Etsy Business Model Explained: All About the Online Artisan Marketplace

Founded in 2005, Etsy was created as an eCommerce marketplace with a personalized touch. Handmade gifts, vintage collectibles, and craft supply all sold by indie artists and hobby collectors.

In 2021, there were approximately 7.5 million sellers and 96 million active Etsy buyers. Nearly 90% of the sellers on the platform are women. Etsy has increased its revenue year after year since its IPO (initial public offering) in 2010. Etsy earned $2.3 billion in 2021 alone.

Let’s dive in and take a look at what Etsy is, how it makes money, and what online marketplace alternatives exist.

What is Etsy?

Etsy is a global eCommerce marketplace that features artisan handmade goods, vintage items, and craft supplies. Like Amazon and eBay, various goods can be purchased on the platform, from handmade cookies to personalized art to jewelry-making supplies.

However, Etsy stands out because it caters to consumers who value handmade, one-of-a-kind, custom items. Etsy shop owners often personalize packaging, send a hand-written note, and will converse with the consumer via the Etsy messaging system to further customize the product to the customer’s liking.

How Does Etsy Make Money?

Listing Fee

Each time an Etsy seller lists an item on the Etsy marketplace, the seller agrees to a $0.20 listing fee. The $0.20 listing fee is good for four months or until the item sells. If the seller wants to re-list the item after four months, Etsy collects an additional $0.20 to make the listing available for sale.

For items with multiple quantities, you can set the listing to auto-renew every time a multiple quantity item sells. Doing so will automatically charge a $0.20 listing fee after a successful sale. The listing fee is unique to Etsy as most online marketplaces, such as eBay, Mercari, Poshmark, etc., do not charge a fee to list the item.

By charging a listing fee, Etsy can keep its overall inventory manageable and fresh for users who routinely browse the site. The listing fee also encourages sellers to be an active part of the community, market their goods, and put items on sale if they are not selling quickly.

Commission Fee

Every time an Etsy seller makes a sale, Etsy takes a 6.5% commission fee. The 6.5% fee includes the item’s price, shipping, and gift wrapping. The commission fee is fixed at 6.5% regardless of the item’s price.

Etsy Ads Fees

Etsy offers both in-house and offsite ad opportunities. Shop owners can choose a max budget for ads to promote a single listing or their entire shop. In-house Etsy ads are charged regularly with a pre-determined minimum (guaranteed not to exceed the maximum) and are automatically deducted from a shop owner’s payment account.

Etsy purchases offsite advertising from partners and search engines. If the ad features your listing, a buyer clicks on it and subsequently places an order from your shop within 30 days of the click; Etsy shop owners will be charged an advertising fee.

Your sales determine the fee you are charged over the prior year.

• The standard fee is 15% on attributed orders (for shops that have made under $10,000). Shops that have made under $10,000 can also opt out of offsite advertising.
• Shops that make over $10,000 in a calendar year are assessed a 12% fee.

Etsy Plus Subscription

Every Etsy seller has a virtual shop to place their products in. To increase sales, Etsy allows shop owners in good standing to sign up for Etsy Plus. Etsy Plus is a monthly subscription ($10 per month + applicable sales taxes) that offers selling tools.

Monthly subscription fees are auto-renew and added to your payment account on the same day every month. All fees are set in your domestic currency and based on location. Etsy sellers can cancel the subscription at any time, with the understanding that their virtual shop will be downgraded to standard after their subscription is over. For example, if your billing day is on the 6th and you cancel on the 10th, your last day of Etsy Plus is the 6th of the upcoming month.

Etsy Plus members receive the following benefits:

15 free listing credits per month ($3)
$5 in Etsy Ads credits

(Above credits must be used in the monthly cycle or expire. There is no rollover of credits) Other benefits include free .store domains and 50% off .com, .net, and .ca domains for the first year through Hover.com.

Pattern Fee

Etsy’s Pattern tool helps you create a personalized website. Shop owners can try the Pattern tool-free for 30 days. After the trial, a monthly subscription fee of $15.00 will be auto-billed to your account.

Pattern can be canceled anytime by clicking “cancel Pattern” from the Pattern settings on your dashboard or your payment account.

