What changes at Etsy mean for NightBlooming
Etsy recently announced some big changes to their marketplace, namely fee increases for their sellers. I’ve been musing on what this means for NightBlooming—I haven’t made any decisions yet, but I have a lot rolling around in my head.
The short version for those that are worried:
- No, NightBlooming isn’t going anywhere. I’m not closing up shop on Etsy, or in general.
- I will continue to ship internationally, and offer the lowest rate possible while doing so.
- I am working to find a solution that’s as fair as I can make it to you, and to me, in light of these changes.
For those that want the long version, this is going to be one of those “Grab a cuppa and curl up for a long post” entries.
Fee & Package Changes at Etsy
First and foremost, this isn’t a ‘bag on Etsy’ post (although wow there’s a lot of those out there). Etsy has been good to me, and the reason I stay there rather than just have my own site is because I do find value in their marketplace, seller tools, and other services they provide me. Because I choose to participate in their platform, however, that means when Etsy changes things up I have to look at changing how NightBlooming dovetails with them in response.
Etsy announced last month that it would start taking more money from shop’s sales and offer owners new tiered subscription plans.
The seller transaction fee will increase from 3.5 percent to 5 percent starting July 16. The new 5 percent fee will also apply to shipping costs, which were not subject to Etsy fees before.
There’s two big points here, so I’m going to break them out individually. If you don’t care about the math, feel free to skip this bit, but the tl:dr is my fees increase 64% and now applies to shipping, something I don’t make anything on.
Examples with Math
3.5 to 5% Transaction Fee
This one was both expected and long overdue. When I started selling on Etsy back in 2007 it cost me 20 cents to list an item and then 3.5% of the final sale price was billed to me as fees. Etsy raising their cut 1.5% over 11 years isn’t anything to get the pitchforks out over, but it does have an impact to my bottom line. For example…
… if a train carrying 500g of Fire Genasi leaves the station at 3pm traveling 78mph…
wrong example, let’s try another one 😉
…if I sell 100g of Fire Genasi for $14.00 and it costs me $3 to ship, under the old fee structure I would be charged $0.20 cents to list the item and $0.49 for the transaction fee: it costs me $0.69 to sell that 100g on Etsy. (This does not include surcharges from PayPal or credit cards.)
under the new fee structure
… if I sell 100g of Fire Genasi for $14.00 and it costs me $3 to ship, under the new fee structure I would be charged $0.20 cents to list the item and $0.70 for the transaction fee: it costs me $0.90 to sell that 100g on Etsy. (Also not including surcharges from PayPal or credit cards.)
That ends up being a 64 percent increase in fees. That, alone, would probably be something I could absorb, but here’s the kicker…
The 5% fee increase also includes shipping costs
Using our previous example, that means, now, that:
… if I sell 100g of Fire Genasi for $14.00 and it costs me $3 to ship, under the new fee structure that also applies to shipping I would be charged $0.20 cents to list the item and $0.70 for the transaction fee: it costs me $1.05 to sell that 100g on Etsy. (Also not including surcharges from PayPal or credit cards.)
But, Melissa, that’s only 35 cents! What are you quibbling about? Let’s try that again with 100g of Fire Genasi going to England.
… if I sell 100g of Fire Genasi for $14.00 and it costs me $14 to ship, under the new fee structure that also applies to shipping I would be charged $0.20 cents to list the item and $0.70 for the transaction fee: it costs me $1.60 to sell that 100g on Etsy. (Also not including surcharges from PayPal or credit cards.)
This change also dis-proportionally hurts sellers of heavy vintage items (who are often shipping at a loss), or sellers like me, who have a large international customer base.
In 2017 I paid $9,648 in Etsy fees, with the new fee structure that same fees due would be upwards of $17,000.
That 35 cents from the previous example has since added up.
Why are they charging you a transaction fee for shipping since you don’t make any money on that?
Etsy’s answer was “because everyone else in the marketplace does that,” and it’s true. Ebay, Amazon handmade, etc. all bill on the total transaction cost.
We can blame Ebay sellers for this because they were using it for fee avoidance. A great example of this is someone selling an iPhone for $1 and $499 shipping. Ebay was only getting paid off the $1 and sellers were able to avoid fees by ludicrously padding their shipping costs.
The practice of fee avoidance practice was starting to creep over onto Etsy, too, and Etsy would both like to end fee avoidance and would very, very much like its sellers to start offering “free” shipping.
The Myth of Free Shipping
You might have heard the saying “There’s no such thing as a free lunch,” and, similarly, there’s no such thing as free shipping. *Somebody* is paying for it, as there’s not a postal service on this planet that operates for free.
