As part of my weekly ecommerce research routine, I like to read and participate in various small business forums and one of my favorites is the Etsy forum.
For all of you who have never heard of Etsy, Etsy is a marketplace for do it yourself and handmade goods. Similar to Ebay, Etsy provides an easy way for talented crafters and artists to sell the fruits of their labor with an Etsy store.
The reason I like reading the Etsy forums is because most if not all Etsy users are casual shopowners who have a strong desire to make some extra money on the side.
Many Etsy store owners would eventually like to quit their day jobs. Many Etsy store owners have the desire to launch their own full blown online stores but are afraid of the technical and marketing challenges in doing so.
Anyway, whenever I browse the Etsy forums, I often see Etsy store owners complain about low sales volumes and increased competition due to the sheer volume of shop owners on the site.
In addition, there’s also been an increase in complaints about lower traffic and sales due to the last Google update.
So today, I decided to write a comparison post about disadvantages of running an Etsy store vs your own online store.
The truth is that Etsy stores are at a major disadvantage when it comes to selling and marketing goods to the end customer compared to shops that own their own website and domain. Here’s why.
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What Is Etsy And What Are The Rules?
Etsy is an online marketplace that focuses on handmade or vintage goods. Almost every product sold on Etsy falls under the category of arts & crafts, jewelry and household goods.
Basically, anything made by hand can be sold on an Etsy store. In addition, you can also buy and sell digital goods like printables, stickers and cards.
However, there are many rules for selling on Etsy that must be followed or else you risk getting your account suspended.
All handmade items must be either made or designed by you. Over the years, Etsy store owners have started selling “produced goods”.
And if you work with anyone who helps you make your goods, you must disclose their name in your listings as well as in your “About” page.
If you sell vintage items, they must be at least 20 years old.
Bottom line, you are prohibited from reselling other people’s goods on Etsy where reselling is defined as any item that you were not involved in designing or producing.
What Are Etsy’s Fees
Unlike other marketplaces, Etsy’s fee structure is fairly transparent.
The are no monthly fees and Etsy will make automatic deposits into your account when you make a sale.
Overall, Etsy store fees are summarized below.
- You pay $.20 to list an item on Etsy. Listings are active for 4 months or until an item sells
- You get charged a 5% transaction fee
- You pay a 3% + $.25 payment processing fee
- You may also have to pay a 15% offsite ads fee depending on whether your sale was the result of one of Etsy’s paid ad placements.
Overall, you are looking at paying between 8-23% of your revenue directly to Etsy.
Why An Etsy Store Will Never Make You Life Changing Money
On the surface, selling on Etsy seems very attractive. After all…
- Creating an Etsy listing is quick and easy
- You don’t need to be technical to launch an Etsy store
- Etsy has a built in user base who will buy your products
- It is very inexpensive to get started
Etsy Stores Can Not Scale
The bulk of Etsy’s listings are handmade goods and their rules are extremely restrictive.
The problem with having to hand make your own goods for sale is that you can only produce so many products in any given day. Basically, you are limited by your own production facilities.
Let’s say you want to make $100K of profit per year selling a $20 product and your margins are 66%.
This means that you need to sell ($100K * 1/.66) / 20 = 7500 units in a year or 7500 / 365 = 20 units per day.
If you are hand making all of your goods and they each take 1 hour to make, producing 20 units per day by hand is going to be a challenge unless you have your own production facilities in place!
In addition, you also have to deal with administrative tasks like bookkeeping, customer service and shipping!
Etsy stores simply can not scale in the limited time that you have because you can not have your goods mass produced.
Your Etsy Store Limits Your Sales To Only Etsy Clients
In terms of ecommerce market share, Etsy is tiny. In 2019, Etsy only generated $593 million dollars in marketplace revenue. By comparison, Amazon made 280 billion dollars!
Here’s the thing.
While Etsy has an installed base that will drive traffic to your listings, the Etsy marketplace is minuscule when compared to Amazon and Google.
When you sell on Etsy, you will only reach other Etsy shoppers.
Currently, Etsy only holds about 4% market share which means that you are missing out on 96% of the entire ecommerce market!
Etsy Stores Have Less Credibility
When I shop online, I rarely ever buy from Etsy. The general perception of an Etsy store is that it’s unprofessional and run by an individual trying to make a little money on the side.
In other words, I consider most Etsy stores to be side hustles and not full time endeavors.
I would much rather buy from an online store with its own domain. After all, if a shop owner is willing to put up a quality website, it means that they are serious about their business.
Having your own online store front also makes a business look legitimate and provides peace of mind when it comes to customer service and satisfaction.
Die hard Etsy shoppers may disagree with me, but the market share numbers do not lie.
You Can Not Create A Brand With An Etsy Store
Back in the good old days, I used to sell a lot of stuff on Ebay. Whenever you have a large marketplace like Ebay or Etsy and you want to sell something, you have a tendency to look at other people’s shops and listings to get an idea of how to structure your own product listings.
At the click of a button, you can pull up sales statistics and other useful information about other shop owners in order to try and emulate their success. And that’s when the copying starts.
On Ebay and Etsy, there is always going to be rampant copying of product descriptions because it’s so easy to do. Joe Shopkeeper sells a ton of handmade bags? He must know what he’s doing. Perhaps I will borrow his descriptions. No big deal.
The result is that a whole bunch of other product listings will look and sound exactly like yours.
