On July 16th, Etsy sellers will see an increase on the transaction fee from 3.5 percent to 5 percent along with a new 5 percent fee on shipping costs. There are some producers in the personalization industry that choose to utilize this platform as a primary tool for selling their products; others use it to appeal to customer convenience and expand their range of potential customers beyond their brick-and-mortar shop. Though this increase is seemingly small, some may wonder if it is actually cause for concern.
Put this in perspective: for a sublimated mug that sells for $20 with $5 shipping, Etsy now collects $1 of the total as well as $0.25 of the shipping charge – with the $0.20 listing fee, that reins in a total of $1.45. The blank mug may have only cost you $2, but when you take into consideration the operational and production costs, the true upfront cost is much higher. An existing gross profit margin for this product is typically around 75 percent, but with the new fees, it would decrease by approximately 7 percent.
Despite these numbers, there are many in the industry who don’t see this change as a threat. Holmes Custom’s President and CEO Bryan Croft is among such. Before branching out onto its own website, 904 Custom, a division of Holmes Custom, had used Etsy since 2014 to sell its personalized products and develop a following. With his understanding of the site, Croft says he has no reason to believe that any Etsy business is put at risk by this increase, let alone those doing customization. “I think that we in the personalized product industry still have some leverage with the consumer – meaning its ok to raise prices every once in a while.”
“Personally, I look at it from this perspective,” Robin Kavanagh, Sawgrass public relations manager, states, “if FedEx or the postal service increased their shipping rates, I would charge my customers accordingly. They are ordering from an eCommerce business and expect to have to pay for shipping to get their product. My shipping charges should reflect my expense for this service – the same logic should be applied to the Etsy fees … When expenses change, so do your prices.”
Many industry experts also support the argument that decorators have more flexibility to go off the books with their pricing than shops selling fixed products. In fact, Jimmy Lamb, Sawgrass manager of communication and education, argues that when it comes to custom products, the general rule of thumb for pricing leaves a lot of money on the table. “The reason for this is that the cost of production is often many more times less than the price the market will bear,” he explains.
Ultimately, product decorators have three choices in this new situation with Etsy: raise prices to account for the increase and maintain their current level of profitability, keep prices the same and have a lower profit margin, or become more efficient and absorb the increase. Kavanagh adds, “Everyone will have their own view on what is right for their business, and only they can make that call.”
But is there more? Aaron Montgomery, host of 2 Regular Guys Podcast and owner of MontCo Consulting, is quick to point out the danger of relying solely on free website builders like Etsy to earn a profit, saying, “That is like building a home on borrowed land.” If this is the case with your business, these increasing fees may serve as a harsh reminder of who’s really in control of the fate of your business. If you have the means to support your own eCommerce site, this seems to be the most reliable way to sell online.
On the other hand, “Some would say that it’s more worth it to continue selling with Etsy than to develop and maintain an eCommerce website or compensate a salesperson the standard 25 to 35 percent of gross profit,” Vince DiCecco, Your Personal Business Trainer, notes.
Regardless of how you choose to approach this update, stepping up your marketing strategy is always a safe bet. “There are a lot of ways to support your Etsy page and drive more traffic there so that you see more sales. One of the most common ways is to propose a reason for customers to respond to a particular offer,” advises DiCecco.
According to Croft, it all comes down to one thing: “Adapt and overcome – it’s business 101.”