Etsy, Amazon Handmade, & Potential Limitations to Scale

Former Vice President at Etsy

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Executive Bio

Jay Bergesen

Former Vice President at Etsy

Jay is a former President at Etsy and enjoyed over 6 years at the business from 2011-17. He joined Etsy when the company had 200 employees generating over $500m in GMS. he joined as Product Manager focused on organizing product categories and optimising the shopping experience. He was soon promoted to manage the full buyer experience and also introduced the first advertising product for sellers. Jay eventually progressed to VP of Etsy.com and was a leading senior executive involved in preparing Etsy for the IPO.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Jay, can you provide a short introduction to your role and responsibilities when you were at Etsy?

I joined Etsy in August 2011. At that time, the company had about 200 people, and we were doing around $500 million in GMS on the platform. Over six years, we saw a lot of growth and a lot of change. The company grew to over 1,000 people, although we came back to the mid-700s after a few layoffs. We closed 2017 at $3.2 billion in GMS for sales on the platform. During that period, I led teams ranging from buyer experience to growth to ad products to internal platforms and built software to help the folks at Etsy do their jobs better. We also helped with product efforts to help Etsy grow beyond the US. I helped Etsy design its strategic planning process company-wide and helped the company get ready for its IPO from a product perspective. In the last year, I led the team responsible for etsy.com and the apps as VP and head of etsy.com.

What were the early growth challenges?

Most of the challenges were probably internal and operational. For example, early on, pre-IPO, we had a team that would focus on the browse experience for buyers, so categories and browsing for items. I was on the browse team. We had another team on search, and so we would ship our own experiences. But to buyers and users, it's all the same. Browse is search; search is browse. We would literally talk to them, and they would say I'm searching, and you would watch them, and they're browsing, and then they'll say I'm browsing, and they're searching. So within one visit, they'll be doing both; across visits, they'll be doing both.

Then we were doing some user research with someone more familiar with product development, and he said it looks like two different teams made this. We were kind of fulfilling a variation of Conway's law, chipping the org chart. That was one thing where, over time, we iterated to make sure that teams had clearer areas of responsibility. Related to that, we went through lots of iterations on how to organize product development teams. We re-organized product development teams probably once a year. To an extent, it's healthy to find that maybe the org structure isn't necessarily fulfilling the needs of the business or could be tuned, but we would go through pretty dramatic changes.

Early one, one approach was we were optimizing for small independent teams. For example, you'd have one product manager, a designer, and four engineers. But we had roughly, say, 50 discrete teams, and it was tough to understand what it all added up to. Also, what would happen when that team was done with the thing that they were working on? It was hard for those teams to reconstitute. We went through several iterations and ended up with a structure that was called groups and squads. Squads were individual atomic teams, and you'd have multiple teams within a larger group, and a group would be around an area of long-term investment. The squads would represent areas of nearer-term investment. You would balance the durability and longevity of a group with the adaptability and nimbleness of a squad. That provided a much more resilient organizational structure. Even in Etsy’s earning reports now, you'll see them referencing squads. That's something where we tried lots of different things and finally found something that stuck and worked.

What were your original thoughts when Amazon launched Handmade?

That was another challenge for growth. Both real and perceived. Amazon was good at putting something out there that sowed doubt in the industry. They announced Handmade in the summer or early fall of 2014. At that time, a small group knew we were planning the IPO, but we hadn't filed the S-1 yet. The IPO was going to be in 2015, so we knew this thing was coming. Of course, anytime Amazon, with all its resources, and for the most part, track record of success in terms of kicking out or disrupting different industries sets its sight on you, you're very nervous. They did a good job of saying, we're going to do this and then give you six months to be nervous about it. Then they launched, and we had our IPO. We had challenges after the IPO, but they weren't explicitly related to Handmade. Still, I think the perception in the media, the market, and the industry was that Handmade was a real threat.

What we found was that yes, Etsy sellers tried out Handmade. We also learned, over time, that our most successful sellers would be on multiple platforms. That's expected. If you're a seller selling at scale, you're going to sell across multiple platforms, and that's okay. But we did observe that there was no meaningful attrition of sellers leaving Etsy to go to Handmade, and there was no material impact on the business that we could attribute to Handmade. It created a lot of doubt internally and externally, which was a challenge to the business. It probably did have a material impact on how it was perceived. Maybe that perception could have influenced the stock price early on; I don't know. But from the actual mechanics of the business, are buyers going to Handmade and leaving Etsy? No. Are sellers going to Handmade and leaving Etsy? No, we did not observe that. It was an interesting situation of the impact of perception and a different impact in terms of reality with the business.

Were you more worried about the sellers leaving rather than the buyers, at that point?

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Etsy, Amazon Handmade, & Potential Limitations to Scale(August 20, 2021)

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