Calculating Etsy Fees

[TallTayl]

Holy smokes, figuring out etsy fees is like some magical black hole. I knew things went up, but I misread by how much.

 

the current fee structure is:

5% of total purchase including shipping

3% + .25 if you use etsy to pay. (This is similar to paypL or credit card transaction fees)

 

So a little exercise... 

someone ordered a single item priced at $3.55 from my shop. Here’s a breakdown of the transaction.  It takes 4 line items for them to calculate their cut.

item price: 3.55

shipping: 3.78

total transaction: $7.33

 

1) the listing fee. $.20

2) payment processing transaction for the sale: $.48.  this is the financial transaction of 3% + $.25. Should be $.47.  (I read something about their skimming of creative rounding to the tune of millions recently.)

3) “transaction” fee of $.18 on the sale this is 5%

4) “transaction” fee on shipping: $.19 this is also 5%

 

total fees: $1.05

COGS: .50

shipping packaging, etc. $.40

total costs $1.95

profit: $1.60

After I pay myself for the time to process there’s no profit. Transactions take a certain amount of time to complete. From printing the order, picking and packaging it’s easily 10-15 minutes.  If something needs to be made to order, that figure climbs fast. Let’s just be generous and say it took me 10 minutes total. I will pay myself $15 per hour, so $.25 per minute, x 10= 2.50 in order processing time. This equals a loss. 

 

Let’s take a $10 candle item that fits under first class limits in the US

item price: 10

shipping: $4.55

total transaction: $14.55

 

1) the listing fee. $.20

2) payment processing transaction for the sale: $.69. This is the financial transaction of 3% + $.25. 

3) “transaction” fee of $.50 on the sale - this is  5%

4) “transaction” fee on shipping: $.23 this is also 5%

 

total fees: $1.62

COGS: $3 generous estimate for a cheap jar, wax, FO, label, wick. 

shipping packaging, etc. $1.00

total costs $5.62

profit: $4.38

the same 10 minutes worth of labor adds $2.50, so profit drops to $1.88.

 

Yikes.

 

A business needs cash flow to survive. I still will need to pay fixed expenses like insurance, along with transactional sales & use taxes and income tax. Without extreme volume sales and essentially automatic robotic order processing there’s no way a small business can be viable using the typical pricing model of 3x cost to price for retail and 2x for wholesale. 

 

 

 

[Sponiebr]

I know... I KNOW... SOMEHOW Paypal keeps managing to skim a few cents off of EVERY transaction I make. Here's a tip: It's NOT 2.9% of the total transaction it's more like 3.2%... But THEY SWEAR it's 2.9%, but I can attest that I'm short $.07-$.25 on EVERY transaction EVEN when I include the 2.9%+ $.30...

I'm in the WRONG eff'n business the real money seems to be in cheating people and calling it a service.  


Meh, just ignore me...

I'm sick and irritable... BUT... IAJS...

Sponiebr 
The Executor of Bad Ideas and Sundry Services. 

 

[NightLight]

It’s not just Etsy. All the platforms have mega fees. And add in advertising costs! 

Most sellers on Etsy don’t have ave a clue to price correctly. You can sell cheap and hope you do mega volume or price what you think

your stuff is worth. So get volume sales going or raise prices.

The way to get people to buy higher priced items is you have to have a niche and be better than the rest.

Or sell cheap and hope for the best.

To make the most profit is making a product cheaply, quickly with high markup.

[TallTayl]

“Hope is not a strategy” was a mantra learned in a former corporate life.  Hoping to sell enough volume at lower price points to cover costs sets us into a different customer group. I would rather have 10 excellent customers than 1,000 mediocre. It costs money to maintain customers. Those low dollar sales cost more to process. We see that realization at suppliers, especially fragrance labs. Minimums rise and annual order levels are set higher each year. 

 

Totally agree about niche markets. It’s where my business’ life turned around. There are people on etsy that make a nice living through their story (packaging, descriptions, photography, etc.). It takes quite a lot of skill to get to that point. 

 

If using etsy to cultivate a new customer base then 5% might be pretty cheap in the long run. It’s easier to sit at home waiting for the cha-Ching of an etsy sale than to haul a tent, displays and product to a farmers market. Likewise it’s cheaper than buying ads and google priority. Then again, you get what you pay for.  In etsy it is difficult to be discovered, so you may never become popular. 

 

The etsy fees were a deciding factor for a client’s new online presence. She has a worldwide customer base that she would bring to Etsy, not vice versa. In this case we decided to just plug BigCommerce into her Wordpress site and keep that 5% in her pocket. I’ll be transitioning too,  keeping minimal stock listed at etsy in favor of my own BigCommerce shop. This is tricky since I discovered many etsy customers prefer to stay within etsy, even if prices are decidedly in their favor to buy direct. 

