How does Etsy make money? – Etsy’s Business Model

Etsy is the world’s leading online marketplace for handmade or vintage items and supplies, clothing, jewelry, art and much more. It provides a platform that allows anyone to sell their creations online. If you are wondering how does Etsy generate revenue, then you have come to the right place. In this article, we explain the business model of Etsy and how Etsy makes money. Let’s dive in!

What is Etsy?

Etsy is an online marketplace that provides space for the sale of art, crafts, and other goods. It’s best known for its handmade toys, collectables, art, vintage furniture, jewellery, clothing, craft supplies and holiday items.

On Etsy, customers can find sellers of all sizes — from small indie businesses to large corporations. Unlike Amazon and Walmart, Etsy puts the focus on its sellers — they’re not just producing goods but also managing orders and inventory. As a middle-man, Etsy gives these smaller creators an opportunity to get their products in front of customers.

FoundedJune 18, 2005
HeadquartersBrooklyn, New York
PeopleRobert KalinChris MaguireHaim SchoppikJared Tarbell
IndustryE-Commerce
Business TypePublic
Websitehttps://www.etsy.com/

What does Etsy do?

Etsy is a worldwide marketplace that connects buyers with a variety of sellers. One of Etsy’s main appeals is that its items are all handmade, non-branded, and unique. Shoppers can shop a variety of products from these categories:

  • Home & Living
  • Clothing & Shoes
  • Jewelry & Accessories
  • Toys & Entertainment
  • Art & Collectibles

Signing up to Etsy as a merchant is pretty simple, which makes it easier to add more sellers and thus products. Sellers can opt-in to have steps such as payments and shipping handled by Etsy, which allows the site to compete with sites like eBay or vinted that offer the same services.

Etsy offers a forum and a special section for Etsy Teams. These features allow you to collaborate with other vendors and find strategies to boost your sales. The marketplace is available either on the company’s website or in the form of an app that can be downloaded from Apple’s App Store or Google Play.

how does etsy make money

How does Etsy make money?

Etsy’s revenue comes from a variety of sources. Transaction fees, subscription fees, and listing fees, for example, all contribute to the bottom line. The company also makes money through promotional advertisements and payment processing fees. Etsy is a marketplace-based business.

Etsy has fully embraced a platform approach that lets the company monetize at many stages throughout the buyer journey. Here we’ll examine each income stream in more depth.

Listing Fees

Etsy charges sellers $0.20 for each item they list. The listing fee is non-refundable and will not be refunded regardless of the success of the sale. Offers are typically uploaded every four months and are automatically renewed. However, sellers can disable automatic renewals at any time.

how does etsy make money

Promotional and Advertisement Fees

Etsy offers various promotional services for its merchants to grow their businesses. Etsy advertisements and offsite advertisements are two examples of the many promotional services that Etsy offers. Etsy Ads can appear in many places, including in search results and on category pages. The only time an ad will pay for its space is when a user clicks on it. Cost-per-click rates (CPC) may differ depending on the type of ad and the country.

Offsite advertising is a good way to reach potential customers. For instance, Etsy usually purchases advertising space on third-party platforms such as Facebook and Google. When someone clicks on an offer from this type of ad and then completes a purchase within 30 days, the advertiser is charged. Off-site sales are commissioned at 12 to 15%. Sales history has an influence on how much payment is made.

Pattern

Merchants can make their stores without the Etsy platform by using Pattern. The pattern is a website builder for retailers who want to avoid monthly fees. Merchants can list or transact with no charges on sites made with Pattern. However, you’ll need an Etsy subscription to list or transact on Pattern-created websites.

A pattern is a great tool with a lot of benefits. For example, Pattern offers unlimited listings and web analytics. The pattern also includes a blog and social media promotion. The pattern also has email marketing in cooperation with MailChimp. The pattern is able to attract new users because the service is free for the first 30 days.

Transaction Fees

Etsy’s commission rate is 5%. Sellers may also charge for shipping and gift wrapping, but this is optional. Etsy historically held its commission rates steady at 3.5% until 2018, when it increased them to 5%. This disappointed many sellers, but the platform remains affordable for sellers. 

For example, eBay and Amazon charge different commission rates for their sales. eBay retains 10% of every sale it makes on its platform, and Amazon charges 8% to 15%.

