Opening an Etsy shop allows you to test a business or product idea without investing too much time or money. But the only way to properly test an idea is to give it a fighting chance.
If you simply list a few items on Etsy and wait for shoppers to come to you, it’s likely your Etsy shop will quickly fail.
You must put effort in to get set up properly and give your listings and shop a chance of being seen.
There are many things required to build a successful Etsy shop. These are the essential tasks that should be completed before you open the virtual doors…as well as 5 tasks that can wait.
What to do before opening an Etsy shop
The following are 7 essential steps a small business should take before opening an Etsy shop.
1) Research the Laws
Etsy doesn’t require you to show a business license, prove you aren’t breaking intellectual property laws, or that you know how to properly collect sales tax.
But that doesn’t mean you’re not accountable for being aware of and following the laws that apply to your business.
Etsy finds sellers breaking the law through complaints. Meaning, they’re not checking to see if each shop is following the laws, but if they get a DMCA complaint about your shop, they may shut it down until you can prove otherwise.
The steps will vary depending on where you live, where you plan to ship your products, what type of products you’re going to sell, etc.
Your government’s website should have resources outlining what types of licenses and permits you require.
>> If you’d like a guide of the steps to take, check out: Laws for Selling Handmade
All laws are important, however, one area of law you want to understand before you get too far is intellectual property.
You want to be sure you’re not infringing on another business’s intellectual property with your:
- Business name – just because the name is available on Etsy does not mean another business isn’t already using it/hasn’t registered it.
- Products – your products cannot use other businesses’ copyrighted or trademarked material. This means, your products cannot rely on Disney characters or team logos for their designs.
>> You can learn more about copyright infringement here: How to Avoid Etsy Copyright Infringement (is Disney fan art allowed?)
If you want a simple guide to walk you through the steps, check out Laws for Selling Handmade.
2) Register your business name
You’ll want to register your business name with your government to not only check that it’s not already in use by a similar business but also to protect your business and ensure someone doesn’t start a similar business using your business’s name.
Once you’ve registered your business’s name and know you’re legally allowed to use it, then you should also claim the name on several platforms, such as:
- Social media platforms
- The Internet – register your domain (purchase www.yourbusinessname.com so you can build your own website eventually)
3) Define your target market
This step is probably skipped by the majority of Etsy shop owners but it’s one of the most important things you can do for your craft business.
Creating products without knowing who you’re making them for is like buying a gift without knowing the recipient.
If you want the recipient to love the gift you give them, you need to know several details about them.
If you want to create products people love, you need to know who your customers are.
I’m not big on typical ideal customer profiles that have you defining your customer’s age, height, favorite ice cream, etc. Most of the information you make up about your ideal customer isn’t helpful.
The information you define should help you FIND your target market.
If you can’t find your customers, how can you sell to them?
Knowing their favorite movie won’t help you find your customers (unless you make movie-themed products and sell them at movie theatres).
You can alter your products; you can’t alter consumers.
So instead of creating a product and then trying to find people who are a fit for it, find a profitable target market and tweak your product to be a fit for them.
To find a profitable target market, look at the existing groups of people other businesses serve.
There are many ways to do this (How to Define a Target Market for your Handmade Business will walk you through an easy process), but start by looking at the specialty business out there. Meaning, stores that serve one main purpose, not dozens.
A specialty business might be a book store, pet store, yoga studio, bridal shop, etc. On the other hand, Walmart, Bed Bath & Beyond, and Amazon serve a variety of shopping needs.
Let’s say I make jewelry and I want to sell it on Etsy. I might look at my jewelry and describe it as quirky, bold, and colorful and then describe my customers in the same way: “My ideal customer is quirky and likes colorful pieces”. This won’t help me find my customers.
On the other hand, if I choose a profitable market first: bookworms, pet owners, yogis, or brides, then I know where to find my customers to market and sell my products to them.
For example, if yogis are my target market, I can find them:
- at yoga studios
- in stores that carry yoga products
- reading yoga blogs
- at yoga retreats and conventions
- reading yoga magazines
These are all places I could advertise my business, get featured in an article, approach shop or studio owners about carrying my line, etc.
I can easily alter my jewelry designs to incorporate yoga symbols, yoga phrases, or even healing crystals.
When I know my target market and base it on an existing group (not one I’ve made up) it becomes so much easier to uncover facts about my ideal customer and then create products suited for them, market those products in the right places, and effectively sell to my target market.
