Retailers Look to Digital Marketplaces to Expand Customer Base
Crafts retail chain Michaels is preparing to launch two different digital marketplaces to attract both creators and consumers, taking a page from Etsy’s playbook as the retailer continues to transition its business after going private six months ago.
The first marketplace will allow third-party vendors to sell components, tools and craft materials, similar to the way Walmart, Amazon, Target and others have integrated sellers into their ecosystem. The second will be a place for creators to sell finished handmade goods, directly competing with Etsy’s flagship platform.
A spokesperson for Michaels told PYMNTS in an email that plans for the creator marketplace “is in development but not ready to discuss broadly yet.” The third-party marketplace for components and craft materials is “coming soon,” but no specific date was provided.
Michaels CEO Ashley Buchanan told The Dallas Morning News after a presentation at the Texas A&M Retailing Summit that plans for the handmade goods marketplace have been spurred on by conversations with customers.
“Makers have been giving us feedback,” Buchanan said. “They’re finding friction points and we’re responding,” noting that Michaels has “hundreds of coders” working to revamp and recode the retailers’ website and app.
The third-party marketplace, which was alluded to earlier this year in an interview with The Wall Street Journal, is currently seeking third-party solution providers for payments processing, order management, and shipping and fulfillment as well as high-volume sellers of components, tools and craft materials. Consumers will also be able to share ideas and watch instructional videos.
“What customers want is a place that they can make their products,” Buchanan told The Wall Street Journal earlier this year. “They can sell their product, they can buy their componentry, they can have a community of people with like-minded interests where they can exchange ideas.”
Etsy’s Expanding Domain
While Michaels and others seek to mimic Etsy, the two-sided online marketplace company has undertaken a series of acquisitions to diversify its business. In 2019, Etsy acquired music gear marketplace Reverb; and in June, the company inked back-to-back purchases of Depop, a secondhand apparel commerce platform, and elo7, a Brazilian handmade marketplace.
Etsy CEO Josh Silverman told analysts in August that he wouldn’t rule out future acquisitions but said the company’s primary objective at the moment is integrating elo7 and Depop, a process that will take “multiple quarters and years to operationalize all the many ways that we believe we can help.”
Still, Reverb, Depop and elo7 represent less than 15% of Etsy’s consolidated gross merchandise sales, and Chief Financial Officer Rachel Glaser said the executive team is “very focused on continuing to grow the Etsy marketplace.”
“There’s a lot of people who still haven’t experienced Etsy,” Silverman said, as well as new demographics, such as men, that the marketplace is starting to lean into. Etsy’s core customer base is currently Generation X and millennial women.
As of June 30, Etsy had over 5 million active sellers, a 68% year-over-year increase, and 90.5 million active buyers, up 50% versus 2020.
New Leader, New Direction
Michaels is coming off a busy two-year stretch that saw the onboarding of Buchanan, a pandemic that caused first a plummet and then an explosion of sales, and an acquisition by Apollo Global Management that took the company private.
Prior to joining Michaels in January 2020, Buchanan served as the chief merchant for U.S. eCommerce at Walmart for six months as well as other executive positions at the retail giant for over a decade. Part of his strategy has been to take some of the momentum seen from homebound crafters during the pandemic to remake Michaels from a general crafts store to a more targeted retailer for “makers,” people who gravitate toward do-it-yourself projects or sell handmade items through their own small businesses.
“People want connection and personalization and something real, but enabled through technology,” Buchanan told the WSJ. “We’re not reverting back to no technology.”