The relatively small-but-mighty Etsy has always been a winsome player in the fiercely competitive ecommerce marketplace, even as it has transformed into a multi-billion-dollar enterprise.

The site has won the particular affection of makers and consumers of “artisanal” goods by fostering a unique cultural niche. This community of “artsy commerce” makes it a far more attractive option for that demographic than other nameless, faceless storefronts like Amazon.

Etsy launched in 2005 as a two-sided online marketplace and community for microenterprises. 

However, over the past decade and a half, Etsy has distinguished itself by offering an entrée into the highly lucrative niche market for handmade and made-to-order products created by individuals and mom-n-pop type shops. 

Buyers report finding Etsy products more “authentic” than their Amazon counterparts and are willing to pay a premium for goods that are untainted by the unsavory connotations attached to mega-corporations.

That sheen of authenticity has paid off in spades for Etsy. As of December 31, 2019, 2.7 million active users were selling a total of 65 million products on the platform, all to a community of 46.4 million active buyers around the world. 

Amazingly, as of 2020, 95% of those sellers said they were running their businesses out of their homes—a figure that demonstrates the extent to which Etsy has successfully supported microentrepreneurs worldwide.

Etsy does an admirable job of connecting those microentrepreneurs to highly motivated, loyal buyers who aren’t looking for low prices, but on the contrary, are willing to pay more on Etsy than they would elsewhere. 

Market researchers have found that handmade products typically sell for 78% more online than their commercially manufactured competitors.

And if a product is handmade and made-to-order? Add an increase of another 38% on top of that. Selling on Etsy can be a real route to success for any microentrepreneur working in this market.

The challenge: Effectively managing Etsy inventory

Microenterprises like Etsy sellers have an advantage over big-box competitors because of their tiny size, which allows them to be more nimble and adaptable in their operations, and thus more easily provide unique goods handcrafted to a buyer’s specifications.

However, this customized, highly differentiated business model also poses significant challenges for Etsy sellers in inventory management.

And that’s not the only challenge they face. These small businesses also struggle with adequate inventory management due to:

• Resource constraints
• Volatile customer demand
• Short product lifecycles
• Steep competition
• Lack of business-operations expertise

This translates into a major loss of time. A 2020 Etsy survey found that for each hour the average Etsy seller spends on fabricating their product, they spend another hour on inventory management and related tasks.

It also translates into a potential loss of sales due to out-of-stocks that shake customer trust, errors in order fulfillment, and a bevy of other problems that plague small businesses without formal inventory management procedures in place.

The Key to growth: Successful stock management

In the platform’s infancy, Etsy sellers were facing such an uphill battle in effectively managing their inventory that they lobbied the site to give them an in-platform inventory management tool.

Etsy obliged and created the Shop Management dashboard, introduced in 2017. Etsy also offers an introductory online tutorial to help sellers implement a few inventory management best practices.

The issue here is, while the tools Etsy has to offer might be helpful to someone at the very beginning of their online retail journey, they’re just too basic to scale up as sellers expand their businesses. 

Keeping in mind that 82% of active sellers on Etsy say they aspire to grow their online shops, it’s crucial to look beyond Etsy for adequate inventory management solutions.

Studies have consistently shown that IT-based solutions to inventory management—which first came onto the market in the 1990s and have rapidly evolved in form and function since then—generate the most significant value for micro-, small- and medium-sized enterprises.

Let’s take a quick look at the inventory management tools and guidelines Etsy currently provides, then compare them to more advanced, data-driven processes offered by a dedicated IMS like SkuVault.

Etsy’s five rules for managing inventory

Etsy offers the following inventory management guidelines to its online shop owners:

Start managing inventory from the get-go

Etsy recommends that makers implement some sort of inventory management system before they even start selling. 

Once orders start rolling in and demand increases, sellers can quickly find themselves overwhelmed, low on raw materials, unsure of where materials or products are, and unable to fill orders in a timely fashion, which translates into negative consumer reviews and loss of business. 

Etsy doesn’t go into detail on how to do this, but offers the generic solution of setting up a simple Excel spreadsheet to track inventory.

Organize your workplace

The site also suggests that makers set up their studios, storage places, closets (wherever they keep their raw materials, make their products, and store their finished goods) so that there’s a place for everything, and everything’s in its place. 

More popular goods should be kept closer at hand, while creators should keep infrequently used materials out of sight. However, makers should still know where all these materials and products are at all times.

Maintain stock levels based on customer demand

Etsy tells its sellers to keep materials for more in-demand products in higher stock levels and order less inventory for lower-demand products. 

However, Etsy doesn’t provide guidance on the sometimes complex calculations, data-gathering, and forecasting techniques that more established retailers rely on to predict demand and make ordering decisions.

Be smart about storage

Etsy also claims makers can efficiently manage their inventory just with “a little organization,” such as alphabetizing materials or checking items off on a printed receipt when packing orders to ensure fulfillment accuracy. 

The site says this “low-tech approach” might be more advantageous to sellers than “fancy inventory management software.” 

