Etsy Stores – Creative Nirvana or Sweatshop?

I fancy myself as a creative curmudgeon, but in reality what I possess is the ability to understand and execute creative processes. I like to think of this as structured creativity. Liam Neeson in the movie Taken had “a very particular set of skills. Skills I have acquired over a very long career. Skills that make me a nightmare for people like you.” Liam Neeson’s skills allowed him to successfully locate his hot kidnapped daughter, garner a $1 million payday and a score an even higher paying sequel.

My unique set of skills has me sitting on a hard wooden chair, alone in a room, forced to stare at a screen while carefully executing a set of keystrokes. It has the makings of an Oscar contender. Instead of the $1 million and safe return of Maggie Grace we will today focus our very particular set of skills on the analysis of the craft selling site Etsy, and in particular the methods that proper creative curmudgeons, not fake ones like me, use to potentially turn a profit on the site.

We aren’t talking Crypto Kitties and cutting edge blockchain technology in this article, nor are we talking about the wilds of hunting pythons in the Everglades. We are talking about people click-clacking together their knitting sticks with a bag of wool and out the other end comes the Emperor’s new coat. The concept of hand-making stuff has been around since the beginning of time. If truth be known, even the dinosaurs were probably even exchanging ugly hand made sweaters with bright red and green accents at Christmas. You heard it here first folks. The product today is essentially the same as centuries ago, only the distribution model has changed.

It is probably worth noting that we are taking a look at Etsy stores from the perspective of attempting create a for-profit sustainable business, and determining if this business is an efficient use of your limited time in comparison to other business models. If you don’t care about making any money then read this article just for my sub-par writing. I am sure that you will still learn a thing or two about the platform, as I sure did as part of my research.

So pour yourself a big glass of prune juice, sit back and relax.

Etsy, The Company Founded On A Hatred Of Cheese

There was a time, a long time ago, it may even feel as though it was centuries ago now, that when you had your eye on a hippie-dyed shirt you would need to stake out your local flea market and identify where the smell of marijuana was blowing from. If instead you wanted your own hand-knit scarf your future would contain long days attempting to win over residents of your closest nursing home. Note that I enjoy encouraging the stereotype that all old people love to spend their days seated in a communal room knitting with a blanket strewn across their legs. Her name is Agnes, Ethel, Gladys or Winifred. Her name could be something more contemporary, but probably not for the sake of this story.

Now enter our heroes. There were three guys who were desperate for a Christmas sweater, but they had shit to do on the weekends. They didn’t want to hang out at bingo halls or flirt with old ladies. They thought that old people smelled like cheese. They didn’t like cheese.

These men were Robert Kalin, Chris Maguire and Haim Schoppik. They had a small company that went by the name of iospace. In 2005 after 2.5 months of development they launched a website.

This website was *pause for suspense* …Etsy.

Now, if it took you by shock that the website was Etsy then maybe I overestimated you.

Anyway, the 3 guys were soon joined by Jared Tarbell, who also was not fond of the smell of cheese. Together they became the Power Rangers of the handmade scene. There was now a website where you could purchase handmade …anything.

Over the next 9 or so years they printed business cards. They put a sign up outside their office in the Dumbo neighbourhood of Brooklyn, New York. They lit up cigars while huddled around a television watching loops of the introduction of the cartoon Duck Tales, where Scrooge McDuck dives into a pile of money.

They probably did lots of other things that contributed to the success of Etsy over this period, however this is irrelevant to the purpose of the article, so we will pretend as though it never happened, pretend that it was all smooth sailing and instead waste our word count cracking jokes about old people knitting.

It was a long 9 years, roughly 3285 days in fact, but as of 2014 Etsy was looking rather impressive:

• Sales of $1.93b
• Revenue of $195.6m
• Net loss of $15.2m (side note: The number of massive companies reporting an overall loss still makes my mind spin!)
• 685 employees
• 29 million items listed
• 54 million registered users, including:
  • 1.4m active sellers
  • 19.8m active buyers
• 36% mobile purchases
• Sales by location:
  • Inside USA: 69.1%
  • Outside USA: 30.9%

How Does Etsy Make Money?

Just like any true Hollywood triple threat (Actor/Singer/Dancer), hello Mr Hugh Jackman, Etsy also employs the Wolverine-star tactics when it comes to making their own profits.

