Etsy’s Handmade Wars

Brett and Crystal Childs were living a hipster dream in Denver. They had taken a class in screen printing together to escape the stress of work; Brett, 28, was a restaurant manager, and Crystal, 27, was an interior designer. Screen printing, it turned out, was their calling. Their favorite design was an oversize diagram of a bicycle. They printed it on T-shirts. They printed it on pillows. And dresses and wallets. Soon enough, they longed to quit their jobs and become full-time screen-printing artists. To find customers, they put their handcrafted T-shirts and pillows and dresses and glassware on Etsy, an online marketplace they had read about on a friend’s blog. In 2007, their first year, they made $25,000. Business grew so fast that after another year they gave notice at their jobs. “We’d always felt we were do-it-yourselfers while we were working for other people,” says Crystal. “We had to go out on our own to see if we were right.”

It seemed perfect, but there was a secret hanging over Brett and Crystal’s venture. Sales were so good that they needed to bring in temporary help to meet demand–a handful of workers they found mostly through word of mouth or via their Facebook page. For just about any small business, that would be an obvious and logical move. Not so in the world of artisanal products: the people who buy handmade items want to imagine their furniture being hammered together by an urban free spirit in a gritty loft and their cashew brittle being hand-stirred with love in a country kitchen. Rent-a-workers squeezing in a shift to earn a few extra bucks between construction gigs simply aren’t part of the vision. Etsy even had a rule: anyone selling merchandise on its site could employ only people he or she knew–in effect, relatives or people living under the seller’s roof. Hiring strangers to produce in large quantities was a no-no. So the Childses kept quiet, unsure if their extra help was a violation and fearful that they might be banished from Etsy. “We rationalized it to ourselves,” says Crystal, “because we couldn’t handle the volume.”

There is a peculiar war under way for the artisanal soul, and survival on the front lines can be complicated, as eager entrepreneurs like the Childses are finding out. These days, craftsmanship isn’t just about the quality of the work. It’s also about selling a lifestyle as carefully calibrated as any Ralph Lauren scene of equestrian bliss. The collision between artisanal purity and capitalist ambition is playing out among thousands of amateur carpenters, potters and condiment makers who have turned household arts and hobbies into thriving ventures. But it is a movement as much as an industry, and many of its leaders insist that remaining virtuous means staying small.

The central battlefield for the future of the handmade movement is Etsy, which sold nearly $900 million in merchandise last year. The site has helped its legions of handicrafters prosper in a weak economy. It has even been hailed by New York Senator Chuck Schumer as a new paragon of job creation. But disenchanted members say that the bigger Etsy gets, the more it tramples over smaller producers and dilutes the charm of handmade goods. “This is a movement that pimps out a ‘Quit your day job’ mantra,” says April Winchell, a blogger popular for her critiques of Etsy and its products. “People’s livelihoods are at stake, and that makes for a lot of anxiety and unhappiness.”

Machine-made, mass-produced goods have been a way of life since the Industrial Revolution. When they first emerged, they were widely coveted; handmade items suddenly seemed cheap and unfashionable. But from the antimaterialism of hippies in the 1960s and ’70s to Martha Stewart’s homemaking revival in the ’80s and ’90s, craftsmanship has given solace to those seeking relief from modernity. Buyers and sellers would find each other at farmers’ markets and church-hall craft fairs.

The Internet, of course, changed all that, vastly expanding the reach of handicrafts. Yahoo provided digital storefronts and credit-card checkouts, while eBay, Amazon and other online giants promoted the idea of the flea-market millionaire, allowing small-town candlemakers in Utah or Kansas to sell their wares anywhere. But an even bigger turning point came in 2005, when Rob Kalin had the idea that would become Etsy.

Kalin was a 24-year-old underemployed classics graduate from New York University, living a life of hipster values, quaint and cool. He made and painted his own furniture in a walk-up apartment in Brooklyn. With two college friends, he launched Etsy–a name, Kalin says, that was purely nonsensical–without a business plan or, really, any plan other than to give small-time artisans a chance to become entrepreneurs without sacrificing their artsy ethos. “It was a ‘Hey, we make stuff, and there’s nowhere good to sell it’ kind of place,” says Matt Stinchcomb, Kalin’s onetime roommate and now Etsy’s vice president of values and impact. (In his roles, according to the company’s website, Stinchcomb has been expected to “keep us all honest and host a dance party or two.”)

