1. What are the chief elements of Etsy’s overall competitive strategy?

Is the
strategy evolving?
Firstly, one of the elements of Etsy’s competitiveness in e-commerce is that it meets the
need for craftspeople and artisans to control their online business by themselves. They
could design their online store as well as sell their handmade products with high price.
Meanwhile eBay had become too large and ineffective, its format made for an exciting
marketplace for bargain-hunting consumers, and Etsy took advantage of increasing value
of crafts products of sellers. Because handcrafts items in Etsy are unique that could not be
found elsewhere, sellers do a business easily by sale online. Etsy created opportunities for
entrepreneurs start.
New technology that enables easier content creation on the Internet and facilitates
interaction via social media has helped online handmade goods platforms proliferate, as
has the growing popularity of custom-made goods. Online platforms have reduced the
risks inherent to starting a business and have provided entrepreneurs with a channel
through which they can try their ideas without the need for a substantial investment up
front. Therefore, people could start their business for a platform like Etsy.
Secondly, Etsy satisfied buyers’ demand and developed the relationship between sellers
and buyers. Etsy buyers could enjoy a personalized shopping experience by finding
unique hand-made products. Buyers simply search for the products they want based on a
category (ex. jewelry, arts & crafts) and can add an item to a shopping cart to eventually
purchase Moreover, Etsy promoted its ability to connect consumers with thoughtful
artisans that helped buyer know how items were made, who made them. That made
prestige of transaction that proved customers’ belief. Furthermore, company introduced
social networking that helped buyers and sellers become friends. It was great function to
connect everybody.

2. What does a five-force analysis reveal about the nature and strength of the
competitive pressures facing Etsy? Which of the five forces is the strongest?
Which of the five forces is weakest?

Threats of New Entrants

New entrants in Specialty Retail, Other brings innovation, new ways of doing things and put pressure
on Etsy, Inc. through lower pricing strategy, reducing costs, and providing new value propositions to
the customers. Etsy, Inc. has to manage all these challenges and build effective barriers to safeguard
its competitive edge.

How Etsy, Inc. can tackle the Threats of New Entrants

 By innovating new products and services. New products not only brings new customers to the
fold but also give old customer a reason to buy Etsy, Inc. ‘s products.
 By building economies of scale so that it can lower the fixed cost per unit. 
 Building capacities and spending money on research and development. New entrants are
less likely to enter a dynamic industry where the established players such as Etsy, Inc. keep defining
 the standards regularly. It significantly reduces the window of extraordinary profits for the new firms
thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Specialty Retail, Other industry buy their raw material from
numerous suppliers. Suppliers in dominant position can decrease the margins Etsy, Inc. can earn in
the market. Powerful suppliers in Services sector use their negotiating power to extract higher prices
from the firms in Specialty Retail, Other field. The overall impact of higher supplier bargaining power is
that it lowers the overall profitability of Specialty Retail, Other.

How Etsy, Inc. can tackle Bargaining Power of the Suppliers

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the prices go up of
one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the lessons
Etsy, Inc. can learn from Wal-Mart and Nike is how these companies developed third party
manufacturers whose business solely depends on them thus creating a scenario where these third
party manufacturers have significantly less bargaining power compare to Wal-Mart and Nike.

Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on Etsy, Inc. profitability in the long run. The smaller
and more powerful the customer base is of Etsy, Inc. the higher the bargaining power of the
customers and higher their ability to seek increasing discounts and offers.

How Etsy, Inc. can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its sales and
production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Etsy, Inc. keep on coming up with new products then it can limit the
bargaining power of buyers.
 New products will also reduce the defection of existing customers of Etsy, Inc. to its
competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry profitability
suffers. For example services like Dropbox and Google Drive are substitute to storage hardware
drives. The threat of a substitute product or service is high if it offers a value proposition that is
uniquely different from present offerings of the industry.

How Etsy, Inc. can tackle the Treat of Substitute Products / Services
 By being service oriented rather than just product oriented.
 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers.
 Rivalry among the Existing Competitors
If the rivalry among the existing players in an industry is intense then it will drive down prices and
decrease the overall profitability of the industry. Etsy, Inc. operates in a very competitive Specialty
Retail, Other industry. This competition does take toll on the overall long term profitability of the
organization.

How Etsy, Inc. can tackle Intense Rivalry among the Existing
Competitors in Specialty Retail, Other industry
 By building a sustainable differentiation
 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for small
market.

3. Does it make good strategic sense for Etsy to be a competitor in both the
Marketplace and Seller Services segments? Which one of its product lines —
Marketplace and Seller Services— do you think is most important to Etsy’s
future growth and profitability?