• Commission on sales: You sell your custom lamp shade for $40 and Etsy takes a cut. There is a cut when the item is first listed and another when the item sells. We look into the fee structure later in this article.
• Seller services: Good news, folks. Etsy would be happy to help your item stand out further in search results, for a small fee of course. And while your wallet is out they will also help to process your payments and can even sort you out with shipping labels.
• Third Party payment commissions: Etsy partner up with multiple third parties by driving traffic through their payment solutions.

So now that we have an idea on how Etsy, the company, makes money, we can continue digging to work out how you can make money on Etsy.

So What Can You Sell?

When I first started out on my quest for Etsy knowledge I had assumed that the platform was only for solo-preneurs (entrepreneurs doing it as a one-person business) who were making their items, themselves, by hand. I had also assumed that there would probably be a few business where those solo-preneurs signed up their friends and family to help with their small production lines.

While these two groups of “makers” are represented in the overall swing of things, the Etsy scope is larger than I anticipated.

Handmade Items

These are the items that people make, by hand. This is the bread and butter of Etsy and the area that people, including myself, think of when the name Etsy comes up in conversation. The people who would be making these items for fun, as even one billion dollars wouldn’t change their life.

Originally it was the case that if you were selling handmade items on Etsy then you had to make them yourself. But as you would be well aware of, on the mysterious world of the Internet where that hot 14 year old girl in the chatroom is most likely a fat and balding 45 year old man, sometimes people’s online presence is not a true reflection of their real life situation.

In 2012 articles were published by major media outlets including The Wall Street Journal which were investigating a number of Etsy sellers who appeared to be selling factory produced goods in their stores. The horror! Most notably tied up in the debate was a store by the name of Ecologica Malibu. These articles then linked up with an April 2012 push from prominent members of the Etsy community to ban Ecologica Malibu from the platform. They didn’t like that the store was making use of a wholesale manufacturer to create their products.

Etsy has a tight anti-corporate community and it was this community that thought Ecologica Malibu was going against the vision and values of everything that Etsy stood for. On 1 October, 2013, Etsy leadership announced that it would open up the definition of handmade to include products that are made in factories, including giving stores the freedom to drop-ship their items (note: drop-shipping is when the product is delivered straight from the factory to the end consumer, bypassing the physical hands of the seller completely).

While you can understand that many in the Etsy community were unhappy with this change of vision from the company, just step back for a moment and look at this from a Profit Pants perspective. You are a major platform that sells handmade products and you have 1.4 million active sellers (as of 2014). How many scarves can 1.4 million nursing home residents knit up in a year? Well, a lot, but not as many as can be made by 1.4 million entrepreneurs who hire workers underneath them to take care of the production. This shift in the handmade policy would allow for the number of products listed on Etsy to explode. And remember, Etsy gets a sweet cut from every single listing.

Now just before we finish on the topic of “handmade” and the outsourcing of production to offshore nursing homes, we must still point out that “reselling” is not allowed. The way that Etsy defines reselling means that you must be either the designer and/or the maker of the product. To be honest (as usually I just make up stories), this is still leaving a fairly large grey area, but let’s just give an example with a clear line case:

• Not Reselling: You sketch up a design for a vase in the shape of tiger testicles. This is a unique design. It was your unique thought process that brought together the concept of the vase and the tiger testicles. Simply genius. These detailed sketches are then handed over to a manufacturer who then brings your tiger testicle creation to life. This is OK by Etsy standards. I’m sure that it will be the biggest hit of the summer. Patent pending.
• Reselling: You browse Ali Express, or a flea market in India or the catalogue of an online vase dealer. Something catches your eye. Are those tiger testicles? Simply genius. You might even ask the manufacturer to make some small changes to the item before they ship to you. This is not OK by Etsy standards. They label this as reselling.

Etsy strongly encourages for all stores to clearly list in their store’s policy section the roles and responsibilities of each person who participates in their creation process. This might include Uncle Jim who does the shipping, Aunt June is the designer and cousins Bob and Mavis perform the assembly. If you are outsourcing your manufacturing completely, remembering the rule above where you still must be the designer, then you can instead list that you have a “Production Partner” (this is the Etsy term).

“Vintage” Items

In addition to the handmade products above, where we have gone into way too much detail, you can choose to sell “Vintage” products on Etsy. Now for the kicker, the Etsy definition of “Vintage” is an item that is at least 20 years of age. We aren’t dealing with clothing from the Titanic here, even your 1990s Hyper Color t-shirt is now a vintage item by Etsy standards.

