.
The site is now paying the price. It could have become another Wikipedia or Craigslist, existing for a more noble cause than just profit, but it chose Wall Street. That decision, plus Amazon's involvement, might end things sooner rather than later.
Etsy has already spent most of the past year on the ropes - a very different outcome to the one anticipated in the high hopes and hype that accompanied an initial public offering just six months ago. The company's shares soared to more than double the offer price before crashing back to earth, and now trade comfortably below that price. Disappointing results, higher than expected costs and slowing growth have taken their toll.
Handmade at Amazon is only going to make life harder, forcing Etsy to invest more, which in turn will further delay profits and further disappoint the markets. Otherwise known as a death spiral.
Etsy's problems can be traced back to the 2008 appointment of its current chief executive, Chad Dickerson, a former chief technology officer at Yahoo. He was brought in to help with the site's technology but became the boss in July 2011, after the craft market's original founders struggled with achieving growth and found themselves out of their depth. The problem is not that Dickerson has done his job poorly. The problem is that he has succeeded in turning Etsy into something it was never meant to be - answerable first to investors rather than to customers.
One of Etsy's worst decisions, and one that alienated many long-term sellers and even employees, was Dickerson's October 2013 agreement to allow the sale of factory-made items on its platform. Nothing says “handmade” quite like something that was knocked out by a robot.
Handmade at Amazon, in fairness, is trying to recapture some of that early niche by insisting sellers prove that what they are selling is indeed made by hand.
There are already 80 000 items on Handmade at Amazon for potential buyers to browse through, including profiles of the artisans who made them. Etsy is going to find it very difficult to compete with its giant rival, as other retailers have discovered.
Amazon is both a blessing and a curse in equal measure, but any sympathy for Etsy must be tempered by the sense that it ceased being anything other than another player the moment it started taking Wall Street's money.
THE INDEPENDENT