If you sell handmade items or patterns, you’ve no doubt heard a lot of buzz lately about Etsy raising their transaction fees. All of this can sound very scary. You may worry that the fees may will cut into your profits. Or maybe they will force you to raise your prices and make your products unaffordable for your customers. First, take a deep breath! Let’s talk about what Etsy fee increases really mean for your crochet business. Once you understand how to calculate Etsy fees, you can make informed decisions for your business and avoid reacting emotionally.
How Much Does Etsy Really Take in Fees?
Good morning, Crochet CEOs. Welcome to Monday morning Crochet Business chat. We’re going to talk today about Etsy fees, the Etsy fee increase, the Etsy strike–all things, Etsy that are happening right now in the world. There’s a lot of confusion happening. There’s a lot of emotion happening. And I think there’s a lot of misinformation happening. And so my goal is to help you understand what the real impact will be on your business, aside from those things that are making people upset, like Etsy offsite ads, the Etsy star seller program, and those things. We’re specifically going to talk about fees today.
Transcript: Etsy Fees Made Easy
[00:00:52] And then I’ll take your questions as well, if you have questions about the other things. I will tell you that I’m a pragmatic person. And so I look at the analytics. I say, “How does this impact me? And what am I going to do about it?” I really am not the kind of person who brings emotion into how I run my business and I get mad and make decisions. It’s just not how I operate. So if you’re looking for drama, you will not find it here. So sorry.
[00:01:23] So anyway, welcome. My name is Pam Grice, the Crochetpreneur. Thank you for stopping by my channel. And if you have never been here before, be sure to click the subscribe button so you can get notified or click the bell as well so you can get notified of live videos, any time I drop a video–all of the things with crochet business tips, so you can grow your profitable crochet business. I think that’s it. Welcome.
[00:01:52] Okay. So sorry. I had to turn my heat off. And I’m running like this this morning because we’re getting a delivery today and Amazon’s never delivered here before. So they’re going to get lost, and I’m trying to tell them how to get here, and I don’t think they’re going to listen. We’ve had companies try to deliver here and end up with two flat tires in the middle of nowhere because they didn’t listen. So always listen to what I say. Anyway. Sorry you guys.
[00:02:27] Okay. It is Monday morning. We’re having a busy week around here this week. I’m going up to Interweave yarn Fest in Loveland, Colorado. Leaving here on Wednesday and I’ll be back on Sunday. And if you’ll be anywhere around northern Colorado, the end of this week, I would love to see you. I’m going to have a booth in the marketplace, specifically talking about the Crochetpreneur Business Academy and you can stop by, ask questions. We’re going to have a massive giveaway and we’re going to have a fun photo booth and other fun things. So if you’re in Colorado, stop by. Come say hi. Hooks by Katie will be there as well. And yeah, I’d love to see you.
The Reality of Etsy Fee Increases
[00:03:08] Okay. Let’s get down to business. Etsy fees. So many of you know that Etsy has raised their transaction fees from 5% to 6.5% and that 30% increase has the internet in a massive uproar. So how does that impact your business? I know 30% sounds like a crazy increase. But I want to take a look at reality because Etsy does charge other fees. So if we look at the overall structure of their fees, this 1.5% increase is not going to impact your business so much, depending on your own pricing structure. So it’s really important that you price your products in a way that these little fluctuations in the market don’t impact your bottom line in such a way that you’re gonna have to close your business because Etsy made some decisions about how they’re going to run their business.
[00:04:14] Ultimately, if you don’t like what’s going on with Etsy, and if you do not find value in what they are offering you in your business, then you can leave. You can start your own website. You can go to another website. There are plenty of websites out there who are looking for your business. But make a wise decision. Make the decision based off of reality and based off of analytics rather than off of emotion. Because in my own research, I have found that there are very few, as in none, maybe besides Amazon, which I don’t use, that offer the kind of traffic to your business that Etsy does. So if you’re willing to give up the majority of your traffic in order to take a stand for what you believe in, then do that. I’m not worried about it, so I’m not leaving Etsy. So that’s just where I am.
Get Your Free Etsy Fees Calculator
[00:05:14] Okay. Good morning, everyone. So glad to have you here. Okay. I’m going to pull up a spreadsheet. You can get this spreadsheet by clicking the description below and filling out the form [or on the blog, use the form below]. When you subscribe to my emails, I’ll send you the spreadsheet and you can plug in your own numbers.
