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Opening an Etsy Shop to Jumpstart Your Small Business

Woman artist whose business can benefit by opening an Etsy shop

If you’ve heard of Etsy, then you know it’s a place to buy crafty, one-of-a-kind handmade items. But you can actually find all sorts of other things on Etsy, from carnivorous plants to cupcakes. So, if your small business is looking to open its first online store and you sell anything that remotely qualifies as handmade or supplies for making things handmade, opening an Etsy shop might be the right strategy for you.

Of course, if you expect to be flooded by customers right after opening your Etsy shop, you’re going to be disappointed. Etsy says it hosts 1.8 million sellers on the platform. There’s an overwhelming amount of competition on Etsy.

So, to make your business successful, you’ll have to work offline too. Maybe get a booth at your local arts and crafts fair, farmer’s market, or even Renaissance fair and sell your products face-to-face. Or spread the word about your business through friends and family and their friends and family.

In all cases, use your Etsy shop as a place where people who have already heard of you can find you. And then buy from you.

Etsy is a well-known platform. It’s easy for small businesses to set up an online store. And it helps you with payment processing, taxes, and shipping. So, if your products fit within Etsy’s seller guidelines, this might be the perfect place for you to open your first online store and start selling.

So, let’s take a closer look at how to sell on Etsy.

Update 7-18-2022: We’ve updated this article to reflect a transaction fee increase Etsy made after this article was originally published. The fee went up from 5% to 6.5%.

What Can You Sell on Etsy?

According to Etsy’s Seller Policy, you can sell three main types of items on Etsy:

  • Handmade items. The item must be made or designed by you. You can use a third party to mass produce this item, but you have to disclose this fact. You’re not allowed to buy other people’s handmade items and resell them on Etsy. For more detailed information, here’s Etsy’s Handmade Policy.
  • Vintage items. All vintage items must be 20+ years old and be authenticated as such. For details on what kind of authentication is acceptable, see Etsy’s vintage items policy.
  • Craft Supplies. This is the only category where you can retail items made by someone else. Still, there are rules on what you can and cannot sell for crafting supplies. In fact, not everything you can find in crafting stores like Michael’s or Hobby Lobby is allowed. For example, you can sell blank canvases for painting but you can’t sell white t-shirts. This is because the t-shirts can be worn as-is while canvases must be further processed before it turns into a final, handcrafted product. For more detailed information, see Etsy’s Craft Supplies policy.

Despite these limitations, sellers seem to be able to sell a broad range of items on Etsy. As mentioned in the introduction, you can even find carnivorous plants on Etsy. Very likely, a lot of items are categorized as crafting supplies and be allowed onto the platform this way.

So, if in doubt, we recommend you search Etsy to see if similar items are already being sold on the platform. If so, then it’s likely that your product can be sold too.

What Are the Costs of Selling on Etsy?

Opening an Etsy shop costs you nothing. You’re charged a small fee when you put an item up for sale. You are charged another fee after you sell the item.

Selling Fees on Etsy

There are three ways Etsy charges you a fee for selling.

Listing fee

Etsy charges a small fee to list an item for sale. As of this writing, the fee is $0.20 per item.

A listing lasts 4 months or until the item is sold. When you list a replacement item, even when the new item is basically the same as the old/sold item, it’s another $0.20.

Transaction Fee

Once you sell an item, you’re charged a 6.5% transaction fee.

This fee is calculated by adding together the price of the item, the shipping, and any gift wrapping charges. It excludes taxes if you sell from the US or Canada but does include taxes if you sell from other parts of the world.

Payment Processing Fee

Etsy gives you a lot of ways to take payments from a customer. You can take credit cards, debit cards, PayPal, Apple Pay, Google Pay, and Etsy Gift Cards.

In the US, the processing fee for each payment is 3% + $0.25, but this rate can change if you’re a seller in another country. This is a fairly standard rate in the US for a type of credit card processor called third-party processor. So, Etsy isn’t gouging.

If you’re in the US or Canada, you’re required to use Etsy’s own payment processing service called Etsy Payments. You can choose to get payouts on a daily, weekly, biweekly, or monthly basis, as long as you meet the minimum payment threshold. Etsy Payments also has the right to set up a reserve or hold on your account if you have high chargebacks.

For more information about Etsy’s payment processing services and rates if you sell from other countries, see this page.

Types of Shops on Etsy

You can pick from two tiers of shops when opening an Etsy shop: the Standard shop and the Plus shop.

Etsy Standard

The Standard shop is free to set up. It comes with:

  • The Sell on Etsy app. You can manage orders, edit listings, and respond to buyer inquiries from the app.
  • Discounted postage for shipping.
  • Customizable shop
  • The ability to create a sale or coupons to drive sales.

Etsy Plus

The Plus shop costs $10/month. It includes everything in the Standard shop, plus:

  • More customizations when building your storefront
  • Highlighted listings when a customer searches for a product
  • Can buy a .com address at 50% off for the first year or have a 1 year free .store address for the first year. The domain is provided by Hover, which is reputable registrar. However, we think you can get a better deal elsewhere. We absolutely think you should have your own website off Etsy, but you don’t need to buy the Plus package to do it.
  • Mailing list function. Be sure the mailing list belongs to you, so you can take it with you if you move off Etsy. This is important because a mailing list is an important marketing tool for your business.
  • 15 free listings/month and $5 credit for advertising within Etsy.

You can upgrade from Standard to Plus at any time, so you don’t need to pick between Standard and Plus when you first open your Etsy shop. For more information on the Etsy Plus shop, see this page.

