>Etsy should know what makes it special to customers. Why isn't it more efficient at delivering that?
It is a Very Hard Problem and I don't envy them at all.
Verification of authenticity. I honestly wouldn't know where to begin. Spot check with live people? Expensive and begging for errors. Have sellers document their process? Easy to fake and expensive to check. Have a hair trigger for banning people that are clearly breaking the rules?
They also have the structural problem that Painstakingly Crafted generally takes time. That means less throughput.
And all of that is on top of the general problems of running an internet retailer with global reach.
Because of all of the pressures of throughput and the cost of verification they decided to ignore all of that and just give up, for the most part. And now it is a race to find a new 'quirky stuff that looks crafty' niche like an online Hobby Lobby to live in or lose their brand completely. I don't think it will work in the long term and I think we are witnessing a slow motion Pets.com.
Probably, what they'd need to do is split what they are doing.
One side would be how most of Esty is right now: a bunch of Hobby Lobby level quality crafty looking things that aren't actually hand crafted in any meaningful sense. It would be the place to go to get cheap, somewhat unusual gifts.
On the other side would be high end items. Hand crafted $2000 rocking chairs, for example. Something that can be marked up significantly and that it is worth it to go the extra mile by Etsy and sellers to verify is handcrafted. Maybe video walkthroughs of the process, spot checks, samples sent in to Etsy to be examined by experts etc.
Sellers can exist in both areas or one. The Verified Crafted side would buttress the Crafty but not Crafted side brand wise and the Crafty side would have a larger, more predictable income stream to make sure Verified Crafted can tackle the sticky problems it faces.