Citron Research claims Etsy is the largest counterfeit online marketplace in the world.
That is quite an accusation! Having sold my jewelry on the platform for about 10 years (2012-2022) and having made just under 3000 sales I can attest this allegation has real merit. I filed my first Intellectual Property Infringement case in 2018; an India based seller copied and pasted my photos of my jewelry claiming to be their own for a much lower price. Later on that same year another one copied and pasted about 150 of my photos. Every year since I've had to file numerous IP infringement reports. I don't spend all day trolling the marketplace for stolen photos, I only knew about the ones that patrons were kind enough to inform me about while they were browsing the marketplace. Fast forward 2023 to my most recent IP violation report, I then decided to spend a few hours trolling 150 pages of jewelry looking for my photos. Not only did I find an additional 7 violations of my own (about 60 photos), I saw the same photos from other artists I follow on Instagram over and over and over. All from India and Chinese based sellers. Of course the promise of a $2500 item for $200 is extremely appealing. The sellers remove any original watermarks and then put their own on it to make it look more legitimate. Wait, they remove original watermarks??? Yeah, that is a major violation of international copyright law, especially in a commercial/retail type setting. Another clever method to trick buyers was to claim their shop was in the US but their production partners were in India, but the items would ship from India. I won't go into significant detail about that right now though. After the violation reports are received and the offending listings/photos are removed from Etsy, the sellers get no further reprimand and continue selling as though nothing happened. To quote the article:
" We see the same trickery when it comes to jewelry. Before anyone can dismiss the attribution of counterfeits to Etsy, note that the search term Designer Jewelry returns 600,000 results and this is what the top 8 results look like….ALL COUNTERFEIT!"
I agree with the articles claim that management does not care about counterfeits. They have made it clear, profit and shareholder price are far more important. They are no longer the marketplace for artists & makers. The marketplace really started going downhill when Josh Silverman took over in 2016, I remember being excited about some of the initial changes he was going to bring to the table, but ultimately time revealed in his further policies and changes that he was a wolf disguised in sheep's clothing installed to bring more value to shareholders. Coming from Ebay, he has turned Etsy into something even worse than Ebay. If I could reach all the artists whos IP has been stolen on Etsy, it would be equivalent to a major, major multi million dollar class action lawsuit (just for the jewelry category alone). I have all the data, screenshots and more to back up my own claims. The article claims the counterfeit and IP theft problem is much, much bigger than just this category which is troubling news considering my own experience. If you own Etsy stock, consider selling it. As an investor, your goal is of course to make money, but when (not if) Etsy gets hit with legal troubles from independent law suits, Department of Justice, Securities Exchange Commission & Federal Trade Commission violations I predict it will get ugly and the stock price will tank, any gains will be wiped out and turned into significant losses. To quote the article:
"Etsy behavior is bordering on criminal"
For buyers considering purchases on Etsy, please, consider researching whether the artist/maker has a independent website and consider buying directly from their website. Etsy can take up to 18% of an order total if they deem the buyer came from one of their paid ads. That is insane. To put that in perspective, a basic Shopify store charges less than 4% total depending on the payment type per transaction. Shopify has other fees and ongoing expenses associated with running an independent business but overall for most businesses the cost per sale even with the ongoing expenses is less than 5%. Most artists will also list their phone number on Shopify, if you have questions or concerns you can call them directly.
How can you differentiate between counterfeit shops and legitimate ones on Etsy?
Well, often these shops stealing photos would take photos from about 40-50 different artists or brands all at once, a legitimate artist/shop will usually have a continuous theme for their photos and videos, meaning the same or similar backdrops or modeled hands for the vast majority of their photos/listings. Counterfeit shops don't have the same theme for their entire shop, many different photo styles, many different modeled hands. I have an eye for spotting them now, at least in the jewelry category.
A little about why Etsy became so large
Back in 2005 when Etsy first launched, it was an easy to use platform to list hand-made and vintage items with an easy to use and functional shopping cart for buyers. Coding a website and shopping cart was out of reach for most makers and artists at that time. As a buyer during those years you might have spent time looking at someone's website but not be able to make a purchase, queue Etsy and their team of developers. Well, a lot has changed in the last 18 years. The growing popularity of independent website builder platforms like Shopify or Wix has changed the e-commerce landscape entirely. I did have to learn some coding to customize my Shopify store to my liking, but to be honest, it is way better then my Etsy shop could ever have been and learning a new coding language is an outstanding skill to have in todays world. At first, Etsy was great, it was easy to use for both buyers and sellers. Etsy brought buyers to the platform through ads and makers and artists could focus on making & selling. As an artist in todays world, you no longer need Etsy to bring in buyers, if you have an Instagram, Facebook, Tik-Tok, or a Pinterest account you easily start attracting an independent following that will go check your website. If you can describe your target market(s) in detail its even easier, especially if you have a budget for paid ads. You can reach the right people at a relatively low cost. As a buyer, I religiously check my favorite artists, individuals & brands independent websites for new items or items I am considering. I closed my Etsy shop in 2023 and I don't buy or sell on Etsy anymore.
What will Etsy say about these accusations?
"We have no doubt that Etsy will respond by directing investors to how many sites they kicked off for violation and how they are vigilant on regulating their marketplace. That is obviously bullshit. As they not only allow this to happen, they sell ads to the counterfeiters for prime positioning."
Disclaimer, I am commenting on this research article and voicing my own experience and opinion. This is not financial advice.
Here is the link to the original Citron Research article (it is worth the read!):