544: It’s Game Over For Etsy Sellers In The US. Here’s What’s Happening…

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You’re listening to the My Wife, Quote, or Job podcast, the place where I cover the latest strategies to grow an online business. And today, we’re gonna talk about Etsy and how a critical decision made this year by the CEO will have a huge rippling effect on all sellers in the United States. But before we begin, if you haven’t picked up my Wall Street Journal bestselling book, The Family First Entrepreneur yet, it’s actually available on Amazon at 38 % off right now. My book will teach you how to achieve financial freedom by starting a business that doesn’t require you to work yourself to death.

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Plus you can still grab my free bonus workshop on how to sell print on demand and how to make passive income with blogging, YouTube and podcasting when you grab the book over at mywifequitterjob.com slash book. So go over to mywifequitterjob.com slash book, fill out the form and I’ll send you the bonuses right away. Now onto the show.

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Welcome to the My Wife, Quit or Drop podcast. In this episode, we’re gonna talk about what’s going on with Etsy right now and my predictions for where the platform is going and it is not looking promising. Now imagine a marketplace filled with counterfeit goods and mass produced products where the sheer number of impossibly cheap listings explodes overnight. Well, this isn’t a hypothetical scenario, it’s actually happening right now as Etsy sellers and China makes its grand re-entrance onto the platform.

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And right now we’re at the beginning of a transformation that will change the Etsy platform forever. So in this episode, I’m going to explain the implications of China’s return to Etsy, decode what it means for you and teach you how to navigate this new landscape. But first off, what is going on exactly and why are Etsy sellers so pissed off? Well, basically it’s because Chinese sellers are coming back to Etsy because Etsy is under severe financial pressure from their investors.

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Now these past three years were not good for Etsy stock and their gross sales have been decreasing year over year. So I’m looking at a graph right now in 2021. I think they had 13.49 billion in sales and two years later they’re at 13.16 billion dollars in sales. So it’s decreasing which is not good. Now ask yourself what is the easiest way to boost profits on a stagnant marketplace and that’s to bring China back on the platform.

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Now, why did I use the words coming back? Well, it’s because Chinese sellers used to be on Etsy up until 2021, where they were silently removed due to worries about protecting the integrity of the handmade marketplace. But recently, they added China back onto the Etsy payments approved country list, which is essentially like rolling out the red carpet for Chinese sellers. Now, from Etsy’s perspective, this is going to be great for earnings.

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as it opens up the market to 1.4 billion new people. But from an Etsy seller’s perspective, things could go very wrong. And here’s what I predict will happen, and this isn’t really guesswork. When Amazon started encouraging Chinese sellers onto their platform back in 2016, it made life difficult for all sellers. Etsy is just a couple of steps behind Amazon, and I guarantee you, history will repeat itself. So mark my words, here’s what’s gonna happen. First off,

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Etsy is going to be instantly flooded with new Chinese sellers peddling copyrighted products and violating legitimate sellers’ trademarks left and right. Now back in the day, prior to 2021, thousands of Chinese sellers were stealing images from other sellers and swarming the marketplace with knockoff products from Chinese factories. Now this is going to happen again. Etsy is going to have a huge onboarding problem and they aren’t going to be prepared for it. And I say this because Amazon had the exact same problem back in 2016.

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Now back in 2016, it was pretty easy to get an Amazon account and you could sell on the platform with very little verification. But once they opened the door to China, they were immediately overwhelmed by new Chinese sellers accounts. Now it took many years for Amazon to adjust, but you now have to jump through a bunch of hoops just to get an account on Amazon today. So for example, today to sell on Amazon, you got to go through a 10 minute interview, show legal identification and utility bills to show your real address.

