By Mari Saito
SAN FRANCISCO, Oct 6 (Reuters) - Etsy Inc ETSY.O , the
online store that made its name selling handmade crafts, is
trying to stop merchants from defecting as giant rival Amazon
Inc AMZN.O prepares to attack it on its own ground with a new
site for artisanal items called Handmade.
But Etsy's policy of allowing sellers to use outside
manufacturers continues to anger the smaller vendors of handmade
items who helped make it successful. Even changes to that policy
have done little to address the criticism or hold off
defections, analysts and sellers say.
"Until now, Etsy sellers had nowhere else to go," said Gil
Luria, an analyst at Wedbush Securities based in Los Angeles.
"But what Handmade at Amazon represents is a trip back in time
to Etsy's original vision."
Etsy, launched 10 years ago, became popular as an
alternative to Amazon and eBay Inc EBAY.O , tapping into
shoppers' appetite for handmade items.
But since its April initial public offering, which valued
the company at $4 billion, its shares have fallen by more than
50 percent. And the company's losses doubled in the most recent
quarter due in part to rising expenses and the stronger dollar,
which dampened demand for U.S. products. ID:nL3N10F5PI
CEO Chad Dickerson rejected the notion that Amazon's new
product posed a threat, telling Reuters that "the most important
thing about Etsy is not about having the lowest price or the
fastest shipping."
In 2013, Etsy let sellers use outside manufacturers. That
decision backfired. Many sellers felt the decision was a
betrayal of the site's roots. Sellers shut down their stores on
the site in protest.
To counter the discontent and prevent sellers' defecting, in
September Etsy announced Etsy Manufacturing, which will connect
merchants with pre-approved manufacturers in the U.S. and
Canada, emphasizing smaller companies that treat workers fairly.
Some sellers say the policy does not address their primary
concern, which is that they have to compete against larger
vendors on price rather than the quality and distinctiveness of
their products.
"I went from being a big fish in a handmade ecosystem to
being a little fish in a saturated market," said Stacy
Mecklenburg, a vendor of handmade swimsuits whose sales
plateaued, she said, when she had to compete with cheaper
manufactured goods.
Amazon has been courting Etsy sellers since May, when it
invited artists to apply to join Handmade. The retailer said
recently it was putting the "final touches" on the site before
it launches. It has not given a date for the launch.
(Editing by Stephen R. Trousdale and Frances Kerry)