Inside Etsy’s product, growth, and marketplace evolution | Tim Holley (VP of Product)
Tim Hawley, VP of Product at Etsy, discusses Etsy's growth from $500M to $13B GMV, focusing on cultural transitions, marketplace dynamics, product changes for conversion/retention, team organization, and frameworks for growth.
Deep Dive Analysis
18 Topic Outline
Etsy's Response to the COVID-19 Mask Mandate Surge
Tim Holley's Return to Etsy and Personal Motivation
Navigating Etsy's 2017 Culture Shift and Business Focus
Etsy's Guiding Principles for Product Development
Leading Teams and Driving Retention During Pandemic Growth
Key Learnings for Building a Thriving Marketplace
Balancing Supply and Demand in a Marketplace
Successful Buyer Conversion Strategies at Etsy
Etsy's Philosophy and Practices in Experimentation
Acquisition and Top-of-Funnel Tactics for Etsy
Etsy's Seller Referral Program and Listing Credits
Leveraging the Habit Loop Framework for Buyer Retention
How Etsy Differentiates Itself from Larger Marketplaces
Addressing the 'Graduation Problem' for Successful Sellers
Lessons from the Defunct Etsy Studio Project
Structuring and Leading a Productive Product Team
Key Qualities Tim Holley Looks for When Hiring Product Managers
A Simple Weekly Reflection Exercise for Teams
10 Key Concepts
GMS (Gross Merchandise Sales)
GMS is Etsy's Northstar KPI, representing the total value of sales made through the platform. It serves as the primary metric for rallying teams, prioritizing work, and measuring the success of launches, ensuring all efforts ultimately contribute to facilitating buyer-seller transactions.
Guiding Principles
These are Etsy's core values, such as 'digging deeper' (understanding the 'why' behind changes) and 'minimizing waste' (ensuring work adds value and pivoting when it doesn't). They inform product development, decision-making, and resource allocation within the company.
Supply Constraint vs. Demand Constraint
This refers to the challenge of balancing the availability of products (supply) with the number of buyers (demand) in a marketplace. While Etsy generally has abundant supply (over 100 million items), specific subcategories may experience supply constraints, requiring targeted efforts to increase inventory.
Behavioral Economic Tactics
These are strategies used to subtly influence buyer decision-making, often referred to as 'signals and nudges.' Examples include highlighting limited stock ('only one of these') or quick summaries of information to build buyer confidence and encourage purchases.
Habit Loop Framework
This framework involves understanding a user's actions (e.g., 'favoriting' an item) as a trigger, and then providing a timely reward (e.g., a notification that the item is on sale). Etsy uses this to close loops and drive buyer retention by making interactions valuable and encouraging return visits.
Keep Commerce Human
This is Etsy's brand statement, reflecting its core identity of valuing unique, handmade items and the independent sellers behind them. It guides decision-making, feature prioritization, and differentiates Etsy from mass-market retailers by emphasizing personal connection and craftsmanship.
Production Assistance
An evolution in Etsy's policy to help sellers scale their businesses. It allows sellers to work with manufacturers, provided they maintain an understanding of the item's provenance, the production process, and a relationship with the person helping them, rather than simply outsourcing without oversight.
Graduation Problem
This describes the challenge marketplaces face when successful sellers, after growing their business on the platform, consider leaving to build their own websites to avoid fees. Etsy addresses this by offering competitive fees, valuable tools, and a supportive community to retain sellers.
Five Legs of the Stool
Etsy's collaborative model for product teams, expanding beyond the traditional three (product, engineering, design) to include insights (research and analytics) and marketing partners. This approach aims to incorporate diverse viewpoints and constraints for building the best possible products.
Product Stack
Etsy's organizational structure for product teams, which includes core customer teams (buyers/sellers), partner teams (e.g., payments), enablement teams (e.g., recommender systems, design system), and infrastructure teams. This structure is designed to align with evolving business strategy.
12 Questions Answered
Etsy experienced a 'Black Friday overnight' surge in demand for face masks after the CDC mandate. They put out a call to sellers to produce masks, proactively contacted sellers to offer support, and then worked to broaden the perception of Etsy beyond just masks to retain new buyers.
The 2017 shift moved Etsy from a consensus-based culture to one focused on business sustainability and speed. Success factors included rallying everyone around GMS as the Northstar KPI, bringing an 'outside-in' competitive perspective, and consistent, clear communication of the new narrative by leadership.
