Etsy, once known as a haven for handmade and quirky craft goods, is losing longstanding sellers who say the platform has been overrun by AI-generated products and drop-shipped copies of their work. Vendors such as Colorado-based artist Emily Olson report steep sales declines after AI-generated pet portraits and mass-produced imitations began outranking their original listings, and many say Etsy's 2024 decision to permit disclosed AI-generated art has worsened the problem. The exodus matters because it threatens the platform's original identity as a marketplace for authentic, handcrafted goods and is opening the door to rival sites positioning themselves as more trustworthy alternatives.

Olson, who earned more than $40,000 from her Etsy shop in 2021, says her sales fell 30% in 2022 and a further 50% the following year, partly due to AI-generated portraits and counterfeit listings on sites such as Alibaba. UK-based illustrator Viktor says his sales have dropped 98% over the past year. Frustrated sellers have taken to forums such as Reddit's r/EtsyCommunity to complain about undisclosed "AI slop," while a new marketplace called Fybe, launching to vendors on 1 August, plans to explicitly ban AI-generated content and drop-shipping, relying on volunteer moderators to keep listings human-made.