Etsy is out to prove that no business is too small to succeed. The popular ecommerce site’s ambitious business model is based on the premise that if people can connect with other people, they will gladly eschew big box stores and shop in a way that encourages and supports small businesses.

“An Etsy economy is a people-powered economy with person-to-person commerce. It’s the feel of a farmer’s market instead of a supermarket,” says Chad Dickerson, Etsy’s CEO. “We want to bring the Etsy ethos into the larger retail ecosystem.” Etsy, which acts as a marketplace for handmade and vintage goods, has a current membership totaling 25 million and employs 400 people in the US and abroad.

Members love the site because, with an easy-to-use platform and a low cost of entry, it takes the difficulty out of starting a business: for a listing fee of $0.20 per item, and a cut of 3.5 percent for Etsy off each sale, sellers can post their wares for sale in virtual stores. In return for these low fees, Etsy offers its members exposure and support that few could afford otherwise.

Amy Stringer-Mowat and her husband Bill Mowat, both architects, are examples of an Etsy success story. Their business, A. Heirloom, has sold more than 30,000 state-shaped cutting boards through Etsy and the couple’s website. “We see ourselves as an Etsy brand,” says Stringer-Mowat. “We were discovered on Etsy. We feel intensely loyal to Etsy. They have been supportive as we’ve grown.”

What’s next for Etsy? Working with local communities, Etsy wants to take its support of budding entrepreneurs to the next level by teaching them necessary business skills. Another goal on Etsy’s horizon is to launch a program that allows its members to connect with buyers from brick-and-mortar retail establishments, giving members the opportunity to sell their products wholesale.

Sarah Woodson, who joined Etsy in 2006, is a case study for this new project. Her company, Downing Pottery, was growing slowly for years until Esty contacted her about selling her handmade mugs in partnership with Seattle-based retailer Nordstrom. The store’s first order of 40 mugs sold out in a week and Nordstrom increased its next order to 60.

Since its start in 2005, Etsy has launched the careers of thousands of entrepreneurs, with members’ sales reaching $895.1 million in 2012 and expected to exceed $1 billion in 2013. By boosting the visibility of small businesses that sell handcrafted and vintage goods, Etsy is succeeding in changing how people shop.

Source: Kathleen Davis. “The ‘Etsy Economy’ and Changing the Way We Shop,” Entrepreneur. March 22, 2013.