For many crafters and makers, Etsy has been a life-changer. This marketplace dedicated to independent artists has opened up the door for many to turn their hobbies into careers. Etsy has enabled artists to start selling their wares online by eliminating many of the difficulties involved with running an online store. Sellers don’t need to worry about building a website, attracting web traffic, or calculating shipping expenses and taxes. Etsy is an easy way to sell, and it has gained incredible popularity for it. With 1.8 million sellers currently on the platform, it’s clear that Etsy is a major player in the eCommerce space.
That said, Etsy also has a few downsides. Perhaps the biggest complaint among sellers regards Etsy’s fee structure. Etsy charges a variety of fees from listing fees to transaction fees and payment processing fees, and it can be difficult to keep things straight (and to calculate how much you’ll owe Etsy for each sale). What’s more, Etsy has been known to increase these fees or add new ones, leaving many sellers wanting a way out. Most recently, Etsy has unveiled a new Offsite Ad service that comes with its own fees, and which is mandatory for some sellers.
In this article, we’ll break down Etsy’s pricing and fees. We’ll explain how you can know if Etsy is worth the cost, and then we’ll give a few strategies for succeeding in the Etsy marketplace. And if you ultimately decide that Etsy isn’t the right choice for your business, we have a few suggestions of alternatives you can turn to.
Let’s get into it!
Etsy’s Pricing Plans
Etsy offers users two subscription options for seller accounts: the free Standard Plan and the for-purchase Plus Plan. Take a look below to find out what each plan offers.
Etsy’s Standard Plan is their free seller account, complete with all the basic tools that Etsy offered before the Plus Plan was created. The Standard Plan allows users to list products on Etsy, buy and print discounted postage, and market their products with sales and coupons. The Standard Plan also gives you access to the Sell on the Etsy App.
The Plus Plan is available at $10/month, and it includes all of the basic features of the Standard Plan, plus a bit more. The Plus Plan includes some additional features, such as advanced shop customization options (banner options, new layouts of featured listings, and more) and restock requests for sold out items.
The Plus Plan also offers credits and discounts on additional Etsy services. Here’s a quick list:
- 15 listing credits monthly (the equivalent of $3 in listings)
- $5 USD in Etsy Ads credits monthly
- Free .store domains
- 50% off select domain extensions: .com .net and .ca
- Discounts on custom web address
- Discounts on custom packaging and promotional materials
The 7 Types Of Etsy Fees All Businesses Need To Know
In addition to the monthly subscription listed above, Etsy sellers must juggle a variety of other fees charged by the platform. Etsy has a rather complicated fee structure, and it’s worth taking a look at their legal terms and policies to really get a grasp on all the nitty-gritty elements of how taxes may or may not apply to fees in your region. For more digestible information on Etsy’s many different fees, take a look below.
Etsy charges a $0.20 listing fee for each item you put up to sell on their platform.
This fee truly applies to each product you sell. For example, let’s say you have 10 identical ceramic bowls, which you are selling individually. You can list all of these identical bowls under the same product page, but after each one sells, you much pay another $0.20 to renew the listing. If you sell all of these bowls, you pay a total of $2.00 in listing fees.
If, however, you sold a pack of ten bowls as one product, you would only pay one $0.20 listing fee.
Listings expire after four months, when you’ll have to pay the listing fee again to renew.
Etsy’s transaction fee (not to be confused with their payment processing fee) is a fee that Etsy charges to cover the cost of using their platform. Etsy’s transaction fee is 5% of the price you charge your customers, including the cost of shipping, product customization, and gift wrapping.
For sellers in the US and Canada, Etsy does not charge transaction fees on sales tax (unless you include the cost of sales tax in your listing price). However, for sellers outside of the US and Canada, these transaction fees might include the cost of some applicable taxes.
Payment Processing Fees
In order to accept online payments, all merchants must pay payment processing fees. Payment processors (such as PayPal and Square) typically offer their services at around 2.9% + $0.30 per transaction.
Etsy Payments is Etsy’s own in-house payment processor, which sellers must use to accept payments if they are in one of the 36 eligible counties (including the US, UK, Australia, and Canada). If Etsy Payments is not available in your country, you can use PayPal to accept online payments.
