Your Etsy side gig is about to get more expensive
Since 2017, Christine Fox has been building a following on the online craft marketplace Etsy. ETSY, +2.59%
She’s made more than 150 sales of $20 candle holders and $220 wool blankets that she knits herself, and amassed more than 600 fans who follow her work on the site. But after about a year of growing her business, she’s packing up and moving on.
She doesn’t want to pay the additional overhead costs that Etsy announced on Thursday. The company is increasing the fees that sellers must pay on purchases from 3.5% to 5%. Fox said she paid more than $1,000 between November and December of 2017 in fees to Etsy, which took a significant bite out of her overall profit.
“I can’t afford it,” she said. “Etsy is sending the message that it doesn’t care about its customers.”
Fox was one of a chorus of Etsy vendors voicing their concerns on Twitter TWTR, -0.37% after Etsy announced the fee increase. Many said they would move to different online marketplaces to sell their goods.
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A spokeswoman for Etsy told MarketWatch the higher fees will go to investments in new features including customer support. The company also plans to increase its direct marketing spending by at least 40% this year, a spokeswoman said. Etsy hosts 2 million sellers on the site.
“Etsy is only successful when our sellers are successful, and we are constantly listening to how we can better help them reach their goals,” she said. “Sellers have been vocal about their desire for us to bring them more buyers and tools to run their businesses effectively.”
“Additionally, our revised fee structure will enable us to make meaningful investments in key areas while remaining the best overall value for creative entrepreneurs,” she added.
Etsy’s fees are still smaller than many of its major competitors. Shopify, home to more than 500,000 online sellers, charges sellers by the month in addition to a smaller fee per purchase. The basic Shopify plan costs $29 per month, plus 2.9% and 30 cents per transaction. The next level Shopify Plan is $79 per month, plus 2.6% and 30 cents per transaction, and the advanced Shopify Plan is $299 per month, plus 2.4% and 30 cents per transaction.
Amazon AMZN, -0.40% takes a larger cut, at 15% of sales per transaction. Amazon launched Handmade at Amazon in 2013 to try to attract more DIY crafters to the site.
Christian Adair, an Etsy shop owner in Pennsylvania, will be moving all of his wares to his personal online shop following the Etsy fee hike. His bath and body products are his main source of income. He said he can’t keep prices low for customers with the new fees. The LuvMilk shop sells 8-ounce cans of bath salts for $6 each and banana-flavored lip balm for $2.50 per stick. He makes about $3,000 to $4,000 a month (after paying fees), and pays about $800 to $1,000 a month in fees during “extra busy” months.
“Etsy doesn’t care about its sellers, they only care about the bottom line,” he said.
Meanwhile, Etsy’s stock soared toward a record high on Thursday after the announcement, with its second biggest gain in its history. The company said it expects to increase revenue in 2018 some 32-34% from one year ago due in part to the increased transaction fees. The FactSet analyst consensus for 2018 revenue of $544 million implies a 23% rise from last year.
Analyst Edward Yruma at KeyBanc Capital, who raised his stock price target on Etsy to $48 from $36 and affirmed his overweight rating, said, “While Etsy’s management baked in some conservatism based on seller discontent, we believe momentum is very strong and any bellyaching will be allayed by continual platform improvements.”
Kari Paul is a personal finance reporter based in New York. You can follow her on Twitter @kari_paul.
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