It’s also important to note that the US Postal Service does not charge everyone the same rate.
- Retail Shipping: This is what they charge a normal human being at the counter when they take a package to the post office and ship it to another human being.
- Commercial Shipping: This is offered to Etsy sellers who choose to participate in the calculated shipping program (which I do), and is slightly lower than the Retail rate.
- Commercial Plus Shipping: This is what Amazon, Zappos, etc. can command. It is high-volume shipping from centralized warehouses and the cost is less than 20% what I pay with commercial shipping. These are super-low because the prices are set based on how USPS wants to compete with UPS/FedEx.
What this means is that if Amazon wants to offer you “free shipping” on an item, they have to add much less to that item’s cost than I do to make it back.
The Psychological Appeal of Free Shipping
So, then what’s the deal with the push for free shipping? In their Podcast, Etsy gave an example from their buyer survey, which said that, resoundingly, a buyer comes to Etsy for quality and handmade and is comfortable paying a premium price for that. They are happy to pay $60 + free shipping for an item, but balked at $50 for the item + $10 shipping because that $10 spent on shipping “felt wasteful.”
Everyone might be aware that there’s no such thing as free shipping, but dang if our lizard-brain doesn’t REALLY like it anyway.
This is also virtually a uniquely American expectation, thank you, Amazon, and one that small sellers simply cannot compete on.
The Problem with Free Shipping on Etsy
Right now there’s only one option for “free shipping” and that’s to disperse the cost of shipping into each individual item, and treat it as just another COGS (Cost of goods sold).
But that also feels shitty to me because I pride myself on not charging more on shipping than it really costs. That’s why I use calculated shipping: at checkout it looks at my address, your address, and the total weight of all the items in an order and then charges you exactly that amount plus a 50 cent surcharge that helps pay for my time spent packing orders.
That means if I were to roll the average cost of shipping a packet of Fire Genasi within the USA ($3) and you bought two packets of Fire Genasi, you’re now really paying $6 in “free shipping” rather than the $4.22 that calculated shipping would shake out to.
This extrapolation gets even more hairy for my international customers. I can’t ship an empty envelope of air to Canada for less than $14 simply because there are base costs of handling, tracking, customs, etc. that are incurred in the process. If an international customer were to buy those “Free shipping” packets of Genasi and then have to pay shipping on top of the incorporated “free shipping.” That is downright cruel and exploitative and I refuse to do that to my customers.
Something else that sellers on the Etsy forums have talked about is offering “free shipping” and then just refusing to ship internationally at all. I am very well-aware how hard it is to get quality, natural products that you can trust in some parts of the world and will never, ever refuse to work with international customers.
But, as of right now, Etsy has not provided me with the tools to do things like:
- Do “free shipping” for US customers and calculated for international customers
- Combine “free shipping” to a lower charge for those that qualify for it
- Do “free shipping” above a certain purchase point, which STILL doesn’t work for international customers.
So, what’re we going to do with all this?
Great question, and I wish I had one clear, easy to implement solution, but I don’t.
In the short term, nothing at all is going to change. The new fees are going to go live in a few days and I’m just going to roll with them as best I can.
In the coming months, I might experiment with things like “free shipping” on samples because those are light and the cost increase would be minimal. They’re also more for new customers than my established, loyal ones.
Etsy is also going to be rolling out Premium Seller packages (that I’ll get to pay an additional fee a month for) and perhaps those will have, or will evolve to have, better tools for handing this mess.
In the long-term, my goal is to switch nightbloominggarden.com over to Woo Commerce rather than the “buy it on Etsy” buttons that it has now. I could, then, raise prices on Etsy to cover their fee increases, but keep the ones here as what they are now (which are more or less fairly paying me for my materials and time).
I didn’t do that when I launched this site because it will mean keeping two sets of inventory tracking and bookeeping for sales. It also makes my tax return process more complicated than it already is.
This would mean Etsy would become a place where new customers could find NightBlooming, but I could offer exclusive discounts and exact-priced shipping to the loyal customers who used this site instead.
Did you know I write fantasy books? I do, and it is consuming a lot of my time
As some of you know, I’m in the process of publishing my first novel in my fantasy series, and that has a lot of my time and attention right now. (And I also work a full-time 40+ hours a week day job). My focus can’t shift to changing nightbloominggarden.com over to WooCommerce until my author site is up and the publishing process is largely out of my hands, but hopefully I’ll have more exciting details to share with you about that, soon!
And no, that’s not me, please don’t panic, I didn’t cut my hair!
I know this was a long one, but I pride myself on being on the level with my customers and thought a good number of you might have seen the fee increases in the news and I wanted to address it directly. As always, I’m keen to hear your insights. 🙂