Did you hear? If you own an Etsy shop, I am sure you have seen the video and press release by now.
Etsy announced last week that they will be increasing transaction fees on July 16th from 3.5% to 5% and shipping will now be charged a 5% fee too. Many Etsy shop owners are wondering how they can still succeed with the new Etsy fee increase.
I understand the need for the fee increase. It has been awhile and I have sensed it was coming. Etsy is now a business with stock investors that want to see a profit. And it costs a lot of money to run a platform like Etsy. They are also adding in some really neat advertising features, which should benefit all shops over time.
There is a lot of feedback and concerns about the upcoming Etsy fee increase, though. The most common one is that Etsy shop owners will have to work harder to make a profit.
Although this might be a little bit true, it is important to remember that transaction fees are just a business expense like all of our other monthly expenses. As a creative business owner, you should expect business expenses to increase over time.
Despite the Etsy fee increase, there are still many ways that you can still succeed on Etsy and make up these extra costs without working a lot more.
It might just take some more confidence in your pricing strategy. And maybe dusting off your shop a bit.
Here are some ideas to help your Etsy shop still generate profits under the new pricing model and succeed even with the Etsy fee increase.
Raise Fees on Higher Priced Items
If your Etsy shop is set up right, you should have items ranging from a couple of dollars (those items encouraging someone to make a purchase even if they aren’t so sure) to high end items (where you really make some profit).
When I ran the calculations on how the pricing changes will affect my shop’s bottom line, the increase of 1.5% had little impact on lower priced items. Although a quarter here and there adds up, it doesn’t have a huge impact on my overall profits.
The Etsy fee increase hurt the most with my higher priced items. I mean think about it. If you sell an item for $5.00, your old transaction fee would be 18 cents and the new transaction fee would be 25 cents.
For an expensive item – a set a 25 handcrafted invitations for example – the difference in the increase sky rockets. If I sell the invitations for $45.00, the old transaction fee would be $1.69. The new transaction fee would be $2.25. That difference will add up after awhile.
To help counter the loss of profits, consider increasing the price points of your higher end items. Shoppers are less likely to notice the cost increase at higher price points. Higher prices will be more apparent with your lower end items. Good news is that you will still be able to make the same (or maybe a bit more) money.
Increase Shipping Fees
If you haven’t already noticed, the postal service hit online shoppers with a very large price increase in January. They have increased shipping fees before and I have always been able to absorb them without much of a difference.
This time it hurt. A lot. And I am still trying to catch up my pricing (I offer free shipping – more on that below).
Now, in addition to the postal service fees, there will be a 5% transaction fee on all shipping fees. It used to be 0%.
So, what does this mean for you and your customer. If you choose to ship the product via USPS Priority Mail and the shipping costs $7.20, there will now be a transaction fee of 36 cents tacked on.
Now this might not be a huge deal if you are shipping smaller goods. But, it could add up a lot if you were shipping very heavy goods with high shipping fees.
The thing about shipping is it costs what it costs. Between the postal fees, shipping supplies and time to package (especially if you have to pay someone for this service), there are lots of things to factor in. If you aren’t careful, you could lose some serious profits with this additional fee.
But what is a shop owner to do when the shipping fees are calculated automatically?
Remember, this is a choice. You can also set the shipping costs to “I’ll enter fixed costs manually”. Then you could set your shipping fees to include this additional transaction fee, your shipping supply costs and time.
Another suggestion is to raise your prices of the item. You could wrap the additional shipping transaction fee into your new pricing structure. That way you can get some of these costs back in some way.
And my last thought – I’ll admit my favorite – is to offer your customers free shipping.
Offer Free Shipping to Customers
One of the favorite perks we offer our customers is free shipping on our handcrafted paper goods.
This wasn’t really by choice. When I decided to create handcrafted invitations, I preferred putting the digital and handcrafted versions into one listing. I found it created less confusion than having customers add on a listing to purchase the handcrafted version.
By doing so, the only way to charge for shipping is to do so on the digital file too – which wouldn’t make much sense since it is emailed. So, I started offering free shipping on everyone’s orders.
I think the free shipping model has worked well for my shop. I do add some of the shipping fee back into the price of the product. Although our items might seem more expensive at checkout, they really aren’t when the shipping fees are zero.
