Selling on Etsy Just Became More Expensive for Some Sellers

Etsy
Etsy

This morning, Etsy announced a new advertising service called Offsite Ads, which forces many sellers to participate without an option to opt out.

Etsy will pay the advertising costs to promote listings on multiple internet platforms such as Google, Facebook, Instagram, Pinterest, and Bing.

When a shopper clicks on an online offsite ad featuring a seller’s listing and purchases from their shop, the seller will pay Etsy an advertising fee.

The fee will either be 12 or 15 percent, depending on the seller’s yearly revenue on the platform. Sellers with more than $10,000 in annual sales on Etsy will pay the 12 percent fee, while sellers with revenue under $10,000 annually will pay the 15 percent fee.

The benefit Etsy is suggesting is that sellers don’t have upfront costs for this program and only will pay Etsy an advertising fee when the item sells.

Etsy Forced Participation

Sellers that reach the $10,000 threshold in annual sales, will be enrolled in the program for the lifetime of the store and do not have an option to opt-out of the program.

Lower volume sellers, those with annual sales of under $10,000 on Etsy, have the choice to opt-out of the program but are being automatically enrolled.

To determine the advertising tier for each seller, Etsy calculated sales based on the past 12 months as of February 18, 2020.

What is a bit unclear from Etsy’s announcement is what happens if a seller is over $10,000 threshold, but then falls below that number.

Going strictly by Etsy’s wording, it seems once a seller reaches the $10K threshold; they are in the program for life and no longer can opt-out.

“If you’ve made more than $10,000 USD in sales on Etsy in a 12-month period you’ll benefit most from offsite advertising. So, you’ll be required to participate for the lifetime of your shop and you’ll get a discounted advertising fee.”

Etsy estimates most sellers will pay the advertising fee on fewer than 10 percent of their sales or 1 out of 10 sales. But the company provides no backup for this assumption.

Mixed Reaction from Sellers

Based on feedback in the Etsy community forum, there is a mixed reaction to this program. Some sellers seem okay with it because it simplifies their off-platform or offsite marketing, but others worry about a significant impact to their bottom line.

Etsy is trying to sell this program as “risk-free,” but that seems a bit of a stretch.

Sellers have no idea what to expect from this program and how it will impact their sales. They will need to run the program for a few months and try different product mixes with different gross margins to really understand what it means to them.

Etsy says it expects the program to impact 1 out of 10 sales, but that is an average across the entire platform. Some sellers may see more sales from the offsite ad program, and what if those sales are on lower gross margin items?

The company is not providing an opportunity for sellers to do A/B testing or exempt lower gross margin products from the program. It is also not phasing in the program. Instead, it is doing the exact opposite, placing every seller into the program.

Eligible low volume sellers have to actively opt out!

Anytime a platform makes drastic changes that may impact a sellers’ bottom line, it entices sellers to look elsewhere.

When Etsy pressed sellers to offer more items with free shipping, it did so because that is what online consumers demand. It was a competitive issue they had to tackle.

Sellers can still charge shipping, but Etsy favors listings in search results that offer free shipping. Key point, it still is the seller’s decision how to deal with today’s consumer behavior.

Marketing is Important, but…

The intention of allowing Etsy sellers to gain more sales from offsite advertising is sound. Marketing is important, and often marketplace sellers overlook the opportunities that may exist beyond the marketplace platform. Offsite marketing also has complexities some sellers don’t want to tackle.

But it seems the implementation of this program is clumsy and a bit eBayesque. Look no further than eBay’s Managed Payments, sound idea, terrible execution.

Tonight Etsy will discuss its fourth-quarter earnings report for 2019 in a conference call, let’s see what they’ll say about this advertising program.

The Offsite Ads program will go into effect on March 27, 2020.

What do you think about Etsy’s new advertising service?

Please use the comments section below or head over to our Facebook Group for Small Business Sellers and interact with other small business owners.

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5 COMMENTS

  1. I think there are way too many people working at “Etsy headquarters” who are trying to keep THEIR jobs by thinking up ways to complicate our jobs! Etsy was GREAT when it was simple. The more complicated it gets, the less money I make. And I have to make less so Etsy can make more money to pay all those people at Etsy Headquarters who are busy “thinking”!

  2. Etsy is gonna die if they keep up this business model of screwing their sellers. A 15% cut on your profit margin without a choice will not go down well. Some sellers will be forced to fill orders that they make zero money on, or risk bad reviews. I have also dobbed in numerous sellers reselling cheap chinese products (not handmade, not even personalized) but etsy does nothing, as it makes them money. This screws actual makers, who will start looking elsewhere for more honest platforms. Etsy deserves whatever it gets.

  3. This has the feel of an exit scam. EVERYONE is going to hate this mandatory participation. Etsy doesn’t care. Many are going to leave. Etsy doesn’t care.
    Question: do you trust Etsy to be honest about whether your order came from Etsy search or Offsite Ads? You will have no way to check. They have a carte blanche to add 12-15% fees to any order they like.

  4. Myself, like many of my friends who sell on Etsy, are starting to look elsewhere for a more honest platform that allows sellers the choice to do as they wish for their bottom line. I cannot afford free shipping for every order over $35, and I still charge shipping. Occasionally, I get a note asking if I want to use their shipping labels – no, no I don’t. If I did, I would be doing it. I’m waiting for them for force us to do that and then I’m really going to leave. Etsy charges us to list an item, and then they charge per sale. They should want more sales and that is what I thought paid them and their advertising – that money came out of the percentage we already paid and the $10 a month I pay for Etsy Plus. Give us the option to have it included in Etsy Plus and just charge me extra per month – but now 12% on every sale I make if it is an off site Ad made by Etsy that I will have no idea is really the case? I really believe they will lose many people to this. I may be one of them.

  5. I don’t have the profit margin for this– especially on high end items. And since this will apply to ANY item sale they deem came from the off site ad for 30days from a click in — I highly doubt the sample model plays true. I plan to Vacation my store at about 9000.00 Which also means no NOV DEC sales. I just cant afford it — ALSO — THE LIFE OF YOUR SHOP — wow — Its a MOB shake down
    I’m not sure how others feel — but– I think it would have been a great proposal if you hadn’t been forced without choice and the rate had been somewhere in the realm of reasonable– 12 to 15% clearly these people are clueless

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