Blog 1A — Business and Revenue Model of Etsy
In the first week of Internet Marketing PG unit, Irfan (our lecturer) was talking about all we need to know about internet marketing, one of which is Business and Revenue Model that we have to talk about in our blog. I chose Etsy to analyse!
Markides and Charitou (2004) explained that business model represented a potential source of competitive advantage. Furthermore, Afuah and Tucci (2001) defined business model as “the method by which a firm builds and uses its resources to offer its customer better value and to make money in doing so”.
Etsy is the e-commerce platform for unique and creative goods. What make Etsy is a bit different from other E-commerce platform like eBay and Amazon is the products that they sell. Etsy products are well known as crafty, DIY and handmade products. This is where Etsy puts their competitive advantage.
Etsy Business Model
In Digital Marketing book by Chaffey and Ellis-Chadwick (2016), Timmers (1999) identified 11different types of business model. Using Timmers’ types, Etsy can be classified as an E-Shop because technically, sellers has the ability to create a shop in Etsy. It can also classified as third-party marketplaces, specifically for handmade items (Businessnewsdaily, 2012).
Etsy also declared itself as “a peer-to-peer (P2P) e-commerce website focused on handmade or vintage items and supplies, as well as unique factory-manufactured items” (Etsy, 2012). In addition, Etsy also apply C2C (customer to customer) basis in every store and item in Etsy shop by providing feedback from customers.
Etsy Revenue Model
Etsy’s revenue stream comes from charging its sellers with:
- Listing fee 0.20 USD per item
- Transaction fee of 5% when making a sale
- Subscription fee 20 USD for Etsy plus
- Advertising and Promotional Fees
Etsy revenue model comes from two revenue categories, Marketplace and Services revenue. Marketplace revenue represents:
- The fees Etsy charge sellers to list their items in the marketplace,
- The fees Etsy charge for transactions between buyers and sellers,
- The revenue from Etsy payments,
- The use of Etsy payments by Etsy’s sellers to process payments.
Services revenue is derived from the optional services we provide to Etsy’s sellers, which include Promoted Listings, Etsy shipping labels, and Pattern by Etsy.
Etsy is one of the online store that I visited a lot because of its unique content, especially in journaling stuff (which is one of my interest!).
Have you heard or bought anything from Etsy before?
Afuah, A., & Tucci, C., L. (2001). Internet business models and strategies: Text and cases. New York: McGraw-Hill.
Chaffey, D., & Ellis-Chadwick, F. (2016). Digital Marketing: Strategy, Implementation and Practice. United Kingdom: Pearson.
Daniel, R. (2012, December 6). eBay, Amazon, or Etsy: How to sell on third-party marketplaces. Business News Daily. Retrieved from: https://www.businessnewsdaily.com/3530-how-to-sell-on-third-party-marketplaces.html
Etsy. (2012). About Etsy. Retrieved from: https://www.etsy.com/au/about
Markides, C., & Charitau, C., D. (2004). Competing with dual business models: A contingency approach. Academy of Management Executive, 18: 22–36.