Shop Fees For Selling on Etsy: How Etsy Makes Money

Etsy Seller Fees How Etsy Makes Money

Fees for selling on Etsy can seem pretty complicated as a new shop owner reading through the seller handbook.

What percentage does Etsy take per sale?
How do I avoid fees on Etsy?
Can you sell for free on Etsy somehow?

There are eight sections of fees listed in the handbook. But, I promise you don't have to be worried about each and every one of them!

This post will explain how Etsy fees work. It will also simplify which Etsy fees will always be applied versus which you may be able to avoid.

Etsy Transaction Fees Explained

Etsy fees are the way Etsy makes money from the millions of buyers and sellers using the platform each year. The platform generates more than $330 million in revenue from marketplace fees, including listing and transaction fees.

Luckily, most of the fees are based on whether and when an item in your shop sells. After a purchase is made, Etsy will automatically take a portion of the sale based on the fees below.

All sellers should stay in the loop about Etsy fees, because they can change at any time. As recently as April 2021, Etsy increased the transaction fee from 5% to 6.5%. Changes like this will impacts seller margins if you do not adjust accordingly.

The most recent version of the Etsy Fees & Payment Policy can be found through this link. If you are a current seller and haven't reviewed the fees recently, I recommend popping over once in awhile. Always make sure you are pricing your products the best way to cover any new or increased fees.

Don't have your own Etsy shop yet? Read my Ultimate Guide to Selling on Etsy here.

Fees for selling on Etsy, How does Etsy Make Money Cover Image

What Are the Fees for Selling on Etsy?

The fees for selling on Etsy include some fees that can't be avoided and other fees that are part of optional “upgrade” features that are not required for sellers.

While the Etsy seller handbook details several types of fees, don't be overwhelmed before starting an Etsy shop! Many of the fees may not even be relevant to you. They are fees based on what you sell or from which country you operate your shop.

Currently, there are three main fees that Etsy sellers incur for every sale that can't be avoided: a listing fee, a transaction fee, and a payment processing fee.

While I explain each in more depth below, the easy way to think about these fees is this. The listing fee is a flat-rate charged to your account immediately after you post a new item for sale. This is the fee I talk about when I answer the question, “Does it Cost Money to Sell on Etsy?”

The transaction fees are calculated based on a percentage of the sale. They are only charged to you after a customer makes a purchase.

The two fees above are primary ways that Etsy makes money as a business. However, the third fee, the payment processing fee, is not a method of profit for Etsy.

A payment processing fee is the charge due to third-party payment processors (think credit card companies, Stripe, PayPal, etc) when a sale is made and their service is used to complete the transaction. They are the ones who profit from this fee. Your payment processing fee may be based on your seller location and whether Etsy Payments is available.

Continue reading below for more detail on each of these fees.

Listing Fee

The first fee you will incur as a seller is the listing fee.

Etsy charges sellers a flat rate listing fee of $0.20 for each new listing posted for sale in their shop.

As soon as you hit “Publish” on a new listing, you will receive a pop-up. It will ask for confirmation that you are ready to list. It will also remind you that a $0.20 charge will hit your payment account. Once you confirm, that listing goes live. Immediately, a $0.20 fee will be charged to the credit card you put on file to open your account. And yes, this is regardless of if the item ever sells.

The listing fee comes along with both bad news and good news.

The good news is that$0.20 an item it is a low fee. Plus, there are ways to avoid the fee for your first 40 items if you find a referral link from an Etsy seller friend!

More good news is that the listing stays live for four months. This allows for a good amount of time to try to bring in customers. Hopefully, in that time you can make some sales to cover upfront listing costs.

Bad news regarding the listing fee is also the “four month” factor. If your product does not sell within four months, you will have to renew the listing if you want it to stay live within your shop.

Listing Renewal Fee

Each time you renew a listing, it gets treated like a new item and incurs the $0.20 listing fee again.

Additionally, if you list multiple quantities of the same item, the initial listing fee is $0.20 as you would expect. Many sellers, though, may not realize that the listing is then automatically renewed at $0.20 after each of the items sells

So to be clear, listing multiple quantities on a single posting does not prevent you from incurring that $0.20 fee once one of that item sells.

If you haven't opened an Etsy shop yet, make sure to ask a friend for their shared link. By using a referral link, you get 40 free Etsy listings and so does person who referred you! 

Here's my Etsy referral link if I've been a good friend or resource as you start your Etsy seller journey! 🙂 

Transaction Fee

Once you actually make a sale, you will incur the transaction fee. The good news is that this charge reduces your profit, but won't have to come from your personal payment account. Instead, you will just receive the difference of your revenue minus Etsy's cut of their fees.

What percentage does Etsy take per sale?

When you sell an item through your shop on Etsy, Etsy will charge you a transaction fee of 6.5%.

One big thing to note.

The transaction fee is calculated as 6.5% of the price you display plus the amount you charge for shipping, plus any amount charged for gift wrapping.