[00:05:28] Now, this spreadsheet will work for any type of business. I made it for my crochet business owner followers, but if you are an Etsy shop owner and you have a different kind of shop, you’re free to use the spreadsheet as well. I just ask that you then unsubscribe from my list because you’re not going to be interested in the things that I sent you. And so I don’t want to pay for you to be on my list if you don’t want to receive my stuff. How’s that? You have to subscribe to get it. But unsubscribe if you don’t want more Crochet Business related emails. I’m going to show you how it works.
[00:06:07] Okay. Also is it just me or is the video blurry too, for others? The video may be blurry because I am streaming live and sometimes it just doesn’t work and you’re on Facebook. So it will be better if you go to YouTube. I think that the image will be better than it is on Facebook.
For Sellers Outside the US
[00:06:31] Okay, also, I’m sorry. One more thing. This spreadsheet is specifically set up with the fees for US Etsy sellers. If you want a spreadsheet specifically for your country, what I can do is I can send you the spreadsheet. You need to know how to use Excel and to write formulas. I’ll send it to you unprotected so that you can adjust the formulas however you’d like. But for anybody else, I’m just sending you a protected file because I don’t want you messing with the formulas and then writing back to me and saying it doesn’t work anymore. That would be a customer service nightmare, and I don’t want to deal with that.
[00:07:15] YouTube is super pixelated and blurry. Oh, I’m sorry. Let me see. I know I’m working on some other things. So I’m doing an upload right now and it says it has four minutes left. So we might be blurry for four more minutes and maybe it will get better. But I’m sorry. I wish I had a better way of streaming, but again, I live in the middle of nowhere, so we deal with what we deal with. Info coming through loud and clear. Okay, good.
How to Use the Fees Calculator Spreadsheet
[00:07:52] Let me pull up this spreadsheet. This is the spreadsheet you will receive when you request it. So it says Etsy Fee Calculator at the top. Now you’ll see it has a bunch of different colored blocks. And what I want you to do is the pink blocks are the only ones you’ll be able to enter information into. So we’re going to start entering information in just a moment. I just want to specify what these different columns are.
[00:08:26] So this one [the first column on the left] is if I make a sale with Etsy payments and it is not through an offsite ad. So this is like my regular sales. Someone goes to Etsy, they do a search, they find my product and they buy it. So that is this one. And they buy it through Etsy payments. This one [the second column from left] is if they buy it on Etsy, through PayPal.
[00:08:46] This [the third column from left] is if they pay with Etsy payments but they come to my shop through an off-site ad. So every once in a while, you’ll get an offsite ad if you’re using offsite ads or if you’re required to use offsite ads. And so you can either turn them off, which would be, you would enter in here 0%. You can opt into them, which would be, I believe 15%, which would be 0.15 is the value you’ll enter here. Or you can be required. If you make over $10,000 a year, you’ll be required to use Etsy offsite ads. And so then you’ll enter here 12%, which is 0.12. So it really depends on where you are in your business. If you have offsite ads turned on … This is not regular Etsy ads, this is offsite ads. And if you have them turned on, if you’re required, it’s 12. If you’re not required, it’s 15%. And again, it only relates to the products that are purchased after coming to your shop through Etsy offsite ads. So that’s what these are.
[00:09:58] Now over here, you have your different fees: listing fee, transaction fee–so this is the one that went up by 1.5%–payment processing fee. And then this is your total fees here in this blue column. And then here you’ll have your Etsy offsite ad percentage, if you’re using that. Here are your total fees and here’s your total fee percentage, so the percentage of your gross sales that is going to Etsy. Then here, this is your gross sales percentage. So if Etsy’s taking 20%, you’re getting 80% and this will give you, based on the price of your item, your gross … Whoops. Oh, yeah. Gross profit. So then you take your shipping costs and your supplies costs, and you get your net profit from your sale.
Calculating Fees for a Physical Product
[00:10:53] So let’s give it a shot. Okay. I’m going to do this twice, one for a physical product and one for a digital product. So if we put in a physical product here, let’s say it’s a hat for $30. And the shipping paid by the customer is $5. And I’m not going to do gift wrapping. The reason gift wrapping is here is because Etsy takes fees based on the gift wrapping as well. So if you’re offering gift wrapping and it’s an extra fee, you would enter that amount here. But I’m not going to do that here because that’s not how I operate my business right now, only in the wintertime.
