They never failed at this. Moving beyond handmade goods was a deliberate move.
FTA
> But the growth — and yet another round of VC funding — put even more pressure on Etsy. Chief technology officer Chad Dickerson had taken over as CEO after Kalin was voted out by the board in July 2011, and in October 2013, in an infamous town hall meeting at Etsy HQ, he announced that the company would allow sellers to contract with outside manufacturers to help make their products, so long as they designed everything themselves and were willing to provide detailed explanations of their process to Etsy’s Marketplace Integrity team.
Much of the community was aghast, fearing the change would ruin the culture of the site forever.