Currency Conversion Fee

Most sellers will list in the currency of their geographical location. If you decide to list in a different currency than your payment account, Etsy will charge a 2.5% currency conversion fee on every sale.

See also: 14 Most Influential Business Operators In The World To Inspire You

Etsy Alternatives

Etsy has various alternatives, from handmade marketplaces to personal shop websites. While each alternative has its fees and requirements, you will need to weigh the pros and cons before deciding which platform is right for you.

Amazon Handmade

Amazon Handmade offers a platform to sell handmade goods in a global marketplace. Amazon Handmade screens new sellers to authenticate the personalized experience.

Currently, you can be a seller when located in the following countries:

• USA
• Canada
• Mexico
• United Kingdom
• Germany
• France
• Italy
• Spain

All Amazon Handmade seller requests must be made through an application process. All sellers must have an Amazon Seller Central account before submitting their application for Amazon Handmade. The application process includes submitting your name, email, design and production methods, and pictures of your sellable goods. An existing website or social media site(s) can help expedite the application process.

To get approved to be an Amazon Handmade seller, you must be an independent maker (with fewer than 20 people working to make the products), Cooperative group, Non-profit Organization (NPO), Non-government Organization (NGO), or Social enterprise.

Once you have been approved by Amazon Handmade and approved for a Professional Selling Plan, using the platform’s virtual shop and listing products is free. There are also no transaction or processing fees. Once the Professional Selling Plan is on your account, you are also eligible for lower referral fees. Products as a part of Amazon Handmade have strict guidelines. For example, you are not allowed to use mass-production methods such as assembly lines, drop-shipping products, reseller products, digital products, food products, electronics, live plants, or craft supplies.

Fees:

• Professional selling plan $39.99 (if you are approved, you will no longer have to pay this fee after the first month)
• 15% referral fee for every sale (minimum $1.00 per item)

Big Cartel

Like Etsy, BigCartel was founded in 2005 and focused on the indie maker crowd. However, if the multitude of Etsy fees makes your head spin, you might be better off looking into BigCartel. The platform doesn’t take a cut of sales or charge fees. Simply pay a small monthly fee based on the size of your business and how many products you want to sell.

You can use one of BigCartel’s free themes to drag and drop your shop’s look. If you are comfortable with code, you can create a custom look. With big business tools like analytics, shipment tracking, inventory tracking, and automated sales tax, BigCartel does the busy work so you can focus on your art. BigCartel has three plans for sellers to fit any budget.

Gold Free plan

• Five products
• One image per product
• Free customizable themes
• Sell online and in-person
• Real-time stats
• Use a custom domain
• Offer discounts and run promos
• Shipment tracking
• Product option groups
• Sales tax autopilot

Platinum is $9.99 per month (no listing fees)

• 50 products
• Five images per product
• Free customizable themes
• Sell online and in-person
• Real-time stats
• Use a custom domain
• Theme code editing
• Google Analytics
• Inventory tracking
• Offer discounts and run promos
• Bulk editing
• Shipment tracking
• Product option groups
• Sales tax autopilot

Diamond $19.99 per month (no listing fees)

• 500 products
• Five images per product
• Free customizable themes
• Sell online and in-person
• Real-time stats
• Use a custom domain
• Theme code editing
• Google Analytics
• Inventory tracking
• Offer discounts and run promos
• Bulk editing
• Shipment tracking
• Product option groups
• Sales tax autopilot

Bonanza

Established in 2008, Bonanza is smaller than online marketplaces like Amazon and eBay, but the platform excels at advertising your shop and helping you build a relationship with your customers. Unlike eBay, Bonanza provides customer information so you can notify them of future items, sales, etc. Bonanza prides itself on being transparent so you can make more profits instead of larger marketplace customers that look for the lowest price (regardless of the seller).

Some of Bonanza’s standout features include its customer marketing tool to segment customers, seller stats dashboard to understand which products are the most popular, and web stores where sellers pay zero final value fees on all sales made through your web store inventory.

Fees:

• 3.5% fee for a direct sale through Bonanza
• 5.5% optional rate using Google Shopping Ads
• 9%-30% optional commission rate for opting into Bonanza’s Advertising Program

Shopify

Shopify is known worldwide for its fair pricing, robust features, and scalability. While most sellers start with a platform like Etsy or BigCartel, indie shops that exponentially scale tend to look for a platform that charges fewer fees and has more features.

