Etsy’s India gamble falters amid leadership exit, freeze on seller onboarding

Etsy’s most pressing issue in India has been the suspension of new seller onboarding, which has been in place since November 2023. Meanwhile, domestic sales have been stopped.

Etsy's India operations have encountered a major setback with the resignation of Pankaj Jathar, the company's India Head, coupled with an ongoing eight-month suspension of new seller onboarding. The development comes amid a broader shift in strategy for the American online marketplace, as it “deprioritises" India, once considered a key market for the company that competes with Shopify, Amazon, eBay, Flipkart and several others.

Furthermore, the firm is facing challenges globally, as it tries to balance the needs of its seven million sellers with declining sales and increased competition.

Pankaj Jathar, who joined Etsy in August 2022 after about a decade at Amazon, was initially tasked with expanding Etsy’s presence in India.

The company, which entered the Indian market in 2018, had ambitious plans to tap into the country’s rich artisanal heritage and establish India as one of its top seven core markets.

However, despite these initial ambitions, Etsy struggled to gain a strong foothold in India.

A source close to the situation revealed that “it was eventually decided that India is not a priority market anymore since it did not yield the desired results.” The source added that while there was considerable international demand for Indian handicrafts, the domestic buyer base remained small which did not yield the desired results.

Instead, Indian consumers gravitated toward more established platforms like Amazon, Flipkart, and eBay, leaving Etsy with a diminished role in the local market.

Ironically, during the same period, Etsy witnessed impressive international sales from its Indian sellers. According to Etsy's first-ever Global Buying Trends report, Indian sellers sold over 4 million personalised products to buyers across the globe between January 2023 and September 2023. Etsy also claimed it had tens of thousands of small business owners from every state in India, selling one-of-a-kind products to buyers from all over the world.

Detailed queries sent to Etsy did not elicit a response.

The ‘infinite' freeze

Over the past six months, most of Etsy's India-based employees, including senior management, have departed, leaving only skeletal staff to manage support functions, a former employee told Moneycontrol.

Etsy’s most pressing issue in India has been the suspension of new seller onboarding, which has been in place since November 2023.

“As of November 2023, new sellers located in India will not be able to open shops on Etsy. Shops located in India that are already open can continue selling,” a company notice read.

Initially, this freeze was intended to facilitate the migration of existing sellers to Etsy’s in-house payment system -- Etsy Payments.

For India, the firm has partnered with Payoneer, wherein sellers will have to open accounts on Payoneer and connect it with Etsy to receive payments. Indian sellers were previously given the option to integrate with Razorpay and Paypal.

The new process, however, has been fraught with delays and complications, leaving many sellers in a difficult position.

“Setting up the new payment system was a nightmare,” said an Etsy seller from Mumbai. “It took weeks just to get the account verified, and even then I encountered issues linking it to my Etsy store. I was advised to open a new shop, but that’s impossible because Etsy isn’t onboarding new sellers in India right now.”

Halt on domestic sales

Additionally, Etsy’s decision to disable domestic sales as part of the Etsy Payments transition has compounded these challenges.

This means that existing sellers in India cannot makes local sales, a move severely limiting their market opportunities within the country.

“We’re making changes to domestic sales in India and your payment methods. Starting June 3, you’ll no longer be able to make domestic sales, and India Payments will be discontinued. Export sales to non-Indian buyers will continue with Etsy Payments, which will be compulsory by July 31,” the company said in an email to India sellers, seen by Moneycontrol.

This leaves Etsy with a small door of existing sellers in India, selling only internationally while struggling to switch to a new payments system.

Global challenges & internal struggle

Etsy’s retreat from India mirrors broader challenges the company faces on the global stage. After experiencing explosive growth during the pandemic, Etsy is now grappling with declining sales and a tumbling stock price.

In the first quarter of 2024, Etsy’s gross merchandise sales (GMS) fell by 3.7 percent year-over-year to $3 billion, while net income dropped to $63 million from $74.5 million the previous year. Indeed, Etsy’s stock has plummeted more than 80 percent since its peak in late 2021.

CEO Josh Silverman attributed these struggles to a reduction in discretionary spending by consumers.

“That made it harder than we expected to bend the curve, which was disappointing,” he had said during the company’s earnings call. These challenges stand in stark contrast to Etsy's performance less than three years ago.

The Covid pandemic brought Etsy new customers and a massive sales boost; its stock price reached an all-time high of $296.91 on November 24, 2021. GMS grew 106.7 percent year-over-year in 2020 and an additional 31.2 percent in 2021.

However, despite an almost 70 percent increase in active users since 2019, purchases have not kept pace. As of the first quarter of 2024, the site had 91.6 million active buyers and 7 million active sellers.

“It just looks like there were one-time purchases in 2021 that just did not repeat,” noted a former executive.

The platform, which initially attracted artisans and craft makers, has struggled with an influx of mass-produced, generic items from resellers. This shift has crowded out handcrafted products and contributed to Etsy’s current woes.

In December, Etsy laid off 11 percent of its workforce, with the CEO citing the “very challenging macro and competitive environment” as reasons for the cuts.

“Etsy’s decision to deprioritise India is telling of the global challenges they’re facing,” the former executive previously quoted said. “While there’s still demand for Indian-made products internationally, the domestic market has been difficult to penetrate, and the current situation with payments and seller onboarding isn’t helping.”

For Indian sellers, the situation is far from ideal, and Etsy’s ability to regain their trust and stabilise operations in the country remains to be seen. “Right now, it feels like Etsy is leaving us in the lurch,” said a Kolkata-based seller.

“I just hope they can sort out these issues before more of us are forced to shut down our shops,” the seller quipped.