 

This coming season will be interesting.

 

[Quentin]

2 hours ago, NightLight said:

Most sellers on Etsy don’t have ave a clue to price correctly.

...and it's easy to see why. I've been browsing through the Etsy forums, and I've seen comments just like the ones I'm seeing posted here. Etsy is incredibly confusing. Everyone has their hand in the till. In the short time I've been on Etsy, I would have to say I've been very disappointed and frustrated. @TallTayl mentioned Etsy Pay. It seems like they automatically set me up on that without offering any other options. On top of that, my account is integrated with Square. Is Square getting a cut also? I don't know. Other than Etsy payments, what are the other choices? If I dropped out of Etsy's payment system, would the customer be able to buy from me using another purchase method? I have no idea what's happening regarding my money when it comes to Etsy. None whatsoever. @TallTayl alluded to the fact that Etsy takes a cut of the shipping as well! How can they justify that? Shipping isn't revenue. I'm beginning to wonder if I need Etsy at all. 

[Jenni Wix]

I'm mostly interested in Etsy for getting my feet wet, add the fact that people likely trust payment through them, and stream lines a shop for me.   That makes it worth it for now .

[TallTayl]

2 hours ago, Quentin said:

@TallTayl alluded to the fact that Etsy takes a cut of the shipping as well! How can they justify that? Shipping isn't revenue. I'm beginning to wonder if I need Etsy at all. 

Yes, they apply a 5% commission per transaction which encompasses the item sale price and the shipping charged.  I get why... prior to the change of policies recently, people would artificially inflate shipping to bypass paying any fees.  A “free” item with shipping of $100 shorts Etsy. They are, after all, a business. 

 

Etsy is nice for people who have not cultivated a following. New customers I would otherwise never reach find me through etsy. 

 

 It’s also marvelous for someone who is not technically savvy since they host, back up, update, etc. everything.  5% is cheap as chips compared to the carts like Shopify or BigCommerce which cost several hundred $ every year whether you sell anything or not. 

 

In the end, a combo approach using a few items on etsy and your own web site/cart will seem like a good fit for those who stay in business for the long haul.  Why send your customers cultivated by you over to etsy where they can be distracted by other sellers? 

[TallTayl]

50 minutes ago, Jenni Wix said:

I'm mostly interested in Etsy for getting my feet wet, add the fact that people likely trust payment through them, and stream lines a shop for me.   That makes it worth it for now .

Definitely!

 

as your sales grow you may evolve into your own site where you can control competition and costs. 

[jerry]

Etsy seems to be following the trend of all credit card processing companies - raising their fees. It is tough to stomach how much the cost of doing business is increasing and revenue (different service field, not products/candles or soap) is decidedly not. But these thread/conversations are so good so you'll to have your eyes wide open if you want to start selling product...

[TallTayl]

Etsy was so much simpler to deal with before they went public. 

[NightLight]

Etsy isn’t the world without going into detail. And mind you every summer they love to let their techs run wild and run stupid tests costing you money, so you better spread your wings in selling.

 

Your new mantra 

 

Multiple Streams of income to acquire your own customer base.

 

If you only sell on Etsy, you’re doing it wrong. You must have your own legit web presence.

Your own website can give you your own identity and you own the customers. Yes, when Etsy started in with The shenanigans with the past CEO it really screwed itself, Sellers and customers.

 

Fact. You will pay multiple fees everywhere so factor in those prices and shipping costs.

[Crafty1_AJ]

Factor in the Amazon mentality, and e-tail customers increasingly expect free shipping and 2-day delivery, even if you're a small business.  If I charge $10 for a candle and $5 for shipping, the customer will choose $15 for the same candle with free shipping, even though the bottom line is the same.  It's the "free is better" mentality.  I've been testing that theory with local soap sales.  I can say "25% off on 4" and sell OK.  But when I change to "Buy 3, Get One Free" ... guess what?  I sell more bars of soap.  

[TallTayl]

It’s so weird isn’t it? I do sell a lot of the 3 for $X and 4 for $Y, but on one product (some tiny tapers) it makes sense to do a buy 5, get one free. And I make a big deal to make sure that they’ve got their free one and people are thrilled.

[MilosCandles]

This is one of my stupid secrets about etsy.  Last year I raised my prices a little higher than I wanted to.  BUT then etsy lets you run a sale anytime you want at no charge.  So I was always running a 10% off sale.  When your item shows up in the search results it crosses out the normal price and shows a sale price.  SHHHH do not tell too many people.