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Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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How Zibbet got 1000 new sellers in 3 days: poaching Etsy’s disgruntled customers

Published 04 October 2013 11:59, Updated 09 October 2013 07:49

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How Zibbet got 1000 new sellers in 3 days: poaching Etsy’s disgruntled customers

Zibbet co-founders Andrew Gray (left) and Jonathan Peacock are focusing their website on individual artists who create handmade items. Photo: Rob Homer

The engineering team at Sydney-based Zibbet, an online marketplace that connects buyers and sellers of handmade art and craft, haven’t had much sleep over the past week. Staff have been up trying to “beef up” the website’s capacity to handle new registrations from interested sellers. Zibbet has taken on 6000 new customers in the past 30 days – 3000 of them coming in a three-day period from October 2 to October 4 – after the company’s main rival, New York-based Etsy , decided to make changes to its site that annoyed its existing customers.

Zibbet is now targeting $1 million in revenue within the next 12 months and will next week officially launch a bid to raise $300,000 from Australian-based angel investors. Although Etsy and Zibbet have different fee models, both companies operate in the online vintage and handmade goods market, selling the likes of art, toys, jewellery, clothing and quilts.

Etsy is the No. 1 player globally, with a massive 1 million active sellers. Zibbet, in comparison, has 6500 active sellers. Etsy is not in danger of losing its No. 1 spot just yet – the company has ambitions to become as big as eBay – but has alienated existing sellers, who concentrate on handmade goods, by allowing sellers to have their products made by manufacturers.

This is why it’s been losing sellers to Zibbet every day. By going for scale, Etsy has annoyed thousands of its existing sellers, which are predominantly smaller niche businesses offering unique handmade products.

These businesses went to Etsy (rather than sites such as eBay) in order to differentiate themselves from mass-produced goods sold by larger manufacturers.

The sellers are moving for one simple reason: they don’t think Etsy is looking after their interests.

More movers?

No company wants to see its customers leave because they don’t agree with its policies. Aside from hitting Etsy’s bottom line (at least in the short-term), it’s a PR disaster.

The Sydney-based chief executive of Zibbet, Jonathan Peacock, says they will never change their policy and, as a result, they are likely to continue to see customers move over to Zibbet.

“We are very much focused on individual artists that take pride in creating their work,” Peacock says. “That’s now our main differentiation from Etsy. They are expanding to allow sellers to use manufacturers. That’s why we’ve seen a big uproar, with so many sellers coming to Zibbet.”

The new Etsy guidelines expand the definition of “handmade” so sellers can apply to work with outside manufacturers to produce items they designed. Etsy will still review and approve each listed seller, and its policy states that re-selling (selling new items that the seller had no role in creating) is still banned.

Until now, restricting sellers to smaller players has been fine for Etsy. But its fee model – Etsy charges a listing fee of 20¢ for every item, and 3.5 per cent commission on every sale – means it needs scale. Etsy can only boost revenue with more listings.

Zibbet instead charges its “premium” customers a monthly subscription fee. Sellers can sign up for free and list up to 50 items for free. A premium subscription is $9.95 per month, or $79 for the year. “We make money from premium subscribers,” thePeacock says. “About 23 per cent of our 6000 sellers are paying premium members.”

So while Zibbet also needs more sellers, it really wants to lock in subscribers rather than one-off listings.

Peacock says Etsy may now be open to thousands of new sellers that use manufacturers, but will, as a result, “get rid of their little guy over time”.

There is an impression that smaller players will get priced out of the market, he says. “They can’t compete with the smaller manufacturers coming in. They will get new sellers, but will lose that handmade original feel.”

Etsy has stated publicly it has seen a jump in the number of sellers exporting their data to Zibbet, although it says departures are falling. A spokesperson said: “We know from surveys we’ve conducted over the years that many Etsy sellers also sell in other venues – from craft fairs to personal websites to, of course, other online marketplaces,” she continued. “With our policy changes our aim is to give sellers more choice and more options for how they run their business. That said, we don’t want to lose a single Etsy seller. This announcement is about strengthening the Etsy community by making the rules fair and clear.”

Zibbet aims for second place

Peacock says “it’s been a crazy few days”, with the server crashing several times as it tries to cope with the inundation of new registrations.

“Etsy sellers are flooding to Zibbet, so much so that they crashed our site on Wednesday night,” he says. “The team stayed up all night to get it back up. Our normal traffic numbers are 10,000 visits to the site a day. On Thursday we had over 25,000 visits; the day before that 20,000.”

He says they have increased revenue by almost 50 per cent in the past month. Zibbet makes its money from premium paying sellers. Zibbet now has 50,000 registrations and has added 80,000 items for sale in the past month.

“September was our biggest revenue month ever,” Peacock says. “We were sitting at 4000 active sellers at the start of September. By the end of September we had 5000. Now we’re pushing up to 6500.

“By October 3, we surpassed our biggest month ever. Within the next 12 months we hope to get to $1 million in revenue. If revenue continues the same as the last three days, we would be hitting $2.5 million within the next 12 months.”

Peacock says they are now on track to being the second-biggest player in the market after Etsy. He says they try to ensure their sellers are individuals are selling “100 per cent handmade products” and that re-sellers don’t come on their site.

“We do have re-sellers try to sneak in from time to time,” he says. “We rely on our members to report those items, and they do because they don’t want re-sellers in there. As soon as it is brought to our attention that there may be a re-seller, we go into investigation. It’s very much a community-oriented approach to maintaining integrity.”

Capital raising

Zibbet’s five-person staff is based in Sydney, but Peacock says about 80 per cent of buyers and sellers are from the US.

“We’ve beefed up the servers and are working on a complete rebuild of the site, which should be ready to go within two to three months,” he says.

“We are looking to raise our first capital round next week. Ideally I would like to do it with local investors. We’ve already had a lot of interest from Aussie-based investors. A large amount is already committed, without us even finishing the pitch yet. We want to use the $300,000 for investments in marketing to US-based sellers. We are looking at a BigCommerce model where we keep engineering staff here, and sales and marketing in the US.”

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