4) Analyze your competitors
On Etsy, shoppers will see your products right next to dozens of your competitors’ products. This means you need to be aware of what your competitors are selling, and confident that your products can draw shoppers away from them.
There are many details you can uncover about your competitors (and you can do a formal competitor analysis if you like).
What’s most important before opening your Etsy shop is knowing:
How your products will be “better” than your competitors.
“Better” is subjective. Everyone has a different opinion of what’s “better”.
The opinion that matters is your target market’s.
Can you make a product that your target market thinks is better than your competitors’?
When you start with a good target market, your USP (unique selling position) is easy.
A USP is what will set your business apart from competitors and make it obvious to consumers why they should choose your products over others.
>> Learn more about finding your USP here: 8 Mistakes Handmade Businesses Make with their USP
It’s hard to make a “better” knitted hat, necklace, or candle. What you’re really after is creating something that’s different.
If you make products for a specific market/group of people, they’ll organically be different.
Almost every jewelry business makes jewelry for women. If I make jewelry for yogis, I have a lot less competition and consumers understand why they would choose my yoga-themed necklace over a gold necklace with a heart pendant.
Spend some time scrolling through Etsy’s search results so you know what your competitors are offering.
Then brainstorm how you can make your products stand out to your target market.
5) Make sure you’ll profit
You’re opening an Etsy shop to make money right? So you need to make sure the prices of your products cover ALL costs and leave you with a profit.
Too many handmade business owners base prices on what they think consumers will pay, or what their competitors are charging.
Before you spend money opening an Etsy shop, make sure you:
- Know your business’s numbers (The Right Way to Price a Handmade Product (Step-by-Step Formula))
- Understand how much Etsy takes per sale (Etsy fees are likely higher than you realize, here’s a breakdown of all the fees associated with selling Etsy: How Much Does Etsy Take Per Sale?)
It’s likely you’ll need to work your numbers to ensure you’ll profit.
- finding ways to lower material costs
- speeding up production times
- streamlining business processes
- reducing business expenses.
>> Here’s a list of business expenses you may have: How Much Profit does your Handmade Business REALLY Make?
>> Here are ways to reduce your costs: How To Lower Production Costs to Increase Profits
You wouldn’t stay at a job that didn’t pay you for ALL the hours you work.
And you wouldn’t continue running a business if you simply purchased materials and turned around and sold them for the same amount, or less than you paid for them.
Yet that’s what many Etsy sellers do because they don’t price their product right.
Understand how to properly price your products and constantly find ways to reduce costs and increase profits.
>> This article will be helpful: The Right Way to Price a Handmade Product (Step-by-Step Formula)
6) Make a marketing plan
So many Etsy sellers get frustrated by their lack of sales and end up closing their shop within months because they’re expecting Etsy to send them hundreds of shoppers.
Etsy doesn’t work that way anymore.
They have millions of sellers and even more listings; it’s a competitive marketplace.
If you want to succeed, you must take responsibility for getting people to your shop. You must continuously work on marketing.
6a) Have a plan for attracting new customers
There are two ways to gain new customers: you attract them to you or you go out and find them.
Attracting customers to you is the art of SEO (search engine optimization).
Search engine optimization requires:
- keyword research – so you know the exact words consumers type into search bars
- keyword implementation – so your Etsy shop incorporates keywords consumers are using and search engines know to match your listings/shop to search queries.
If I make “yellow polka dot earrings” but no one is typing that term into search bars, it doesn’t matter how much effort I put into Etsy SEO, it won’t help my yellow polka dot earrings get found.
Keyword research must come first for SEO to work.
Through keyword research, I discovered thousands of people are searching “cross earrings” each month. If I create several pairs of cross earrings and use the terms “cross earrings” in my listing title, product description, tags, etc., I’m creating a product people are searching for and Etsy’s algorithm will understand that my products are a fit for their searches.
>> For a better understanding of keyword research and Etsy SEO, check out: Etsy SEO: 3 Easy Steps to Boost Traffic (2022)
6b) Have a plan for reaching new customers
As mentioned, new customers either come to you (through SEO) or you go to them.
Going out and finding new customers is outbound marketing (while SEO is considered inbound marketing).
Outbound marketing is less effective than SEO because SEO allows your products to reach consumers when they’re shopping for your specific product.