Having a look through the items for sale in the category shows bits and pieces of everything. You can try selling off the old table that you found on the scrap heap, a GI Joe that you bought from a yard sale when you were young or even sell off your mom’s pair of jeans that have sat in the wardrobe for decades and now smell of mothballs. You have loads of options.

Craft Supplies

This is another interesting category, and one that will catch your eye too. The craft supplies category contains items that, unsurprisingly, are used for the creation of arts and crafts. In general, these items could in most cases be used to make something to sell on Etsy.

This category is big business, unlike the small side hustle activities going on in many other parts of the site. There is no need to be designing or making these products, nor do you need to go around yard sales or your mom’s wardrobe to source products. These are essentially the same as brick and mortar craft stores.

Buy a pallet of craft glue on the cheap and sell it to the masses. You could be the glue man.

Etsy Manufacturing Program

And finally we have one other interesting category, the “Etsy Manufacturing Program”. This is where you can list your manufacturing services in the fields of:

• Apparel and textiles
• Jewellery and metal-smithing
• Machine and fabrication
• Printing

There are some basic guidelines that you must abide by if you are offering your services here, which hopefully are a no-brainer. These include items along the lines of agreeing not to use any child labour or involuntary labour.

Now what is really interesting about the Etsy Manufacturing Program is that Etsy don’t charge any fees to either list your services, or to contact one of the manufacturers, at least as at the time of writing. Etsy seem to have somewhat distanced themselves and placed this more as a “community service” item than anything else. They also state that they do not endorse, or in any way validate the claims made by those who list their services in this section. Profit Pants’s best guess is that the company are well aware that this is money being left on the table and just have some legal loopholes to jump through before they begin charging in this space. After all, how would it look if they were endorsing a company that were forcing nursing home residents to knit against their will.

Who Are The Top Sellers?

I love it when I find a website that has detailed statistics. Does anyone else enjoy sorting through property price data, or Alexa’s website ranking data, or even just a good old Forbes Rich List? Maybe I am just a data nerd.

There is a site that has done some of this for the other stupid data nerds out there who want to know more about Alexa. It is Etsy Rank (http://etsyrank.com).

We will start out with a massive hugely important point to note about this data. It only tracks sales volumes, rather than being any indication on profit per store/item. So while someone may have 100,000 sales they might also only make $0.01 on each of those items. This data also won’t show us the people who are only doing 50 sales a year of super premium product, but are making $2000 profit per deal (it sounds a bit like selling weed when I put it that way).

Let’s start with the top sellers of all time, by way of volume of sales:

In the top spot with 1.241 million sales is BohemianFindings. That is an absolutely massive number. Clearly this isn’t a single hippie making candles out of the back of their van. This is big business.

Out of the entire top 100 list the majority fall into the Craft Supplies & Tools category. They aren’t making their own products, they are essentially craft stores.

It isn’t until you get down to position #16 and the store named OnceMoreWithLove that you hit someone who seems to be designing something themselves, in this case they are custom stickers. We then go down again through a few more craft supplies stores and hit position #20, which is the jewellery maker LayeredAndLong.

Now let’s take a look at the top sellers for yesterday, once again by way of volume of sales

If you descend further down the lists you can see those big numbers drop off. Position #100 yesterday sold 90 items, less than 10% of #1. Assuming at least a few dollars net profit per item they are still probably earning a very solid full time income.

But just remember, there are 1.4 million active sellers on Etsy. We have seen that number #100, which puts them in the top 0.01% of all sellers, is earning a solid wage. But think about how it might look for the person in position #1,000 (top 0.1%) or even in position #10,000 (who is still in the top 1.0%).

Remember those facts at the top of the article about Etsy? The ones covering their 2014 profits and sales. No? Well let me list a couple of them here again:

• 2014 total sales: $1.93b
• 2014 total active sellers: 1.4m

It jumped out at me like a gold-digger who has just seen a newly single billionaire in a mega yacht. That’s a lot of active sellers for only $1.93bn in sales. Divide the number of active sellers by the total sales figure and you end up with $137.80 in sales per active seller. Am I missing something here?

