How to Make Money on Etsy: The Ultimate Guide
Etsy is one of the fastest growing marketplaces on the internet and now is your time to utilize it to increase your income. Through the platform, you can sell a wide variety of handmade, vintage and supply products.
Whether it’s handmade wooden jewelry, paper supplies or vintage clothing, Etsy is the place for you to access a wide audience. Millions of customers head to the marketplace each year to browse and buy products, and this gives you an existing audience which you wouldn’t have as a solo seller.
Making money on Etsy isn’t easy, but it’s also not overly complicated. The platform itself is straightforward to understand, and this makes it an excellent place for new business people to start.
If you’ve ever been interested in selling your products online, Etsy is an excellent option because of its existing audience of customers who are already looking for products like yours. In this guide, we’ll be looking at how to make money on Etsy and how you can increase your chance of making vast amounts of money.
Searching for Potential Products
Arguably one of the most challenging parts of selling on Etsy is deciding on the right product. Without something that people want to buy, you’re going to struggle to make sales. Similarly, if there is too much competition or better goods that are similar, customers might choose your competitors.
Handmade products don’t necessarily need to be made only by you, which means that you could source them from a supplier if you wish. However, the vast majority of Etsy businesses sell goods which they make themselves because it fits the target market and allows you to have higher profit margins as a young business.
For the sake of this guide, we’ll presume that you’re going to create your products because this is the most common method. With this in mind, you’ll want to choose a product that you care about and have the skill to make.
There are plenty of guides which tell you to look for favorite goods, but if you don’t like them or lack the skills to produce them, it’s irrelevant. You need to sell something that you can easily create yourself, a good which is going to be high-quality and desirable for your target audience.
It’s always useful to look at top-selling products, particularly if you have a broad skill base but no idea what you want to make. You might be able to spot something that you’ve crafted in the past and therefore generate new ideas.
From there, you need to come up with a unique twist.
You can always copy somebody else and compete based on price, but that’s not a good idea. You’ll sink to the bottom and compete purely on cost. It’s better to try and create something unique that people are willing to pay money for because they love it.
Having looked at the most popular product listings, fashion items tend to attract a lot of attention. Scarves and other accessories are particularly fashionable, probably because they can be highly personalized and are hard to find in stores.
Small mementos and home furnishings like plant pots and unique storage solutions are also well-liked. Again, the commonality is that they are unique and not easily found in stores. Keep this in mind when you’re deciding what you want to make and sell on Etsy.
Doing the Math
While the product itself is important, you have to keep in mind that you’re running a business and not creating crafts for a hobby. This mentality change is the biggest mistake that sellers on Etsy make because they don’t pay enough attention to the financials of the business and therefore find themselves working hard for little money.
Mathematics isn’t the most exciting subject for most of us, but it’s the fundamental basis of being a business person. Without a clear understanding of the costs that you incur as well as the revenue you can hope to generate, you’ll never be confident that you can create a profit.
If this is the case, you shouldn't be running the business. Before starting, you need to have an obvious picture of the financial model before you invest time and money.
When you’re selling on Etsy, the financial component is far simpler. You don’t need to worry about website costs and the effort that comes with it. Your primary costs will be product creation and Etsy fees, while you’ll be generating revenue from a single platform.
You can figure out how much money you should be able to make on each item on a piece of paper. But the easiest way to do it is to use a spreadsheet like Google Sheets or Microsoft Excel, where you can use formulas to quickly change the selling price and supply costs to see how it impacts your profit.
You’ll want to start with realistic figures and then over time increase the estimated sales volume to create a forecast for revenue, costs, and profit. This model will show you in simple terms how much you can expect to earn from your business and is an important step in learning how to make money on Etsy.
Figure Out the Cost of Each Item
Depending on the type of items you’re producing, you’ll likely need a wide variety of supplies and tools. A common mistake that new sellers make is only to consider the cost of the necessary ingredients for their products and not the tools or software needed.
A sewing machine, for example, won’t last forever. You’ll need to use what is known as amortization. This financial tactic is when you spread a single cost over its lifetime. While you might spend $360 in one month on a sewer, you can pretend that it’s only $15 per month for the next two years.
By factoring in all of the costs, you’ll get a better idea of your real profitability.
You want to minimize your expenditure where possible by choosing cheaper materials, without sacrificing quality too much. This cutting of expenditure will make each sale more profitable, meaning more money in your pocket at the end of the month.
If you’ve been making crafts already, you might be accustomed to buying from a local store. However, buying supplies online can often be far cheaper and can save you upwards of 50% when you’re purchasing in larger quantities for your Etsy business.
