It’s been a couple of months since I began selling art prints in my Etsy shop February Stars Art. Today, I thought I’d share 10 things to know before starting an Etsy shop.
What Is Etsy?
First, in case you aren’t aware, Etsy is an e-commerce website with a focus on craft supplies, handmade and vintage items. It allows individual makers to set up online shops and sell their handmade goods.
As a buyer, it’s a great place to shop if you are looking for unique items and shopping through Etsy is an easy way to support small businesses.
10 Things to Know Before Starting an Etsy Shop
Getting started selling is simple. However, there are a few things worth knowing before you open your shop.
Below are 10 things I have learned as a new Etsy seller. If you have anything to add, or any tips for me, please leave them in the comments at the bottom of this post.
1. It’s Free to set up An Etsy SHop & Costs Very Little TO Get Started
Getting started selling on Etsy is a straightforward process and is completely free. There are no charges to open a shop.
To begin, you simply need to sign up for an Etsy account and then click on the “Sell on Etsy” link.
Next, you set your preferences (such as your language and location) and name your shop. You can then add your shop policies, an about page and finally start adding your listings.
To list one item only costs $0.20 (+VAT is you are a UK seller), so again, getting started is affordable.
You can find more information about setting up your shop here.
2. That said, The Seller Fees May Be More Than You Think
Now this one is my fault but I have to admit that the fees Etsy take confused me initially. Naively, I had thought that Etsy took a 5% transaction fee on the listing price and shipping costs.
It turns out that they take more than 5% of your profits though. As a UK seller, and as I understand it, the fees work like this:
Transaction fees
- 5% transaction fee on the cost of the item (+VAT)
- 5% transaction fee on the cost of shipping (+ VAT)
Etsy Payment Transaction Fee
- 4% + £0.20 (+ VAT)
This rate is different depending on your location. You can find more information about this here.
Relisting Fee
If you have your listing set to auto-renew, you will be charged $0.20 (+ VAT) to relist it. This fee applies to multi-quantity listings too.
An Example Of Etsy Fees
To help you understand all of the above better, here is an example.
Say you are selling an item that costs £20 + £5 shipping. The fees are as follows:
- $0.20 (+ VAT) initial listing fee=~£0.16 (+£0.03)
- 5% transaction fee on the cost of the item (+VAT) = £1 (+ £0.20)
- 5% transaction fee on the cost of shipping (+ VAT) = £0.25 (+ £0.05)
- 4% + £0.20 Etsy payment transaction fee charged on listing price plus postage (+ VAT) = £1.20 (+ £0.20)
- $0.20 (+ VAT) auto-renew relisting fee = ~£0.16 (+£0.03)
The total cost of fees is £3.28, which is 16.4% of the cost of the item (£20). Which means your gross profit is £16.72.
From that, you subtract your costs to obtain your net profit.
(I’m not including shipping here as this is paid for by the buyer and isn’t something you should profit from).
3. State Sales Tax Can Be Confusing
In addition to the above fees, if you sell an item in the USA there are taxes paid that are dependent on the individual state (more info here).
This isn’t something you need to set as an individual seller because Etsy automatically calculates, collects and remits sales tax on your behalf.
When you make a sale in the USA the buyer is automatically charged sales tax on top of the item and shipping cost.
Despite this being a tax that Etsy charges and collects themselves, it’s still included in the total amount for the sale in your Etsy account.
In my experience, this is problematic because it makes keeping your accounts correct a little challenging. Here’s why.
Why Sales Tax Is CHallenging
This is a made-up example but say you have an order that comes to £50 and the sales tax is £5. This will shows on your Etsy payment account as a sale amount of £55.
Next to this, the 5% transaction fee will be deducted under ‘Fees & Taxes’. In this example, this would be £2.50.
Yet the ‘Net’ column will show as £42.50. Doesn’t add up, right?
This is because Etsy deducts the sales tax from the total sale amount but nowhere in your payment account or CSV files will it show you the sales tax amount.
You are simply left with sums that don’t add up.
As it stands, the money for the whole order goes to you and then Etsy reclaims the sales tax. For some reason, they just don’t show any information about sales tax on your payment account.
I fail to understand why Etsy doesn’t add the sales tax into the ‘Fees & Taxes’ that show on your account.
It’s an annoyance but the easiest way to find out the sales tax amount for a sale is to make sure you are sent a copy of the customer receipt.
4. Make Sure You Price Your Items TO MAke A Profit
When it comes to pricing your products you want to price competitively but you have to ensure you will make a profit.
To ensure you price your items correctly you must work out the item cost before you begin selling.
