Anna Marie – thanks for a fantastic post! Was an interesting read. I wonder how competitors are going to react in the longer term, especially large, established, multinational brands and conglomerates, which are far from nimble. Their purchasing departments have spent decades optimizing for low cost sourcing and manufacturing from Asian countries. While many recognize the threat that fast fashion poses, I think several of the household names are not in a position to quickly react to it – by their very nature they are slow fashion companies that take 1.5 years on a design cycle and at least as long to disseminate strategy and operations change from the top. It will be really interesting to see which other new entrants gain scale in the next few years and how prominent online and omnichannel becomes vs. physical stores, especially in the fast fashion world where every day cut out of the supply chain counts!
Campbell, I really enjoyed reading this. Thanks for posting! Reading it made me wonder more about controls and standardization Etsy may or may not have in place and whether they have made any purposeful decisions around two points so far:
1) Standardized pricing. Do you know if Etsy provides any guidance or controls around pricing by product or category? From perusing their website, it seems that many comparable products don’t tend to vary by more than $10-30 or so, but in percentage terms this can be quite high. I wonder how they think about this in terms of providing a better experience for the customer as well as helping their suppliers consider appropriate pricing when they often may not have a lot of background in different pricing strategies.
2) Quality control. I’m curious as to whether Etsy enforces any sort of quality control on their many suppliers or whether they may have to expand to accommodate this in the future. If the have any issues with fraudulent or low quality goods, they may need to set up some form of a product quality random sampling agreement with the troublesome distributors or put them on some form of probation. As you mentioned, the community engagement around this type of business is strong and it seems that a well publicized quality issue could degrade Etsy’s brand image as a trustworthy portal to a diverse set of suppliers.
Fantastic post – really enjoyed reading it. Having worked in the grocery industry in the past I can say the advantages you pointed out are certainly points that worry competitors! I am curious if you have looked into a few things (thought I know with their policy of secrecy these may not be easy to come by):
1) How do they set their pricing strategies? Many grocers use KVI’s (key value items) that consumers commonly price check (milk, bananas, cucumbers are common) to establish their positioning as a low price leader. They then drive significantly higher margins on less common and harder to compare items. Especially given the prominence of their private label offerings, this might be an effective strategy for them.
2) How do they approach Fresh? Low SKU variety definitely helps here, but do they employ any other strategies like requiring frequent deliveries from suppliers, etc. to optimize on their fresh/produce goals? They definitely seem to achieve high quality fresh (look, feel, as well as expiry dates) while minimizing out of stock instances, which is impressive in this category.
3) Related, I would be curious to learn how they balance scale and distance with their suppliers. How much do they look for local suppliers, especially in fresh, seasonal offerings vs. try to leverage their scale for purchasing power at a national level? My hypothesis is that their scale isn’t large enough vs. many other grocers (especially given industry consolidation in recent years) to really drive purchasing power. However, if they are utilizing a lot of local suppliers, they don’t seem to be capitalizing on that fully through advertising / in-store signage.
Again, thanks for a really enjoyable post!