Why Etsy fee rise is a play to attract sellers

Etsy are to raise fees as previously reported and at at the same time start applying them to the shipping cost as well as the product’s sale price. The question is why the fee increase now?

Etsy has traditionally been a low cost platform to trade on and even with the fee rise from 3.5% to 5%, which goes into effect on the 16th July 2018, it still is. There appear to be two main reasons for the free increase:

Etsy to charge fees on carriage

There is one very simple reason for Etsy charging fees on carriage- fee avoidance and search manipulation. Fee avoidance didn’t matter much at 3.5% and still doesn’t make a lot of difference to carriage charges at 5%, although over multiple purchases from 34 million shoppers the fees on carriage add up to a significant amount. What it does do is remove the incentive to back load the sale price onto postage to appear cheaper as unreasonably high fees are always a disincentive to buyers and lead to an increased number of abandoned checkouts.

Here at Tamebay we’re realistic about offering free carriage which the Etsy fee change makes more attractive. We recognise that for some products with a higher value in proportion to the carriage cost then free carriage can make sense. We are equally cognizant that for a huge majority of low cost products, especially those that lend themselves to combined orders, that free carriage doesn’t always make sense. All Etsy have done is remove a reason to offer free carriage and disincentivise the temptation to gouge on postage instead of display realistic prices.

Etsy raise fees to attract more sellers

There is really only one reason that sellers choose to list on a particular marketplace in preference to another and that is an abundance of buyers. You can offer all the incentives in the world but if you don’t have enough buyers to make sales attractive then sellers will find alternative venues on which to sell.

By raising fees, Etsy intend to massively increase their advertising spend by a massive 40% in the next year. That’s impressive considering last year Etsy spent $78 million in marketing to bring buyers to Etsy, the most they have ever spent compared to previous year and at a 40% increase their planing to up that to more than $110 million in 2018.

This is a smart move by Etsy as it could attract traditional eBay and Amazon sellers to the site if they see increased traffic and sales. It’s worth remembering that whilst the fee increase is close to a 43% increase for existing Etsy sellers, it’s still incredibly attractive for merchants selling on Amazon Handmade or eBay where fees would be 5 to 10 percentage points higher. Increasing traffic whilst still having relatively low fees is a smart move, leaving Etsy competitive. At the same time Etsy are increasing the tools available for sellers at scale who demand a higher level of service and selling insights and again sellers on other marketplaces are used to paying a monthly subscription to access these extra site features.

Looking at Etsy’s fee changes, they are very much set up to attract sellers from competitor marketplaces rather than solely designed to serve existing sellers. Etsy are positioning themselves for growth and that will come from new blood and at the same time existing sellers will be first to see the benefit from increasing numbers of buyers.