Now take into consideration that the figure will be heavily skewed towards the power sellers, those who have built up large businesses on the platform. Just take a look at those in the tables above who have sold 100,000+ items.

Now also consider that we are talking $137.80 in sales per active seller. The net profit per active seller will be significantly less.

That’s potentially a whole lot of people not making much money.

Is there any point in starting an Etsy store if you only aim to be average? In my opinion, no.

So instead, let’s talk about how to end up well above average.

Tuning Your Niche

So you have read this far and you still think that the Etsy crafting game is for you? Well then, what items are you going to sell on the platform?

If you already have a product that you love making then that is a head start, well, maybe it is. Let’s just touch on the 2014 data once again, in particular the number of sellers. There are 1.4 million active sellers, which is a hugely scary number. If you have your heart set on making a particular type of item then at the very least do a search on Etsy. Use a few different search terms and work out how you are going to compete:

1. Is there anyone else selling this type of item?
2. How established are the other sellers?
3. Will the version that you create be a better quality product?
4. Can you compete on price? (note: this is often a no-win game, but read the fees section further down if you don’t care and wish to forge ahead anyway)
5. Are you sure that you can’t make anything else that might make a better profit?
6. Can you sell to a market/country that the existing sellers don’t sell to? Many sellers will only ship domestically. Find the gap in another market. Maybe something sells like hotcakes in Europe but none of the sellers will ship to the USA. Do the research.
7. Double check that all of your numbers work out. If the numbers don’t stack up it is much easier to move on to a different product right now than to blast ahead with production and then later attempt to make the numbers work, either through raising your prices or cutting your costs.

If you don’t have a product in mind then spend some time browsing around the categories to drum up ideas. Look at what is selling on other platforms too. Ask yourself the exact same questions that are above, but also if there is a type of product missing that you can provide. It is Peter Thiel’s book Zero to One where he suggests that the best way to win is by being the only one in the market.

Etsy, for the most part, still has a strong community spirit. Purchasers on Etsy like to connect on some level with the sellers. They love the idea that they are purchasing something handcrafted by the man in the same town as them, just like an ol’ time flea market. They love that they know his name. They love the fact that his fourteen children help him to ship his products (we will pretend that they are over the age of 18 to avoid the child labour discussion). Bonus points if he has a pet cat that makes appearances in his store photos.

Put your story into words and allow the buyers to build an emotional connection with you. What if you are a money-hungry capitalist pig and don’t have fourteen children, or a cat? At least have your story communicate to the potential buyers what it is that you are trying to achieve. Maybe you are aiming to reach financial freedom for your family because you feel trapped by your day job. Be creatively honest.

Now for some additional areas that need to be thought about before you launch:

• Store Name: The name that you select can help you stand out significantly. Be creative, however remain descriptive. Think about how your store contents may transform in the future and how your store name may help, or hinder, that transformation process. For example, naming your store “Small Green Knitted Tiger Testicles” may be a somewhat limiting move if you wish to branch outside of selling small green knitted tiger testicles, not that I could ever foresee the need to branch out beyond that gold mine. Etsy provides the option of changing your name down the track., however a name change, in my opinion, should be viewed as a last resort. Any familiarity that a buyer has with your brand name will be lost with a name change.
• Your Profile: Remember the community aspect that we discussed above. Fill out the bio section and upload a few photos. Start building a connection with your audience.
• Product Naming: Search Engine Optimisation is just as applicable if you are listing on Etsy as it is if you are trying to have your own website rank well in Google searches. Have a look at some of the most popular stores and see how they are naming their products. A product name should use descriptive words that people are likely to search for.
• Product Photography: Nobody likes crappy cameraphone photos. Notice that I say “crappy cameraphone photos” instead of “cameraphone photos”. A cameraphone is perfectly capable of taking a high quality photo suitable for Etsy, but you need to take the time to think about how you present your item in that photo. Do you need any other props in the photo? What sort of lighting should you use? I’m not talking about anything expensive. I’m not even necessarily talking about special items that you will need to spend money on. Just take the time to think about what would make your photo stand out if someone is scrolling through the other 100 photos of similar items. The photo gives the buyer an indication of the quality of your product and an indication on your store’s level of professionalism. Photos are really important!

Build A Brand, Don’t Be A One Platform Sucker

We have talked a lot about what you can do with your Etsy store, but where you may be better served in the long term is thinking about building a brand. Set your mind to the mission that you are launching a new manufacturing/sales company. Think of Etsy as just one of your sales channels. Etsy might just be the primary channel to begin with.

