How Etsy sellers are adapting to a post lockdown economy
As part of our interest in supporting Etsy sellers, we’ve been doing some digging into the current state of the Etsy world as lockdown becomes more and more a thing of the past. What makes Etsy Sellers so interesting is their creativity, which draws them to craft and sell goods in the first place, but also makes them highly adaptable to a rapidly changing market.
Etsy itself saw a huge boom during the pandemic as more people not only turned to shop online but also, with furloughs and layoffs, started side businesses and full-time businesses of their own. Now in 2022, Etsy’s share price has dipped, but the signs look good for the long term future of the platform. Here we examine how Etsy sellers are adapting to a post lockdown economy.
- What is Etsy?
- What is an Etsy Seller?
- How the pandemic affected Etsy 2020-2021
- How is the Etsy platform fairing after the pandemic?
- How are Etsy Sellers adapting to a post Lockdown economy?
1. What is Etsy?
- The Etsy platform acts as an online marketplace which is focused on handcrafted items sold by independent Etsy sellers to buyers who browse or search the market.
- Etsy has three categories; handmade, vintage, and supplies (which makes up 90% of sales).
The top items sold on Etsy include jewellery, paper and party supplies, wedding gifts, furniture and clothes. In general these products are crafted by the seller with the focus being on their unique designs and high quality.
Etsy sellers pay $0.20 per product they list, and then Etsy takes 6% of the revenue from each sale from the seller, and adds 4% for the buyer.
Etsy was started in 2005 by a group of friends; Rob Kalin, Chris Maguire and Haim Shoppick looking for a better way to sell their crafted goods online. The goal was to “become protagonists of their own lives”.
The platform took off quickly with the business reporting $4.3 million in revenue in its third year, which led to an investment of $27 million in its series D fund raising round.
To emphasise Etsy’s support of the independent, Kalin put out a 2008 white paper; Swimmy which was written in the form of a children’s book. The message was that rather than ‘becoming a big tuna’ like all the other corporations, Etsy was a school of smaller fish who teamed up against these bigger companies.
As social media expanded and became increasingly image focused through platforms like Instagram and Pinterest, Etsy saw its business continue to grow year on year since its IPO in 2010. In 2017, it increased the amount it charged sellers per transaction, from 3.5% to 5% as it looked to increase revenue.
The more people shared crafts on social media the more traffic they sent to Etsy. In 2019, the platform acquired music equipment site Reverb for $275 million.
What really boosted Etsy’s fortunes however was the coronavirus pandemic that saw a huge shift from the public buying from the high streets to ecommerce. It also saw large numbers of people placed on furlough or out of work, so side hustles, like selling on Etsy, became an attractive form of income.
In 2021 Etsy acquired UK based vintage clothes app Depop for $1.63 billion, a purchase that should allow Etsy access to the Gen-Z age group and taps into the retro and vintage clothes market.
The site now boasts 96 million users.
2. What is an Etsy Seller?
- An Etsy seller is someone who lists products in their Etsy shop for buyers to purchase.
- Etsy sellers differ from Ebay and Amazon sellers mainly because they handcraft the items themselves and they’re usually independent sellers.
- Usually sellers are small business entrepreneurs who will (at least initially) be using Etsy on the side of their central business.
- In 2021 there were 96 million Etsy users.
- Etsy sellers are predominantly female (87%).
Joining Etsy as a seller means joining the world's biggest online craft fair. You’ll compete for the attention of buyers, usually through making sure your shop is optimised towards key search terms and by having the best photography to convince people to buy your products.
While the site boasts a large number of sellers, the stats for how much people make from their Etsy shop varies a fair amount.
According to Etsy SEO tool, Sales Samurai, the average seller makes about $46,000 USD (£38,400 GBP) but this average is distorted through top earners bringing in tens of thousands every month, and the 65% of sellers who made an account and lost interest immediately after.
The median amount earned by Etsy sellers is around $100 per year (£83.00 GBP) according to the Statistic Brain Research Institute which seems like a more realistic number. That’s not to say you can’t make decent money on Etsy if you try.
