Etsy sellers aren't very loyal, leaving a huge opening for Amazon

Jeff Bezos, Amazon, IGNITION 2014Michael Seto PhotographyJeff Bezos, Founder Amazon

Amazon launched Amazon Handmade Thursday, a new marketplace for artisanal and handcrafted goods.

That puts Amazon Handmade squarely in competition with another artisanal goods marketplace Etsy.

Given Amazon’s market size, it’s a major potential threat to the $US1.5 billion company that just went public in April. Amazon has roughly 285 million active customers versus Etsy’s 22 million.

And new data from Wedbush analysts suggest it’s likely going to get worse for Etsy going forward.

According to a Wedbush note published last week, nearly 90% of current Etsy sellers said they’re planning to or would consider selling items on Amazon’s new marketplace. Although the survey only asked 30 Etsy sellers, it’s a sign that shows many of the sellers “lack a sense of loyalty” to Etsy, Wedbush noted.

The bigger concern is that Etsy sellers are becoming growingly upset about Etsy’s recent decision to open up the marketplace to mass-manufactured items. Etsy used to have rules against selling items mass produced, sticking to its artisinal roots, but launched Etsy Manufacturing last month to broaden its market.

“A majority of [Etsy] sellers we surveyed were concerned with the presence of mass manufactured and potentially counterfeit merchandise on the platform,” the Wedbush note wrote. “Many sellers complained that lower-priced manufactured items from China resulted in an unmatchable pricing environment and lower sales volumes.”

It added, “We believe this will further drive Etsy sellers to the Amazon platform, as many of them are already frustrated by manufactured items on the site as our survey indicates.”

Amazon Handmade, on the other hand, has strict rules against manufactured goods. It states in its press release, “We only approve artisans whose products are handcrafted. We are factory-free.”

But shifting to Amazon Handmade will come at a price. Amazon Handmade takes a 12% cut of the sales (which includes all costs associated with payments and security) versus Etsy’s 3.5% cut.

Etsy shares closed down 4.3% Thursday, continuing its slide of more than 50% since its IPO in April.

Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.

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