Advertising Fees

You can advertise on Etsy itself or off Etsy.

Etsy Onsite Ads

You can choose to advertise on Etsy. Your product will stand out on an Etsy search result. Etsy controls the mechanics of how and where to place the ads. You only pay when someone clicks on your ad.

Etsy controls the precise price per ad, which can change based on the word searched and season (e.g. ads around Christmas time tend to cost more per click). You control how much you’re willing to pay per day and for how many days. Once you reach your daily budget, your ads stop until your budget resets the next day.

For more information on running ads on Etsy, see this page.

Etsy Offsite Ads

Esty partners with third parties to run offsite ads for its shops. You join this program by default, but you can opt out of the program if you sell less than $10k/month. The program is mandatory for Etsy shops that sell more than $10k/month.

You only pay for the ads if someone clicks on the ad. For those who sell less than $10k/month, you pay 15% of the order price. For those who sell more than $10k/month, you pay 12% of the order price.

The offsite ads run through large advertising platforms. These platforms include Google (search results and independent websites in Google’s ad network), Facebook, Instagram, Pinterest, Bing, and Etsy’s direct advertising partners (e.g., Martha Stewart, Buzzfeed, Better Homes and Gardens).

For more information on Etsy’s offsite advertising program, see this page.

Best Product Photo Formats for Your Etsy Shop

When opening an Etsy shop, you’ll need to have a business logo and various product photos. You can make the logo or take the photos yourself or hire a professional to do it for you. Either way, there are different file and size requirements for each type of image.

Etsy takes images in the following file formats:

  • .JPG
  • .GIF
  • .PNG

Each type of image also has an optimal format and file size. For example, photos of your products are best if they have 2000 pixels on the shortest side and be 72PPI in resolution. File sizes larger than 1 MB might be difficult to upload.

For other size recommendations (e.g. shop logo), see this Etsy page.

Etsy Will Help You Calculate and Pay Sales Taxes

If you’re in the US, then you usually have to collect a sales tax whenever you make a sale. Then, you’ll have to remit the tax to the state from time to time.

If you make an in-person sale, then it’s fairly easy to withhold the right taxes and then send the tax to the proper government authority. But if you sell to many different states, then keeping track of how much to charge and where to submit the sales tax can get very complicated, very fast.

Fortunately, by law, e-commerce platforms like Etsy must help you collect and then remit the sales tax to each state. In other words, you won’t have to worry about the mechanics of this very complex task.

Technically, not every state has this requirement for e-commerce platforms. But most states do. Here’s the list of states where Etsy will help you with sales taxes.

For the handful of states that are not on the list, you’re technically on the hook for collecting and remitting the sales tax. But a state might not have an internet sales tax, and you might not have to do anything. So, if in doubt and if the state you’re selling into is not on Etsy’s list, double check the state’s website to make sure.

You can Get Discounted Shipping by Opening an Etsy Shop

Because Etsy is a place where customers can order custom-made items, Etsy’s shipping procedure is a little different from most e-commerce platforms.

When you list a product on Etsy, you must include the shipping cost and processing time. By default, each order will ship within 30 days. You and your customer can agree to a longer shipping time, but the agreement must be in writing and preferably messaged through the Etsy website or app.

US merchants on Etsy can get up to a 30% discount on shipping. You’d have to use USPS and print your shipping labels through Etsy. If you do this, Etsy’s software will automatically mark your order as shipped. Otherwise, you’ll have to mark the order as shipped by hand. Here are some of the other benefits of shipping through USPS.

US and Canadian sellers can use Etsy’s shipping cost calculator. Otherwise, you must enter the accurate shipping charge. US sellers selling internationally can also purchase Global Postal Shipping service from Etsy.

For full information about Etsy’s US and global shipping policy, see this page.

Items You Can’t Sell on Your Etsy Shop

You can only sell handmade items, vintage items, and crafting supplies on your Etsy shop. Even so, this can still cover all sorts of things.

But Etsy doesn’t want to be associated with some of these things. These prohibited items fall into the following general categories:

  • Alcohol, tobacco, drugs, drug paraphernalia, and medical drugs
  • Animal products and human remains
  • Hazardous materials, recalled items, and weapons
  • Items that promote, support, or glorify hatred
  • Illegal items, items promoting illegal activity, and highly regulated items
  • Internationally regulated items
  • Pornography and mature content
  • Items that promote, support, or glorify violence

This isn’t a bright-line list, though. There are plenty of exceptions to items that technically fall under the list but still can be sold on Etsy. For example, while pornographic items can’t be sold, there are plenty of artistic nudes that can still be sold. So, if in doubt, read Etsy’s policy and look at the examples in the policy before making a decision.

In general, you can’t sell services by opening an Etsy shop. Of course, if someone wants you to customize an item you so sell, that would be allowed. However, if someone wants you to alter something (e.g. tailor a piece of existing clothing, alter an existing piece of jewelry, or restore a book), then that is not allowed.

If Your Product Fits Etsy’s Branding, then Opening an Etsy Shop Might be the Perfect Way to Start Your First Online Store

Of all the e-commerce platforms we covered in our series on how to quickly build your first online store, Etsy probably has a most curated look and feel. For example, if you think of eBay as a Walmart, then Etsy is like a Target. The difference is very subtle, but Target stores have a slightly better presentation.

So, if that slightly better presentation is the look and feel you’re going for and your product fits within Etsy’s guidelines, then opening an Etsy shop might be the perfect way for you to open your first (but not permanent) online store.

Interested in starting and running a small business? Here’s the beginning of our step-by-step guide: What to do right after getting that great business idea.

Questions? Comments?