Amy Hamley of Redraven Studios makes jewelry and delicate home décor items out of porcelain, like hanging planter sets and necklaces in the shape of arrow heads. For three years, she worked out of her basement and tried to break into the wholesale market.
But since September, she quit her job, moved to a studio space in a Pittsburgh suburb and attracted enough wholesale accounts that they now make up most of her business.
She used a beta offshoot of Etsy, the popular e-commerce site for handmade, vintage and other artisan items, to help get her there.
“I had been working really hard to build my wholesale business, and I had done what I considered to be a fairly decent job,” Ms. Hamley said. “But in the last few months since I’ve been on Etsy Wholesale, I’ve gained as many buyers and retail stores as I had in the entire first three years doing it on my own.”
Etsy’s site now has over a million sellers of goods, generating $1.35 billion in sales last year, the company says. Still, although Internet retailing is a growing market, more than 90 percent of retail commerce still takes place in physical stores, and like many retailers that started online, Etsy wants a piece of that action. Instead of opening locations, Etsy wants its sellers to take wholesale orders, so that through them, Etsy can be in thousands of stores at once without ever cutting a rent check.
After spending a year in beta, Etsy plans to make its role as a wholesaler official. On Tuesday, Etsy will announce a 3.5 percent commission on each wholesale transaction, the same cut it takes on its retail website, and substantially lower than a standard wholesale markup. Etsy will start charging for wholesale in August.
“If merchandise from Etsy sellers can be available in thousands of stores, as opposed to in a handful that we could possibly run ourselves, then it’s better for our sellers and it’s better for our buyers,” said Chad Dickerson, chief executive of Etsy.
And because it is a commission-based business, what’s good for Etsy’s sellers is good for Etsy.
Wholesalers generally mark up goods as much as 35 percent, according to Marshal Cohen, chief industry analyst at the NPD Group. But low, stable fees on Etsy’s retail site, Mr. Dickerson said, have meant that its sellers don’t tend to go looking for another platform.
Sucharita Mulpuru, an e-commerce analyst at Forrester Research, said that Etsy Wholesale smooths out expenses and obstacles that make it difficult for small retailers and tiny manufacturers to find one another, including the price of attending trade shows and the difficulty of getting a buyer’s attention if you’re making jewelry in a basement.
“Trying to get a meeting with a buyer is hard to do, and you may not know where to go,” Ms. Mulpuru said. “It requires a lot of marketing savvy. What Etsy has done is to allow the product to sell itself.”
It also has set up a minimum application process to ensure that buyers on its wholesale site are equipped to resell the items retail, and that sellers are prepared to produce some amount of wholesale product.
Michele Varian, whose eponymous boutique is in Manhattan, said she tried to place wholesale orders on regular Etsy site in years past, but she didn’t always succeed.
“It was a big investment in time to bring them up to speed on how to do business,” Ms. Varian said. “If I receive a product in the store and it arrives without pricing, I don’t want to go back and find a document they sent me two months ago. But these are things that, step by step, they didn’t know.”
Perhaps the biggest obstacle Ms. Varian encountered buying wholesale on Etsy’s retail site was price: Many of the goods were just too cheap.
“They didn’t build in any margin for anyone to go in between,” she said. “And no, you can’t sell it on Etsy for less than I have to sell it in my store.”
To keep wholesale prices visible only to those buying at that rate, Etsy intends to keep a firewall in place. If shoppers know a throw pillow is available somewhere for $25, they will be loath to buy it for $50 on another website, even if they need to buy two dozen of those pillows to get the cheaper price.
Camilla Velasquez, director of payments and multichannel sales at Etsy, said that while the company had already determined that some sellers who applied for the site weren’t quite ready to go wholesale, a lack of knowledge about the business is not generally a problem. (Ms. Hamley of Redraven Studios said she learned the basics of a line sheet, which is retail’s most fundamental order form, from Google.)
A fair amount of hand-holding is built into Etsy’s new system, with each seller being assigned an adviser from Etsy whom they can speak to for help or advice.
For example, last year Etsy contacted Shelli Worley and her husband, Seth, who were handmaking wooden lamps in her parents’ garage in Pineville, N.C., and selling them on Etsy’s retail site.
“At that point, we hadn’t even thought about wholesale before,” Ms. Worley said.
Today, they buy raw lumber, process it themselves in their 1,500-square-foot warehouse in Rock Hill, S.C., and turn it into elegant table lamps, cutting boards and bookends. Their small company, Worley’s Lighting, is their full-time job, and they just finished an order for Nordstrom.
For many small retailers, especially those far from major hubs like New York City, browsing for merchandise online is much cheaper than flying to New York City for a gift fair, retailers and analysts say. But Ms. Mulpuru of Forrester said that could cut both ways.
“That is probably going to be their single biggest obstacle to overcome psychologically, that this is a legitimate way to source merchandise,” she said. But, she continued, “it’s just a matter of time.”
Other adjustments have already begun, like small-scale producers of distinct artifacts getting accustomed to producing one thing — by hand, perhaps — hundreds of times.
“It’s still fun,” said Ms. Hamley of Redraven Studios. “Though,” she acknowledged, “I do not love packaging something 300 times.”
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