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and basically prove that you are who you really are. It’s actually quite an ordeal to get an account today, and it took a lot of time and manpower for Amazon to implement these stringent procedures. Now the same thing is going to happen to Etsy, and Etsy will have to deal with this correctly, otherwise the platform is going to be overwhelmed with new applications. Second of all, China has incredibly low wages, so they can mass produce products far cheaper and more efficiently than any individual seller on Etsy. And if you look at Etsy’s terms of service,

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They technically allow production partners as long as all handmade items are made or designed by you and mass produced items have been on Etsy for quite a long time now. But you haven’t seen anything yet. Once Chinese factories start selling direct on the platform, it is going to flood the marketplace with cheap mass produced products. Now I got to be a little bit careful what I say here, but let’s just say that sellers in China have a penchant for breaking the law. The culture is just different over there and they’re going to do whatever it takes to maximize their sales.

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Now I’ve interacted with many Chinese sellers in the past and I’ve seen rampant piracy on Amazon, eBay and other marketplaces. And let’s just say that it’s going to happen. Etsy already has a copyright problem with the tiny amount of sellers it has now. But as of now, the floodgates are completely open. You’re to see fake Taylor Swift stuff, fake name brands, the whole gamut. And Etsy is going to need to have some strict onboarding procedures in place to fight it. Now if Amazon’s past was any indication, I am skeptical that Etsy is going to be able to handle it.

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Banning Chinese sellers right now on Amazon is like playing whack-a-mole. Because they’re so far away, it’s easy for a Chinese seller to have a ton of different accounts. If one account gets banned, they have another ready to go. And trust me, even though Etsy implemented a new $15 account setup fee, it’s not going to change anything. As of right now, Etsy is not doing video interviews or any really stringent checks that Amazon performs for new accounts, so waves and waves of Chinese sellers are going to get onto Etsy breaking copyright and trademark law.

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Now don’t get me wrong, Etsy’s going to do their best to police these accounts, but there will be and already be collateral damage through algorithmic account flagging. If you look in the forums and Etsy groups, many Etsy sellers have been banned for seemingly no reason as of late. One YouTuber named Matira Made Jewelry recently had her account banned after three years of being a seller on Etsy and having hundreds of sales and great reviews. There are countless stories like this in the Etsy community. All you got to do is perform a simple Google search.

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Now the next thing that’s going to happen is that the sheer number of Chinese sellers is going to dilute the entire marketplace, making it harder to gain visibility with your products. And today, over 50 % of the top sellers on Amazon are Chinese sellers, and mark my words, this exact same thing is going to happen to Etsy. Both legal and illegal products will be sold on Etsy from China for impossibly low prices and pull buyers away from existing sellers who have similar legal products that are actually handmade.

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It’s the illegal products that will likely hurt sellers the most. Even though Etsy will do their best to ban illegal sellers and products, the illegal Etsy listings will generate sales for months before they are taken down. And regardless of these bans, new Chinese sellers are going to pop up immediately, selling the same illegal products, and it’s going to get out of control. And as we all know, the Etsy algorithm is based on a quality score which is determined by your sales. Chinese sellers will compete very aggressively based on price,

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which will leach away quality scores and sales from existing sellers. Now don’t get me wrong, I hope I’m wrong and that Etsy will have all this under control, but this is still a huge problem on Amazon even after many years and Amazon has far more resources than Etsy to fight it. Now the next point that I want to bring up is that Chinese sellers have huge advantages over existing sellers in terms of prices, taxes, customs duties, basically everything. So first off, Chinese sellers can ship their products directly from China

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without having to pay sales tax or customs duties due to the de minimis rule. The de minimis rule states that a seller does not have to pay import duties if the product being sold is under 800 bucks. And since most Etsy products fall way under this amount, Chinese sellers on Etsy won’t have to pay any import taxes. Now in contrast, most existing Etsy sellers are getting the raw materials from companies in the US where all the taxes and duties are already baked in. And for the existing Etsy sellers importing from China,