Whether you’re buying online or in-store, you should look carefully at the precise price and list it on paper or in a spreadsheet. You can then figure out the total costs per item your product and from there, decide how much you want to charge, which will dictate your average profit per item you sell.
Keep in mind; you’ll be required to post the item to the purchaser. Postage can be expensive, particularly for bulky items. This postage cost is another reason why many Etsy stores sell soft and small goods because they can fit in envelopes which are incredibly affordable and will increase your profit margins.
Research the Competition
When it comes to deciding how much you should charge for your items, you’ll need to consider your costs, but you should always be researching the competition. While you must charge enough to generate a profit, you’ll also have to keep your costs in the same ballpark as those selling similar products if you want to make a lot of sales.
Price is always one of the top two factors when making a purchase, and therefore you’ll have to ensure that your price tag is reasonable.
Generally, staying within 20% of others is a good guideline to ensure that you aren’t under or overcharging.
The great thing about a platform like Etsy is the freedom of information. Based on the number of reviews that a product has, you can get a great idea of how many items they are selling each month.
This number will give you a little guidance about the price sensitivity of customers for your niche of products. You might find that for clothing, customers are not bothered by paying more for a product they love.
Whereas for stencils it could be the case that customers are incredibly price-sensitive and reluctant to pay more for similar goods.
Is There Enough Profit Per Hour?
The only cost that you won’t factor into any financial model is your own time. As a small business owner you’ll eat based on the bottom line profit, and therefore it’s always critical that you work backward and ensure that there is enough profit per hour:
Selling on Etsy is fun, but if you want to know how to make money on Etsy, it’s vital that you focus on the cash. To figure out the hourly profit, you should figure out how long it takes for you to create each product. You’ll then need to look at how long you spend each month on other related functions like marketing and posting.
At the end of a month, you’ll add up the total hours and divide by the total profit. This calculation will tell you the amount of money that you’ve earned per hour you spent working on the Etsy business. Of course, at a minimum, you should hope to earn enough to replace your job or give you enough to live on, if that’s your end goal.
When you’re first starting, you’ll likely have a much lower level of acceptance for hourly pay, perhaps even just hoping to break even. But if you want to sell on Etsy full-time, the hourly profit rate is one of the most important numbers to keep an eye on to ensure that you’ll earn a living wage from your business.
Setting Up a Successful Store
Product selection, manufacturing, and financing is only part of the game. You’ll also need to set up and optimize your store. The sales pages that you use are a huge factor in the sales process, arguably one of the most important.
The greatest benefit of selling on Etsy and what you pay fees for is access to an existing audience of customers that loves handmade products. Your job is to grab their attention and convince them to buy from you.
To do this, you’ll need two things, captivating copywriting and dream-worthy photographs. Most Etsy sellers fail in both of these regards and therefore struggle to generate any significant number of sales each year.
Copywriting is the words that appear on your product page. Believe it or not, studies have shown that your writing makes a huge impact on the percentage of people who turn into customers. By using the right words and framing your product correctly, you can improve your sales rate and generate more profit.
Similarly, low quality photographs plague Etsy and fail to inspire, let alone show people what a product truly looks like. Use a good camera, or borrow one from a friend, and read a few photography articles to figure out how to get the right lighting to make the items pop and look beautiful.
Marketing Your Products
While selling on Etsy will automatically give you access to an existing database of customers, that’s not enough. You need to give yourself at least a few hours each week to market your products on forums, social media and through blogs.
Without marketing, you’re relying on people finding you on Etsy, and that can be nearly impossible when you’re starting and don’t have any reviews or sales.
A great way to market yourself is to create YouTube videos or social media posts about your topic. You don’t necessarily have to only talk about your products. If you’re selling stencils, you might talk about how to use stencils, how to make them or anything that would interest your potential customers.
You’ll also want to try and rank in the Etsy search results and appear higher in the category pages. While nobody knows the precise algorithm, it relies heavily on the number of sales a product has, the number of reviews and the average star score.
For this reason, you’ll want to try and get as many positive reviews from customers as possible. You should always email them and encourage them to leave a comment if you can get them to so that more people can find your goods.
After a while, you’ll find that you hit a point where you experience a positive feedback loop. You’ll have enough visibility that you get sales and plenty of reviews, keeping you near the top without any extra work. But getting there will involve hustling, which is why you need to get out there and market your new Etsy business!
The above article was researched and written by the editorial staff at WomensWealth.Money.