Recently I launched a channel on a site named Vid.me (completely unrelated to Profit Pants). Vid.me were a competitor of YouTube. I stress the word “were”, as they went bust and folded up shop. The platform looked promising, they had spoken of a wonderful community for creators. I wanted to be a part of it.

I had put a few hours of effort into customising my new channel. I had transferred over 100+ of my videos from YouTube to act as a base. I had started to build an audience, things were moving along nicely. Then one day out of the blue I woke up to an email stating that the company were shutting down the service within the month.

That was it for my Vid.me project. It was game over. What if I didn’t have YouTube to fall back on? Where would I be with my videos and the audience that I had built? Up shit creek holding on to knitted tiger testicles, that’s where.

Now, i’m not suggesting that there is much of a chance of Etsy suddenly shutting up shop, they are massive. However, there is the possibility that one day you will wake up and things will have changed on the platform. Maybe it will be an increase in fees. Maybe Etsy will change their core values and the product that you are selling can no longer be sold on their platform. What control do you have over these situations? None. You are at the whim of Etsy.

So what would I suggest to safeguard yourself? Build a brand:

• Get a .com: Check the availability of your chosen name on Etsy, but also find out if the “.com” is available too. For the sake of around $10 a year you can register your own .com domain name and start building your brand. You don’t even need to build a website to start with, simply direct the .com straight to your Etsy store. I believe that there are still enough good .com’s out there available for the taking, so don’t bother settling for a second rate .co, .org or .me. You are a creative curmudgeon, so should have no problems finding something. Write down a stack of options and throw them into a bulk domain search tool. All the major domain name providers should have a similar tool. Registering a domain name is as easy as signing up for an account on Etsy. Don’t be intimidated, you can do it!
• Until the point when you build a website you can point your .com to lead directly to your Etsy store. A quick Google or YouTube search should find you plenty of information on how to do that in under 5 minutes.
• Register accounts with the matching name on all the social media sites. These sites include Facebook, Twitter, Instagram, Snapchat, Pinterest and whatever else is hot right now. These social sites become the first of your many marketing avenues and should all link back to your .com address so that people can find you.
• Build a website. You can work on this step later once you have tested your product and made a few sales. The most important part is getting the .com sorted out at the beginning.

Now this may all sound like a lot of work, but you can do the initial registrations of the domain name and social media accounts in less than an hour, total. I go through these steps whenever I want to start a new project, they are not Etsy specific. If this still sounds like too much work then maybe you need to ask yourself if you have the time or determination to make this business venture a success.

These are the building blocks of your brand. You now have:

• Multiple social media accounts where you can build a following. People will then build a connection with your products. To these followers you are not just 1 of the 1.4 million active sellers. You have a competitive advantage.
• A registered domain name. At the least you will be able to give people your .com and they can be launched directly to your Etsy store.

Also think about starting an email list, so you can then contact your customers directly whenever you have a message to tell them.

Once you have these set up you are then in a hell of a lot better of a place should anything change at Etsy.com. You have also taken control of your brand and have a level of direct communication with your potential customers. Now sound the horns, you have a business.

Are there any other handmade stores online where you can sell your items? Maximise your revenue streams and try them all out. You are now a brand. You can be everywhere. If a potential customer notices that your brand is on multiple platforms, then as well as having your business name stick in their mind, you are also setting yourself up as an established name in the market. You are a level about the sellers who are only on Etsy. When you competing with 1.4 million active sellers you need to take every advantage that you can get.

An important note: Etsy does not permit for you to attempt to redirect customers away from your Etsy page to your own website’s shopfront. For example, by listing items on Etsy with images containing your own site’s URL suggesting that they purchase directly from you to save money. You can get banned for this. If a customer finds you on Etsy and want your products then complete these sales through Etsy. But don’t limit yourself to just those who find you via the Etsy search engine, do your own marketing and build up your own direct customer base too. Unlike a liability such as owning a car, owning your business can be viewed as an ongoing revenue stream. Feed it, care for it, watch it grow.