Etsy's guiding principles include 'digging deeper' to understand the 'why' behind changes and 'minimizing waste' by ensuring work adds value and being willing to pivot away from initiatives that aren't working.
While Etsy has over 100 million items, suggesting no overall supply constraint, they analyze at a subcategory level to identify and address specific pockets of supply needs. The focus is on helping buyers choose from the vast inventory and guiding sellers to offer what's in demand.
Key conversion wins include leveraging buyer review photos and videos to help purchasers visualize items, and using behavioral economic tactics like highlighting limited stock ('only one of these') or adding text in the cart about Etsy offsetting carbon emissions from deliveries.
The vast majority of changes at Etsy are run as A/B tests, which are seen as the highest bar for proving causal relationships. However, they are expanding to other validation methods like cohort analysis for retention and pre/post analyses for policy-driven changes, always aiming to understand if a change adds value.
For sellers, early acquisition involved attending craft fairs and leveraging word-of-mouth. For buyers, Etsy uses SEO and Google Shopping to capture long-tail, niche searches, and benefits from sellers promoting their own listings and the natural dynamic of sellers also being buyers.
Etsy leverages a habit loop framework, using buyer actions like 'favoriting' an item as a trigger. They then provide rewards such as notifications when favored items go on sale or are selling out, and use an 'updates feed' to highlight changes and new activity relevant to the buyer.
Etsy differentiates through its strong brand, which conjures a specific image of unique, handmade items. This is reinforced by strict policies on what can be sold and the brand statement 'keep commerce human,' which emphasizes valuing the unique and handmade over mass production or impersonal transactions.
Etsy believes its fees are competitive and aims to be a place sellers love to sell, offering tools and a community that provides stickiness. While some sellers may build their own sites, Etsy often continues to play a role in their distribution strategy due to the difficulty and cost of driving traffic independently.
Etsy Studio was an initiative to connect inspiring craft ideas (like Pinterest) with the necessary supplies and tutorials, aiming to bridge the gap between inspiration and creation. It was ultimately discontinued because it didn't align with the company's renewed focus on driving short-term sales and ROI for the core marketplace during the 2017 pivot.
Tim looks for a strong willingness and excitement for collaboration, decisiveness (especially when data isn't perfectly clear), and a deep sense of curiosity or a growth mindset, as PMs at Etsy may be asked to work on diverse and evolving priorities.
21 Actionable Insights
1. Rally Around a Northstar KPI
Establish a single, clear Northstar KPI (like Gross Merchandise Sales for Etsy) and make it the consistent drumbeat in every meeting and the measuring stick for all launches. This provides clarity, aligns teams, and helps prioritize efforts by articulating how work contributes to the main goal.
2. Cultivate a Clear Narrative
As a leader, consistently articulate a clear narrative about the company’s direction and goals. Repeat it often (more than three times) so people internalize it, marrying clarity on goals with clarity on why, which is an incredibly powerful combination for driving change.
3. Bring an Outside-In Perspective
Benchmark your business against competitors and the broader competitive set, even if you’re a unique marketplace. This helps ground discussions in the overall dynamics of what customers are doing and where they’re spending their money, leading to better decisions over time.
4. Prioritize Minimizing Waste
Adopt a product development principle of minimizing waste by asking if the work is adding value to the customer and business. Be willing to stop projects that aren’t working out, as being diligent about resource investment is crucial for small teams to be successful.
5. Deeply Understand Your Customers
Immerse yourself in understanding your customers (e.g., sellers) by doing studio visits, going to their workshops, and involving them in product development. This deep understanding helps identify their unique needs and how to best support them, especially during times of rapid change.
6. Evolve Team Communication
Continuously adapt team communication methods based on their needs and context, especially during stressful times. For instance, if daily coffee chats become repetitive and add to video call fatigue, evolve to different formats or frequencies to keep a pulse on what the team truly needs.
7. Expand Experimentation Horizons
While A/B testing is valuable for immediate impacts, expand your approach to include different validation methods for metrics like retention or SEO, which necessitate longer time horizons. This forces teams out of their comfort zone to understand and measure change over longer periods.
8. Leverage Buyer Review Photos/Videos
Encourage buyers to submit photos and videos with their reviews, especially for unique items. This helps future purchasers gain confidence by seeing what the item looks like in a real-world context (e.g., in a buyer’s hand or home), addressing concerns about size, color, and fit.