Etsy Payments charges 3% + $0.25 per transaction.Â This allows you to accept payments by credit card, debit card, Etsy Gift Card, Etsy Credit, PayPal, some bank transfer services, Apple Pay, and Google Pay. You can also allow your customers to pay using their PayPal accounts. Etsy Payments rates will apply to these payments instead of PayPal rates.
In-Person Selling Fees
Etsy has partnered with Square to offer sellers an option for in-person selling. In order to accept in-person payments, you’ll need a Square card reader (take a look at our review of Square for more information). When you accept payments in person for items that you have listed on your Etsy site, you’ll pay the usual listing fees as well as Square’s payment processing fees (2.6% + $0.10). You will not pay the 5% Etsy transaction fee.
If you’re looking to build a more personalized website to sell your products, Etsy has an option worth trying. It’s called Pattern, and it’s website building software that allows you to develop your own store that is still connected to your Etsy seller account. Pattern is available for $15/month.
Listing fees also apply to Pattern, although there is a bit of additional complexity. If you list a product only on Pattern and not on Etsy, you must pay a listing fee. If you already had a product listed on Etsy, and you want to also list it on Pattern, you do not need to pay an additional listing fee (you have already paid one to Etsy). What’s more, Pattern listings do not expire.
Currency Conversion Fees
Etsy recommends that sellers list their pricing in the same currency as their payment account currency. This will allow sellers to avoid foreign exchange charges. Customers are able to select the currency in which they view listings, so listing your products in one particular currency shouldn’t impact your sales at all. However, if you do not do this, and you list your products in a different currency than your payment account, you will be charged a 2.5% currency conversion fee.
Over the past few years, Etsy has rolled out some marketing tools for users. These include on-site and off-site ads, which of course come with their own fees.
Etsy Ad Fees
Etsy allows sellers the option of marketing their products within the marketplace via Etsy Ads. These ads are available on pay-per-click pricing, and the cost of each click will vary depending on demand. You can set a budget that limits the amount you’re willing to pay for on-site ads daily, and Etsy will only list your ads until you reach that daily maximum.
Offsite Ads Fees
Etsy’s Offsite Ads are the newest development in Etsy’s advertising. All users are currently being set up to use Offsite Ads, with the option to opt-out available to sellers who have made less than $10,000 in sales in the last year.
With the new Offsite Ads program, Etsy will market your products on major sites like Google, Facebook, Instagram, Pinterest, and Bing. When someone clicks an ad that includes one of your products and then purchases one of your products within 30 days, you are charged an advertising fee on that order. This fee is either 12% or 15% depending on your annual sales. For those who make under $10,000 in sales in the last year, Offsite Ads is an optional service, and the rate is 15%. However, for those who made over $10,000 in sales in the last year, Offsite Ads are mandatory. Etsy charges these sellers a rate of 12% on purchases made from the ads.
What Real Users Have To Say About Etsy Seller Fees
Etsy sellers have mixed opinions regarding fees. Some sellers say that Etsy is the most affordable option for their business while others say that Etsy’s increasing fees are forcing them to leave the platform. Take a look below at a couple of comments I found on Etsy’s community forum from 2019. I think both of these quotes encompass user sentiment:
“I think Etsy’s fees have got ridiculous. I am getting charged nearly 13% (incl VAT). This is not viable for me, I will either have to close my shop or put up my prices. Etsy used to be a viable platform for crafts people, designers and sole traders but their fees are too high and too complicated. I have complained.”
“It’s still much cheaper than eBay, where it’s 10% on sale price and shipping. I think the new billing system did us all a favor by making us much more aware of what our profit margins actually are, and forcing us to take a hard look at our business model. My big revelation was that I seriously need to eliminate ALL the low priced items – a $3 item that sites for 2 years before it sells is actually losing money. Planning to flea market half my inventory when the weather warms up.”
More recently, Etsy has caused a stir with its announcement about mandatory Offsite Ads for some sellers. There are a couple of comments from the community forum in March 2020 that represent the conversation currently underway about this new policy:
“This may be exciting for those who WANT to advertise, but for those of us who do not want to advertise, this is a strong-arm technique. We deserve the right to opt out.”