However, it declines to offer any more detailed, hands-on advice about inventory organization, nor how to scale up those simple, low-tech systems as customer demand increases and shops diversify and expand their offerings.

Implement an efficient SKU system

This is one area where Etsy offers a little more practical advice to sellers. The Shop Management dashboard was designed to let Etsy shop owners and managers easily input and edit SKUs for their products. 

In their online handbook, Etsy offers the following advice to develop an effective SKU system:

• Keep SKU labels short, between 4–8 characters
• Use a mix of numbers and letters for each SKU to help both minimize character count and avoid repeating number sequences
• Create SKUs that reflect product type
• Create SKUs that reflect your product’s location in your workplace/storage
• Create SKUs that reflect variations in colors, patterns, etc.
• Don’t use the letters “O” or “I” in your SKUs, which can be mistaken for numbers
• Don’t use symbols like commas or dashes in your SKUs, which can conflict with programs like Excel

Want to expand your business? Think “Enterprise 2.0”

The inventory management guidance that Etsy offers its sellers is certainly sound advice to keep in mind when you’re first setting up shop. But sellers will likely find these solutions too thin if they have any ambitions for growth. 

Due to the massive amount of competition in the eCommerce marketplace and the increasing volatility of markets in general, Etsy shop owners need better tools to give them a competitive edge.

In the realm of academic business studies, there’s a concept known as “dynamic capability theory” that suggests enterprises can safeguard their profitability in today’s environment of rapid changes and technological advancements by perfecting their organizational processes and mastering organizational technologies. 

In the words of one researcher, “businesses can only thrive in a rapidly changing environment if they can learn how to cope with the changes.”

Just like how we now refer to social media platforms and even sites like Etsy itself as “Web 2.0,” those businesses that are unafraid to seek out the latest technological solutions to navigate the vicissitudes of today’s mercurial markets are referred to by researchers as “Enterprise 2.0.”

Microentrepreneurs on Etsy might feel like the “Enterprise 2.0” concept only applies to big business. 

Therefore, tech-driven solutions (what Etsy dismissed as “fancy inventory software”) are too expensive for them or too difficult to use. 

But studies have demonstrated time and again that these kinds of software offer remarkable benefits to micro-sized, self-run businesses if sellers can just overcome their fears and invest in them.

Implementing a better solution for Etsy inventory management

This is where products like SkuVault Core’s eCommerce Inventory Management software system come into play.

By automating several processes, SkuVault Core’s cloud-based program—which fully integrates with Etsy—saves sellers an enormous amount of time and prevents the inevitable human errors that come with manual data-entry tasks.

The software also offers a data-driven, highly accurate forecasting tool that lets sellers predict demand with precision and make inventory decisions accordingly. 

Accurate forecasting helps sellers run a leaner, more profitable operation by keeping just enough inventory on hand to avoid the costs associated with overstock or dead-stock while preventing overselling and the dreaded out-of-stock scenario.

Furthermore, because SkuVault Core’s inventory management system is a cloud-based data-sharing platform, it dynamically updates and evolves along with Etsy’s technological advancements, which alleviates the burden of upgrading traditional software that quickly becomes obsolete.

Here’s a breakdown of a few of the advanced features the SkuVault Core eCommerce inventory management platform offers to Etsy sellers, allowing them greater flexibility and resilience as they continue to develop.

Automate your inventory processes through:

• Barcoding: SkuVault Core’s inventory management product utilizes barcoding to reduce risk from manual data entry. To save time—Etsy sellers simply have to scan in products at receiving to adjust inventory levels as they change.
• Inventory syncing: The software syncs marketplace quantities in real-time across multiple channels, with quantity syncs updated every five minutes.
• Cycle counting: SkuVault Core’s easy-to-use cycle count process lets Etsy sellers minimize the physical counts that can damage their day-to-day productivity. Cycle counts keep inventory levels in check and let Etsy shop owners make more informed purchasing decisions.
• Easy receiving: SkuVault Core offers the ability to add and receive inventory from purchase orders to simplify the receiving process.

Next steps for Etsy inventory management

Via instant access to multiple types of detailed reports, SkuVault Core gives Etsy sellers complete visibility and insight into their inventory’s journey through the entire supply chain. With better data and greater inventory visibility, Etsy sellers can make more informed decisions about ordering and maintaining stock levels. 

These data-driven reports also feed into SkuVault Core’s precise forecasting capabilities, which aid Etsy sellers in maximizing sales.

As we discussed above, Etsy sellers have special needs, given that they’re typically working with a wide variety of product mixes and short product lifecycles. 

Supply chain efficiency is crucial for micro- to mid-sized enterprises seeking a competitive advantage. 

Still, many Etsy sellers shy away from adopting those advanced IT solutions, often due to a lack of expertise with business software. However, products like SkuVault Core’s eCommerce inventory management system offer an easy-to-use, highly intuitive interface that doesn’t require a degree in inventory management science to utilize. 

Given today’s highly fluid, often erratic inventory management environment, any Etsy seller who wants to see their shop flourish should consider researching tech-based inventory management systems.

Looking to expand beyond just selling on Etsy? Check out Etsy alternatives here.