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they’re likely importing containers of goods and paying taxes and tariffs on their products. Now, the other huge advantage that Chinese sellers have are low labor costs. And with the floodgates open, Chinese factories will start selling direct on the Etsy platform at rock bottom prices that no Etsy seller is going to be able to match. Just imagine a mom and pop shop selling handmade mittens competing against a factory in China paying their workers one-tenth of the wages in the U.S. Just not going to be a fair fight. Now, you might think that shipping from China will be slow and expensive,

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But that’s actually not the case either. Right now, Tmoo is killing it in the US, and they are able to offer free or cheap shipping to the US with delivery times of four to 15 days. Now, in case you’ve never heard of Tmoo, Tmoo is a relatively new online marketplace that sells mass-produced merchandise direct from China at dirt cheap prices. Now, because of the current state of the economy, low-cost shopping sites like Tmoo are rapidly gaining market share. In fact, in just one short year,

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Tmoo is already getting one third the shopping traffic of Amazon. And even though packages take a little longer to arrive, it hasn’t affected Tmoo’s sales and the same Chinese sellers on Tmoo will eventually come onto the Etsy platform. Now the final nail in the coffin is that the sheer number of sellers will greatly reduce the visibility of existing products. Right now there are about 10 million sellers on Amazon and about 6.3 million are Chinese sellers. And right now there are about 7.5 million sellers on Etsy.

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Now if those 6.3 million sellers come to Etsy, the seller pool will essentially double. And that’s not even counting the number of product listings, which is going to grow exponentially. Because Chinese sellers will be far more aggressive than the average Etsy seller, the listing pool could be diluted by 10x or more. Now having battled against Chinese sellers in the past on Amazon, I can definitely say that Chinese sellers are willing to take lower margins, they have a cost advantage, and they have an advantage in shipping costs as well.

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Anyway, I don’t want to depress you guys, but that’s my two cents on the Etsy situation. But before we jump to any conclusions, let’s just review the facts. Etsy has added China to Etsy payments. They’ve not made a formal announcement yet, and it hasn’t been 100 % confirmed that Chinese sellers are going to be able to sell on the platform. But let’s just be realistic here. Abysmal earnings for the past three years means that Etsy needs to do something to boost shareholder value. And when a country is added to Etsy payments, the country is going to be selling on the platform.

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And for a country the size of China and how aggressive they are at selling on Amazon, new Chinese sellers will exponentially increase the seller base and listing base on Etsy. More sellers on Etsy means less visibility and exponentially more competition. Now, if past performance on Amazon is any indication, there’s going to be rampant piracy, trademark and copyright infringement on the platform that Etsy is going to have to fight algorithmically. Etsy is going to do their best to fight the bad actors and many innocent sellers are going to get banned.

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In order for all this stuff to work out in the long run, Etsy will have to do many things right with a pool of resources that is far less than Amazon. And right now, the rules for selling on Etsy are that all handmade items must be either made or designed by you. Etsy store owners are permitted to sell produced goods under certain conditions. Well, with Chinese factories in the mix, the lines between handmade products and factory mass produced products are about to get even more blurred. The Chinese have a cost advantage.

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They have a shipping advantage, have a production advantage, and it’s easier for them to break the laws with impunity. Now, overall, I’m not saying that it’s game over for Etsy, but it’s going to get a lot harder. Meanwhile, on the periphery, sites like Tmoo are flooding the market with cheap Chinese goods, which puts further pressure on Etsy sellers. Now I want to hear what you all have to say about this. So get in the comments. Let me know how you feel about China’s likely return to Etsy’s marketplace. Is it a good thing? Is it a bad thing? Let me know what you think.

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Hope you enjoyed this episode and I want to know what you think. Are Chinese sellers going to ruin the platform? Let me know in the comments or send me an email at steve at mywifequitterjob.com. For more information about this episode, go to mywifequitterjob.com slash episode 544. And if you are interested in starting your own e-commerce store, head over to mywifequitterjob.com and sign up for my free six day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.