Ecommerce company Etsy is hiking its transaction fees for sellers for the first time since 2018.
Starting on April 11th, fees will rise from 5% to 6.5% for each sale.
The decision comes after a record fourth quarter in which Etsy gained $717.1 million in revenue and added 10 million active buyers for a total of 90 million. But small businesses may need to find a way to raise their conversion rates in order to make up for the new fee they'll be paying.
What to Know
Etsy revealed the change in emails to sellers as well as a report to investors yesterday.
The transaction fee was last upgraded in 2018, when it went from 3.5% to 5%. That makes this April 11 fee hike an increase of 85% within five years. The transaction fee is distinct from Etsy's two other types of fees, listing fees and payment processing fees.
Why the increase? It'll help the company invest in marketing, Etsy CEO Josh Silverman says:
“We have demonstrated our ability to make improvements that directly translate into more sales for our sellers, as evidenced by record sales per seller in 2021. Our new transaction fee will enable us to invest in key areas like marketing and support to further extend our strong momentum.”
The fee hike also applies to shipping as well as to the product sale itself.
Running an Ecommerce Business
The pandemic spurred online shopping, and Etsy benefitted: In 2020, the average active seller on Etsy increased their sales by 23% over their 2019 sales number. Esty enjoyed their best quarter ever in the just-ended fourth quarter of 2021, so they're still seeing numbers on the rise.
Many small businesses selling through Etsy have small margins already, however. In the comments of one YouTuber's video about the new fee hike, one store owner says they only earn $9 per hour on their store.
Etsy remains cheaper than many major ecommerce venues, although Facebook Marketplace remains less expensive with its 5% fee.
Getting Your Own Website?
Operating a small business has gotten pretty tough, and that remains just as true for online sales as for physical ones. Etsy's new fee increases are likely to most strongly impact businesses with low existing sales margins, and these businesses are the least likely to have a large enough audience to upgrade to their own ecommerce website.
For those who can manage it, however, creating a website with ecommerce tools can open up more third-party payment services and offer some flexibility when one unexpectedly raises its fees.
You can check out our roundup of the top seven best website builders for launching your own online store. We'd recommend Wix for its features and value for its cost, but plenty of other builders are worth taking a look at as well.