There has been an article titled “A Growth Plan for eBay: Buy Etsy” circulating, which is quoting an analyst from Monness, Crespi, Hardt & Co. to have said that eBay should consider acquiring Etsy as a strategy for growth. The combined could company would have a larger product offering, and thus improve Ebay’s chances in competition with Amazon.
We think this is flawed idea.
Should eBay acquire Etsy? Maybe. Etsy has built a strong community of craft sellers, and a catalog of curated unique products. Plus they have great international reach, and a technology team which has been consitently rolling out great improvements. Especially in terms of search and discovery of products - a problem eBay has been trying to fix through acquisitions, but has yet to have achieved measurable impact. So an acquistion of Etsy makes sense as a talent or brand acquisition, similar to eBay owning StubHub.
eBay might want to grow stronger in the handmade and craft market, but Etsy acquisition is not the only way to do it. As a business eBay focus should be on much more important aspects, like sellers and users growth, than trying to build out strong categories.
However eBay acquiring Etsy as a way to compete with Amazon is not possible. Etsy consumer and seller base is drastically different than that of eBay. It is hard to find any sort of shared interest between the two. Thus eBay would not benefit from this without trying to push their products from Etsy website, risking ruining the balance of Etsy marketplace.
It’s worth mentioning that Amazon is trying to compete with Etsy by launching the Amazon Handmade marketplace in 2015, not the other way round. Etsy is not trying to become Amazon, they focus on their own niche of ecommerce. If anything, it would make sense for Amazon to acquire Etsy and combine Amazon Handmade and Etsy into Etsy.com. So far Amazon Handmade as a standalone category hasn’t made significat impact to Etsy growth, so Amazon could consider growing categories as separate websites - in this case Etsy.com - instead of all under one site Amazon.com.
Nonetheless, in the eBay vs Amazon competition Etsy won’t make any difference as it focuses on a segment of a market instead of trying to own the whole ecommerce. The growth plan for eBay is thus growing services and services revenue, attacting sellers in the marketplace, and reastablishing itself as more than an auction site.