Payments Processing

Etsy Payments allows sellers to accept a number of payment methods from their native currency. Accepting third-party systems such as PayPal, bank transfer services, and Google Pay will allow for a seamless payment experience.

Etsy charges sellers a flat fee for facilitating payment. The fee is typically either 3 or 6 percent, or $0.30. The amount depends on the country where the seller has his bank account. Merchants who sell online can avoid the costs listed above with Square’s card readers. These readers can process in-person sales, which otherwise would incur the same costs.

Square may be a cheaper option than Etsy. For example, Square may be receiving a commission from Etsy for facilitating the transaction and advertising its card reader to you.

Subscriptions

Etsy Plus is a bundle that includes several premium features for sellers on the Etsy platform. Sellers can subscribe to Etsy Plus for just $10 per month. Etsy Plus includes all of these great features:

  • Making Restock Requests (customers are notified when you get your products back in stock).
  • 15 Listings credits.
  • Etsy Credit of $5.

Etsy Plus subscribers can get free .store domains and discounts on domain registrations. If you’re a first-time registrant, you can get 30% off with Etsy’s partner.

What is the Business Model of Etsy?

Etsy’s business model is multifaceted and specializes in handmade goods. With the launch of Etsy in 2000, it has grown into a massive global marketplace for sellers. Etsy is more than just a website. It’s also a physical store, where thousands of sellers come together to share their goods. If you’re looking for a niche marketplace, Etsy is perfect for you.

Etsy is home to one-of-a-kind objects. Founded in 2005, it is now recognized throughout the world as an online marketplace for creative goods. Including vintage pieces and handcrafted pieces, Etsy is the place for anyone looking to stand out.

Etsy is a marketplace for handmade goods. It connects artisans to shoppers around the world who want to buy their work. They offer high-quality handmade items such as accessories, clothing, shoes, toys, home decor, vintage items, and crafting materials.

Etsy has an excellent goal: to enable artists to grow their businesses and find a special connection with their customers. The website is like Amazon and eBay in that it brings artists in touch with people who want unique products.

how does etsy make money

How much is Etsy worth? (Valuation and Revenue)

In over ten years of being a private company, Etsy has received a total of $97.3 million in VC funding from notable investors such as Accel, Index Ventures, and Union Square Ventures.

The company’s first public offering on April 1, 2015, raised $266.7 million. (This isn’t an April Fool’s joke).

Etsy was valued at $1.8 billion when it went public (at a share price of $16). Now, the company’s share prices hover around the $200 mark, which values Etsy at about $24 billion.

The e-commerce site Etsy reported a 100% increase in revenue for the fiscal year 2020, coming in at $1.7 billion. They also made $349 million in earnings during this time frame.

YearRevenue
2016$364.97 Million
2017$441.23illion
2018$603.69 Million
2019$818.79 Million
2020$1.2 Billion

What is the founding history of Etsy?

Robert Kalin, Haim Schoppik, and Chris Maguire are three friends who founded Etsy. Knowing that customer care is just as important as a fast website or beautiful products, they developed the first version of Etsy in 2005, launched the website in the same year.

According to Kalin, he was looking for a unique brand with potential. The word Etsy is taken in three languages and interpreted as “what if” in French and Latin and “oh yes” in Italian. By choosing this name, Kalin said he wanted to avoid any pre-existing associations.

Kalin’s original idea was to create a collective of sellers. Kalin himself was an amateur furniture maker and needed help marketing the wood-encased computers he sold. One seller who was thrilled with the new site called it “a godsend.”

New startups are built on the idea that investments in infrastructure will increase revenue. Etsy launched in 2005, and by 2007 it had already sold more than $1.7 million worth of goods. However, the company was not yet making a profit due to overhead expenses, such as site maintenance and employee costs. As of 2011, Etsy had 20 engineers on staff because its engineering and optimization standards were so high.

Key Statistics of Etsy

Etsy made $1.72 billion in total revenue in 2020.
  • Etsy processed $10.28 billion in gross merchandise sales in 2020, making it one of the largest e-commerce sites in the world.
  • Etsy’s mobile transactions account for 61% of the company’s total sales.
  • Etsy made $1.72 billion in total revenue in 2020.
  • A whopping 4.36 million sellers are active on Etsy.
  • More than 80 million people are active Etsy buyers.

If you liked reading this article, make sure to check out our article on how does Instacart makes money!