Of Unicorns And Lame Mules

Internet searches will reveal long threads of people making no money at all from their Etsy stores. These folks shall now be known as the Lame Mules. Sprinkled amongst the self-proclaimed losers in the Etsy profit chatter are the glimmers of hope, the Unicorns. Unicorns making $1,000, $5,000 or even $10,000+ a month. This phenomenon is seen to be repeated in almost any online earnings platform where the barrier to entry is so low. Try doing a search for Google Adsense, YouTube or Amazon affiliate earnings and you will see the same sad story.

If the barrier of entry was higher, instead being the requirement to rent a physical building to sell your wares, would you be jumping in and setting up your store within 24 hours without a clear plan? Would you be starting up your store at all?

I have been on both sides of the winners/losers game at various times, that’s right kids, even Profit Pants is not perfect. I have found that the key difference between being a winner and being a loser is persistence. But not just any persistence, the difference is targeted persistence.

Etsy, and almost any other similar online selling platform where you can run your own business, makes it easy, too easy, to get started.

The Lame Mule enjoys crocheting scarves for winter. The Lame Mule finds out that they can sell their crocheted scarves on Etsy. The Lame Mule registers an account and chooses a name along the lines of Sparkle FuFu’s Stuff. Nobody knows what the hell that name means. They pull out one of the scarves they made last winter and snap a shot with their iPhone, disregarding the fact that their partner is in the corner of the frame, watching television in their underpants. The site goes live, they are now entrepreneurs. Out comes the bottle of champagne as they sit on the porch and say a cheers to themselves. It’s going to start raining dollar bills any moment now. But it doesn’t.

The Unicorns perform market research and identify potential niches to enter. The Unicorns research production and labour costs for their selected items. The Unicorns think carefully about what the name of their store says about their product and also register a .com domain and associated social media account. They take the time to make their photos look professional. Unicorns carefully choose product names and descriptions. Once the Unicorn’s site is live they don’t then sit back, as they know that this is where the real work starts. It is now a matter of continuing to drive traffic to their listings, through social media and other platforms. The Unicorns keep grinding, they review why some products fail and they test new ones. The Unicorns are in this for the long haul. The Unicorns know that it might take months or years to reach what they define as success.

Demand higher personal barriers of entry.

But hey, if you just want to quickly put up a store and don’t care if you sell anything, then good for you too. Just know that your chance of earning Unicorn money is practically zero.

Commission Structure

Starting up an account and a shopfront on Etsy is completely free, so you can go ahead right now (well, after you finish reading this article) and set up a store to check out how everything works.

Once you begin listing up your items for sale the commissions to Etsy begin. There is also a commission based on the final sale price of your item.

When it comes time for the proud new owner of the tiger testicles to make a payment the transaction is handled by the Etsy Payments Platform. This payment platform replaces an old credit card payment system known as Direct Checkout. The payments platform is available in around 50 countries. As of May, 2017 it is required that all sellers on Etsy provide the option for payments to be made via the Etsy Payments Platform. Some may see this as a money grab by Etsy, and in a way I guess that it is. From the perspective of the customer it allows for a standardised method of payment, whether they are shopping for candles or for something a little more exotic …maybe something of the tiger variety.

Etsy payments allows for payments using:

• Android Pay
• Apple Pay
• Credit cards
• Debit/bank cards
• Etsy Gift Cards and Etsy Credits
• iDEAL (Netherlands only)
• PayPal
• Sofort (Austria and Germany)

An interesting note is that by default even if your purchaser chooses to pay using PayPal, the funds will be sent to your Etsy account, rather than to your PayPal account. You can change this if you want, however you would then still need to transfer the funds from your PayPal account to your bank account.

Fees on Etsy are as follows:

• Listing fee: $0.20. This gets your item up for sale on Etsy. Your item will be visible and available for purchase for 4 months, or until it sells, whichever occurs first. This fee is charged at the time of listing, so even if your item doesn’t sell you will still need to pay this fee. If at the end of 4 months you wish to re-list your item you are up for another $0.20. If you are selling more than 1 of the exact same item then you will only be charged the listing fee on the 2nd, 3rd, 4th and so on items when the previous item sells. For example, if you have 2 identical shirts for sale you will initially only pay a listing fee on the 1st shirt. When the first shirt sells the 2nd listing fee will be charged and so on. If both shirts sell as part of the same sale you will still be charged a listing fee for both.
• Transaction fee: 3.5% of the sale price. This is what eBay would call a “final value fee”, however it is important to note that Etsy do not include any associated shipping costs in their calculation of this fee.
• Payment processing fee: 3-4% + $0.25-$0.50.This is assuming that your payment is processed using the Etsy Payments Platform. The fees charged here vary depending on which country you are based in, along with whether or not it is a domestic or international sale.

