How To Price Your Etsy Products For Profit
If you're here today, it likely means that you fit into one of two scenario. Either you're thinking about setting up an Etsy shop and you want to know how much it's going to cost you to get started, or you're an active Etsy seller who is feeling like you're not making the money that you should be on Etsy. No matter which of these scenarios fits your current situation, I'm here to help break it down.
Over the years, Etsy fees have changed time and time again, which has caused a lot of sellers to get pretty upset. But let's be real for a minute. You have every right to feel upset by Etsy's fees, but it's important to note that as of right now, Etsy is still the most affordable platform to host your products online, even with the fees that we'll be talking about today. And I'll be sharing an epic secret that will help you to price for profit with all of those fees in mind.
How to price items on etsy
First of all, it's important to note that starting an Etsy shop is completely free, right? When you sign up, you'll be prompted to enter your bank information so that Etsy can pay you, and you'll also need to provide your tax information. In the US this will be an EIN or your Social Security number if you're a sole proprietor, which will apply to most newbie business owners unless you register for an llc.
However, to list new items on Etsy, you'll be charged a fee of 20 cents for each item that you list in your shop and your listings. Renew every four months, at which point you'll be charged again, so 20 cents per listing for four months. If you enroll in Etsy's automatic billing, this will deduct automatically from your account, but you can also disable auto billing to pay your bill yourself. Just be aware that if you miss a payment, your shop will likely get deactivated.
Next, you have your Etsy transaction FEES, which are 6.5% of the price that a customer pays for your items, including the amount that you charge for delivery, any paid gift wrapping services or paid variations. This fee is only charged to you when a sale is made, so you'll need to price your items with this fee in mind.
It's also important to note that if you sell from the US or Canada, the transaction fee will not apply to sales tax, goods and services tax, or harmonized sales tax unless you have included those charges in your listing price.
Next up are your advertising and promotional fees which will be optionable for most newbie sellers. Basically, if you use Etsy ads, you can select a daily maximum budget to spend on ads for your products which will display on Etsy search pages. So what you spend is completely up to you.
You also have the option to advertise through Etsy's off site ads, which are ads that run on platforms like Facebook, Pinterest and Google. For offsite ads, fees are only charged to you if one of your ads directly resulted in a sale and Those fees are 15% of the total sale.
With off site ads, it's important to note that if a buyer clicks on one of your ads then orders from your shop within 30 days of that click, you'll still be charged an advertising fee of 15%.
Now here's where it gets tricky for bigger sellers. If you make less than US$10,000 on Etsy within a 365 day window, offsite ads are totally optional and can be turned off. But if you make more than US$10,000 on Etsy within a 365 day window, you are required to participate for the lifetime of your shop. Even if you have one year where you make over $10,000 and then the following year you make significantly less, you're still stuck with them for life, which really sucks.
But on the bright side, sellers who are stuck with the mandatory off site ads fees get a discount. So rather than a 15% fee per sale, you' be charged a 12% fee per sale.
Lastly, if your connected bank is in a location where Etsy offers Etsy payments, you'll be forced to use their Etsy payment system to handle the transfer of money from your customer's bank account to your bank account.
In the US this fee is 3% plus a flat 25 cent flat fee per order. But if you're outside of the us you can see this list in the picture below to find your own country.
Now that we've covered all of Etsy's fees. Let's break it all down with a quick example. Then I'll share a cool tool with you that will help you to price your items for profit. So let's say that you're selling a mug on Etsy for $15 with $5 shipping, making the total $20. You'll be charged a 20 cent listing fee when you list the item for sale.
Then, when the item sells, you'll be charged a 6.5% transaction fee, which equates to $1.30 on your $20 sale. Then, assuming that you're using Etsy payments, you'll be charged whatever your country's bank fee is. For the US that fee is 3%, plus the flat fee of 25 cents, which will equate to 85 cents.
How much does Etsy take out on a $20 sale?
In the US Etsy would take a total fee of $2.35 total. And if all of this still feels super confusing and you want to ensure that you're also being paid appropriately for your labor and materials, I have an amazing tool that can help.
Using Erank Profit Calculator, you can ensure that you're making the money you deserve on every single purchase by factoring in things like the price of your item and shipping, any current coupons that you may be offering, and the cost of labor, materials and that 20 cent renewal cost of your item. You'll also be able to factor in fees and taxes in order to generate an estimated profit margin for your item.
Don't like the number that you see on screen? Charge a little higher until you get your pricing just right. And if you don't already have an Erank account, you can sign up for free with this link up here. Because though many of E Rank's SEO tools and features are limited for only paid users, the profit calculator is currently available for all users. So sign up for a free account and start experimenting.
When it comes to selling on Etsy, offering the lowest possible price isn't the objective, especially if you're a handmade seller. Compete in quality, compete in branding, compete in customers service. But never compete in pricing. Otherwise, you'll quickly find yourself in a race to the bottom. And with a little science, a lot of data, and some help from a trusted Etsy expert, you'll be well on your way to Etsy success.