Have you ever thought about opening your own Etsy shop? Maybe you’ve been making and selling crafts for a while, and you’re ready to take your business to the next level. Maybe you’ve recently retired and you’re looking for a way to supplement your income. Or maybe you just love crafting and you want to share your creations with the world.
Etsy is a great platform for selling handmade goods, vintage items, and craft supplies. But before you open your shop, it’s important to understand the costs associated with doing business on Etsy. In this article, we’ll break down the three main different fees you need to be aware of when selling on Etsy, as well as how to calculate your pricing to ensure you make a profit.
What is Etsy?
Etsy is an e-commerce platform that focuses on selling handmade, vintage, and craft supplies. Items sold on Etsy must be handmade, vintage (at least 20 years old), or craft supplies.
How much does Etsy cost?
There are three different fees and charges associated with selling on Etsy: listing fees, transaction fees and payment processing fees.
Let’s go through each of these now:
Every time you list an item for sale on Etsy, you will be charged a $0.20 listing fee. Listings are active for four months, or until the item is sold.
Whenever you make a sale on Etsy, you will be charged a 6.5% transaction fee. This fee is calculated based on the total amount of the sale, including shipping and taxes.
Payment Processing Fees
In order for Etsy to process the payment, you will be charged a percentage of between 3-4% + $0.25 USD payment processing fee on every sale. The percentage varies by the country you are based in.
Other costs to be aware of when selling on Etsy
In addition to fees that are charged directly by Etsy, you’ll want to ensure you are also factoring in the costs to make your product and deliver it to the customer, along with any taxes appliable to selling online. This is really the key to making money selling handmade goods online.
Let’s cover each of these costs now to see how they work:
Material and Labor Costs
If you want to make a profit, you’ll need to account for all the materials used in your product and your time spent making it.
To calculate your make costs, start by adding the cost of all the materials you used to make the item. Then, calculate how much time it took you to make the item, and multiply that by your hourly wage.
For example, let’s say it took you two hours to make a scarf that cost $10 in materials. If you wanted to earn a $15/hour wage, your make cost would be $30 ((2 hours x $15/hour) + $10 in materials).
Remember, these are just estimates. You don’t need to be exact, but you want to ensure you are accounting for all your costs so you can price your items accordingly.
The cost of shipping your items will vary depending on the size, weight, and distance the package needs to travel. You will need to factor shipping costs into the price of your items when listing them for sale.
Depending on where you live and what you’re selling, you may be required to collect and pay taxes on your Etsy sales. For example, in the United States, many sellers must collect and pay state sales tax on all transactions.
Is it worth it to sell through Etsy?
The decision of whether or not to sell through Etsy is a personal one. There are pros and cons to using Etsy as a platform for your business.
Some people love Etsy because it’s an easy and convenient way to sell their products. Etsy does a lot of the heavy lifting for you, from processing payments to marketing your items. And because Etsy is such a popular platform, it’s easy to reach a wide audience of potential customers.
However, some people don’t like Etsy because of the fees associated with selling on the site. When you factor in listing fees, transaction fees, payment processing fees, shipping costs, and taxes, it can eat into your profits pretty quickly.
It’s also important to remember that because Etsy is so popular, there is a lot of competition. You’ll need to make sure your items are well-priced and accurately described if you want to attract buyers.
Does Etsy has a lot of fees in comparison with other online marketplaces?
The answer to this question may vary depending on who you ask, but the general consensus seems to be that Etsy’s fees are on the high end when compared to other online marketplaces.
For example, Amazon charges a $0.99 fee for each item you list for sale, plus a referral fee that ranges from 6% to 20% of the total sale price.
Ebay also charges a listing fee of $0.35 per item, plus a Final Value Fee that ranges from 2.15% to 12% of the total sale price (plus a $0.30 charge if you use PayPal).
So, when compared to these other platforms, Etsy’s fees are definitely on the high end. However, it’s important to remember that Etsy is a different type of platform. Amazon and Ebay are both massive marketplaces that sell just about everything under the sun. Etsy, on the other hand, is a niche marketplace that specializes in handmade goods, vintage items, and craft supplies.
Because of this, there is a lot less competition on Etsy. And, because Etsy does such a great job of marketing and promoting its sellers, it’s easy to reach a wide audience of potential customers.
Etsy is one of the most popular online marketplaces for handmade goods, but it’s not the only option out there. If you’re considering selling your products online, be sure to research all the different platforms available to you. Each one has its own set of fees and rules, so it’s important to choose the one that makes the most sense for your business.
How to calculate pricing to make profits on Etsy
In order to be successful selling on Etsy, it’s important to have a clear understanding of your costs so you can price your items accordingly.
Here’s a quick breakdown of how to calculate the prices for your items:
Figure out your cost of goods sold (COGS). This includes the cost of materials and your labor. You can use a spreadsheet for this, or dedicated craft inventory and pricing software like Craftybase to calculate this for you based on your real time material costs.
Add on any additional fees associated with selling on Etsy, such as listing fees, transaction fees, shipping, and payment processing fees.
Calculate your desired profit margin. A good rule of thumb is to triple your COGS to reach a standard retail price. Then, add on your additional fees to reach your final price.
For example, let’s say you’re selling a handmade mug that costs $5 to make. You’ll need to factor in the cost of materials, labor, and shipping when calculating your COGS.
Let’s say those costs add up to $2.50. To reach a standard retail price, you would multiply your COGS by 3 ($2.50 x 3 = $7.50). Then, you would add on your additional fees ($0.20 + $0.375 = $0.575). Your final price would be $8.075.
In conclusion, it’s important to do your research before selling on any platform, including Etsy. Make sure you understand all of the fees associated with selling on Etsy, and calculate your prices accordingly to ensure you’re making a profit. Good luck!