How Etsy Became America’s Unlikeliest Breadbasket

Yes, she sells bread on the site best known for knitted hats and topical greeting cards and, lately, hand-sewn masks.

On her farm in Roane County, W.Va., Ms. McMinn has cows, a dozen chickens and a kitchen in which she bakes cookies, scones, biscuits, muffins and breads. She works alone but is hardly singular. Thousands of her peers all across the country do what she does, every day: sell the products of their humble home kitchens on the internet.

For most of America’s history, people’s food came from no more than a few miles away, the distance a farmer could travel in a horse-drawn wagon. During the Great Depression, rural farms were an important source of food security for the country, a way for people to feed themselves despite their poverty.

In these uncertain times, Americans are once again taking solace in food. But the horse-drawn wagons have been replaced by FedEx jets and trucks, and the “penny restaurants” of yore have been replaced by internet-savvy entrepreneurs who have discovered they can still eke out a living, even while stuck at home.

Etsy is no longer the company it once was. It was born in Brooklyn in 2005 as a market for individual craftspeople and artisans to sell unique handmade gifts, including jewelry, screen-printed T-shirts and literally anything you can fashion out of distressed wood. Having gone public in 2015, it’s fast becoming, as Chief Executive Josh Silvermansaid in the company’s most recent earnings call, a place for “everyday essentials that you need.”

Mr. Silverman, previously at eBay, was installed in 2017 by a board under pressure from activist investors. Many of the changes he has instituted have been controversial with both the company’s employees and its millions of sellers. They include cutting costs through layoffs, mandatory off-site advertising of individual sellers’ goods, which can cut into their margins, and a general realignment of the company’s mission: fewer crunchy-granola values, more shareholder value.

Nevertheless, the changes seem to be working. Revenue in the latest quarter was double the level three years earlier, right before Mr. Silverman took over, and Etsy has gone from steady red ink to consistent profits. Its share price is up about 90% so far this year.

In Etsy’s earnings call this month, Mr. Silverman said business continued to surge in April, driven by the sale of fabric face masks—Etsy sold about $133 million of them in the month, the result of mass seller mobilization—and of the sorts of items homebound shoppers want for their nests or to send to loved ones.

“We are seeing very strong growth in brand-new buyers, and we’re excited by that,” he added.

In 2017 when Mr. Silverman took over, the company’s revenue was growing, but its expenses were growing faster, and its board had become convinced that its then-CEO, Chad Dickerson, had to go. Mr. Silverman soon ended Etsy’s Values-Aligned Business team, responsible for its environmental and social initiatives. The company also ceased being a certified B Corp, a designation given to companies that are “using business as a force for good.” Mr. Silverman initiated a number of experiments at the company, many of which he later admitted didn’t work, including an attempt to get sellers to offer “free” shipping by rolling its cost into the price of items.

Mr. Silverman has “changed things radically,” says Abby Glassenberg, president of the Craft Industry Alliance, a professional group that represents craft makers and sellers of every kind. She’s also been an Etsy seller since its very beginning, back in 2005, and has paid close attention to its evolution.

“He knows how to run a public company and increase shareholder value. If that’s the goal, it’s undeniably working, and it’s working during a pandemic,” she says.

Far from the Etsy corporate headquarters, other changes have swept across the U.S., making home-baked goods more commercially viable. From 2013 to 2018, 10 states passed so-called “cottage food laws” allowing home bakers to legally sell their goods in a variety of venues, including online, says Emily Broad Leib, faculty director of the Harvard Law School Food Law and Policy Clinic. Many other states amended existing food laws.

While this wave of legislation was driven by, and has enabled, a grass-roots movement of professional home bakers who have found a natural home on Etsy, the company itself hasn’t done much to encourage this category above others. Those who have been selling baked goods on the site for years feel like the lack of promotion of Etsy’s many bakers shows the company’s interests lie elsewhere. “I really hate feeling like the people selling baked goods are the ugly stepchild,” says Ms. McMinn.

Nevertheless, the category has exploded. The half-dozen bakers I talked to all reported increases in orders of between 200% and 450% in the past two months, compared with a year ago. A company spokeswoman said searches on Etsy for terms like “baked goods” and “brownies” have roughly doubled in the past two months, compared with a year ago. Searches on the site for related terms yield tens of thousands of items from nearly as many sellers, everything from sourdough bread and gourmet doughnuts to Keto-friendly waffles and alkaline tahini spelt cookies. The company declined to offer numbers on the sale of food items.

Like just about every e-commerce company on this pandemic-stricken space rock, Etsy is benefiting from the fact that people still want to buy stuff but, for the past couple of months at least, are unable to visit conventional retail outlets. The e-commerce divisions of Amazon and Walmart have been overwhelmed by record demand, Instacart has pledged to hire hundreds of thousands of new personal shoppers, and FedEx has had to cap shipments from stores.

But Etsy has proved to have strengths that would have been difficult to anticipate, says Ms. Glassenberg. For one, its suppliers generally already work at home, so lockdown didn’t affect their ability to be productive, as long as they were able to get raw materials. For another, while both eBay and Amazon offer handmade goods, sellers who have sold at all three of these outlets say Etsy is their preferred marketplace. Etsy customers are willing to accept higher prices than eBay customers, and Amazon prioritizes sellers who can ship goods quickly, which isn’t always possible for solopreneurs producing on demand.

Besides, shoppers find comfort in buying food from producers who seem like real people they can relate to and trust—which Etsy does better than Amazon, for one.

The Etsy bakers I’ve spoken with are tired but, to a person, glad to have a marketplace for their goods. And in a time of pandemic, it’s not just the ability to make a living they are grateful for. On a site that encourages customers to message sellers, bakers say they’re chatting with buyers more than ever.

“One lady ordered scones and put a note on her order to please put nothing on the outside of the box that revealed there was food inside,” says Ms. McMinn. “She said, ‘Life is hard right now and I don’t want to share.’”