Thursday, March 5, 2015

Esty, the online seller of hand-knit beard warmers, vintage Madras sportcoats and everything in between, filed for a $ 100 million initial public offering on Wednesday evening.

The precise details of the transaction are subjection to revision and addition, but the basic outline of the Brooklyn-based company’s financial details and strategy are unlikely to change much, if at all. Etsy generated $ 195.6 million in revenue last year, up 56.4 percent from 2013, according to documents filed with the U.S. Securities and Exchange Commission.

The details also show that as Etsy begins the process of going public, the company is in transition: It’s making less and less money selling things to customers and more and more money selling services to sellers.

The share of the company’s revenue that comes from what it calls its “marketplace” (aka the website itself), have fallen for three straight years. In 2012, the marketplace revenues made up 74 percent of the company’s total revenue, according to the filing. In 2013, it was down to 63 percent; in 2014, 56 percent. At the same time that the marketplace’s revenue share fell, the company’s only other major source of revenue, what it calls “seller services,” rose: from 21 percent in 2012, to 34 percent in 2013, to 42 percent in 2014.

What exactly are the seller services Etsy offers? Three things, which basically amount to artisanal logistics: promoted listings, payment processing and shipping labels. In other words, more and more of Etsy’s revenue is coming from a combination of what are essentially ads, payment fees and logistics support. Those deeply dull offerings mean Etsy is competing with decidedly un-handmade companies like PayPal (for payments), Facebook (for ads) and FedEx and UPS (for shipping support).

But, as the company says in the “Path Forward” section of its filing, these services “help an Etsy seller spend more time on the pleasures of her craft and less time on the administrative aspects of her business.”

This whole strategy relies, of course, on the unlikely proposition that Etsy can, over the long term, compete with UPS and PayPal on price, or the more likely idea that sellers simply like Etsy and want their products affiliated with Etsy in a way they don’t like or feel affinity for a corporate death star like Facebook, where anyone can pay to have anything promoted. Etsy is self-selective, and that’s part of the appeal for people who want to promote products on it.

The strategy may work. Big companies are annoying and not a pleasure for super-small businesses to work with. On the other hand, convincing a tiny producer of handmade coasters that you are not a big corporation becomes a little harder when you are, in fact, a publicly listed company.

The problem Etsy will face as a public company is how to monetize artisans’ trust and have it too.
Business News on The Huffington Post

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WASHINGTON — Democrats on Wednesday fired their own salvo in Capitol Hill’s ongoing tax cut battles, offering a slew of breaks that would primarily help middle-class and lower-income earners.

Republicans, led by Rep. Paul Ryan (R-Wis.), the chairman of the House Committee on Ways & Means, have already begun work on making a slew of temporary tax cuts permanent — primarily breaks that benefit businesses. Those cuts would add hundreds of billions to the federal debt and deficit.

The Democrats’ offerings Wednesday were aimed to counter that push, and to set themselves up as champions of the middle class.

“We want the spotlight to be very much turned on these basic middle-class tax cuts that matter so much to the middle class, and to those who are not yet in it who want to reach it,” said Rep. Sander Levin (D-Mich.) in a Capitol Hill news conference.

Among Democrats’ proposals are bills that would increase breaks for child care, working couples and education. Many of these measures were first enacted in the 2009 stimulus legislation, but will expire in 2017. They echo proposals in President Barack Obama’s budget, and aim to prevent millions of people from slipping into poverty.

A measure called the Helping Working Families Afford Child Care Act would expand the Child and Dependent Care Tax Credit to cover expenses up to $ 8,000. That would boost the average credit that most families get from $ 600 to $ 2,800.

A measure called the Working Families Tax Relief Act would augment the Earned Income Tax Credit and the Child Tax Credit by making permanent expansions that were passed temporarily in 2009. It would also index the CTC to inflation.

Another bill would make permanent and expand the American Opportunity Tax Credit, which gives families credit for college tuition. It would allow up to $ 3,000 in credits for families earning up to $ 200,000.

“Our economy has changed a lot in the last few decades, and it’s time for our tax code to change with it,” said Sen. Patty Murray (D-Wash.), the lead sponsor of the working families measure. “Wages for middle-class families have been flat even as costs like child care have been rising. And while Republicans continue to call for more tax cuts for the wealthiest Americans and biggest corporations, I’m proud to introduce middle-class tax cuts that will reward families for their hard work.”

“The expansions of these tax credits are of vital importance to tens of millions of families, and it is critical that they be extended,” said Levin, the top Democrat on the House Committee on Ways & Means. “While the American economy has made significant strides in rebounding from the Great Recession, many middle-class families have been left behind. These tax credits are a priority that should be addressed in tax reform to give families the certainty they need to succeed.”

A spokesman for Ryan did not immediately comment on the proposals, although Ryan has backed an expanded Earned Income Tax Credit in the past.

Democrats had been highly critical of Ryan’s tax cut bills in large part because Ryan’s measures are not paid for by cuts elsewhere. If all of the GOP-favored cuts were passed into law, they would add some $ 850 billion to deficits over the next 10 years.

The Democratic proposals do not include estimates of their impact on the deficit, or ways to offset the associated costs, but Democrats said there are numerous loopholes that could be closed to achieve that.

“We propose to pay for anything we advance, to be consistent,” said Rep. Lloyd Doggett (D-Texas), who is pushing the tuition breaks along with Sen. Chuck Schumer (D-N.Y.).

Levin said the point of offering the bills is to make sure that as the GOP’s proposals advance — and as possible tax reform plans take shape — measures aimed at the middle class will be part of the debate.

“You can’t talk about middle-class needs, you can’t talk about their income — which has been stagnant for decades — improving, without considering these bills,” Levin said.

Although much of the debate around taxes has tended to be partisan, the Democrats said there is some Republican support for their ideas.

“I think there is some interest,” said Doggett. “That’s part of what we’re doing — continuing to put this issue up there so it can’t be forgotten.”

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.
Business News on The Huffington Post

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