When you use outbound marketing, you’re typically reaching consumers when they’re not shopping. So it requires more effort to grab their attention, and convince them to stop what they’re doing (e.g. scrolling Instagram or checking email) and start shopping.
Decide which outbound marketing efforts you’ll use. They may be:
- social media
- paid ads
- public relations
- email marketing
You don’t have to implement them all from the start, but you should plan for which channels and methods you’ll use to promote your Etsy shop and its products.
Do not expect Etsy to send hundreds of shoppers your way.
Yes, there are millions of people shopping on Etsy every week. But there are also millions of people selling products on Etsy and competing for those shoppers.
You must work to get a piece of Etsy’s pie (and that takes time so you need to hit the ground running).
If you have a realistic plan for how you will reach new customers, your Etsy shop is more likely to succeed.
Determine how you will use inbound and outbound marketing to promote your Etsy shop.
>> Learn more about inbound and outbound marketing here: Inbound Marketing vs. Outbound Marketing
7) Plan sales-driving products for your shop
Based on each step above, you can plan a product collection for the launch of your Etsy shop.
The products you list for sale in your Etsy shop should:
- follow the laws (no copyright infringement)
- appeal to your target market
- be “better” than competitors
- be priced for profit
- be marketable (use keywords people are searching and/or be interesting enough to capture people’s attention when they’re not shopping)
On top of that, try to have a well-rounded Etsy shop.
That doesn’t mean offering something for everyone.
That means having options for your target market to choose from:
- Entry-level products – products that allow new customers to “test the waters”. These products ease them into being your customer and allow them to experience what your business and products have to offer without a steep price point. If you were at McDonald’s, a Happy Meal would be an entry-level product (which is smaller and less expensive than a Big Mac Meal). Find examples of entry-level products Etsy shops might carry here: How to Create an Entry-Level Product for your Handmade Business
- Upsell products – there are consumers who want to spend more. Upsell products give shoppers the option to “upgrade” their purchase. At McDonald’s “would you like to supersize your meal” is upselling. It’s taking something consumers are ready to buy and offering them a slightly better version of it. Find examples of upsell products Etsy shops might carry here: How to Use Up-Selling to Sell More Handmade
- Add-on products – these are items customers can buy with the other items in your shop. “Would you like fries with that?” or “Would you like to turn that into a meal” are examples of add-ons at Mcdonald’s. If the only options were burgers, most people would only buy one burger. Fries, pop, coffee, apple pie, etc. encourage people to buy more than one item. Find examples of add-on products Etsy shops might carry here: How to Use Add-Ons to Sell More Handmade
When planning products for your launch, ensure they all appeal to the same target market.
If you have a mix of jewelry, candles, and art in hopes that each shopper will be able to find something, you’ll actually be harming your sales, not helping them.
Think of your Etsy shop as a specialty boutique; not a department store.
Specializing in one type of product for one type of person will label you an expert in the eyes of consumers.
You can expand your selection as you grow.
Things you need to open an Etsy Shop
Aside from the steps you should take before opening an Etsy shop, there are a few things you’ll require to register on Etsy and sell your products.
- Business license – Etsy does not require a business license to open a shop, however, they do require you to follow any laws that apply to you as a small business selling online (source). Laws vary depending on several factors, but chances are, your business will require a business license.
- Sellers permit/license – again, Etsy doesn’t require you to have a seller’s permit but laws may require you to have one.
- Credit card or PayPal account – Etsy will charge you fees once you start listing products, selling products, creating ads, etc. For Etsy to collect those fees, you’ll need to link up your credit card or PayPal account (source).
- Bank account – when you make a sale, Etsy will send you money. You’ll need to link your bank account to receive direct deposits from Etsy. Where Etsy Payments isn’t available, you can use your PayPal account to get paid (source).
- Shipping materials – when you make a sale on Etsy, you must ship your product to the customer. That will require shipping materials such as padded envelopes, boxes, bubble wrap, tissue paper, postage labels, etc. You want your shipping materials to be economical to keep costs down, protective (so your products make it to customers in one piece), and professional (to make a good impression on customers).
- Camera – you’ll need to take professional-looking photos of your products. You don’t need expensive equipment or a fancy backdrop. Your camera’s phone, a clean white background, and natural light should suffice.
5 things to ignore when opening an Etsy shop
There are many things a business owner must do to run a successful Etsy shop. However, not everything needs to be done from the start or requires your full attention in the beginning.
