On April 11, 2022, Etsy’s transaction fee will increase from 5% to 6.5%. While no price hike is welcome, Etsy promises the increased revenue will be used to improve the platform and expand its marketing efforts.
Of course, a fee increase is always a concern for handmakers. You’ve got a lot of moving parts to keep track of, and you’re going to have to swallow another 1.5% of the total cost of your listings in fees. If you create goods that typically only work on a small profit margin, this fee increase will only make things tighter.
Don’t despair, however. Etsy promises good things are in the pipeline, and you’re not totally powerless - you can make tweaks in your business and strengthen weak points so you come out the other side of this transaction fee increase stronger. Let’s take a look at some of the pros and cons of this transaction fee increase.
Pros of Etsy’s Transaction Fee Increase
While a transaction fee increase isn’t welcome, Etsy promises this one will come with a range of benefits for sellers. Here are the pros of Etsy’s transaction fee increase:
👍 More Marketing = More Buyers: Etsy says one of the key reasons they’re increasing transaction fees is so they have more money for marketing. Etsy says they spent close to $600M in 2021, and intend to increase that spend in 2022. They plan to scale up their efforts by investing in “TV commercials, influencers and tastemakers, billboards, podcast advertising, and email marketing,” all geared toward bringing more buyers to Etsy.
👍 20% Bigger Support Team: Etsy has failed to offer a good customer service experience thus far for buyers or sellers, but they promise this will change with this 20% increase. They say their support team will respond faster, you’ll have greater access to live chat, and be able to prioritize urgent requests.
👍 Etsy Doesn’t Increase Fees Often: While this may not seem like much of a pro right now, it’s worth noting that Etsy isn’t known for frequent fee increases. In fact, this is only the second time in Etsy’s history they have increased fees (the last was way back in 2018), so you can potentially adjust to this new fee and not expect another for some time to come.
👍 A Catalyst to Get Smart About Pricing: A lot of handmade sellers do their pricing math on the back of a napkin and call it a day, or spend hours fiddling with spreadsheets in Excel and Google Sheets, not sure that their calculations are correct. There has never been a better time to get your pricing in order and make sure you’re doing everything intentionally.
You need to fully understand what’s going into every product so you can price appropriately. When you don’t have the hard numbers in front of you, it’s easy to underestimate your time, labor costs, or forget a fee (learn more about common pricing mistakes handmade sellers make). Fortunately, you don’t need to spend hours creating the perfect spreadsheet (or getting to grips with one someone else has made), because Craftybase does it for you.
We’ve designed Craftybase to simplify your pricing as much as possible, so all you need to do is look at the figures and our suggested pricing and decide on what’s right for you and your store. Craftybase also keeps track of your inventory, tells you when it’s time to reorder materials, and tracks your expenses, making tax-time a much smaller headache. To find out more about Craftybase and to start your free trial, click here.
👍 Plans to Increase Security: Another promise Etsy has made with this fee increase is to improve site security. They reportedly spent $40M in 2021 on their teams and technology to ensure Etsy is secure, and they promise to do more to remove listings that fail to meet their policies. They also promise to “help you resolve issues with buyers”, which is one area many sellers feel powerless with on Etsy.
👍 A New Etsy Seller App: Etsy promises that a new seller app will be coming to help you better manage and grow your business.
Cons of Etsy’s Transaction Fee Increase
Okay, now we’ve looked at the pros of this increase, let’s look at the–inevitable–cons.
👎 Etsy is Crowded: Etsy is a popular platform already, and the added marketing will only push that further. Etsy may only market to bring new buyers to the platform, but even if they don’t encourage new sellers, people who want to make and sell handmade goods will be attracted to the platform too (this makes getting your SEO strategy on Etsy even more important)
👎 Etsy Isn’t Managing Things Perfectly Now: Despite Etsy’s $40M investment in security, many users are still seeing plenty of fake accounts pop up, so it’s difficult to see how that will change when there are even more people using the platform and wider brand awareness.
👎 It’s Yet Another Expense: Yes, this is the elephant in the room. For all Etsy’s good intentions, there’s no getting around the fact that it’s taking 1.5% more from seller profit margins. For sellers of digital products, this may be an easier pill to swallow, but with all the other fees (listing fees, processing fees, shipping fees, and offsite ads fees) it’s not going to be so easy for the average handmaker, who is likely feeling the financial squeeze in other areas too, due to the global economic climate.
👎 It Makes Admin More Complicated: You got into this business to make beautiful products, right? One of the things that attracts our userbase to Craftybase is it takes care of so much of that administrative work that can suck up hours of your time. This change in fees is just another thing you need to do and take care of. If you’re using manual spreadsheets or even paper calculations, you’re going to have to go through and edit it all and recalculate. With the right systems in place this can be negated, but if you’re still working with 90s technology, you’re going to suffer. (If you’re yet to create standard operating procedures (SOPs) read our guide How to Create SOPs for Your Handmade Business.)
👎 Off-Site Ads Will Increase: Some of all that marketing budget will go toward increasing off-site ads, which is not going to be a welcome change for most. If you don’t know, off-site ads are those Etsy runs on other sites on your behalf. If you’ve ever browsed on Etsy and then headed to a blog and seen a display ad at the side of the page showing you a product you just looked at, this is why.
So, why are more off-site ads a bad thing? Surely they drive more traffic to your listings? Well, yes, they can and do. The problem is that on Etsy, off-site ads are a double-edged sword. While you get more eyes on your products, you’re hit with fees. Hard.
In fact, users on the subreddit r/Etsy refer to offsite ads as “an absolute profit vampire” Why? Because fees for selling via an off-site ad are astronomically high - you’re looking at 12-15% on the overall product cost. Add to that all the other fees, and things can feel pretty desperate.
Besides the additional costs, there are two other factors that anger sellers:
1) You are “conscripted” in when you make $10,000 on Etsy, meaning you can’t (currently) opt-out once you’ve reached that threshold (you can before this).
2) Sellers who find you organically for their first purchase, may return to you through an ad (through Etsy’s retargeting) and you’ll still be charged because they came to you through an ad. Some sellers don’t feel like it’s worth the charges when the customer was likely to return to them anyway.
Only time will tell as to what real changes we see on the platform, for better or worse. While you can’t control whether or not Etsy makes good on its promises, you do have control over your pricing. Now is the time to tackle that issue and be prepared for the change that will happen automatically on April 11.
Get your pricing in order, and get real about your profit margins and what you need to do to be profitable. If you’re struggling, may now be the time to look for alternative suppliers with lower fees, bulk pricing, or even consider starting to sell on an additional platform. Craftybase will help you know your business inside-out so you can make the best decisions for your business, so it can continue to grow and thrive, despite fee changes. Ready to start your free trial? Click here.