“…I am capable of working out my own costs and I have. And that INCLUDES advertising. Time will tell but for my shop I think these adverts will increase my profits. Everyone screamed about the current adds, but guess what? Yep, they worked really well for my shop. Business is booming, each month I am up. The only thing I do disagree with is the fact that for successful sellers, its mandatory. That isn’t fair.”
Is Etsy Worth The Cost For Your Business?
So, is Etsy worth the expense for your business? That depends on a few factors: your profit margins, and the value you derive from the marketplace.
In order to really use Etsy to your advantage, you’ll need to keep a close eye on your profit margins. If you aren’t careful, Etsy fees can easily eat into your profits, causing you to actually lose money on a sale. Here’s a reminder of Etsy’s fees:
- Transaction fee: 5% of total
- Payment processing fee: 3% + $0.25
- Listing fee: $0.20 of total
- Total Fees: 8% +$0.45
So, let’s imagine that one of the products you sell costs you $5 to make, and you sell it on your platform for $15 with “free shipping.” Here’s a breakdown of what associated fees would be.
- Shipping costs (estimate): $5.00
- 5% transaction fee: $0.75
- 3% + $0.25 payment processing fee: $0.70
- Listing fee: $0.20
- Total expenses (including shipping): $6.65
When we subtract the cost of making the product and the expenses related to fees, we end up with a $3.35 profit margin. In this example, you’d likely need to raise your pricing in order to increase your profit margins and better account for the cost of offering free shipping.
Another factor you’ll want to keep in mind is the value your business derives from the platform. What value does Etsy provide to your business? Is it the ease of being found by new customers? The ability to sell products online without having to maintain a website? This value, whether or not you can put a dollar sign in front of it, is a huge factor in your decision to use Etsy despite the fees.
How To Offset Etsy Seller Fees
As I mentioned above, in order to succeed on Etsy, you have to pay close attention to your bottom line. Here are a few ways you can make sure to stay on top of Etsy Seller Fees:
- Increase Prices: The most obvious way to protect your profits is to increase product pricing. Often, sellers are worried that increasing the cost of their goods will make them less competitive. While this is sometimes the case, I have also seen Etsy users reporting that even after they increased their pricing, their sales did not experience any decrease. This could be because buyers often view higher-priced items as higher quality. Perhaps shifting your pricing will surprise you by having a positive impact on your brand.
- Cut Costs: This is the next obvious step. Rethink the way you handle both production and shipping. Is there any way you can make your products faster or more affordably without significantly impacting quality? And when it comes to shipping, are you comparing options from multiple shipping carriers to make the best decisions possible? If there’s an area where you can lessen your expenses, do so. It’ll make a big difference.
- Weigh The Pros & Cons Of Ads: If you have the ability to choose whether or not you use offsite ads, I would consider this very carefully. If you opt in, you’ll likely get a number of sales that you wouldn’t otherwise, but you will also need to leave space in your profit margins for the occasional 15% fee.
- Don’t Keep Stale Listings:Â Because your listings renew every four months (for an additional $0.20 fee), you want to make sure that the products you list on your store move within four months. Don’t keep stale listings around. Over time, they may end up costing you more than the product is worth.
- Get Help From The Community: The Etsy community is a strong bunch of sellers. Ask the Etsy community forum for ways they are handling Etsy’s fees, and to get more specific advice on your own store.
Tired Of The Fees & Ready To Switch?
While some merchants choose to navigate Etsy’s ever-shifting fees and guidelines, many sellers are tired of constantly adjusting their prices to reflect new fees. If you’re one of those sellers who is fed up with Etsy’s various fees, it might be time to try something different.
There are plenty of other ways to sell online, including opening your own online store or just trying out a different marketplace. For some advice on leaving Etsy, read our article 8 Signs You’re Ready To Leave Etsy (And How To Do It). And for a few suggestions on quality selling tools, check out our article on The Best Etsy Alternatives For Online Sellers.
So keep making great products, and keep an eye on your profit margins. Whether you choose to stick with Etsy or switch to something else, we wish you the best of luck.
The post The Real Cost Of Selling On Etsy: Etsy Fees, Pricing, & Offsite Ads Explained appeared first on Merchant Maverick.