Thinking of setting up an Etsy shop?
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With the rising cost of living and wages in the UK failing to keep up with inflation, side-hustling and multi-hustling look set to be key trends for 2023.
For entrepreneurs looking for a way to earn extra income, online marketplaces like Etsy can offer a way to sell products from home and generate a passive income stream.
The concept of a passive income stream is that you put the work in at the beginning to create a product offer, and then sit back and enjoy the money rolling in month after month, as your product virtually sells itself! All you have to do is keep making (or buying in) more of the product, and shipping them out as customers place their orders.
You are in complete control of how much, or how little time, energy and money you invest in marketing your products so this business model is ideal for entrepreneurs who have full or part-time jobs, plus family responsibilities to take care of, alongside running their business.
Armed with these tips, you’ll have an Etsy shop to be proud of.
Tip 1: Wear your small business badge with pride
People choose to shop on Etsy because they want to support independent businesses. When they come to part with their hard-earned cash, they’d rather it go to a small business owner like you than to a global corporate machine.
So, when you start adding information to your Etsy shop, there’s really no need to try to create the impression that you’re running a much bigger company with a “sales department”. Lean into your smallness and use this to show customers how special and unique your business is.
As Etsy puts it:
"Buy directly from someone who put their heart and soul into making something special. Find things you'll love. Buy directly from makers."
People like to buy from people
It's worth adding a bit of information about yourself to add some personality to your shop.
You can do this in SHOP MANAGER by going to SETTINGS and choosing “About your shop”. Here you can add:
Shop member profile photos and bios (just you, or you and your business partner or team members)
Your Shop Story (how and why did you decide to create your business)
Shop Video - take a look at these shop video FAQs
Shop photos - photos will be cropped and displayed at 760px by 468px so you may want to create a design in Canva that fits these dimensions. You can upload photos as .jpg, .gif or .png.
Shop links - here you can invite your customers to follow you on social media where they can get to know you, your brand and your products even better
Here's Etsy's advice for creating compelling videos (from the Explore Creator portal)
• Create videos between 15 seconds and 3 minutes long as a way to bring your brand to life for buyers—videos that are ~45 seconds typically work well.
• Consider showcasing the creative details and techniques behind your products, or provide inspiration about how your items can be used.
• Share the story of your shop and how you got started creating your items! Buyers love to know more about who you are.
Tip 2: Give customers a choice
If you’re just starting out, your range of products might be quite limited to start with. That’s perfectly OK. It is possible to have an Etsy shop with only one listing (and there are some pretty impressive UK brands who only “do one thing well”).
If you’re not sure how to create options for your customers to choose from, think about:
Optional personalisation
Gift options
Different postage options
Packaging options
Here’s an example of an eco-conscious seller giving customers the choice of whether they’d like their item (a kids' colouring book) to arrive in a plastic wrapper, or not.
To make changes to your listing, go to Shop Manager > Listings, then click on the product you want to add options to.
Tip 3: Factor in your fees
Although setting up your shop doesn’t have an upfront cost, there are regular fees you’ll have to pay to Etsy to actually sell things on the platform. These include:
Listing fees (it costs $0.17 each time you create or renew a product listing)
Transaction fees (Etsy take 6.5% of the total order)
Processing fees (these vary according to the sale price of your items, the shipping fees you charge, and any sales tax if you charge tax on your listings)
Regulatory operating fees (in the UK, sellers are charged 0.25% of the item price and shipping cost (including gift wrap and personalisation costs, if applicable)
VAT (tax on top of your seller's fees (find out about what VAT Etsy charges)
NOTE: There is no fee for making changes to your listing.
You’ll only be charged if you take your product down and then re-list it. So, if you’re setting up your shop, don’t worry about getting your product pages looking 100% perfect from day one. You can go back and add more detail plus extra images and videos after you’ve listed them.
Taking the red figures away from the green gives you your net profit on Etsy.
