Etsy is a global online marketplace that has carved out a unique niche in the e-commerce world. It's a platform where artisans, crafters, and vintage sellers connect with buyers who value creativity and uniqueness.
Understanding how Etsy generates its revenue is crucial for sellers, buyers, and investors alike. So, how does Etsy make money?
Etsy's primary revenue streams come from listing fees, transaction fees, and advertising services. Each time a seller lists an item, a fee is charged. When the item is sold, Etsy takes a percentage of the sale as a transaction fee.
Additionally, Etsy offers advertising services to sellers who want to promote their items within the platform.
But there's more to Etsy's revenue model than just these three streams.
What Are All The Ways Etys Makes Money?
How exactly do these revenue streams work, and what other methods does Etsy use to generate income?
Etsy charges a listing fee of $0.20 USD for each item that a seller lists for sale on the platform.
This fee is charged regardless of whether the item sells or not. The listing remains active for four months or until the item is sold. If the seller wants to re-list the item after this period, they must pay the listing fee again. This consistent fee for all sellers contributes significantly to Etsy's overall revenue.
When a seller makes a sale through Etsy, a transaction fee is deducted from the sale price.
This fee is 6.5% of the total cost of the item, including shipping and gift wrapping fees. This means that as sellers earn more through the platform, so does Etsy, making this a major source of income for the company.
Etsy offers sellers the opportunity to advertise their items directly on the platform through a service called Etsy Ads. Sellers set their own budget and Etsy uses this to promote their items in search results and other pages.
This service operates on a cost-per-click model, meaning sellers are charged every time a potential buyer clicks on their ad. This service, while optional, is used by many sellers looking to boost their visibility, thus generating substantial revenue for Etsy.
Payment Processing Fees
Etsy has its own payment platform called Etsy Payments. For every transaction made through this platform, Etsy charges a payment processing fee.
This fee varies depending on the location of the seller's bank. This service not only provides convenience for both sellers and buyers but also adds to Etsy's revenue.
Etsy offers two subscription services: Etsy Plus and Etsy Premium. These services provide sellers with additional tools and features such as advanced shop customization, discounts on marketing and advertising, and more. These subscriptions come at a monthly fee, contributing to Etsy's revenue.
Etsy provides sellers with the option to purchase shipping labels directly from the platform. These labels are priced competitively and offer the convenience of allowing sellers to manage all aspects of their business within Etsy. The revenue from this service adds to Etsy's overall income.
Currency Conversion Fees
When a transaction involves different currencies, Etsy applies a currency conversion fee. This fee is a percentage of the cost of the item and is included in the total amount of the sale. This fee, while small, contributes to Etsy's revenue due to the global nature of the platform.
Etsy's Pattern service allows sellers to create their own standalone websites while still managing their Etsy shop. This service comes at a monthly fee and includes a range of features such as custom domain names, website themes, and inventory management. The revenue from this service adds to Etsy's overall income.
Etsy's Offsite Ads program promotes sellers' items on platforms like Google, Facebook, Instagram, Pinterest, and Bing. When a sale is made through one of these ads, Etsy charges an advertising fee. This fee is a percentage of the total sale price, including shipping and gift wrapping fees.
This program, while optional (if you make less than $10,000 per year on the site), is used by many sellers to increase their reach, thus contributing to Etsy's revenue.
Etsy allows sellers to offer gift wrapping for an additional fee. This service not only enhances the buyer's experience but also provides an additional source of income for Etsy. Sellers can set their own price for this service, and while it's optional, many buyers appreciate the convenience, especially during holiday seasons.
How Much Money Does Etsy Make?
By making more than $640 Million in the first quarter of 2023 alone, it’s safe to say that Etsy is on track to be a multibillion-dollar company this year.
If we take a little bit of a deeper look at that number we can see a bit of a clearer picture of how they make their money.
The biggest chunk of their revenue is what they refer to as “Marketplace Revenue” this includes all of the money they make from things like listing fees and other order-related fees.
In the first 3 months of 2023, this comes in at $467 Million or about 73% of their total revenue.
The rest of their income (a little over 173 million in the first quarter of 2023, about 27% of their total revenue) comes from what they refer to as “Services Revenue”.
Services Revenue accounts for all of the money generated from Etsy Ads, Etsy's Offsite Ads Program, and Payment Processing fees.
Etsy makes money in many ways. They charge sellers a fee to list items and a fee when an item is sold. They also offer advertising services to help sellers get their items noticed. In the first three months of 2023, Etsy made a total of $640.9 million. This shows that Etsy's way of making money works really well.
To sum it up, Etsy makes money from listing and selling items, advertising, and other services like payment processing, subscriptions, shipping labels, currency conversion, standalone websites, offsite ads, and gift wrapping.
But remember, these fees are costs that sellers have to pay. So, if you're a seller, it's important to understand these fees so you can figure out how much profit you'll make.
If you want to learn more about how Etsy's fees can affect your profits as a seller, check out our article on “How Much Does It Cost To Sell On Etsy“.