Don’t Make These Pricing Mistakes!
It’s a fairly regular occurrence to see questions in the Etsy forums, or on social media, from new sellers asking about how to price a product on Etsy. Sometimes people mention they’ve sold a few items, and then realised after all the fees and their own costs, they’re only making a tiny amount, or worse, losing money.
So how do you price your product on Etsy to make sure you’re not only making a profit, but a decent enough profit that it’s worth your time?
Know your costs
If you’re selling a physical product you made, make sure you know how much money it actually cost you to create.
If you’re selling a print-on-demand (POD) product, make sure you know how much you’ll be charged from your POD company when a product sells. Note: if you’re an international seller you may have different pricing and may pay extra taxes or conversion fees when an order comes through.
You will also have to pay for packaging/posting, which depending on your listing may be covered by your customer, or will have to be taken out of your product cost if you offer free postage to buyers.
If you’re a digital download seller make sure you factor in any subscription costs you’re paying, or resources purchased, to make your products.
Etsy Fees
Take note of Etsy’s fees.
It costs US$0.20 to list an item for four months.
If you have multiple of a particular item that sells, the next will be listed for US$0.20 and reset the four-month time period.
When you sell an item Etsy charges 6.5% of the total price the customer pays (sales price, postage price, and price of gift wrapping if you have that option available and it’s chosen).
If you are an international seller, Etsy charges you your local tax required (eg 10% GST for Australians) on all their fees.
Optional (and sometimes mandatory) advertising fees.
Etsy has two advertising options you can take advantage of if you wish, and add to your costs.
On-site advertising. This is an optional cost. You can set a daily budget and select what items you want to be advertised.
You can’t set a price per click, so if you use on-site advertising, go slow and take the time to study what’s being clicked on and selling so you can factor in your advertising costs.
Off-site advertising. If you make under US$10,000 in a 12-month period on Etsy you can choose to turn on or off off-site advertising. If you turn it on, Etsy will advertise your products through social media and search engines, and any item you sell via a click to your shop, and for 30 days after to the same customer, they will take 15% of the total cost to the customer.
If someone clicks on an ad to another shop and buys from yours, you don’t pay, it’s only if they buy from your shop via your ad.
If you make over US$10,000, you’re automatically opted into off-site ads but pay a reduced fee of 12%.
Even if the next 12 months you make less than US$10,000 you will stay in the off-site ad program. Once you’re in, you can not leave.
The US$10,000 does not take into account sales you’ve made through their Pattern system if you’ve signed up for that (see below).
Other optional fees
Etsy has a website service called Pattern, where you can have your own website linked to your products in their system. It costs US$15 per month.
If you use Square to take payments in person, you can link it to your Etsy shop to help with inventory management. However, every item you sell through Square will receive a US$0.20 renewal or transaction fee.
As you can see, even though it’s advertised that selling on Etsy only costs a small listing fee + 6.5% on the sale of an item. It can add up and be a lot more than that.
Don’t forget to pay yourself
Make sure when you are pricing your products you’re taking into account all your costs and making a profit on top of that so you can pay yourself.
What would I do?
Personally, I wouldn’t bother with the two optional fees (Pattern and Square integration), especially if you’re just starting up. You can go all in and use everything Etsy offers, but you’ll just be wasting money.
On-site ads are only effective if you’ve got good Etsy optimisation to begin with, so take some time to figure out what works for the products you’re offering first.
Off-site ads are similar. Figure out what works in terms of converting views to sales, and make sure your prices are going to cover the higher fees. You will have some time before mandatory off-site ads kick in to work out if you’re charging enough to cover them, and you can always turn on off-site ads for a short while before they’re mandatory to see what items are more likely to get the clicks and sales.
Don’t race to the bottom
In a large marketplace like Etsy, it’s often easy to price match or price beat if you’re selling similar items to others. That’s the quick way to make a loss and become frustrated.
Depending on what you work out your profit to be, it might be advantageous to start off at a price point close to your competitors to get some early sales. But don’t be afraid to raise your prices over time once you get some traction.
Make sure you’ll be covering any extra expenses Etsy throws at you in the future.
Don’t stay ‘cheap’, because you’ll be seen as cheap, and some people find that raising their prices actually brings in more sales because price reflects quality.
If you’re wanting, or needing, to charge more than others selling similar, explain the benefits. Put your effort into your images. Etsy is notorious for hiding the description, so use an image spot to list why your product is superior and worth extra. Make people know buying your product over others is the best option.
All of Etsy’s fee information
To see all the information from Etsy about their fees, head over and read through their Fee information page: https://www.etsy.com/au/legal/fees/
Save yourself $8
If you‘ve been thinking of starting an Etsy shop and want to take the plunge. Feel free to use this code to sign up. Once you list your first item it will give both of us 40 free listings: https://etsy.me/3OWrSoP