This does not account for the cost of creating the product (buying the materials, shipping stock) or your time, so you need to build these costs into your sale price.
Here’s an example of a monthly statement showing what the net profit looks like for one product sold at £9.99 when the seller didn’t do any marketing through Etsy.
As soon as you’ve made your first sale, you’ll be able to see the money coming in (revenue shown in green) against the cost of sales (expenses shown in red).
Find your monthly statement by going to Shop Manager > Finances > Monthly statements.
You’ll pay additional advertising fees if you choose to advertise one or more of your listed products using Etsy’s Ads Marketing tools.
Here’s a statement from an earlier month when the seller invested in Etsy ads.
The success of your Etsy ads will depend on lots of factors, which feed into an algorithm (similar to the way social media advertising works).
To find Etsy’s Advertising FAQ, go to Shop Manager > Marketing and click on ‘Go to FAQs’.
Your personal tax
You must report your Etsy Sales on your self-assessment (personal tax return).
You can treat Etsy seller's fees, listing fees and advertising costs as allowable expenses. It’s then only the profit you make from your Etsy shop that is taxable income.
If you are VAT registered - or considering setting up your business as a Ltd company - you’ll need to keep records for corporation tax.
This is pretty straightforward, but you’ll have to get into the habit of downloading and saving your Etsy Seller’s report every month so that these documents are available to you when you need them in the future.
It’s a good idea to set yourself a reminder to download your seller’s report on the same day each month!
You must report your Etsy Sales on your self-assessment (personal tax return). You can treat the seller's fees, listing fees and advertising costs as allowable expenses. It’s then only the profit you make from your Etsy shop that is taxable income.
Tip 4: Plan for when things go wrong
It’s not realistic to expect every customer to be 100% satisfied with their order. It’s sensible to factor in a few returns (and think about whether you’re willing to cover the cost of postage for returned items, or whether you would expect customers to cover this themselves).
It’s a good idea to:
Add a returns policy to your shop. You can use the simple 30 day returns and exchanges policy provided by Etsy, or create your own. (You can find both options by going to Shop Manager > Settings > Policy settings).
Allow for a few returns when completing your cashflow forecast.
Tip 5: Reviews matter
When sending out your product, consider adding a note to every customer’s order receipt asking them to leave you a review.
You can say thank you to customers who leave you a review and encourage repeat business at the same time.
There are several ways to celebrate and make the most of your reviews.
i. Publicly thank your customer for their review on Etsy
ii. Message the buyer privately with a personal note of thanks.
Even if they don’t give you the rating you’d hoped for, a thank you message could encourage them to return to your shop and gives you the opportunity to find out how you can improve your product or your customer’s experience.
iii. Post the review on social media.
This is a great endorsement of your product and your brand - but remember that the buyer will only see this if they are already following your business on socials, so it’s nice to contact them directly as well.
iv. Create a ‘thank you’ offer
Give customers money off products in your Etsy shop when they leave you a review. Once you’ve created your offer, you can use Etsy Messages to share the code privately with customers who have left you a review.
Tip 6. Communication is key
To reduce the risk of negative reviews if a customer receives your product and isn’t happy with it, use the Etsy messenger to send customers a follow-up note along the lines of “Thank you for your order. If you have any questions or concerns please get in touch." That way, you’re opening up your preferred communication channel before the customer has a chance to leave a negative review!
Read about updates to the way Etsy Messages work
Let us know if we can help
Team Transmit have helped thousands of entrepreneurs to 'set up shop', IRL and online, by providing low interest loans of £500 - £25,000. As an Etsy shop owner, you might choose to use your loan to buy stock or raw materials, packaging and get a professionally-designed logo.
If you're thinking about launching a business of your own, have a read of our Success Stories. We love telling tales of real people who've been where you are, and are now fully-fledged founders!
The information provided in this business advice article was correct at the time of publication (March 2023). Please check Etsy's seller website to be sure you have the latest information.
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