Many sellers opt to offer free shipping on their products, or free shipping over $35 purchase, as Etsy recommends. However, if you do not offer free shipping in your store, it's incredibly important to realize that Etsy will continue to take a 6.5% cut of the additional shipping fee the customer is paying for. If you are not adjusting for that piece of the puzzle, you may actually be losing money in your shipping charges.

Payment Processing Fee

Payment Processing Fees are fairly standard across all platforms (even if you sell on Shopify or your own website.) These fees go straight to the financial vendors who are actually moving money from customer to store owner.

It's important to know what the payment processing fees are in your location so that you can appropriately price your products. However, if you are comparing Etsy to other sales platforms, they are likely to have very similar payment processing fees. That means technically, the processing fee is not a percentage per sale that Etsy itself is taking or profiting from.

For sellers in the United States the payment processing fees are 3.5% plus $0.25 per sale.

If you are in another country, check the chart on the Etsy Payments page to confirm your processing fees.

Note that because the Payment Processing Fee is independent from the Etsy fees, it is calculated on the gross order amount, including shipping and tax (if applicable). These are deducted from the total amount of the payment at the time the payment is considered complete.

So, in simple terms, even if you have already calculated that you will only make $9.35 off of your $10 listing, your Payment Processing Fee will still use $10 (plus tax) as the number they use to multiply by 3.5%. Plus, don't forget to add an extra $0.25 (for the USA rate.)

Advertising Fees For Selling On Etsy

As mentioned earlier, the fees listed above will be incurred as a standard part of listing products and closing a sale with a customer. However, there are other fees for selling on Etsy that you may or may not run into as a seller. As a general overview, these fees are often related to specific marketing efforts. They are connected to increased promotional opportunities to be seen within the crowded Etsy marketplace.

Etsy Ads Fees

Etsy Ads are one way to help promote your shop and get your items to stand out on the platform. You can pay to advertise your shop(s) and products on Etsy.

Etsy Advertising is completely optional, so these are seller fees you can avoid if you choose.

If you enable Etsy Ads, simple access Shop Manager > Advertising Dashboard. There, you can opt in or out. You can also set up a daily maximum budget for the amount you are willing to pay for advertising your business on Etsy.

Off-site Etsy ad fees

Off-Site Etsy Ad Fees are a little more complicated to describe than the others. They are not as black-or-white as to whether you can avoid them as a seller.

When Etsy made the most recent update to Off-Site Ad Fees, they set specific categories based on shop size to define whether you were allowed to opt out of the Off-Site Advertising program or not. Additionally, based on your shop size, you may have a different percentage Etsy takes per sale of your advertised products.

What Are Off-Site Etsy Ad Fees For?

One of the biggest benefits of selling on the Etsy platform is that it is a well-known global marketplace. Etsy is already full of high-quality shops and positive shopping reputation for millions of customers each year.

As a small business owner, one reason you likely opted to sell on Etsy is because there is plenty of traffic being driven to their website. If you start your own website, you have to spend a lot of time and/or money getting the word out to tell people about your new shop.

However, Etsy advertises on behalf of sellers on platforms like Facebook, Pinterest, and Google to help build consistent traffic to their site. This, in turn, benefits each of the individual sellers on the platform. Shop owners don't need to drive as much of their own traffic to their shops thanks to this partnership.

The implementation of Off-Site Etsy Ads Fees helps Etsy balance some of this advertising cost. When it directly benefits a particular seller, a small piece of that seller's profit is attributed back to Etsy through this fee.

How Off-Site Etsy Ad Fees Work

fF you are included in the Off-Site Ads program, here's how it works.

Etsy's advertisements on social media sites and search engines often includes specific listings targeted at the user. If an item from your shop is one of these listings and a potential customer clicks through to your store and makes a purchase, you will be charged the additional Off-Site Ad fee.

There are a few additional important notes about Off-Site Etsy Ads as well.

  1. The buyer doesn't have to buy the specific listing they clicked on for this fee to be implemented. If they are brought to your shop through the off-site advertising and end up purchasing any item in your shop, the fee will be added to what Etsy collects before calculating your profit.
  2. They buyer doesn't even have to make a purchase from your shop immediately after clicking through the advertising link. Etsy tracks this clickthrough for 30 days. Any purchase that buyer makes from your shop within 30 days of clicking the advertisement will incur the Off-Site Ads Fee.
  3. When a customer orders multiple items from your shop after clicking an Off-Site Ad, the entire purchase is subject to the Off-Site Ad Fee. It won't be just the single listing that is charged.

While it might seem frustrating to sellers who are hit with this fee, especially on a bulk sale, it's important to remember the benefits. Without being seen on a large platform thanks to Etsy's investment, you would not have made that sale at all. So, while your margins on the order will be lower than usual, it is still making a profit from a customer that would not have found your shop.

Who Has To Pay Off-Site Etsy Ad Fees?

