Etsy—the online treasure chest for all things handmade—cultivates a community for those who have a knack for crafts like candle-making, knitwear, jewelry, or pottery. With over 1.7 million active vendors and close to 28.6 million active consumers, Etsy has established a peer-to-peer business platform that eliminates the middleman of corporate production. Yet this marketplace is more than just an e-commerce site; it is a community of like-minded individuals who appreciate handicrafts.

Within the site, buyers and sellers interact through a variety of IT-enabled features, like following and messaging shops, reviewing and favoriting products, and curating lists of products. Yet as sellers socialize by favoriting and promoting others’ products, are they redirecting potential customers away from their shops?

Professor Sunil Wattal and doctoral student Ermira Zifla of the Management Information Systems Department at the Fox School of Business investigate how social mingling affects e-commerce marketplaces in their paper, “Understanding IT-enabled Social Features in Online Peer-to-Peer Business for Cultural Goods.”

“What really fascinated us about this platform is that you have this community aspect, but you are also introducing this e-commerce agenda,” says Wattal.

“We thought that sellers may have mixed incentives to participate in the online community,” adds Zifla. “On the one hand, participating by following others and posting in forums may increase the visibility of sellers and subsequently increase their sales. On the other hand,” she continues, “following other sellers and sharing their products could negatively impact sales by diverting traffic away from their own page.”

While online communities have often been the subject of research, this is one of the first studies to link social indicators with economic performance. Using a dataset of nearly 2,000 sellers on Etsy, Wattal and Zifla examined their interactions in the online community and found how socializing with others can inherently affect a shop’s sales.

The researchers identified two categories of social e-features that promote new products and validate users:

1. Community participation features—such as following other sellers and joining teams—which facilitates socializing with other members, and
2. Content curation features—such as curating favorite lists, sharing products, and favoriting shops—which serve as tools for validation and tastemaking.

“When you are following other people on Etsy, those people are listed on your page as a form of validation, for what you like to buy as a consumer or what you can provide as a producer,” said Wattal.

The researchers hypothesized that community participation and content curation would increase a seller’s online status by increasing their number of followers, but would decrease a seller’s sales by diverting attention away from their own products.

Using a web crawler to collect public information, the pair obtained a dataset of 1,728 unique glass sculpture sellers—a randomly chosen subcategory of marketplace shops on Etsy—to compile a year’s worth of data, including sellers’ followers, lists, favorited products, and sales.

Analyzing the data proved the researchers’ hypotheses correct: a 10 percent increase in community participation, like following other sellers, and content curation, like favoriting products, resulted in a 3.89 percent decrease in sales. Yet this reduction was outweighed by the effects of cultivating a stronger social following. In other words, the same activities that led to a direct decrease in sales helped sellers attract more followers, and were associated with an indirect increase in sales by 4.64 percent—an overall net gain.

“IT-enabled features have benefits that supersede the negative,” says Wattal, “since exposure is what can ultimately lead you to be on an influential list or you can simply commercialize yourself to the point of high-status.”

Trends can come and go as quickly as a trendsetting blogger changes her mind. Yet in the realm of vintage trinkets and artisanal finds, relationships stay relevant.

This story was originally published in On the Verge, the Fox School’s flagship research magazine. For more, visit www.fox.temple.edu/ontheverge.

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