A worst case scenario for total fees will be approximately 7.5% plus $0.70. Now let’s throw that through an example and see how it looks.

Etsy Example: We will sell shirts for $30. They cost you $10 in materials to make. You charge $10 to ship the shirt anywhere in the country.

• Sale price: $40 ($30 + $10 shipping)
• Profit before commissions: $20
• Fees: $3.35
  • Listing fee: $0.20
  • Transaction fee: $1.05
  • Payment processing fee on total sale price @ 4%: $1.60 + $0.50 = $2.10
• Total transferred to you: $36.65
• Minus: Your materials and shipping cost: $20
• Actual profit: $16.65

eBay Fees

It is always fun to compare the fee structures between platforms, and you would be silly not to, as this is your hard earned money that they are attempting to snatch out of your worn bloodied hands. eBay has similar sort of fee structure, but there are a few small differences in the way that they are calculated:

• Insertion / listing fee: Can be $0.30 per item, but is usually free. eBay generally waive these fees, at least for the first 50 items each month if you have a personal account. If you are running an eBay store the number of free insertions each month is even higher [free insertion joke goes here], topping out at over a couple of hundred free insertions for the top stores. The insertion fee is the initial cut that eBay takes for allowing you the absolute privilege of listing an item for sale on their platform.
• Final value fee: 10% of the total sale, including shipping costs. This is the fee that you are charged when your item actually sells. It is important to note that eBay are also taking a cut on any fees that you are charging for shipping the item. A few years ago it wasn’t uncommon to see items listed for unusually low “buy it now” prices on eBay, but they then had high shipping costs. This would look very enticing to a buyer who is sorting listings by price. I’m guessing that eBay chose this calculation route as if they didn’t take the commission on shipping costs then the unscrupulous sellers could list their items for $1.00 and then charge $100 in shipping costs to avoid the vast majority of the eBay final value fee.
• Paypal: 2.6% to 3.6% plus $0.30. Life on eBay before Paypal was a bit rough, well any payments on the internet really were a bit hit and miss. Trusting that you could pay via a direct deposit and the person on the other end would be honest enough to ship the item. Thanks Paypal.

So all up on eBay you are looking at somewhere around 14% in end-to-end fees, remembering that this also includes eBay swindling a commission out of your shipping costs.

eBay Example: Once again we will sell shirts for $30. They cost you $10 in materials to make. You charge $10 to ship the shirt anywhere in the country.

• Sale price: $40 ($30 + $10 shipping)
• Profit before commissions: $20
• Fees: $5.20
  • Insertion fee: $0
  • Final value fee: $4 ($3 on the item plus $1 of shipping)
  • Paypal fee @ 3%: $1.20
• Total transferred to you: $34.80
• Minus: Your materials and shipping cost: $20
• Actual profit: $14.80

For each of these fictional items that you sell you will be $1.85 better off selling on Etsy compared to if you sold the same item on eBay. The large difference in final value fees, and the fact that eBay also take a cut of your shipping costs, can result in considerable overall differences. Of note is that PayPal does work out cheaper than the Etsy Payment Platform processing.

Run your own numbers, also throw this scenario through other selling platforms. If you only take one thing away from this subject, keep in your mind that for this particular scenario close to 1/4 of the total profit was wiped off with commissions. How would this look if you were only starting out the example with a $10 profit before fees? You would see half of it gone in a flash! People aiming for $2-3 profit on items will be quickly savaged …by a crocheted tiger.

How Much Are You Worth?

Internet businesses quite often have a massive advantage over many other types of business. This advantage is the ability for them to scale. The possibility of exponential growth, often without the need to significantly change the business model. Note that this section is really only applicable to those of you who are thinking of starting up a store to sell handmade goods that you are making yourself.

You could be typing away at your little Profit Pants blog for weeks on end (ps: that guy is a jerk), pushing out new articles as fast as your delicate typing fingers will allow. While this is going on you are seeing $1 per week for your 40 hours of work. You continue your 40 hours a week but suddenly that paltry sum of $1 becomes $50, then $100, then $5,000. Your effort is still 40 hours per week. Your business model, your workflow, is almost identical to what it was when you were earning $1 per week.

