If you follow a large amount of small maker businesses on Instagram or other social media platform you may have noticed a few posts about Etsy announcing a change to their fee structure in July. I just want to explain what is going on. So if you’re a buyer you understand the backend a bit better and some of my opinions on the announcement. At the time of writing this the fee change hasn’t come into effect yet and there is information that is still coming out, so my opinions might change as more info comes to light.
This is not the fun side of owning a small business where you make cool stuff, this is the boring logistics side but I want to talk about it regardless.
How It Currently Works:
Etsy is free to join and start a shop. This makes it great for people that are just starting their business. Most of the time you can use links from referrals and affiliates to get your first 40-50 listings free . When I just started my Etsy shop in 2012 I do not believe that was a thing, or it was a smaller number but I could be wrong. (Shameless Plug to my Referral Code , although you might not want to start a shop at the moment). It's the world's biggest hand made market place that makes it a very attractive option for makers.
Time to talk about the money you pay Etsy to use the website. Listing an item costs you money, $0.20 US per item. This does not cut into profits if you are listing stuff that’s higher than a few dollars. The only spot I see this being a really high fee is with digital downloads that are commonly sold for around $5.
When the item is sold, Etsy takes a transaction fee of 3.5%. It's pretty similar to a credit card transaction fee, so that part is okay.
The shipping portion being added to your account is 100% of what you charged the customer. Etsy recommends that you use their calculator to produce shipping labels, and it calculates the rate for you when you add the listing. Until relatively recently the rate calculator was USPS only. So I was sitting in Toronto not able to use that feature.
You could buy Canada Post labels through Etsy after a purchase was made and save yourself a trip to the post office. I personally don’t use that feature often since I don’t want a package to come back to me if I sucked at measuring. My old roommate has a shop and that was the only way he ships items.
Anyways, some people, but very few, gamed the system by charging low item fees but really high shipping fees as a way to sidestep Etsy taking a large transaction fee, but I’ve very rarely seen this happen. For the most part, it was shops that technically are breaking Etsy’s seller’s code (not selling what I would consider Handmade, Vintage or Supplies) pulling this kind of game.
For the most part everyone was pretty honest with their pricing, since it makes the platform as a whole look better if everyone is being honest with their prices.
The Announced Changes:
So this brings me to today's email to sellers. Fees are jumping from 3.5% up to 5% a transaction... and this now includes the shipping portion being paid by customers. It doesn’t seem high; 5% is still lower than most online marketplaces but it is a 40% jump from the previous fee. This is ruffling many people’s feathers, including mine. The jump was bigger than people expected after 13 years of no fee changes.
They are introducing a paid subscription service that would be $20 a month, this isn't mandatory but at this time the advantage of the service seems a little vague. For about the same price you can get a Shopify or a Squarespace, and their fees when you make a sale are lower (Shopify $0.3 + 2.9%, (or lower depending on the plan) a sale, Squarespace 3% or 2% if you can website, zero if it’s a full online store but the monthly fees are higher).
With Etsy Plus or Etsy Premium you are still charged the normal fees ($0.2 + 5%). If you are big enough to be able to afford the subscription, you really don't need an Etsy and are probably better off on a different platform because of the new higher fees. They are saying the subscription allows for more customization and restock announcements to customers.
In my opinion, it is not worth $20. There are also credits every month for posting listening or promoting, which are valued at $8 US. I wish they expanded this area of the announcement since I’m curious what type of customization Etsy could offer that couldn’t be done on a website.
My Opinion and the Word on the Web:
I've been looking on Reddit and the Etsy forms all day and I actually cannot find a quantifiable advantage to this new system. Etsy is saying that they are charging more fees because they are introducing new ways to bring customers to the site, but do not explain how, apart from more investment in advertising, which if it was done correctly would pay for itself.
Etsy is evaluated at about 7.6 BILLION dollars according to my quick Google search... (Which might be wrong but the idea still stands) They are not struggling for money and were growing consistently before this announcement. They most likely already have the capital to do anything they are planning on launching.
The annoying thing is that this announcement has increased their stock value... It shouldn't!
This is a BAD idea, it alienates the sellers and I don't like it! Is that not reason enough? Their stock is probably going to tank in the new year, as I can't imagine longtime Etsy users wanting to stick around after this announcement, unless there is more follow-up that makes this change make sense.
Many people online are saying this was the same pattern that began the downfall of Ebay. I do not know enough about the history of Ebay’s policy changes to have any real comment on this but I saw this comment often enough, that I thought I should mention it.
I don't mind fee increases if they are gradual and there's a good reason. It’s very similar to taxes. I don’t love paying taxes, but that money is going into supporting the infrastructure around me. I guess because taxes are for public services I feel better about it, instead of a private corporation.
I was looking everywhere to see something that justified the huge jump and the closest thing I found was they will start offering live call and chat tech support for buyers and sellers. They currently only have e-mail support. More support would be pretty nice, but it’s still not really all that impressive.
I did some looking around and their fees are lower than their direct comparison, which would be Amazon Handmade whose transaction fee is 12%. You do have to apply to be part of Amazon Handmade and I can understand it not being a good fit if you are just starting a small handmade business.
As a mentioned before the increase is really high and sudden and it’s shocking the sellers that now need to reevaluate their prices to make sure they are making a profit. Especially people selling heavy items or ship international since the shipping they charge is going to be really affected.
Overall it seems like a major money grab and a lot of people in the forums have really interesting and valid questions about the changes and they are not getting answers (or not yet) and it's bumming me out.
I like Etsy and I want it to still be a place that allows new and old handcrafters a place on the internet to sell their work but I’m not sure if this is the right way to go about it. There are things I would have preferred they did instead of introducing a subscription service; like when you search a shop’s name in the search bar, it should actually show a result, instead of making me actively click on search 'find shop names containing'.
This actually affects me really often, I’ll type in a shop name or something I found on Instagram or just want to look up and there will be no search results. Then I groan, go back in the search bar and specify I want 'shop'… It’s a quirk I wished they'd fix. I know a lot of people have issues with the SEO (Search Engine Optimization) and how it changes pretty often and I’m sure people would prefer that be fixed instead of this announcement.
They also think that this is a conspiracy to force sellers into offering free shipping. I do not think that was the intention of this change. Although I don’t really enjoy that the transaction fee will now include the shipping cost from the buyer, it does make sense for it to be part of it. So it will be 5% of all the money coming from the buyer going to Etsy as the transaction fee. I think it is more consistent to do it that way.
This morning when I opened the email I was actually really upset, and I know many makers were as well. I’ve since cooled down. I’m curious as to what the next round of announcements will be like. As a buyer, nothing will really be changing except I believe people will be increasing their prices slightly.
I feel like it's time to just focus on my Shopify and work on my marketing on social media. It is possible to be a successful handmade business without Etsy; many people have proven it can be done.
I really want to know your opinion on this, especially if you're an Etsy buyer, since all these changes were made in the name of improving the experience with you. I know that most buyers don’t give a 💩 about the backend of a business and I really appreciate you taking the time to read this. I promise my next post will be more light-hearted and shorter.