Etsy is a popular platform for selling handmade products, but the costs can add up. Etsy takes a percentage of each sale you make through their platform, and charges some fees regardless of whether you make a sale or not.
Once you understand the fees Etsy charges (find an easy-to-follow guideline here), it’s important to look at the other costs associated with running an Etsy shop.
This article will share examples of what you may need to spend your money on as a handmade business owner selling on Etsy.
How much does it cost to open an Etsy shop?
It is free to open an Etsy shop. Once you start listing items in your shop, you will be charged $0.20 USD per item.
Let’s say you want to open an Etsy shop and list 20 items. It would cost you $4 USD to open your Etsy shop.
If/when you sell an item, you will have additional fees to pay. Below is a breakdown of Etsy fees, as well as other costs you may have as an Etsy seller.
#1 – Etsy fees
There are several types of fees Etsy can collect, but many are optional based on the services you choose to use. The mandatory fees are listed below:
- Listing fees – Etsy charges $0.20 USD for each item you list. You will be charged this fee whether you sell the item or not. Unless you create a private listing (e.g. you make a custom item for a shopper and create a private listing so they can purchase it), in which case, you’ll only be charged the fee when the privately listed item sells. If the item you list does not sell, the listing will expire after four months. At which point, you will need to re-list it for $0.20.
- Transaction fees – Etsy charges 5% of the total price your customer pays. That includes the price of the product, as well as the amount you charge for delivery, personalization, or gift wrapping. *Update: Etsy has increased transaction fees from 5% to 6.5% as of April 2022.
- Payment Processing fees – Etsy Payments is required for all sellers in countries where Etsy Payments is available. There are currently over 40 countries on that list (and yes, US, UK, Canada, and Australia are on it), so there’s a good chance you’ll be forced to use Etsy Payments. You will be charged a set rate, plus a percent of the total sale price of the item sold. The rate and percent vary depending on the country. For example, US businesses will be charged 3% + 0.25 USD. UK businesses will be charged 4% + 0.20 GBP.
You can find a list of Etsy Payment fees by country here.
Additional/Optional Etsy fees
There are several other types of fees you may be charged if you opt into additional Etsy services or options, such as:
- Advertising and Promotional fees
- Subscription fees (if you opt-in to Etsy Plus)
- In-Person Selling fees
- Delivery Fees
- Regulatory Operating Fees
- Pattern Fees
- Currency Conversion
You can find details on each fee here: https://www.etsy.com/ca/legal/fees/
#2 – Business Expenses
Aside from the basic Etsy fees (listing and transaction), your business will also have expenses associated with selling on Etsy.
A business’s expenses will vary depending on what it sells, where it operates, and how it operates. Below you’ll find some of the more common expenses associated with running an Etsy business and selling handmade products.
- Business registration, permits, licenses, etc. (check out Laws for Selling Handmade)
- Tools and equipment
- Packaging supplies (e.g. clothing labels, price tags, tagging gun, stickers, boxes, etc.)
- Printing business cards or other promotional material included with orders
- Shipping supplies (e.g. packing tape, shipping boxes, tissue paper, bubble wrap, etc.)
- Gas for driving to and from craft supply store, post office, etc.
- Office supplies (e.g. printer & ink, pens, paper, envelopes, etc.)
- Logo design
- Paid ads
- Studio space (even if you’re using a room in your house, chances are, some bills will increase, e.g. phone bill, internet bill, electrical bill, etc.)
#3 – Production Costs
It’s important to determine how much it costs, in materials and time, to create your products. These will likely attribute to the bulk of your costs when running an Etsy shop.
If you don’t set your prices properly, it will be impossible for you to be profitable selling on Etsy.
Sellers who price items too low in an attempt to gain sales often end up doing the opposite. Most consumers will question the value of a handmade product that’s priced much lower than similar items on the platform.
Not only that, lower than normal prices make it hard to cover the costs associated with running an Etsy shop.
#4 – Shipping Costs
When selling on Etsy, you’ll be required to ship your products to customers. This is a charge that should be passed on to the customer, but depending on how much shipping fees are, you may want to cover some or all of them to encourage more sales.
There are a few ways to handle shipping fees:
- Charge a fee on top of the product’s price (e.g. Product price $50 + $12.99 shipping)
- Increase product prices to include part of some of shipping fees (e.g. Product price: $55 + $7.99 shipping, or $62.99 & free shipping)
- Keep product prices as is and reduce profit margins to cover some or all of shipping fees (e.g. Product price: $55 & free shipping, and reduce profits by $7.99)
High shipping fees can often cause shoppers to abandon their cart, so it’s important to put some thought into what you’ll charge customers.
If you’re able to charge customers all of the shipping fees without compromising sales, you won’t have to worry about shipping fees as a business cost that impacts your profits. However, if shipping fees are so high they discourage shoppers from buying, your business may need to take on some of those costs.
#5 – Hours
Your time is not free. You must be tracking your hours and multiplying them by your hourly wage to determine your hourly “costs”.
If you’re not getting paid for your time, you don’t have a business that will stand the test of time.
Some of the tasks you may work on as an Etsy shop owner are:
- Designing new products
- Sourcing materials
- Photographing products
- Uploading photos and editing
- Writing product descriptions & creating listings
- Researching keywords for SEO
- Posting to social media to promote Etsy shop and products
- Designing business cards/flyers/etc.
- Answering messages/emails
- Packaging orders
- Driving to and from the post office
- Updating Etsy shop announcement
- Creating content for the About section
- Starting a newsletter
- Creating newsletter content
Let’s imagine each of these tasks requires 1 hour of your time each month (which is a low estimate; many of these tasks require much more time). That’s 15 hours/month.
If you wish to be paid $20/hour for your time, that’s $300 in wages for the time you spend running an Etsy shop.
Although your wages aren’t necessarily a cost that leaves your bank account as the business owner, they do need to be considered when determining how profitable your business is/can be when selling on Etsy.
Those are some of the costs you may have to run an Etsy shop. Use them to estimate if your business can be profitable on the platform.
You must also be informed of tax laws and whether or not you need to charge sales tax and remit it each year.
You may be interested in:
- New 2022 Tax Law for Etsy Payments, Venmo, PayPal, & More
- Why Does Etsy Take So Much Money? (is there a cheaper way?)