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What Your Business Can Learn From Etsy
As 2017 begins in earnest, one of the most intriguing companies to watch is Etsy, the peer-to-peer ecommerce platform that specializes in unique crafts. Now in its 11th year, Etsy’s growth has the business world talking—and other companies, big or small, should take note of their 2017 strategy, which looks to expand on what’s already made them successful.
In
a recent Forbes article, contributor Paul Armstrong detailed his conversation with Jennifer Beugelmans, Vice President of Financial Planning & Analysis and Investor Relations for Etsy. Here are a few key takeaways from the conversation.
Machine learning is at the forefront of growth
Not every business will have the kind of massive listings database that Etsy hosts — over 40 million unique listings in all, according to the article. But what helps visitors to the Etsy site have such a rewarding and fruitful shopping experience is the company’s dedication to expanding machine learning capabilities.
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Machine learning is a broad term, but it’s essentially how technology can continue to learn without being explicitly programmed, usually involving data analysis. In the case of Etsy, it has made search discovery easier, by giving users more relevant results and shopping experiences tailored exactly to them. As our ability to collect, mine and analyze data becomes stronger, search algorithms will become more adept at predicting what users want, increasing click-through and buying rates.
One great example of this is
“Query understanding.” Machine learning helps search engines better understand what you meant when you typed a certain word or phrase, in the following ways:
- Query classification: This is how a search engine separates, say, a news search from a shopping search.
- Spelling suggestions and corrections: Misspelling a word could led to zero results, unless the machine knows what you meant to type.
- Synonyms and query expansion to include related words: Maybe you didn’t type the exact right phrase to find what you want, but the use of synonyms can help expand your search to include what you meant.
- Intent disambiguation: There’s a difference between the Eagles football team and the Eagles band. Knowing which you meant can provide massively different results.
This use of machine learning isn’t as important for businesses that don’t have the number of listings that an Etsy, or Amazon, or Target might have. But machine learning is vital for
supply chain efficiency, which is something businesses of every size and scope should pay attention to. Machine learning
can improve inventory forecasting needs; improve
safety stock levels; and take into account market trends and social media to help with planning. All of this can be done without human interaction, and will only improve as more and more data are added to the company database.
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Machine learning will become more crucial to supply chain management, customer acquisition and improved ecommerce experiences as “big data” becomes even bigger—
data is not just “big” but “wide” nowadays (this is because we can collect a number of variables like purchase and browser history, mouse clicks, text from reviews and more) which makes analysis even more complex. But emphasizing machine learning is not all we can glean from Etsy’s success.
A loyal buyer base emerged from a unique buying experience
Companies everywhere want to know how to create a loyal buyer base that comes back to them again and again, eschewing their competitors. That’s because the cost of obtaining a new customer
far outweighs the cost of retaining existing ones.
Etsy found that their alternative to traditional retail—emphasizing unique personalized goods, connecting buyers directly with creative entrepreneurs, and a model that honors all users and stakeholders—has resonated with buyers.
According to Beugelmans, “nearly half of the buyers that were with us in 2012 continued to shop on Etsy in 2015,” and they spent nearly twice as much money in 2015 as three years prior. So while the other half of the site’s active buyers only made a single purchase in 2015, there is precedent for converting even occasional users into devoted customers. Conversion rates grew across all platforms as well, meaning Etsy is doing a good job of updating their mobile and app experiences for the modern era.
Give users as many payment options as possible to facilitate purchases
Etsy found that “Sellers that accept multiple payment options have, on average, nearly 50% higher sales compared with those who do not.” Some users may only have (or feel comfortable) with a credit card, or a PayPal account, or another form of payment. If you make purchasing easy and available to every kind of customer, you’ll be more likely to secure their purchase, not to mention make return visits and purchases more likely.
Support users creatively and politically
According to the article, Etsy supports their sellers in a myriad of ways, including helping them ship items, advertise their wares and customize their websites. They also go to bat for them in ways that everyday users might not recognize, but still see the dividends of:
"Etsy has a dedicated team in the U.S. and Europe that focuses on advocating for policy reforms that make it easier for sellers and other microentrepreneurs to do businesses. In September, Etsy brought dozens of sellers to Washington D.C. to meet face-to-face with congress members on the issues that directly affect their businesses…”
This is, of course, above and beyond the call of duty for Etsy. But it’s in their best interest to advocate for their sellers, from a public relations standpoint as much as from a business perspective. In a world that is increasingly political and divided, a company that has their users’ backs is appreciated and will lead to increased goodwill.
Again, Etsy isn’t a perfect model for all emerging small and medium-sized businesses. It’s an incredible success story that has cornered a niche in a way that not every company can replicate. But their novel approaches to a shifting business world—including their emphasis on machine learning for both improved search and
supply chain management, support for a loyal and unique buyer base, and the way they facilitate purchases across a number of payment platforms—is something that any business can draw inspiration from.