You will need to consider the cost of your labour plus the cost of materials. And, don’t forget to factor in Etsy fees and the cost of the packaging you will need to ship the item.
Not only that but be sure to think about coupons and sales. Will you still make a profit if you offer a discount coupon or hold a sale?
Whatever profit margin you decide on, don’t undervalue yourself.
5. Shipping Profiles Can Be A Bit of a Headache
This won’t be relevant to every seller or every item sold but I’ve found the shipping profiles on Etsy to be a bit of a headache when it comes to selling multiple items.
Here is the UK, Etsy does not offer calculated shipping.
If you sell different sized items or variations of the same item, setting up the shipping profiles can take a bit of working out.
The way shipping works is that you set the amount to sell one item and then add a second price for any additional items.
This can work out fine. But, if it’s not worked out correctly it could mean buyers are paying too much for shipping or that you end up losing out.
Ideally, it would be best if you could set the shipping amount for 1, 2, 3… etc. items. This means you could always charge accurately. But Etsy doesn’t currently allow this.
Furthermore, if you sell variations of the same item setting up shipping isn’t ideal either.
For example, down the line, I want to sell different size options for my artwork. However, the cost to send a 5×7″ print is much lower than it is to send an A3 print. And, an 8×10″ print is somewhere in the middle.
Yet I can only set one price for each listing. It doesn’t make sense to have different listings for each size of print (as this doesn’t make for an easy shopping experience).
So, this means I will have to set one price for the shipping and then adjust the cost of the items themselves to account for any differences.
As I said, it isn’t ideal. But doing this will ensure customers are paying the correct amount for the item + shipping and neither of us loses out.
6. Learn SEO (Search Engine optimization)
I’m learning that it’s important to treat Etsy like a search engine. This is admittedly a work-in-progress for me as I learn best practises for Etsy.
So far I have come to understand that your listings need to be well optimised to show up when buyers are searching.
Etsy is highly competitive. Getting your SEO right is what will help to get your listing seen.
If you listing SEO is poor, you can guarantee hardly anyone will find your listings.
Etsy SEO Basics
My understanding is that you need to find keywords that are appropriate for your listing and include them in your title, description and tags.
Keywords are essentially words or phrases that describe your item.
When thinking about keywords to use, there are a couple of things to consider. Firstly, they need to be terms that people will use when searching.
A simple way to find keywords is to begin typing into the Etsy search bar to see what auto-populates. These are terms that people are using and typing into the search bar.
However, if you want to succeed it helps to know how many people are using those search terms.
Websites such as Marmalead and Etsy Rank can help you with this.
With regards to SEO, it is also worth reading about it in the Etsy Seller Handbook.
And, remember, getting your SEO spot on means your Etsy listing has the potential show up in search engines too.
Etsy Values Recency
It’s also worth taking into consideration that, as part of SEO, Etsy likes recency. That means if you sell an item and it auto-renews it will get a little SEO boost.
I believe Etsy also favours shops who consistently add new listings too.
7. You Need To Promote Outside Of Etsy
SEO is super important but, given how competitive Etsy is, it’s also necessary to promote your shop and listings elsewhere.
Work on building up a social media presence and promote your listings there (something I need to get better at!). And, don’t forget to utilise Pinterest.
Driving traffic to your Etsy shop from other sources will increase your chance of making a sale.
8. Keep AN Accounts Spreadsheet from the Start
In the UK, you need to register as self-employed once you have earned more than £1000.
Despite that, it pays to keep a spreadsheet of your income and expenses from the get-go as this will help you further down the line. Keep all of your receipts too.
You can easily do this in Excel but there are also services like QuickBooks to help you. QuickBooks has the added benefit of syncing with your Etsy shop.
9. Be Patient
It will take time to gain traction with your Etsy shop. Don’t expect to be an overnight success and appreciate it’s going to be hard work to make sales.
Don’t be hard on yourself if the sales don’t come rolling in and be patient. Keep adding to your shop, promoting it and continue reading about ways you can improve.
10. Just Get Started
With all of that said, start with what you have and just get going! Don’t put it off waiting for the right time or for everything to be perfect.
It’s absolutely okay to just begin and learn as you go. It’s what I’m doing!
Are you an Etsy seller? What would you consider as things to know before starting an Etsy shop?
Let me know in the comments below!
Hi, thanks for this article it helped me understand more about the Etsy sales tax. At the moment I include the sales tax that Etsy charges for some customers as an Etsy Fee in my expenses.
Do you know what happens if we refund a customer who paid sales tax? Does that sales tax part get paid back into the Etsy payment account?
Thanks
Greg