Online marketplace Etsy has introduced new mandatory fees which will significantly hurt its sellers’ profits while adding little value to the service it provides.
Etsy has become the favoured destination of shoppers seeking out unique, hand-made and vintage products. It gives smaller sellers – from hobbyists to independent retailers – the levels of visibility and opportunity to connect with new customers that they likely wouldn’t be able to afford themselves.
Through the old model, Etsy would pay to market its brand, and sellers would pay transaction fees in return for the ability to tap into that popularity and volume of traffic.
But now Etsy is making its sellers foot the bill for that marketing, too, and making it mandatory. Specifically, any sale made through Etsy’s pay-per-click advertising (which the company estimates are around 10% of all sales) will be subject to a fee to cover the cost of the ads.
There are two major drawbacks for sellers using the site to trade.
The first is simple maths and how much these new fees, which are likely to be around 12% to 15% of the sale price, will cut into profit margins. Once you take into account Etsy’s standard transaction fees of around 4%, card payment processing fees, delivery costs, plus any employees or premises your business has, margins can be tight. Take another sizable chunk out of that, and – depending on the nature of your business – there may not be a whole lot left over.
The second problem is that sellers are now essentially paying twice for the same thing. The biggest reason to sell on Etsy is the size of its audience. Paying extra to market the brand is almost paying more money for the same rewards you were already receiving.
If your shop must be burdened with a pay pay-per-click bill, why would you send the traffic to somebody else’s site? Etsy is a great channel, but they retain control over a great deal of the selling process. And worse, your competitor’s products are listed right alongside yours.
Any marketing budget you spend should guide shoppers to your own website, where you control the look, the feel, the message, the buying process, where your competition isn’t featured heavily and where you get to retain your profits.
Etsy has been a fantastically popular site for more than a decade. But by pushing more costs upon its sellers, the site risks turning them away. And the quantity and variety of sellers is what draws shoppers in. It’s a risky strategy.
What you can do
Despite the new fees, Etsy is still an important marketplace for the sectors and niches it covers. As with other similar outlets, such as Amazon and eBay, it’s one of the better ways to attract customers who don’t yet know your brand. Large numbers of users begin their search with a trusted name and through those sites, they can find your products. Any channel you choose not to use represents a section of your potential customer base that you aren’t selling to.
Always market your own brand
The Etsy announcement is further evidence that it’s dangerous to rely too much on somebody else. There are sellers who won’t now be able to showcase competitively-priced products on Etsy, and if the site is their only route to market, this will be devastating to their business. Whenever you sell through a channel other than your own, make it clear that your customer can also find you at your own site, over which you will have full control. Use follow-up emails, discounts, promotions and marketing materials within shipped goods to raise awareness of your brand and website.