More and more sellers join Etsy every year. So with the increase in competition on the marketplace, is it worth it to start an Etsy shop? Are Etsy stores still profitable? They can be! Let's talk about how to set your shop up for success.
How to grow a profitable shop
Becoming profitable on Etsy is all about getting traffic quickly from the millions and millions of buyers searching on the platform every year. Sellers who understand how to leverage the platform's unique marketplace and align their shop with current trends are seeing growth and consistent sales.
You'll want to focus on your niche strategy, showing up in Etsy search, and pricing your products appoproriately. So let's talk about each of those factors next.
Niche Strategy
Etsy is unique as a marketplace in that most buyers are never going to see your shop homepage. Think about how you search on the platform as an example. You probably search for a specific keyword then click on a listing. When that listing isn't quite what you want, you probably go right back to the serach results, right? That's what most buyers do too.
Because of this, your niche strategy doesn't need to be as rigid as it does on other platforms. You can list a lot of products in different products lines without worrying too much about your branding.
You do need a strategy behind what products you're listing and when you're publishing them, however.
Focusing on one niche at a time will help you get traffic quicker on Etsy because you're saturating those keywords in your shop faster, which is an important part of the Etsy algorithm.
There's a lot more to the etsy search algorithm, though. So let's talk about that next!
Search Engine Optimization
Search engine optimization, or SEO, is how Etsy uses your listing titles, tags, and description to decide were you listings should rank in buyers' searches. The most successful etsy shops perfect their SEO to get traffic organically from Etsy without needing to rely a lot on outside marketing tools like ads or social media.
The Etsy algorithm places a large emphasis on your listing tags and titles. To get more traffic start by finding keywords with a good ratio of demand to competition then make sure to format them for the Etsy search engine.
You can learn more about the Etsy algorithm here.
Pricing your products
Setting the right price for your products is one of the most important factors to keeping Etsy profitable as a small business owner. Many Etsy sellers make the mistake of underpricing their items in an attempt to compete, but this is not sustainable in the long run and makes it really hard to be profitable. Here are some factors to consider when pricing your products:
Material costs: Calculate the total cost of materials used to make your product. Be thorough and account for even the small expenses, such as packaging and shipping materials.
Labor: Don’t forget to pay yourself for your time. Consider how long it takes to create each item, and set an hourly wage for yourself.
Market research: Look at what similar products are selling for on Etsy, but don’t undercut the competition at the expense of your profits. Instead, focus on the unique value your product offers through your products design, photography, and processing times.
Profit margin: Once you’ve covered your costs, set a price that allows you to make a reasonable profit. Don't forget to factor in Etsy fees (listing, transaction, and payment processing fees) into your final price. Also include shipping costs if you'll be offering free shipping or using Etsy's free shipping guarantee.
While there are some sellers that will complain about increasing Etsy seller fees, the reality is that Etsy is still the cheapest online marketplace for handmade sellers.
Etsy also tends to be cheaper than investing in your own website because of the larger monthly fees involved in a platform like Shopify.
While many Etsy alternatives advertise cheaper fees, none of them are getting as many buyers to the platform as Etsy is. These platforms tend to be a waste of time for sellers who set them up and then get very slow, if any, sales.
Other ways to get profitable
Take advantage of seasonal searches
Etsy has a huge buyer pool for seasonal gifting occasions, especially during the fourth quarter for winter holiday months like Christmas.
To take advantage of seasonal searches, make sure to list your seasonal products before the searches start to give yourself a better chance of outranking other Etsy sellers who are also targeting these in demand, but competitive keywords.
Increase your return customer rate
Etsy customers who have already purchased from you make great return buyers who are more likely to increase your conversion rate and leave you a positive review.
You can increase your return customer rate through your email marketing strategy or by offering active buyers a coupon on their next purchase.
Mistakes to avoid
If you want to prioritize profitability for your Etsy store, there are some mistakes you're going to want to avoid.
Competing solely on price
While pricing is important, competing solely on price can be a race to the bottom that you will never win. If you only focus on being the cheapest option, you aren't going to attract customers that really appreciate what you make. You'll also be less likely to pay yourself appropriately. That can easily lead to burn out.
Here are some factors to consider when pricing your products:
Etsy seller fees tend to add up to around 10% of each sale. Make sure to factor these into your product pricing.
Etsy runs site-wide sales a few times a year. They'll often ask for you to use a discount of 20% or more. Increasing your pricing to include a buffer for these sales can be helpful
Sometime what we consider to be reasonable prices as makers can be cheap for buyers. Remember you are not your own target market!
Market research is important but only with the right mindset! Get a good idea of the pricing range of your competitors but remember your goal isn't to be the cheapest
Building a garage sale shop
Think about your neighbor's last garage sale. They probably had a bunch of random junk, right? Some baby toys, random sized clothes in a bunch of different styles, some old DVDs, beat up furniture, and who knows what else.
This garage sale wasn't really important for any single product that they sold. They weren't a destination for any particular buyer.
You don't want to be that garage sale shop that sells a bunch of stuff but not a big variety of any one particular thing.
Why? Because on Etsy, quantity matters to the algorithm. You're more likely to rank for keywords that you've saturated in your shop through having full product lines.
That doesn't mean you can't sell a bunch of different products. Target sells just about everything and no one would consider them to have any garage sale vibes, right? That's because they don't just one of anything to choose from.
Instead, you have like 100 pillows to choose from and 50 different candles and even a full aisle of bread or cereal or diapers or whatever you're looking for.
Just remember that you'll saturate the keywords in your shop faster if you focus on one product line at a time.
Using Etsy ads before you're ready
Advertising your Etsy listings before you're ready can be a really quick way to tank your profits.
Is your Etsy business ready for ads? To successfully advertise an Etsy listing, it needs to have a great conversion rate so it takes less clicks to get a sale and be priced to profit with room for the ads cost.
If you aren't ready to try Etsy ads, consider opting into Etsy offsite ads. These are ads with a fixed cost that you're only charged when you make a sale. Click here to learn more about them.
Selling what's popular
It's going to be hard to gain traction and create a profitable and successful Etsy shop if you're too focused on recreating current best selling listings.
Etsy sellers who use their own creativity and knowledge of their target market to make unique products will get a lot more traffic and sales. You'll also be able to charge higher prices that help your shop get and stay profitable on any sales channel.
Conclusion
Selling on Etsy can easily be profitable for makers trying to sell their handmade items, whether the listings are digital downloads or physical products. Focus on getting traffic from Etsy search, creating unique products, and pricing them appropriately.
Want to learn more about creating a sucessful and profitable Etsy business? Click here to grab a copy of my 5-part Etsy framework.
