Etsy’s new billing system has rolled out to sellers in the last few weeks and the true devastation to Sellers is just coming to light. Etsy has cut off every shop’s cash flow overnight on top of the fee increases earlier in the year. How are shops supposed to get off the ground much less, how do successful shops even survive?
Etsy’s Billing Change Timeline
Examples shown using:
Average Order: $10
Average sales tax rate: 8%
Small Flat Rate Box at Etsy Label Rate
Cost of Goods Sold: $5
Before Jan 2018
Etsy Commission Fee (shipping excluded): 3.5% + $0.20
Direct Checkout Fee (shipping included): 3% + $0.25
Sales Price: $10
Calculated Shipping: $6.45
Etsy Commission: $0.55
Direct Checkout: $0.74
Available for Deposit: $15.16
Cost of Goods Sold: $5
Profit: $3.71
Fees were taken out immediately with the remaining funds available to transfer to Seller’s bank account the next day.
When purchasing shipping labels through Etsy, the cost was added to your bill along with other costs such as listing fees, promoted listings, etc. The prior month’s fees were totaled on the first of each month and due by the 15th.
Jan 2018
Etsy starts collecting sales tax for certain states and submits them on behalf of the Seller. Sellers pay a transaction fee on that sales tax.
USPS Priority rate increase, Small Flat Rate Box now $7.05
Sales Price: $10
Calculated Shipping: $7.05
Tax: $1.36
Etsy Commission: $0.55
Direct Checkout: $0.80
Available for Deposit: $15.70
Cost of Goods Sold: $5
Profit: $3.65
July 16, 2018
Etsy increases Commission Fee to 5% and now includes Shipping in their calculation.
Sales Price: $10
Calculated Shipping: $7.05
Tax: $1.36
Etsy Commission: $1.05
Direct Checkout: $0.80
Available for Deposit: $15.20
Cost of Goods Sold: $5
Profit:$3.15
In less than a year, profits are down 15% strictly because of fees
Etsy’s Newest Billing Procedure
All fees are taken out of your balance IMMEDIATELY. If you owe Etsy money from purchasing shipping labels, creating new listings, ads, etc. you will not have access to funds until those fees are paid off.
Common advice for new sellers is to fill your shop with 100 listings, costing $20 in fees. The following scenario is what goes down:
Opening Etsy Bill Balance: -$20.00
Order #1
Sales Price: $10
Calculated Shipping: $7.05
Tax: $1.36
Etsy Commission: $1.05
Direct Checkout: $0.80
Purchase Shipping Label: -$7.05
New Etsy Bill Balance: -$11.85
Available for Deposit: $0
Order #2
Sales Price: $10
Calculated Shipping: $7.05
Tax: $1.36
Etsy Commission: $1.05
Direct Checkout: $0.80
Purchase Shipping Label: -$7.05
New Etsy Bill Balance: -$3.70
Available for Deposit: $0
Order #3
Sales Price: $10
Calculated Shipping: $7.05
Tax: $1.36
Etsy Commission: $1.05
Direct Checkout: $0.80
Purchase Shipping Label: -$7.05
New Etsy Bill Balance: $0
Available for Deposit: $4.45
This is devastating.
Having a positive cash flow is Small Business 101. You have to have cash to invest in supplies, marketing, and making more listings to potentially increase sales. How can any Etsy store even get off the ground?!
There are reports of sellers being forced to pay off their entire balance before being able to issue a refund. Can you imagine being forced to pay off a $100 bill because a customer accidently bought two $5 items when they meant to buy one?
Usually an easy transaction for a seller, that $5 refund is going to unexpectedly cost you $105. This may be a good time to review your cancellation policies before you get an ugly surprise like this.
Etsy doesn’t give a damn about your shop
Some sellers have complained they will be losing credit card points from paying their monthly bill but this cuts deeper than that. This is about Etsy increasing their cash flow to the delight of their investors who could give two shits about Etsy sellers. They are here to milk Etsy for all it’s got and leave it a shell of a company in 5 years.
INCREASE PRICES
There is no way around it. Even if your costs have stayed the same and your sales are consistent, you are making less today than you were last year. Using my $10 item costing $5 to make as an example, I am making 15% less today than I did a year ago. Depending on where your customers live and their sales tax rate and how large your items are, you could be making less now that commissions are taken out of shipping as well.
DO NOT CHARGE CALCULATED ETSY LABEL RATE.
If you are charging customers the Etsy Label Shipping Rate, you are already upside down. You need to be charging for shipping supplies as well. Even when using Flat Rate boxes, tape and labels are not free. Charge for them.
If purchasing labels through Etsy, charge the USPS retail rate + Shipping Supplies + $0.46 for a Small Flat Rate Box
Why the extra $0.46? Etsy and Direct Checkout charge commissions on the shipping price, so you are still upside down $0.46. That doesn’t seem like much but it adds up over a year’s worth of sales. This is a business and you need to recoup your costs. You are not a charity.
If purchasing labels through USPS.com, charge the USPS retail rate + Shipping Supplies + $0.63 for a Small Flat Rate Box
PURCHASE SHIPPING ELSEWHERE
This is a hassle and a half, but the only way to keep your bill balance positive and cash flowing is to purchase shipping labels elsewhere. Shipping is probably your biggest expense but there is no other way around it.
The problem is that it takes more effort to go to USPS.com, enter the address, mistakes can be made, and then entering the tracking number back into the Etsy system. PayPal shipping is unusable in my opinion. I use Legal Flat Rate Envelopes most of the time and it’s not even an option with PayPal.
This is what I will be doing from now on until my shop closes for good. I can’t have zero money coming in when supplies need to be purchased and orders made.
Between customers expecting custom orders to arrive in 2 days of purchase, Etsy expecting us to reply to messages immediately, fee increases, and the irrelevant SEO guidelines published by Etsy, I do not expect to be open much longer. I am working more for less on a platform being used to line investor pockets.
I bought into the American Etsy dream and like everything else, greed has killed any chance of survival.
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