If you try to have everything a successful Etsy shop has in place before you open your shop, it could take you months to get set up.
Growing your Etsy shop takes time, and it may even take weeks or months before anyone sees your launched Etsy shop. So have the essentials in place and work on perfecting it over the coming months. But don’t wait until it’s perfect to open.
The following things are important. They’re just not essential for opening your shop and can be implemented and/or improved upon over time after your shop is open.
Professional branding can be expensive. And a brand is something that develops over time as you learn more about your customers, your place in the market, your best-selling products, etc.
Some businesses do the research beforehand and launch with a developed brand that’s the perfect fit for its target market.
However, most Etsy businesses are launching on a budget and are using the platform to test a business idea. If that’s your business, don’t spend too much time or money on branding before you open your shop.
You DO want your Etsy shop to look professional, but keeping things simple and cohesive is the easy and cheap way to do that.
If you don’t feel comfortable creating a simple logo, choosing a few brand colors, and designing your banner, look for someone on Fiverr to create a branding kit for you without breaking the bank.
You can redesign and revamp your branding once your shop grows and you have profits.
2) Wide Product Selection
When you open your Etsy shop, you do want a handful of products in it to give your shoppers options and to start optimizing your shop for Etsy’s search engine (SEO).
However, you should NOT try to be a one-stop shop for consumers or offer everything you think your target market might want.
An Etsy shop is not a department store; it should be a specialized boutique.
It will take time for you to learn what Etsy shoppers are interested in, the types of products your target market likes, the product options and features they prefer, etc.
If you fill your shop with dozens of products before you open, you have no idea if they’ll sell and the time and money you spend making them could be a waste.
Start your shop with 10 – 20 products to test your market and plan to expand that selection once you’ve been on Etsy for several months, have stats to work from, and hopefully several sales to guide product decisions.
3) Multiple social media accounts
It’s likely your Etsy shop will require social media to drive consumers to your store. However, it’s important not to overwhelm yourself trying to maintain and grow a variety of social media accounts.
Register your business on several platforms (to reserve your business’s name) but choose to focus on one account to populate and grow.
The platform you choose should be:
- one you understand, enjoy using, and caters to your skills (e.g. if you take great photos, focus on Instagram)
- where your target market is
You’ll need to test different marketing methods on each platform to determine what works for your products and audience. Trying to do this on multiple platforms while you’re learning the ropes on Etsy can become overwhelming.
Once you master one social media account, then you can start working on others.
Remember, not every platform will be a fit for your business. TikTok may be the hottest social media platform of the moment, but if your target market doesn’t use it, it’s hard to market your products using short videos, or you simply don’t understand the platform, it’s unlikely it will send many shoppers your way.
Even when you’re able to focus on more than one platform, only spend time and money on ones that give you a return on investment.
4) Expensive photography
Your product photos are very important to your shop’s success. However, there’s no need to buy expensive photography equipment, props, tools, etc.
The phone on your camera is likely sufficient and some of the best product photos are taken during the day in natural light (not direct sunlight) and on a plain white background.
Keeping photographs simple is the easiest way for an amateur photographer to take professional-looking photos.
5) A detailed business plan
What’s great about Etsy is that it allows you to set up an online shop quickly, cheaply, and easily.
You can test a business idea without investing hundreds or thousands.
A business plan is a handy tool, however, when creating a formal business plan, you’re often required to plan 5 years down the road and define details that are likely to change in a few months.
Making sure you’re thinking through everything before you spend any money on your small business is important. For that reason, I would encourage you to complete the steps in this article, as they act as a quick business plan.
But I don’t believe you need to spend hours and thousands of words creating a business plan before you know if you have a business.
Etsy will help you prove you have a viable business.
If you get that proof, through sales, you may want to invest more time and money, at which point, you can write a formal business plan and dive into every detail of your business.
>> You’ll find this checklist helpful for a more creative business plan: Checklist for Starting a Craft Business
I hope this article helps you feel confident about opening your Etsy shop. If you’d like more resources for your handmade business, check out:
- Laws for Selling Handmade
- How To Find a Goldmine of Customers
- The Success Planner for your Handmade Business
Hey, I’m Erin 🙂 I write about small business and craft show techniques I’ve learned from being a small business owner for almost 2 decades, selling at dozens of craft shows, and earning a diploma in Visual Communication Design. I hope you find my advice helpful!