Economy

How English (And Etsy) Killed Germany's Online Crafts Leader

DaWanda will soon disappear, clearing the way for its top competitor — the U.S. firm Etsy — to dominate the e-commerce market for homemade goods.

DaWanda is struggling on the online crafts market
DaWanda is struggling on the online crafts market
Michael Kläsgen

MUNICH — DaWanda just wasn't growing fast enough. It was destined to die a slow death, reasoned Claudia Helming, a top figure in the German startup scene. And so, after months of difficult reflection, she decided to pull the proverbial plug.

The news came as a shock. DaWanda — the leading online marketplace in Germany, Austria and Switzerland for homemade objects, handicrafts and unique items — will cease its operations at the end of August. Helming recommends DaWanda sellers and customers instead switch to the marketplace of its U.S. competitor, Etsy.

The entrepreneur launched DaWanda in 2006, together with Michael Pütz. Two years ago, the company took third place in Germany's startup ranking. But now it's set to be liquidated. Its name will disappear, and the remaining 150 employees will be laid off, although about 50 of them will stay on for a few months to supervise the transition to the Etsy platform. Helming herself will act as a consultant for Etsy during the transition period. She doesn't know what will come after that.

The step is all the more surprising because DaWanda was no failure.

At its peak, DaWanda had about 380,000 active sellers from all over Europe. It had six million products on offer, representing 140 million euros in sales. One piece of jewelry was sold every 20 seconds, a baby item every 30 seconds. And Claudia Helming was a star in the scene.

The step is all the more surprising because DaWanda was no failure. True, Helming had to fight for her company these past years in what proved to a be a difficult market. In the summer of 2017, she had to lay off a quarter of her employees. But by autumn of that year, DaWanda was turning a profit. Sales rose by 21.4% year-on-year, to 16.4 million euros in 2017.

Helming realized, however, that the scalability of DaWanda's business model is finite — for a number of reasons, including the German language. To expand, things would need to be translated into other languages. There is also the problem of the different rules and regulations that exist in different European countries. DaWanda also found it difficult to keep up to date with the latest standards on a technical level.

A one-company market

In the end, there were too many parts that needed rebuilding. Its faster-growing American competitor, Etsy — founded in New York in 2005 — had the advantage of starting in the much larger U.S. market, and of operating in English, which is more widely spoken. Also, the turnover the vendors made on DaWanda was no longer growing as much as expected. "That's why we've been looking for a partner since the fall of 2017," Helming explains.

Photo: DaWanda via Instagram

Together with co-founder Pütz and the shareholders, she spoke to many potential partners, including the U.S. investor Insight Venture Partners. But most solutions just didn't fit. "Etsy is simply the best choice for our idea and our community," Helming says.

But Etsy will not take over DaWanda. No shares will be transferred. No money is flowing DaWanda's way. Etsy and DaWanda have instead made an "agreement." Over the past few weeks, they have jointly developed a tool that allows sellers to transfer their self-made articles to Etsy with just a few clicks. Helming receives a compensation in return but doesn't say what it consists of.

It seems there's only room for one player in the online crafts market. Amazon entered the fray almost two years ago with "Amazon Handmade," but appears to have lost interest since then. Pinterest and eBay could also be considered to belong to this category, but Etsy is the market leader and continues to grow.

The publicly listed U.S. company is much larger than DaWanda. In the first quarter of 2018 alone, it generated gross sales of $861 million, an increase of 19.8% over the same period last year. Revenue even rose by just under 25% to $121 million. And as it absorbs DaWanda sellers, Etsy can look forward to even higher profit and user numbers.

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money for a blockchain-powered e-commerce app. But the simplest of errors exposed the scam and limited the damage to investors. A cautionary tale for the crypto economy.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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