Etsy found a huge untapped market, and within its first two years it grew to 50,000 sellers and nearly $10 million in sales. Before long, it attracted as much attention from elite venture capitalists as from craftspeople. In 2008, Etsy announced a $27 million investment from, among others, Union Square Ventures and Accel Partners, investors in Facebook, Twitter and Tumblr.

There were deep contradictions in this growth, and Kalin’s obvious ambivalence about commercial success made him an awkward fit with Silicon Valley and Silicon Alley. “I speak to people in the business world and technology world, but I don’t admire them,” Kalin said in an interview for Inc. magazine in 2011. (He did not respond to Time’s requests for an interview.) In a blog post about the big infusion of venture capital, Kalin compared Etsy to the heroes of a children’s book, Swimmy, about small fish that join forces to scare away a big tuna. The company would not strive “to be a big tuna fish,” Kalin wrote. “Those tuna are the big companies that all us small businesses are teaming up against.” Within nine months of Accel and Union Square’s investment, Kalin was out as CEO; he briefly took back the reins, but in 2011 he ceded the role to the company’s chief technology officer, Chad Dickerson, a former Yahoo executive.

The early skirmishes of the handmade wars were already under way. Etsy’s user forums began to see postings by customers and merchants who complained that Etsy’s management played favorites among sellers by glamming up bigger producers in splashy features on its home page, where shoppers couldn’t miss them. When they didn’t get satisfaction from Etsy, some of the complainers turned up the volume, setting up blogs and spin-off sites–one is called Etsybitch–where disgruntled Etsians could freely criticize top sellers. Of all the attacks that could be launched, one soon became the artisanal world’s equivalent of the nuclear option: accusing a top Etsy merchant of reselling manufactured goods with a handmade look and a misleading backstory.

Thus was launched the Battle of the Boat-wood Benches, which was fought last summer and would prove to be one of the most bitter conflicts in the artisanal wars. The flash point was a successful Etsy seller called Ecologica Malibu. Run by Mariana Schechter, 31, it had all the trappings of a handicrafter’s utopia: a young Brazilian designer building rustic, eco-friendly furniture from reclaimed nautical wood and selling it out of her painterly studio in Malibu, Calif. Schechter also ran a brick-and-mortar store in Malibu and says she initially listed her sun-washed wooden mirrors, shelves and media consoles on Etsy as an afterthought on a friend’s suggestion.

Etsy shoppers couldn’t get enough of Schechter’s furniture. Within two months, the pieces were selling so well that Etsy contacted her about featuring Ecologica Malibu on its home page. “I got a lot of big clients from places like New Balance and Google from listing on Etsy that were ordering 100 pieces at a time,” Schechter says.

To the roaming truth squads out in Etsyland, that sudden prosperity smacked of pseudocraftsmanship–or worse, flat-out evidence of a big business. Purists were already irked that Etsy had begun loosening its rules to allow bigger sellers on the site. They soon began questioning Schechter’s bona fides in forum postings. “It’s a wonder how you balance your life as a mother, business woman, and still have time to hand craft so many furniture pieces,” one reader commented. Another got right to the point: “Mariana, do you make the work yourself?”

The attack might have petered out if not for Winchell, the blogger and Etsy critic. Winchell, it is fair to say, had become obsessed with Etsy. The daughter of a ventriloquist and herself a professional cartoon voice actor–her credits include King of the Hill and Mickey Mouse Clubhouse–Winchell started a game with her friends. Every time they had a dinner party, they’d buy something absurd on Etsy to take as a gift for the host. Before long, she had launched a blog dedicated to lampooning the kitschiest of Etsy’s offerings. She called it Regretsy. It soon became a hub for disgruntled Etsians.

At this point, Schechter and Ecologica Malibu were still only suspected of faux craftsmanship in the first degree; Winchell decided to investigate and prosecute. She scoured the Internet and found Schechter’s pieces listed on Overstock.com and seemingly identical pieces on a website called All from Boats, a wholesaler that specializes in Balinese furniture. Winchell posted screen shots of the listings alongside Schechter’s Etsy listings. When Winchell discovered that the California dealer for All from Boats had the same address as Schechter’s Ecologica business–suggesting that Schechter was merely distributing mass-produced furniture–traffic on Regretsy went through the roof. “The whole thing exploded, and people were furious,” says Winchell. “I received thousands of comments and hundreds of e-mails and tweets by the minute. People felt like they were being heard.”