[00:11:33] So $35. So now here we can see our listing fee is 20 cents, just like always. Our transaction fee will be $2.28. Our payment processing fee is $1.30 and our total fees are $3.78 cents. Now, if we go over here and enter my shop, I’m required to do Etsy offsite ads. Oh, it’s not working. Okay. So now I know that my calculator is broken and I need to go fix that. You guys, I’m really sorry. It looks like the formulas here are protected. I can fix this. So unprotect. I don’t want you to see my password. So let me unprotect it. We’ll come back there. All right. There we go.
[00:12:50] All right. Thanks for your patience. Okay. Now I’ll put in my 0.12, and here is 0.12. Etsy off-site ads paid. This should be … I’m sorry, you guys, we’re just going to walk through this together. It looks like I have a calculation problem. What is G7? Nothing. It should be E7. I’m glad we did this together because now I see there is this error.
[00:13:46] Okay. So you can see with Etsy offsite ads I’m getting a much higher, of course, fee. There we go. So here you can see Etsy is taking … Regularly, they would be taking 10.8%, and here with Etsy offsite ads, they’re taking 22%. Now it’s important to remember–and I do have a blog post about Etsy offsite ads and how they impact your business–they’re not going to be taking 23% of every sale that you have. They’re only taking that percent from sales that come directly through Etsy offsite ads. If you’re noticing in your business that you have a large percentage of your sales coming from Etsy offsite ads, that tells you that you’re basically losing money you don’t need to be losing because if you optimize your shop, you should be making more sales organically than you are through Etsy site ads. Because look at the sales difference. Sorry, I need to fix all of these formulas.
[00:15:15] So anyone who has already requested this file, I will go ahead and resend it to you later. Okay, so you can see here my gross profits are 90% and here they’re 77%. My gross dollar amount that I’m getting for this product is $31.23 or $27. Okay. And now this doesn’t account for shipping. So we need to go ahead and pay for our shipping and we need to calculate our cost to make this item, to see what the actual numbers look like. So my shipping costs would be … So I know for these products, my shipping cost is like $3.99. So I’m going to put that here on everything. And my supplies cost for this hat is $5.
[00:16:12] All right. So now you can see that my net profit is 63%. Or here, if I have Etsy offsite ads, my net profit is 51%. And that for me is acceptable. So I always try and operate at a 50% net profit. So here we go, 50%. And then here, our net profit without offsite ads is $22 for that item or $18 for that item. So that’s a $4.20 difference, basically. So with Etsy offsite ads, it’s $4 more. And without it’s $22. So you’ll have to look at this and analyze the data for yourself to see exactly how much money you’re actually making from your sales.
[00:17:05] Now it’s important to realize, I think, that if you were selling at a consignment shop or something like that, they’re going to take 35 to 50%. And so you would be left with 50 to 65%. And you can see that this is really comparable to that. It’s just really important to recognize the Etsy is not taking fees above and beyond what would be industry standard for physical products. So that’s just something you need to be looking at.
[00:17:44] Sonia, “Is this accounting for labor and overhead though? Is that rolled into the profit for this calculator?” So labor and overhead … I’m just saying what your profit is. So your labor and overhead would come out of this. So I have that built into how I price my products. So my overhead, which mostly for my physical products, would just be Etsy. So this would be Etsy. And then I would pay myself. My products take an hour to make. So I would pay myself $12 an hour and then I would end up with $10 to reinvest in my business. So I hope that helps. If you want to drill down and get more specific, you can certainly take this formula and tweak it. “Or use in combination with the Handmade Item Calculator.” Yes. So you’re going to have to mishmash some things together because everyone operates their business differently.
Calculating Fees for a Digital Product
[00:18:47] So let’s take a look real quick at what this would look like for a digital product. I guess I can leave that there. Okay. So I’m going to leave this here. We have no shipping costs. And here, under supplies costs … Sonia, under supplies costs, you could include all of your business fees in here. So your supplies plus your hourly wage, which I wouldn’t do that here, though. Your supplies plus your business expenses could go here under supplies costs.
[00:19:26] So for my digital products, for example, if I sell a pattern for $5, there’s zero shipping and there’s zero gift wrapping, right? So we’re at $5. We come over here, we have the listing fee, transaction fee, processing fee. There’s our total fees. It comes to almost a dollar. And then if it’s sold through an Etsy offsite ad, it is $1.50 or $1.60, depending on how the customer pays. And then you can see our gross profit.
