Etsy has lost half its value since going public -- here's part of the strategy that could help it recover

EtsyEtsyHere’s a look at the production process behind Etsy store Deluxe Screen Printing

Online craft marketplace Etsy has a new program called Etsy Manufacturing that will make it easier for the people who sell their wares on the site to find manufacturers to help build them.

Two years ago, the site started letting Etsy sellers hire additional employees and work with outside manufacturers, as long as they list the information on their “About” page.

Part of the policy was that sellers had to partner with “transparent” manufacturers, and show that they still had authorship and responsibility over the products made. But connecting with manufacturers that met Etsy’s stipulations could be difficult for sellers.

Which is why the company says it’s launching Etsy Manufacturing: To make it easier for sellers to connect with approved manufacturers.

More “seller services”

Etsy says the marketplace will launch in beta in late 2015, and will be free for designers who want to sign up to find a manufacturer.

However, Etsy will also eventually let designers and manufacturers make transactions through the marketplace — for a fee. An Etsy spokesperson told Business Insider that “it’s too early to say exactly how it will work,” but you can imagine that Etsy might charge a middleman fee any time a seller and a manufacturer wanted to work together on a new service.

That makes Etsy Manufacturing a new business opportunity for the company, which has been knocked around on the stock market since it went public in April. Its stock has sunk from $US30 per-share at its initial public offering to ~$US14, down about 53%.

Etsy reported losses in its first two quarters, and blamed that in part on weaker foreign currencies reducing the demand for dollar-denominated products.

Right now, Etsy’s main revenue comes from charging sellers $US0.20 to list a single item for 4 months, and then 3.5% of the value of the sale if an item sells.

However, while the growth of its marketplace revenue slowed, growth of its “Seller Services” revenue, the amount it makes from offering sellers things like promoted listings, shipping labels, or direct checkouts, grew.

By making money on manufacturing transactions, another seller service, instead of goods-sold, Etsy would be expanding up a new revenue stream that didn’t rely as much on the strength (or weakness) of the dollar.

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