9. Employ Behavioral Economic Nudges
Use signals and nudges (behavioral economic tactics) to help buyers make decisions by elevating small, glanceable snippets of information. Highlighting details like ‘only one of these’ can fit into a buyer’s decision-making process and drive conversion.
10. Test Small Copy Changes
Don’t underestimate the impact of small, one-line text changes in key areas like the cart experience. Unexpectedly, these can resonate deeply with buyers and lead to significant conversion uplift, sometimes by communicating core business values.
11. Don’t A/B Test All Changes
Recognize that not all changes are suitable for A/B testing, especially when honoring direct inputs from users (e.g., a seller offering an item on sale). In such cases, use pre/post analyses or other data interpretation methods to understand impact, even if confidence in causality is slightly different.
12. Acquire Sellers Through Community
Acquire initial supply by engaging directly with sellers at relevant events (e.g., craft fairs) and leveraging word-of-mouth through seller communities. Sellers often know others with similar inclinations, creating a natural growth loop.
13. Drive Buyer Acquisition via Long-Tail SEO
Leverage a vast, unique inventory to drive buyer acquisition through SEO and Google Shopping. This strategy effectively meets niche and specific needs, showing not just single items but also related options, attracting buyers looking for something very particular.
14. Implement Seller Referral Programs
Consider seller referral programs using a low-barrier currency, such as listing credits instead of cash. This encourages existing sellers to bring in new ones by making it easier for them to start or list more items, while also mitigating fraud risks often associated with monetary incentives.
15. Close the Habit Loop for Retention
Design features that close the habit loop for retention, using user actions (like ‘favoriting’ an item) as triggers for notifications. Inform users when a favorited item goes on sale or is low in stock, making the interaction valuable and encouraging return visits.
16. Maintain Marketplace Integrity with Clear Policies
Invest continuously in enforcing clear policies about what is allowed on the platform to maintain brand integrity and differentiate from competitors. This ensures only relevant and high-quality items are available, which is crucial at scale and for unique marketplaces.
17. Support Seller Scaling with Production Assistance
Evolve policies to support sellers in scaling their production (e.g., through ‘production assistance’) while maintaining item provenance. This allows designers to bring ideas to life or existing sellers to meet higher demand, provided they understand and have a relationship with their production partners.
18. Structure Teams with Five-Legged Stool
Consider a ‘five-legged stool’ approach for product team collaboration, including Product, Engineering, Design, Insights (Research & Analytics), and Marketing. While challenging, this incorporates diverse viewpoints and constraints, leading to better product decisions and features.
19. Empower PMs for Decisive Accountability
Clarify that the Product Manager is ultimately accountable for making decisions and owning the consequences, especially when data isn’t perfectly clear. This empowers PMs to choose the best ideas and learn from outcomes, rather than getting stuck in consensus-driven debates.
20. Hire for Collaboration, Decisiveness, Curiosity
When hiring Product Managers, prioritize candidates who demonstrate a real excitement for collaboration, decisiveness in ambiguous situations, and a strong sense of curiosity or a growth mindset. These traits are crucial for navigating change and learning in dynamic, relatively small organizations.
21. Implement Weekly Focus Exercise
Encourage a simple ‘weekly focus’ exercise where team members articulate their priorities for the week and reflect on last week’s progress. This low-fi practice fosters accountability, helps identify patterns in time management, and keeps focus on priorities rather than just tasks.
6 Key Quotes
When the CDC mandated face masks in early April 2020, that's when essentially we went to sleep one day with our typical April traffic, typical April sales, and then it was Black Friday overnight.
Tim Holley
You need to say something three times before people understand it. I would wager, you need to say it another three times before they internalize it.
Tim Holley
The job of a marketplace, even, you know, pre, pre, the technology definition of a marketplace is a seller will go there to make sales. And if they're not making sales, they probably won't go to that marketplace.
Tim Holley
Etsy offsets carbon emissions from every delivery.
Tim Holley
You don't have to have the best ideas, but you have to choose the best ideas.
Nick (Etsy's CPO, quoted by Tim Holley)
All or nothing, like go all in, go, go do the thing. And in German, ganz oder gar nicht.
Tim Holley
1 Protocols
Weekly Focus Reflection Exercise
Tim Holley- On Mondays, each team member articulates what they are focused on for the current week.
- Team members reflect on whether they completed their stated focuses from the previous week.
- Share these focuses and reflections with the team, often in a Slack channel, to create accountability and identify patterns.