While it’s true that getting plagiarized can still happen if you have your own website, it’s infinitely easier and more likely to happen on Etsy because all of the shops are within the same marketplace.
The other problem is that the format of all Etsy stores look the same and feel the same. Sure, you can customize your store header a little bit but in the end, almost every single Etsy shop looks identical which makes it hard for you to stand out in the crowd of other users.
The double whammy here is that Etsy’s shopping format makes it very easy for consumers to comparison shop your products with other listings which focuses the consumer’s attention on price as opposed to quality.
To further illustrate the point about how hard it is to make your listings more visible, here’s a quote from a frustrated Etsy user I found on the forums.
As you already know there is a problem getting your items seen on etsy these days. With the batch loading system and the the increase in the number of shops.. it makes it difficult to get views.
The scenario goes like this… you list/renew on item and another shop batch loads 30 items right after yours… your item then gets sent to the 3rd page… not a good place to be for views.
What this illustrates is that as the number of Etsy users continues to grow, you will have a much harder time getting exposure for your goods.
It’s Hard To Get Press With An Etsy Store
To build a brand, it helps to get mentioned by the press. But magazines and catalogs prefer to refer readers to actual stores and not Etsy.
It’s because it’s difficult to tell readers how to find an individual’s Etsy shop. Instead of a nice concise domain or brand to refer to, they are forced to link to a long Etsy branded URL or tell people to go on Etsy and perform a search.
This is why magazine editors and buyers rarely feature Etsy products. Etsy stores are not considered legitimate brands.
You Don’t Own Your Customer Base
According to Bain and Company, a 5% increase in retention rate can result in 75% more in sales. And repeat purchasers are a key component to the success of any ecommerce store.
For my online shop over at Bumblebee Linens, repeat buyers make up 36% of our annual revenue. And the way we generate so many repeat sales is through our email list.
Unfortunately, Etsy does not allow you add buyers to an email list or utilize an email marketing provider like Klaviyo. As a result, every sale that you make is a one off sale. You can not communicate with buyers after a purchase.
As a result, Etsy greatly limits your sales potential.
Etsy Stores Are Hard To Rank In Search
Lately, there have been a number of forum threads from Etsy sellers complaining about a big drop in views and sales.
My guess is that the last Google update completely removed many shops from the search rankings due to duplicate content across listings.
Now no one knows exactly how Google decides which content is original and which is the duplicate which puts you at risk of getting penalized by Google if someone else steals your content.
Even if you write completely original product descriptions, it largely depends on the order in which Google crawls your site and the page strength of the other shops in determining who possesses the unique content.
The fact that copying occurs so often in marketplaces like Etsy makes it harder for you to rank in search. But don’t take my word for it, try it yourself.
If you search for products in Google, you’ll rarely find individual Etsy product listings on the front page.
The other more important point to emphasize is that the search rankings are largely determined by the volume and strength of the backlinks pointing to your site.
It takes a lot of hard work and patience to build backlinks back to your shop so you have to ask yourself whether you want to be doing all of this work for a site that you do not even own.
Sure, you can build backlinks back to your Etsy shop but all you would be doing would be strengthening Etsy’s position in the search rankings.
If Etsy were to ever increase fees or close up shop, then guess what? All of that hard work would go down the drain. When you own your own website and domain, you own the fruits of your labor and no one can take that away from you.
You Are Completely At The Mercy Of Etsy
A while back, a similar site to Etsy called Artfire abruptly decided to cancel all of their basic accounts. And what was the result? Many shopowners suddenly got the boot without much warning at all.
Here’s a quote from one Artfire user who was lucky that he hadn’t invested too much time yet.
Just found out that Artfire is discontinuing all of their basic accounts… really frustrating after spending two days setting up my shop over there to try it out as a second venue. Anyone else know of this? Glad I found out before dedicating yet another day to making more changes I had planned. Heads up everyone!
The truth is that companies like Etsy, Ebay and Artfire don’t really care about you. They care about making money for themselves. So when the sh$t hits the fan, guess what? They are going to do whatever it takes to stay profitable.
So what are the implications for you? At a moments notice, Etsy could raise their fees dramatically and put you out of business. It doesn’t matter how much work you put into your store.
It doesn’t matter how much money you’ve made in the past. All of your hard work could be flushed down the drain because of factors outside of your control.
It’s Time To Take Charge
Ultimately, you need to ask yourself why you are building up a shop that is controlled by someone else.
Do you want to be in control of your own business and costs?
The only way to do this is start your own web property. So stop relying on the Etsys, the Ebays and the Artfires. These sites are good for getting your feet wet but will prevent you from ever growing.
It’s about time you started writing your own rules. Now I’m not saying that you should abruptly stop using Etsy.
Instead, you should plan on transitioning your Etsy store to a model where you call the shots and are in control of your own destiny.
Any Etsy users want to share their thoughts?
Frequently Asked Questions About Running An Etsy Store
How much does it cost to have an Etsy store?
It will cost you $0.20 to publish a listing on Etsy and a listing lasts for up to 4 months. If your item sells, Etsy will charge you a 5% transaction fee plus 3% for credit card fees. Sometimes, Etsy also charges an additional 15% advertising fee depending on how the sale was made
What is an Etsy store?
An Etsy store is where you can sell handmade or vintage items and craft supplies online. All goods must be either made or designed by you. All vintage items must be at least 20 years old.
Is it worth selling on Etsy?
It is very inexpensive to sell on Etsy so it's a good place to get started. But it will be difficult to scale your business in the long run.
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