Amazon is launching a digital boutique, the Handmade Gift Shop, selling cute crafts at low prices; this will give retail rival Etsy and physical stores a run for its money
Amazon is crafting a plan to combat Etsy.
On Monday, the Internet retail giant announced the launch of the Amazon Handmade Gift Shop, a new division of the site’s existing “Handmade” branch which debuted in 2015. The Gift Shop will offer an array of “handcrafted items for every holiday, milestone or occasion.”
These items include arts and crafts like handmade candles, monogrammed wooden-cutting boards, and affordable pieces of art. Products are categorized into multiple arenas, including jewelry, custom wine glasses, engraved BBQ grill sets, personalized nursery decor for infants and gifts for kids, and plenty of couples-oriented merchandise, such as housewarming and newlywed presents.
A quick search reveals that most items cost less than $50.
Why, exactly, did Amazon enter into this new space? “Every item on Amazon Handmade has a story behind it – and after hearing from customers and artisans, we are thrilled to make gift shopping an experience they will look forward to,” said Amazon Handmade spokeswoman Katie Harnetiaux.
But retail experts say that Amazon’s motives may be more economically driven. “It’s pretty easy for Amazon to go into this space, because all they’re doing is modifying their portal… and they have the ability to have people upload their products. Why not just expand it? It’s very easy for them to penetrate the market,” Rick Singer, a consumer tech specialist and founder of GreatApps.com, said in an interview with Moneyish.
Given Amazon’s expansion into so many areas of retail in recent months — its acquisition of Whole Foods, and rumors of a burgeoning interest in pharmaceuticals and potentially its own, proprietary delivery service — it’s not entirely surprising that Amazon is ramping up sales of handmade gifts. And this should strike fear into Etsy — the site famed for quirky, customized gifts and trinkets — according to experts. Indeed, Etsy’s stock already took a 3% dive as of Monday morning, upon news of Amazon’s new Handmade Gift endeavor.
Asked if Etsy ought to be concerned about Amazon competition, Singer said, “they absolutely should be.” Given Amazon’s greater online traffic and retail presence, individual retailers selling their products online may ask themselves: “We’re going to get more traffic from being on Amazon versus on Etsy. [So] does Etsy lose business?” Singer asked.
But comparing Etsy and Amazon Handmade is a bit like comparing apples and oranges. Etsy has more than a decade of experience in this space, selling everything from customizable music instruments and accessories (like engraved drumsticks) to “healing crystals,” derived from geodes. And plenty of sellers have long been loyal to the platform.
Still, Etsy is tiny compared to Amazon: Its market cap is roughly $1.9 billion — compared to a market cap of more than $460 billion for Amazon. And Amazon’s size and market-tested conveniences may be an advantage: “Shopping Amazon Handmade, customers support local Artisans and purchase the handcrafted products they want with the convenience of all things Amazon,” the company touted, just in time for the retail bonanza that Halloween, Thanksgiving, Christmas, and other holidays will bring.
The e-commerce Goliath may also affect the David’s of the world — small businesses like local, independent arts and crafts boutiques.
“One of the things that it changes is what the small businesses have to do to compete,” said economist and Wharton management professor Peter Cappelli. “Are US artisans… going to be able to compete? Boutiques [are going] to have to figure out how to tell a better story,” Cappelli admonished, noting that danger could set in for small businesses specializing in handmade gifts if Amazon becomes overly dominant.
However, William Goetzmann, a Yale professor of finance, holds a somewhat optimistic view.
“I think for the artists and artisans that are making things, this is a great opportunity,” Goetzmann said. “If it’s Etsy versus Amazon, right now they’ve got two companies competing to list their [goods], so I think that certainly doesn’t harm them.”
© 2018 Dow Jones & Company, Inc. All Rights Reserved