Within days, angry Etsy members banded together on a website called Protesty to plan a boycott of the site. Six hundred sellers set up a Change.org petition decrying Etsy’s support of mass producers, and Schechter says she was ambushed with hate e-mails and phone calls criticizing her business. Her husband, an attorney, issued a cease-and-desist notice to an angry Etsy follower. It was swiftly posted on Regretsy.

Dickerson, Etsy’s CEO, waded in to announce his support for Schechter. In a statement posted on Etsy, he condemned the “mob mentality” of her critics and framed the situation as an oversight rather than deceit. “Ecologica Malibu is a collective shop, run on Etsy by Mariana with help from a local staff,” an Etsy administrator wrote on the site. “In keeping with Etsy’s rules, that collective should have been disclosed within the shop; this is now corrected.” That only stiffened the dissidents’ resolve: two weeks later, 4,000 sellers agreed to black out their shops for 24 hours in protest of Schechter’s featured shop.

Within weeks, Schechter closed her Etsy shop. Fearing for her safety, she moved her brick-and-mortar store to a different location in Malibu. Schechter says she was designing the furniture, outsourcing the labor to reclaim wood to All from Boats and then assembling the imported pieces from Bali with four carpenters in Malibu. “I didn’t fully understand the concept of Etsy when I opened my shop,” Schechter says. “I never lied to anybody. My products are handmade. I don’t think it’s my place to sell next to a person selling soap out of their kitchen. The community is right about that. But I shouldn’t have been demonized.”

The venture funds that have pumped millions into Etsy didn’t invest to promote the ideal of the independent craftsman. They want to make money, and that means Etsy has to grow–and change. Dickerson is the embodiment of those changes. He is a programmer, not an artisan. At Yahoo, his claim to fame was instituting “hackathons,” marathons in which programmers were encouraged to geek out on improvised code instead of doing their work.

On a recent afternoon, Dickerson strolled through Etsy’s 45,000-sq.-ft. (4,200 sq m) loft space in Brooklyn and into his office, where the gleaming acoustic guitar on display–yes, he knows how to play–signals that he has a creative side. (Etsy’s decor–reclaimed-wood floors, handmade desks and vintage couches–is a holdover from Kalin’s days.) In Dickerson’s year-and-a-half-long tenure, he has beefed up the tech staff to make selling easier on the site, loosened the rules to allow a broader definition of collectives so successful sellers can grow and created a separate site, Etsy Wholesale, to connect growing sellers with big-box retailers.

“Defining handmade isn’t simple,” Dickerson says. “For us it’s about the spirit of people buying and selling from other people. When you think about it that way, there’s a lot of micro-entrepreneurship Etsy can support.”

Plenty of ambitious artisans are O.K. with that. Others are quitting Etsy and turning to smaller competitors like ArtFire and Gawanda, even though those sites offer only a fraction of the traffic on Etsy. Some of the more sensitive buyers have also moved on, viewing the new and improved Etsy as another big-box label. “Etsy has turned handmade into just another annoyingly pretentious brand people have to have,” says Winchell. “They’ve taken what’s magic about it and turned it into Walmart.”

Maybe not Walmart–yet. Etsy is, in fact, turning handmade into a brand for retailers such as CB2, West Elm and Anthropologie, which have been angling for a piece of the craftsman craze. The share of “handcrafted” goods sold at West Elm has nearly tripled over the past four years. (According to West Elm’s definition, handcrafted includes merchandise made in small foreign factories with good working conditions.) Etsy sees this as an opportunity for sellers who want to scale up. “You try to make as many people as possible happy when you’re a young company,” says Stinchcomb of Etsy. “But we don’t want to limit creativity.”

Can products made in foreign factories hold true to the handmade ethos that started Etsy? The company will confront that question next. Its latest $40 million injection of venture capital is helping it expand further into other countries. Union Square’s Fred Wilson–one of Silicon Alley’s most celebrated VC brains–envisions an international network through which collectives of Etsy jewelers in, say, Turkey can sell regularly to customers in New York City and Tokyo. “There are some negatives to expanding abroad,” Wilson says. “But once we light up a global marketplace where any seller can connect with any buyer around the world, we’ll see phenomenal growth.”

The expansive attitude of this new, not-so-small Etsy has allowed the Childses to stop worrying about their small cadre of screen-printing temps. With annual sales now up to $500,000, they’ve added a full-time employee. “Etsy has become a lot clearer about what they feel handmade is, so we’re not as worried about growing,” says Crystal. Still, they’re not going out of their way to emphasize their enlarged operation. Says Brett: “We don’t like to come off as too successful.”