Large sellers making $10,000 or more per year are automatically included in the Off-Site advertising program and cannot opt out. Shops in this category are obligated to be included, which Etsy does automatically. (So, there is no action needed on behalf of the shop owner to join the program.)

For these shops above the $10,000 threshold, the Off-Site Etsy Ad Fee is 12% on every sale that results because of the advertising undertaken by Etsy.

Note: If you are close to the $10,000 annual threshold and cross it for the first time this month, your shop will be included in this category beginning the 1st of the upcoming month. Etsy will reach out and provide notice to you if this is the case.

Who Can Avoid Off-Site Etsy Ad Fee By Opting Out?

Shop owners who make less than $10,000 per year and have the option to opt out of the Off-Site Advertising Program altogether. This means that Etsy would never include their products on external advertising.

If you are opted-in to Off-Site Etsy Ads and make under $10,000 a year, the Off-Site Etsy Ads Fee is 15% on every sale that results because of the advertising undertaken by Etsy.

Comparing Off-Site Ad Options

When it comes to what percentage Etsy takes per sale on Off-Site Ads, realize there are two separate categories with different rates.

Category 1: Sales Below $10,000 Annually

Sellers below the $10,000 annual revenue threshold incur a 15% off-site ad fee. However, they also have the option to opt-out altogether if they prefer.

The benefits to opting out may help newer sellers get used to the platform. It could provide the time to ensure pricing is profitable before scaling up their shop. If you are new to setting prices or not strong with finance, a surprise 15% fee could make the difference between making a profitable sale or actually losing money on the sale. And, if you are just starting out and only making a few sales a month, you might not be making enough money on other sales to make up for it. The last thing you want is to be losing money by making sales!

At the same time, remember the benefit to opting in (if your prices are set wisely.) You could gain more views and more sales much more quickly, because you could benefit from the intelligence of targeted advertising on large platforms.

Category 2: Sales Above $10,000 Annually

Sellers above the $10,000 annual revenue threshold incur a reduced 12% off-site ad fee. However, the offset to that benefit is that they do not have the flexibility to opt-out.

Because there is no option to opt-out, it's vital to price products with a bit of an extra margin in case they incur an Off-Site Ad Fee.

You won't know which products Etsy is promoting or which sales will be a result of Off-Site Advertising until after the sale is made and you see the revenue – and all the fees – hit your account.

The good news is that if you are a seller above the $10,000 annual threshold, you likely have a good handle on your finances and have already learned some of the positive and negative lessons about Etsy selling along the way. Plus, sales being made organically (not through Etsy Ads) should be making a higher profit margin and helping to offset any of these additional fees.

Etsy Seller Upgrade and Bonus Options

If you look at the Etsy Seller Handbook to learn about the fees, there are so many listed that it looks like you might never make money! But that's a big reason I put together this post about fees for selling on Etsy.

Everything described in the sections above is a true fee based on listings and sales made.

To better describe some of the other “fees” listed in the handbook, let's consider them Upgrade or Bonus options for sellers who want to take advantage of them.

These fees include:

  • Subscription Fees
  • In-Person Selling Fees
  • Pattern Fees
  • Currency Conversion
  • Regulatory Operating Fees

The first three fees listed above I consider more “Upgrade Fees” because they are only a result of sellers deciding to expand their Etsy shops in certain ways.

The subscription fees relate to opting in to Etsy Plus – read more about Etsy Plus directly from Etsy here. In-Person Selling Fees relate to the interest in linking your shop to a Square reader (for example, if you also sell the same products in-person at craft fairs.) And “Pattern Fees” are related to the service Etsy now offers called Pattern. It allows users to link their Etsy shop inventory to a personalized website supported by Etsy itself.

Because many sellers do not venture into in-person sales or Pattern websites, these are not fees for selling on Etsy that the general new shop owner needs to concern themself with.

If you sell out of the United States, the latter two fees will not apply to you. (Read the Seller Handbook for details on operating from another country.)

How To Pay Etsy Fees

You must know if your country is eligible to use Etsy Payments to choose how you'll get paid. Etsy Payments gives your buyers different options to pay for their order. Then, they consolidate all the payments for you in your Etsy Payment account.

If you’re in a country is not eligible for Etsy Payments, you can use your PayPal account.

Setting up your billing will depend on the country you’re in. You may need to enter a credit or debit card to open your shop. This could be any of the following cards:

  • Visa 
  • Mastercard 
  • American Express 
  • Discover 
  • Carte Bleue (France)

The payment account you set up when first opening your shop will be the method Etsy uses to charge upfront fees – like listing fees. Since these fees must get paid regardless of whether a sale is made, Etsy will directly debit them from your account on file.

Additional fees incurred from a sale made – like the transaction fees, payment processing fees, and potentially advertising fees – will be deducted from the total sale revenue proper to Etsy releasing the funds to your account.

Mom Has The Last Word

Think you have what it takes to start an Etsy shop? Hop over to my Launch An Etsy Shop in A Day course to walk through the steps of opening your Etsy shop in under 24 hours!

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