Also, I’ve realized over the years that the thing I hate most about ordering online is paying shipping. This is why I love Amazon so much even though I want to support more small businesses.
I am sure others have the same thought, so offering free shipping is my way of providing a more pleasant shopping experience.
Take Advantage of the New Benefits
One of the reasons Etsy claims that they have to have a fee increase is so they can provide new and updated tools for sellers. Take advantage of these new tools to help increase your sales.
I found the best improvements have been with the promotion tools. There are new ways to integrate Facebook ads, promote my listings on social media and advertising on Google Shopping.
They are also adding Google Search Analytics to help Etsy shop owners understand their customers better and what products they’re looking for.
There are two coupon types available – both for free as of now. One is sent when a customer adds a product to their cart, but doesn’t purchase it right away. You can send them a discount code to encourage them to complete their purchase. So far, I’ve had a lot of positive feedback with this coupon.
The coupon type sends an email to someone who has favorited your item. You can then follow up with a discount code.
Etsy also expanded the number of sections your shop can have. Sections are great way to organize all the wonderful products that you sell. Now you set your shop up so customers can find your items more easily. When your shop is simpler to navigate, there’s a better chance of making a sale.
Consider Another Platform
I started on Etsy in 2012 and I’ll be the first to admit it isn’t what it used to be. Others who have been on since its birth – around 2005 through 2007 – say it’s nothing like how it first began. That’s what happens when organizations change CEOs and visions. It’s just the way of business.
If you suspect these changes will really affect the bottom line of your business, maybe it is time to start considering branching out or switching altogether. We are looking forward to launching our shop – Katarina’s Paperie – on a secondary e-commerce platform in September.
This isn’t because of the changes on Etsy, though. I still really like Etsy and the community it provides. It’s more because our customers have been asking us too.
There are many people that don’t like shopping on Etsy (even that seems too big box to them) and want another option. As I always say, let your audience guide your business and you’ll be successful. I’m excited to provide another shopping method.
It will also let me branch out a little on our product offerings, which turns on my creativity in a whole new way.
Join the Boycott
One of the first Etsy communities that I started following when I opened my shop in 2012 was Oh My! Handmade. Jessika has been a huge advocate of Etsy shops and Etsy as a selling platform since its beginning.
She is also not a huge fan of its new direction and CEO. Understandably. The company and vision has really changed since it started.
Being a community advocate, Jessika is organizing a strike of Etsy shops on July 16th, when the fee increases are set to take place. (As a side note, don’t be surprised when your traffic and sales go down that day.)
If you are passionately against the changes that are coming, consider joining her efforts on July 16th. She has listed many ways you can get involved on her blog. It’s just one way to find a voice for your shop.
Remember, You Own your Work and are Your Own Shop
Someone once asked me why I sold my work through Etsy from the beginning. It has been a question I have asked myself a lot too. Being a new mom, Etsy was an easy path to build a following and make sales without a lot of time or online business experience.
I also didn’t have a lot of advertising dollars or marketing time to spend when I first started. Etsy allowed an audience already interested in what I was selling to find me. I took it from there, but I think it was a great way to get started and I will be forever grateful for them.
During these changes, it’s important to remember that you are your own entrepreneur. No one else owns your work. Etsy is a fantastic platform that I recommend to everyone as a place to get started. But if these changes don’t follow your shop’s vision, don’t feel like you have to stay. Maybe now is the time to start exploring other options or directions for your work.
The Etsy fee increase can be unnerving to small shops. I get it. Business expenses are already high and now Etsy’s taking more off of our profits.
When thinking about how you want to move forward, consider what changes would work best to help grow your Etsy shop. And remember to start making changes slowly. See how your customers react to a small price increase or a free shipping offer.
However you decide to move forward, I hope these ideas will help you continue to succeed on Etsy. Although you might need to work harder as some have suggested, that isn’t the only way to be successful in the new marketplace landscape.
There are many other things to consider as you move forward. I will admit, though, this might not be the best time in Etsy’s (or your shop’s story) to do nothing (as I’ve done in the past). With some hard work and shop preparations, you can be ready for the changes on July 16th.
And keep in mind, you’re never alone on your business journey. There are so many of us out here ready to help and lend advice. You just have to ask.