Children are scared of the dark for a reason. In the dark, you can’t see what’s coming. They have a fear of the unknown. That fear is rational! You should be scared of the unknown. You should be constantly building yourself to protect against threats that don’t exist yet.
Etsy is positioned with little real competition. Amazon Homemade doesn’t have the brand to compete. Mercari isn’t it. Etsy is strategically positioned in a gigantic niche market. The problem is, they aren’t really continuing to add value and when they do, they extract it. The power of search and brand isn’t enough!
Someone will come along and do more for the same fee. They will provide a better way of delivery. They will provide more resources. Or maybe they’ll just provide search for a far lower fee. Or maybe they’ll have a cooler brand. Etsy could be replicated by someone with the right network effects. They need to do more to protect their fat cut, but aren’t.
What will bring Etsy down doesn’t exist yet. Maybe it will never exist. But a $30B valuation is too sweet to for the free market to ignore bringing competition. It’s weird to be scared of competitors that don’t exist, but Etsy has no innovation. If they did, I wouldn’t be scared. Network effects aren’t enough to be a durable advantage for Etsy in the long term. The reality is enough companies have larger network effects that could move laterally into this market. Some of them have killer brands too.
Where did the moat go? Oh, it got swallowed by a bigger moat.
I want my companies to either have a great moat or a great pace of innovation. I’m not saying it will be easy. Etsy is a good business and will put up a fight. Problem is great businesses tend to win out, not good businesses. Until something changes, I’m going to start easing my way out of this position. I want to love Etsy, but I’m a man of high value and Etsy hasn’t been adding it. I like living in a world with Etsy, so hopefully my fear of the unknown turns out to be irrational. Until then I am leaving my night light on.