Business Bevies: The Etsy Dilemma

Screenshot of Google Image Search for “Etsy.” Retrieved February 25, 2021

Etsy™ and I have had an on again-off again relationship for many years now. In fact, I opened an auxiliary Etsy shop WAY BACK in 2009 (just 4 years after they launched as an exclusively handmade marketplace) and was one of the first sellers on the platform to offer historical fashion. I chose to sell on Etsy’s marketplace back in the day because I knew it was something special and would offer a viable secondary outlet to sell some of my ready made fashions in addition to my main website ( est. 2000).

Etsy was attractive then because it was a place exclusively for hand made items. It was finally a place for creatives to have their own marketplace. Even back in 2009, it was hard to compete with mass produced imported goods. It was understood customers who valued one of a kind items made by individual hands could search out Etsy knowing they were supporting true makers, creators, and artists.

Since 2009, our world has changed significantly. The rise of behemoth selling platforms like Amazon, Facebook, Instagram, and Ebay put Etsy at a crossroads. Could Etsy still exist as it was or did it need to change to keep up?

That is a question left only for speculation as Etsy chose to throw its handmade hat into the Megalith Marketplace and strike out to become one of the giants themselves.

Image ©Bryan Angelo

In 2017, Etsy ousted its CEO and replaced him with Josh Silverman- an Etsy board member and “progressive” businessman. With a Silicon Valley curricula vitae as long as the novel War and Peace, Silverman was the man investors wanted at the forefront. And it has paid off.

But for whom? And at what cost?

In 2018, Etsy garnered a gross income of $603 million with a profit of a little over $41 million generated in the US alone. Etsy currently draws its profits from 3 revenue streams: sales commissions (5-15% depending on Etsy’s terms), a listing fee (currently $0.20 per item), and a catch all category entitled “Seller Services” (1).

It all sounds straight forward, right?

Not quite.

Since 2018, Etsy has been rapidly changing its policies to benefit the good of its investors. There seems to be less transparency about these changes with increasing burdens on the seller. In 2019, there was an uproar amongst Etsy sellers about a coerced “free shipping” policy. According to a 2019 The Verge article, Etsy would begin giving perks to shops who offered free shipping. This encouraged Etsy sellers (and still does) to increase their product pricing and roll shipping fees into their retail prices (i.e. pass the cost onto the buyer). While this not a new business practice, it is not a one size fits all model and when Etsy stated it would give preference to shops who conformed (based on sales analytics that ultimately generate more sales for the platform), it created HUGE seller inequalities (2).

In 2020, Etsy announced ALL of its sellers would be subject to an additional 7-10% commission rate increase to pay for unsolicited seller advertising on search engines. Essentially, Etsy would begin advertising products from shops on various search engines (mainly Google) in order to drive more traffic to its site. If a customer clicks on say a Google Ad leading him/her to your Etsy shop and that customer then purchases the advertised item, your Etsy commission rate jumps from 5% (which was 3.5% in 2009) to 12-15%. All shipping fees are also subject to the 15% commission rate. In addition, Etsy is now penalizing sellers for slow turn around times in order to compete with its next day shipping arch-nemesis- Amazon.

Recently, Etsy acquired a third party payment processing system further increasing revenue for the platform. These additional “Seller Service” fees include payment processing (so long PayPal), shipping transaction fees, shipping service fees, and now unsolicited “promoted listing” fees.

A Google shopping search for “straw bergere.” You can see my Esty listing shows up as sponsored 4X! Screesnshot retrieved February 25, 2021.

For some sellers, the “cost of doing business” with Etsy is definitely worth it. In a consumer oriented world that is now doing more of its buying and selling online than ever before, it is becoming harder and harder for small businesses to compete with Big E-Corps. In some ways, Etsy seems to be out there fighting to get the little guy’s stuff in front of customers. It’s going head to head with platforms like Amazon, Ebay, and Instagram. And small businesses who choose to go at it alone have already realized that “promoted listings” for independent websites not only cost significantly more but seem to be pretty ineffective.

But one has to ask– Is doing business with Etsy worth it? Personally, I have seen my sales double since reopening my Etsy shop. It is ideal for businesses who do not necessary want to be tasked with the management of a private e-commerce site or invest in an extensive digital marketing plan. It allows businesses to capitalize on the collective power that comes from a mega platform. However, understanding that Etsy has a proven history of selling out sellers for increased platform/investor profits, one must really consider if it is worth the risk. And one must consider at what point does partnering with Etsy (or any large platform) reach the point of diminishing return?

It’s no surprise there has been a mass exodus from Etsy by individual makers, creators, and artists over the past two years. The progress ushered in by Etsy has irreversibly changed its culture and customer base. So, I suppose the answers to the Etsy dilemma really depend on one’s business model, one’s business ethics, one’s belief in free trade, and one’s willingness to give up a huge chunk of profit just to make sales.

Etsy has made it clear- it wants you to succeed so it will succeed. For Etsy, it’s go big…. or go home.

Business Bevies is a series designed to address small business topics for creatives.



About Susan

My interest in historical costume began at a very early age. I knew by age 5 I wanted to be a designer. Over the years I have been fortunate enough to turn my passion into a full time business. You can find my costumes onstage in NYC, on the big screen, and in museums around the globe.