Ok, I get it. We all hate change and Etsy keeps changing things. We all want to control our businesses and Etsy is making offsite ads mandatory for sellers who make over 10K (a massive trigger for control freaks). And we’re all confused, pissed off, ready to throw in the towel (well, some of us).
But, before we jump ship, let’s take a look at the numbers and see how Etsy offsite ads will impact your business so you can make an informed decision.
TABLE OF CONTENTS
What are Etsy Offsite Ads?
On Feb. 26, 2020, Etsy sent out an email with the subject line, “Introducting Etsy’s Updated Advertising Service” and the interenet almost crashed from the ensuing uproar.
The email explained, “Our offsite advertising service promotes your items on Google, Facebook, Instagram, Pinterest, and Bing. When a shopper clicks on an online ad featuring one of your listings and purchases from your shop within 30 days, you’ll pay a 15% advertising fee on that order. You’ll only pay an advertising fee when you make a sale.”
So, OK, well, Amazon Handmade takes a 15% cut of ALL sales, so it looks like Etsy is trying to get in on that action…maybe. Or, maybe they’re trying to respond to all the hate the current Etsy ads system is getting. Either way, they’re making changes.
The email included a link to the Etsy Seller’s Handbook that offered more details, including this, “If you’ve made more than $10,000 USD in sales on Etsy in a 12-month period you’ll benefit most from offsite advertising. So, you’ll be required to participate for the lifetime of your shop and you’ll get a discounted advertising fee.”
So, basically, if you made over $10K in the previous or any future 12-month period, you’ll be opted into this program and it will be mandatory for the lifetime of your shop, even if your profits dip below $10K. That adjusted fee will be 12%.
How Dare They?
Once Etsy announced this upcoming change, the predominant response was “How dare they change things and take away my control over my ads?”
And the internet went crazy with posts from “whatever” to irrational and incoherent rants telling customers to never, ever, ever, click on an Etsy ad.
(Ummmmm yeah, I don’t love the histrionics behind this one.)
Listen, I’m not here to defend or demonize Etsy. It’s their business, they can do what they want. I’m just, naturally, one of those go-with-the-flow kind of people who takes things with a grain of salt, makes adjustments to create a life and business I love, and moves on. So, you won’t hear much crying on this end.
Instead, what I can help you do is to take a look at the actual numbers to determine how this change might impact your business in the coming year.
The Impact to Your Business
OK, again, if you’ve known me for any time, you know I’m all about data-gathering. The truth is in the numbers, the answers are in the numbers, and your next best step is in the numbers.
So, let’s talk about the numbers.
I’ve created a little spreadsheet for my newsletter subscribers that you can download for free, just click that button, below. The speadsheet will do all the calculations for you.
Basically, the numbers you’ll need are:
- Your Etsy stats from last year
- Number of sales
- Gross Sales ($)
- Estimated percentage of sales impacted by Etsy ads
- From the Etsy email
- Your sales from ads divided by your total sales
- Or use 10% if you can’t work out an estimate
That’s it! With these simple numbers, we can figure out the impact to your business and make some decisions based on the results.
Let’s take a look at a hypothetical shop:
Sally sells handmade hats. Her gross sales last year were $6325.00 with a total of 253 total sales.
The Etsy Offsite Ads announcement email stated that 10% of her sales would, likely, be impacted by sales.
With a little mathematical magic, we can determine that for 10% of Sally’s sales (25.3), the cost for her to make that product will increase by 15% and her average sale is, currently $25.00 (again, math).
To keep the same profit margins, she’ll need to (hang in with me, the spreadsheet will walk you through all of this) increase 10% of her sales prices by 15% which means she’d increase from $25.00 to $28.75.
But how does she do that?
She doesn’t know which products will sell via ads and which won’t. Well, the simple answer would be to spread that increase across all sales. If 25.3 sales will increase by $3.75, that means her expected adspend will be $94.88.
With that adspend of $94.88 spread out over 253 sales, she’d need to increase the price of each item by $0.38.
The Action Plan
So, to boil it all down, if Sally increases her prices by $0.40 to $0.50 each she’ll be able to cover the cost of her Etsy Offsite Ads and any projected increase in sales from ads in the coming year.
Easy peasy, right? Hey, I know it sounds confusing, but I created this spreadsheet for you. Simply plug in your numbers and the spreadsheet will spit out a number for you.
What to do next
Well, I can’t really tell you how to respond to this bombshell (or firecracker, depending on how you choose to see things), but let’s look at some options:
Incorporate changes into annual adspend budget
This is the tack I’ll be taking. Look, (again, not defending, just trying to look at this rationally) I enjoy the ease of hosting a shop on Etsy and I kind of get what they’re trying to do. As a business owner, I want to make decisions that I feel are best for me, my business, and my customers. And I think Etsy is trying to do the same.
When I look at the numbers, for my business, I project that the impact of Offsite Ads will cost me $64. Last year, I spent $390 on Etsy ads. So, the there will be no impact or a positive impact to my annual Etsy ads budget.
For now, I’m going to leave things as they are and reevaluate once the offsite ads go into effect.
Adjust pricing to cover anticipated adspend
Based on the calculations of the Etsy Offsite Ads Impact Spreadsheet, I can cover the anticipated cost of this mandatory adspend by increasing prices by $0.03. Since I expect my business to grow year after year, I can cover the added expense of that growth by increasing this number to $0.10.
If, after offsite ads implementation, I find that the ads are cutting into my profits more than expected, I will move to this method of covering the cost.
Investigate other selling platforms
Sellers of physical products might investigate options like Amazon, Handmade at Amazon, and Ebay to sell their products. There are, also, many up-and-coming seller platforms – though I haven’t had time to delve into them so I can’t recommend any to you at this time.
Sellers of digital products (particularly, crochet patterns), can add on additional selling platforms like Ravelry and LoveCrafts to increase reach and minimize fees.
Start building a self-hosted site
Platforms like Squarespace and Shopify and plugins like WooCommerce make it easy to start your own shop. Sure, there are a lot of headaches that come with hosting your own shop, like taxes, conflict resolution, etc…but, as growing businesses, hosting your own shop makes sense for your long-term success.
In the end, Etsy is making changes. You can either pivot and adjust or jump ship. It’s totally up to you, your business goals, and your numbers.
The one thing you should not do, is panic, throw a fit, and complain publically to your customers…oh my gosh, how many of these ranting posts have I seen in your Facebook groups? Stop it!
We are not over-entitled teenagers who can’t think logically. We are all adults, business owners…crochetpreneurs.
By taking a look at the numbers, analyzing the data, and making rational choices for our businesses, we look like actual CEOs of our crochet businesses. How you behave in front of your customers when curveballs come your way will do a lot to build trust and create raving repeat customers….or customers who run away from the drama.
Ultimately, if you find yourself angry and responding out of that anger, you might take some time to ask what’s really going on. Most likely, you’re operating out of fear…fear that Etsy is stealing your profits, fear that you’re losing control of your business, fear that a $0.50 increase in prices will drive away customers.
I’ve said it before, operating out of fear is no way to run a business. Figure out what’s going on with you, address those issues, do the work, and your success is inevitable. You’ve got this!
Take a deep breath
With a sensible pricing strategy that incorporates business expenses (including adspend), the impact to your profits will, likely, be minimal.
Advertising is a good thing, wise businesses advertise, everything is going to be ok.
Price Your Products Like the Pros
Includes: the exact formula I use to price my products for maximum sales and profit while attracting my ideal customer.