Selling on Etsy can be a profitable business and a sustainable source of income. Just ask those who left their 9-to-5 jobs to focus on growing what started as a side hustle or a weekend hobby into a full-blown business and never looked back.
Some of these people didn't even have any business background, but they managed to figure out the key elements of success in reselling online. One of these key elements is pricing. Even if you only mean to sell on Etsy in your spare time or "just for fun," you still need to know how to price your goods right to make sure you're at least breaking even and not bleeding money and exerting time and effort for nothing.
Most sellers recommend a profit margin of 30% to 40%, leaving you with enough money to keep earnings and reinvest into your business. Having a healthy profit margin allows you to set realistic projections on your earnings on a short or long-term basis.
However, before you compute your margins, you need to factor in all of the expenses you incur in running your Etsy shop. Doing this gives you an accurate picture of how much money comes in and out of your pocket.
Quite clueless? We made a checklist to help you get started.
An Etsy Seller's Expenses
1. Inventory - This is a high-ticket expense that needs to be shouldered upfront. Since this article focuses on resellers and not on artists and crafters of handmade items (which Etsy was initially known for), inventory, in this case, involves the amount needed to acquire the used or thrifted items per se, as well as the incidental expenses. If an item needs special handling or minor repair, tuck in the price of having it altered or professionally cleaned. If you're selling items from thrift stores, include transportation costs.
Because inventory is an important expense that affects your pricing, it would help to work on establishing a good relationship with the thrift stores where you often source your goods for a shot to avail of special discounts.
2. Marketplace Fees - Compared with other platforms, Etsy charges sellers quite several fees, and although some are minimal, these can still add up over time. Be sure to factor in these fees in computing your prices!
Listing Fees - For every item you post for sale, Etsy automatically charges you $0.20. Note that this flat rate listing fee is charged even if the item doesn't end up getting sold.
If an item has multiple stocks on hand, you may opt to auto-renew its listing once it gets sold. You will be charged the same flat rate listing fee each time. The only difference is you don't have to repost it manually. Now, if an item has multiple varieties indicated in its listing, you will be charged $0.20 for every variety, even if the same buyer purchases them.
A seller is also charged a private listing fee of $0.20 for every item posted for a specific customer.
- Transaction Fee - On top of the listing fee is the transaction fee that costs 6.5% of the item's total sale price, including shipping and add-ons such as gift-wrapping.
- Processing Fee - There's a cost involved in using Etsy payments for your transactions, and if you're not mindful, these could eat up your profits. There's no standard fee, as it depends on the country where your bank account is located. For US sellers, it's 0.25 plus 3% of the item's total sale price.
- Paid Ads - Etsy has different ad options, some of which are mandatory. Your listings may automatically be enrolled in external ads with Etsy partners, and you will be charged every time a buyer purchases from your shop through those ads. The in-house ads on Etsy, on the other hand, are optional. If you choose to run ads, you'll have to set a daily ad budget of anywhere between $1 to $25.
3. Packaging - It's easy to overlook the expenses you incur in preparing your items for shipment and ensuring your buyers receive them in great condition. These may include bubble wraps, packaging tape, stickers, special envelopes or boxes for delicate items, ribbons, notecards, and branding elements that lend warmth and uniqueness to your items. If you are one of those sellers who like throwing in tiny treats like candies or trinkets, factor in the cost under this expense charge. Buy your supplies in bulk to save some bucks.
4. Shipping - While you aren't obliged to shoulder free shipping, consider offering it from time to time, especially on holidays or during the sale season; Just be sure to set a reasonable purchase threshold for buyers to avail of it. Buyers usually wouldn't mind adding more items to their shopping cart to qualify for free shipping rather than spending that money on the shipping fee.
Pricing tips for your Etsy listings
Now that you have a clearer grasp of your expenses, learn from the tips below to further guide you with pricing.
- Factor in the cost of labor. Take into consideration the amount of time and effort you put into working on your Etsy shop. If you have an assistant, factor in their salary.
- Research your competitors' price range. Look around the marketplace for an idea of how much similar items are priced. You don't necessarily have to set your prices lower, but aim to list competitive prices or offer free shipping.
- Review the performance of your listings. Look inwards - your shop data - for clues. Find out if a particular price range tends to get sold faster or if revenues are higher on the days you offer free shipping and similar helpful insights.
- Have a system for tracking expenses and income. Whether using high-tech software, a standard spreadsheet, or good ol' pen and paper, you must diligently track how much money comes and goes in running your Etsy business.
- Consider the discounts you offer on your promotions. When pricing your items, project scenarios for how much you will be earning from them if you eventually offer them at a discounted price. You need to ensure you will still earn a decent amount from it. Your profit margins may take a hit, but if these promotions lead to a significant increase in the volume of sales, it's still a winning situation.
Being on top of your reselling business
Pricing your items may be tricky at first, but as you gain more experience in selling, you will likewise gain insights and confidence to price correctly. It will also be easier once you figure out a system that works for you - and that goes not just about pricing but to other aspects of your venture as well. It would help to audit your work processes and see what can be further improved for efficiency. This is especially important if you also run businesses on other platforms.
With the help of the right system and tools, you'd be surprised at how much time and effort you could save by simply automating tasks. OneShop provides resellers the ultimate assistance in not just preparing your listings and cross-listing but also smart tasks like managing your orders across multiple platforms and even bookkeeping. Although OneShop isn't integrated with Etsy on marketplaces yet, you can readily experience its amazing service on other platforms such as Poshmark, Mercari, Depop, and eBay.
Trusted by thousands of resellers, OneShop can also benefit your online store. Don't miss the opportunity to grow your business with this superb automation service and enjoy a 7-day free trial. Sign-up here and take advantage of the benefits it can give you!