It is because of the possibility of future profit that Profit Pants and many other online businesses are created in the first place. If $1 per week was the defined end-game for 40 hours of effort then a job flipping burgers paying $9 an hour would look very tempting to many.

So now when we translate this scenario over to Etsy, what are your options? If you follow the route of most newbies on the platform then you will probably have your knitting sticks on the table at the same time as you are registering your store. Fire up the stove and make a big mug of cocoa, as you have a long night of knitting ahead of you.

Once you take out your listing fees, transaction fees, payment processing fees and the cost of materials, let’s say that you are making even $20 of profit per item. That sounds pretty good, right?

Now for that $20 of sweet profit you also have these somewhat hidden costs:

• Time to make the item. Considering a $20 profit, maybe this magical mystery item took you an hour or two to make.
• Time to take photographs and edit them so that they look good (as remember, photos are really important).
• Time to create the listing.
• Time to package and ship the item. Do you also need to travel to a post office to do this?
• Time to perform customer service.
• Time to market and refine your store.
• Tax. Taxes will of course vary depending on your situation. Paying what you owe is very important, just ask Al Capone.

That’s a whole lot of stuff that you need to dedicate some sort of time towards in order to make your $20. Don’t get the impression that I am taking a dig at selling on Etsy, these sorts of hidden costs of doing business are applicable for many different platforms, but many people look at the sale price of an item and only consider the cost of physical materials and forget about everything else. Don’t cheat yourself.

The important things to keep in mind if you want to profit and beat these hidden cost challenges is:

• Make sure that you are making a big profit from each item (this will probably need to be a much larger profit than you first think you need to make); or,
• Make sure that you have a system in place that allows you to sell large volumes of product. Either you have worked out a way to create 50 products within an hour, each of which will bring you a few dollars of profit, or you have outsourced your production to a third party, allowing you to scale considerably.

You might throw out the line “But Profit Pants, I love making this stuff, I would do it for free!”. This might be true, right now, while you are starting out and are maybe selling a handful of items each month and feel warm Etsy love flowing through your veins. But what will happen to your motivation levels when you are 6 months into your project and have to knock out 10 sweaters within the next week? Success anywhere is unlikely to happen quickly. Create a model that you can sustain after the rose coloured glasses begin to clear.

Run your numbers over and over again. What might at first appear to be a decent profit may in reality only be a $2/hour wage that you are creating.

Etsy’s Foes

Now that we are towards the end of our scheduled tour this may be a good time to look at who else is competing in the Etsy arena. You could view these as “alternatives” that you could try out instead of Etsy, but the smarter way to play may be to iron out the products that you are currently selling and then expand to also sell on these platforms. Choose the multiple revenue streams model whenever possible.

• Amazon Handmade – The behemoth Amazon has a department set aside just for the handmade community.
• Bonanza – Launched in 2008 as a bit of an alternative to eBay. Bonanza are USA-based and carry big brand names including Louis Vuitton and Kate Spade alongside handmade items from the homemade community.
• Craigslist – Another site that needs no introduction. Craigslist doesn’t have the same style of platform or community as Etsy / eBay, but they are still an additional option for selling your wares all around the globe.
• Dawanda – A bit like “The Etsy of Europe”.
• eBay – The elephant in the room and requires no further introduction. We have already had a look at their commission structure above. If you can make the profit work, and take advantage of their 50+ free listings per month, then give them a shot as an additional revenue stream.
• EzeBee – Another in the “Etsy of Europe” category. Founded in Switzerland.

So, What Now Profit Pants?

The guys who hated cheese at the beginning of this article created a monster. A big warm happy monster who allowed crafters from all over the world to come together and form the world’s largest flea market.

It may have been the case originally that any Agnes, Ethel, Gladys or Winifred at the nursing home could use Etsy as a quick way to earn a reliable few dollars each week by listing a handful of their handmade items. But as platforms grow, so do the number of people who try to spin a profit. In Etsy’s case this has come in the form of 1.4+ million active sellers. A potential 1.4 million honing in on your unique tiger testicle market.

You can still make money on Etsy. But if you want a reliable and sustainable profit then your focus must be to treat Etsy as a business. Be professional. Take the time to perform research. Build a brand.

None of this is difficult, but it is all hard work.

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