Shopify offers five plan options for sellers starting out with enterprise solutions.

Shopify Lite $9 per month (no online store)

• Buy buttons on your WordPress, Squarespace, Tumblr, etc.
• Take payments on an iOS or Android device (POS Lite sales channels) anywhere you have an internet connection.
• Create custom order invoices

Basic $29 per month

• Online store with unlimited products
• Two staff accounts
• Up to four inventory locations
• Basic reporting
• 2.9% + $0.30 credit card rate

Shopify $79 per month

• Online store with unlimited products
• Five staff accounts
• Up to five inventory locations
• Standard reporting
• 2.6% + $0.30 credit card rate

Advanced $299 per month

• Online store with unlimited products
• 15 staff accounts
• Up to eight inventory locations
• Advanced reporting
• 2.4% + $0.30 credit card rate

ShopifyPlus (Enterprise) $2,000+ per month / 90 day initial set up

• Get up to 18% higher conversion with Shop Pay and a 60% faster checkout
• Future-proof with built-in AR, video, and 3D media on product pages
• Deliver localized shopping experiences with multiple stores, currencies, and languages for B2B and DTC
• Customize your checkout and offer advanced discounts and shipping rates
• Never lose a sale with unlimited transactions, products, and 99.99% uptime
• No migration charges

Storenvy

Storenvy creates an inviting place for sellers no matter what kind of indie art you make and sell. Top product categories hosting over 56,000 shops include handmade jewelry, housewares, recorded music, books, beauty products, and more.

Storenvy works by providing an online store hosted on the Storenvy platform. You are also given access to a commission-based marketplace.

The free Storenvy Store includes the following features:

• 20 free product listings
• Email tools
• Management tools
• 5-minute set-up tools
• Discount codes
• Apps to handle order fulfillment, inventory management, etc.
• Optimized for mobile

Optional paid plans include:

Artisan Plan $9.99 per month

• Up to 100 products
• No ads
• Free custom domain
• 25 discount codes
• eCommerce-based sales emails

Growth Plan $24.99 per month

All Artisan Plan features plus:

• Up to 500 products
• 100 discount codes
• Automated sales emails

Professional Plan $49.99 per month

All Growth Plan features plus:

• Up to 5,000 products
• Unlimited discount codes
• Customized sales emails

Additional features include selling internationally, fraud detection, and product ratings. Storenvy has partnerships with Printful, ShippingEasy, Packland, and Stitch Labs. Stores can currently accept PayPal and Stripe as payment. Like Etsy, Storenvy allows you to follow a store, watch a store, envy a product, and make collections of items to share on social media or for your private lists.

If you are new to selling handmade products online, you may find Etsy’s sales platform more efficient in getting your brand off the ground. Storenvy doesn’t pull in the traffic numbers that Etsy does, and you might spend more time getting your shop up and running.

FAQs

Conclusion

Most people have purchased a handmade item on Etsy. The platform is famous for its custom art, handmade gifts, and stellar customer service. It makes multiple billion dollars annually just by charging fees for listings, sales, and premium features. Selling on Etsy can blossom into a rewarding career. However, most sellers use Etsy as a way to afford their hobbies or as a side hustle. Practically every niche has a spot on Etsy and a community to welcome and critique your craft.

Etsy excels in the digital download category as they store the file on their server so the buyer can immediately download it after purchase. Other profitable categories include craft supplies, jewelry, home, personalized gifts, clothing, wedding, and spa products.

However, some sellers may find the complexity of multiple Etsy fees offputting and prefer a platform with a fixed monthly fee. Additionally, established businesses with an active audience may not need Etsy’s platform for long-term sustainability. Fortunately, there are many handmade marketplaces and shop-focused website services available. Sellers can narrow down a platform depending on what they would like to sell, the quantity, and the desired reach.

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Julie Thompson

Julie has a passion for small businesses. A personal finance and digital marketing expert, Julie has spent years working with international entrepreneurs, startups, small businesses, and ghostwriting for CEOs. She understands what makes a business successful, regardless of its size. Julie has written for Business.com and Business News Daily, and loves assisting people on their entrepreneurial journey.

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