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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