How to make a million dollars on Etsy — buy from Alibaba and run your store like eBay

Online marketplace Etsy is known as a place to buy home-made items, clothing, artworks, and jewelry created by individuals or produced in limited runs by small businesses. But not everyone using the site ascribes to this folksy philosophy. Others, such as Alicia Shaffer, are using Etsy like eBay, buying items wholesale from huge retailers such as Alibaba, and reselling them through the site.

Shaffer claims her store, ThreeBirdNest, earns her just shy of a million dollars a year. The second-most successful store on the entire site, Shaffer's store sells clothing and accessories — socks, headbands, boot cuffs, and T-shirts with slogans such as "Feed me and tell me I'm pretty." ThreeBirdNest advertises its products as "handmade boutique" fashion, but Shaffer hasn't got to the top alone. She employs a team of 15 women who help sew some of the items in her store, and controversially, a number of the other products are bought wholesale from retailers in India.

THREEBIRDNEST EARNS ITS CREATOR JUST SHORT OF A MILLION DOLLARS A YEAR

The resale of wholesale items is common for sellers on eBay, Amazon, and other e-commerce sites, but Shaffer's business model has attracted criticism from other Etsy sellers and shoppers who argue that the site, with its focus on homemade crafts, is not the place for such tactics. The site's struggle is one of handcrafted idealism versus cut-throat capitalism — despite its charm, Etsy is a marketplace that pitches cute knitted animals against each other in a fierce fight to draw more eyeballs and money.

ThreeBirdNest might not follow Etsy's projected philosophy, but it does make money — profit margins for such items, Shaffer told Fast Co. Design, are around 65 percent. There are examples with even higher markups: a pair of lace socks appear in her store for $28. The same socks are also available from Chinese retail giant Alibaba's eBay-esque marketplace Aliexpress for around $6 a pair.

Shaffer pins much of ThreeBirdNest's success on savvy marketing. By buying cheap wholesale items, using her in-house team to make alterations as necessary, and then using a model to show them worn in the US with complementary clothing, the wholesale goods are turned from cheap socks into boutique must-haves. Certainly it's a commercial approach that has allowed Shaffer to climb to the top of the table while others have a trickier time. Etsy made $895 million in 2012 alone, but the spread of that wealth was uneven: in a report published in 2013, Etsy said 65 percent of its sellers reported making less than $100 a year from their stores, while the median income for a full-time Etsy seller's household was $44,900, $5,100 below the national average at the time.