[00:20:02] Now, if I have my supplies cost … It’s really hard to figure out supplies or your business expenses for a pattern. I would likely say 50 cents would be my business expenses for a pattern. That would be basically the time I put into it. I’m dividing that out between all of the patterns I’m ever going to sell for this product. So again, it’s really hard to figure out. Someday, maybe we’ll put together a calculator for that. Say, “If I sell a hundred patterns, then my business fees for tech editing and my time are this.” But I don’t have a calculator for that right now. But I’m just going to say 50 cents per pattern is my basic business expenses. So then it comes down here. My net profit is $3.50 without offsite ads or $3 with offsite ads. So that’s not that big of a difference.
Pricing Products on Sale: How Low Should You Go?
[00:21:05] So it’s important to recognize when you put your products on sale–this is just as an aside. If I’m going to put this product on sale for $1, which a lot of people do to try and get some traction with that product. But I put that product on sale for $1. Look down here. It’s actually costing me money to sell that item. This is very important to recognize. Based on the Etsy fees, it’s costing you money. So I would never suggest putting an item on sale for a dollar unless you have a strategy behind that, unless you’re going to monetize those customers in another. $2, at least you’re making 80 cents or 60 cents on that pattern.
[00:21:52] But again, it’s just important to recognize exactly all of the fees that you’re paying. And I’m not faulting Etsy. I don’t love their fee structure. It would be awesome if they just had a flat fee and they didn’t take such a percentage of your products. You can see here, the total fees are 32% here, or 44% here. That’s not awesome. And here I’m getting less than 50% of my purchase price. That’s not great. I don’t love that. But they’re a business and businesses make their own decisions. Again, if you don’t like it, you can find …
Selling from Your Own Website
[00:22:35] Of course, I would recommend that you create your own website anyway and you drive as much traffic to your own website as possible so you are mitigating these fees. There is a cost to having your own website. But ultimately, in the end, it’s usually cheaper than selling on Etsy. So if you drive all of your own traffic from your website, from your blog, and all of your marketing–you drive it to your own website so you don’t have these fees–and you just let Etsy sell to their customers to be before coming to their site, then you’re going to be saving money in the long run.
[00:23:10] So I always think that is a really great model to use. So I suggest starting off on Etsy so you can get traction and you can benefit from their large customer base. And then over time, start your own website, either on WordPress or Shopify or Squarespace. Any of those places are a great place to start selling products on your own so that you don’t have to deal with these fees. So that is what I suggest.
[00:23:39] Now that I know that this spreadsheet was broken, which is ridiculous because I tested it so many times … It’s just good to know. And I will redo that and get that to anyone who has already purchased–or I’m sorry–who has already subscribed and received this. I will re-send this out to my entire list. So if you’ve requested it, you’re on my list, I will send it to you, the updated version. So I’ll get that to you in just a few moments.
Q&A: What About 50% off Pattern Sales?
[00:24:08] So let me come back here and check out if you have questions. “I see sometimes pattern sellers would have 50% off sales.” Yes. So then they would be selling, in my case, the pattern for $2.50. And then let’s just come back here. So if I did $2.50 here, then you can see that I would be keeping … About 40 to 50% of the profits would come to me. So I’d be making about about a dollar on each pattern, which again, not awesome. But if you have a different strategy–if your strategy is to reach more customers, if your strategy is to boost that pattern either in Ravelry or on Etsy by getting all of these sales to start off with–then you might want to take this as a loss leader and then focus your marketing strategy as that grows. And hopefully some of those customers will create projects in Ravelry or share their photos on Instagram and get other people to go and buy that pattern.
Wrapping Up
[00:25:23] Just a few ideas, just some help to try and help you see–specifically looking at the analytics of exactly how much you’re paying every time you’re making a sale on Etsy. I hope that helps. Let me check. I don’t see any more questions. So I’m going to go ahead and update this and get this out to my list. And if you have any questions, leave them in the comments. And I will be back later to check on those Again. I hope that you will join me in Loveland, Colorado, this coming week. Thursday through Saturday [April 21-23, 2022], I will be at the Embassy suites at the marketplace. And I would love for you to stop by and say hello.
[00:26:05] And also something big is coming. The Crochet Business Summit is coming in about a month. Beginning very shortly, you’ll be able to register. If you want to get on the waitlist, feel free to do that. You can do that at CrochetBusinessSummit.com. It’s going to be an amazing time. Lots of learning, lots of fun, lots of laughs and lots of prizes. And I hope you’ll join us. Okay. I’m going to let you all go so that I can get some things done before I take off for the week. I hope you have a wonderful week. I hope you make lots of money and I hope that you love your business even more. All right. Take care.