Some of the top Etsy sellers include:
- Caitlynminimalist - averages 31,000 sales a month
- ModParty - averages 26,000 sales a month
- A Corn and Crow Studio - averages 26,000 sales a month
- Beadboat1 - averages 24,000 sales a month
- Seedgeeks - averages 17,500 sales a month
The top 1% of Etsy sellers tend to make at least $10,000 dollars a month.
3. How the pandemic affected Etsy in 2020-2021
- During the pandemic Etsy acquired 31 million new users.
- Etsy made $734 million from mask sales alone.
- Active sellers increased 62% to 4.4 million.
- Etsy’s share price peaked at $300 dollars a share last year (currently it’s around $150).
The pandemic was a good thing for Etsy’s business. As many could no longer shop physically, and they could no longer shop for services or experiences, ecommerce boomed. The uncertainty that many faced with work also helped as those who were on furlough or had lost their jobs, sought new ways to earn an income, translating into an increase in both buyers and sellers.
It would also see a significant increase in sales with net profit in 2020 hitting $349 million and gross merchandise sales also fetching $10.3 billion. You can see from this Business of Apps chart the significant increase in Etsy’s revenue during the pandemic
Source: The Business of Apps
In return Etsy also advocated on behalf of its seller base. CEO Josh Silverman along with 24,000 sellers wrote a petition to the US Congress for more financial support for the self-employed.
According to recent poll of Etsy sellers, 60% of sellers confirmed that their sales had increased, so it would be fair to infer that sellers also benefited from the pandemic. Although 61% of the test group claimed not to have benefited from Etsy’s advocacy for state support and also explained that the increased profits from Etsy sales still didn’t account for the losses they were making on their physical business.
So while there had been wide growth for Etsy itself and it did increase revenue for its sellers, there were still pains from the pandemic that sellers had to endure like the rest of the world.
4. How is Etsy fairing since the pandemic?
- Etsy’s share price is in a dip at the minute at around $150 (down from its heights last year at $300).
- It’s increasing its seller fee from 5% to 6.5% of transactions to increase revenue.
- It’s now offering full refunds to buyers if their product arrives damaged or not as expected. It will cover these costs themselves if it was outside of the control of the seller. This is expected to cost them $25 million a year.
- Etsy recently acquired Depop for $1.63 billion which should help it grow into the Gen-Z, vintage clothes world.
- Etsy is prioritising spend on marketing ($654 million) as it looks to hold onto its gains post pandemic.
It looks as though Etsy is now gearing up to rival Amazon as it changes up its payment structures and looks to become increasingly buyer focused with its new returns policy.
It also shows continued increased profits as the Investor Chronicle predicts a profit of $758 million this year. The reason for the dip is the expected slow down of trade and the plateauing of the pandemic share price hype.
Source: Yahoo Finance
The increase of the seller transaction fee has led to walkouts and strikes from 20,000 sellers. Etsy have given the reason that this is to invest in 24/7 seller support, a new community forum and to provide new ways to share insights and data analytics to sellers to optimise their sales.
They also explain that the money spent on marketing ensures more customers for sellers. Although there hasn’t been any number provided on how much is yet to be invested and how many more buyers marketing is expected to provide.
What’s most encouraging though for Etsy is that their customers have returned even as lockdowns have been lifted. Yahoo reports that 53% of customers who bought something in 2020, bought something again in 2021.
In terms of growth Etsy is also exploring demographics who aren’t as engaged in the platform, namely men. CEO Josh Silverman recently explained that they were pursuing men for their disposable income: “As we looked at our opportunities going forward we realised that we’ve never really tried to speak to men.” With such a broad demographic to target it would suggest a lot more growth ahead.
5. How are Etsy Sellers adapting to a post Lockdown economy?
- Etsy sellers are seeing the similar levels of customers as they were in 2020-2021 but are also seeing increased competition. 49% of sellers in 2021 sold for the first time.
- Ecommerce will continue to grow with predictions it will make up over 20% of global retail trends making it a stable place for sellers to be.
- It’s getting harder for platforms, including Etsy, to get or retain visibility as competition increases and with major platforms such as Meta seeing a decline in return on ad spend.
The main challenge to Etsy sellers is marketing and standing out. According to Etsy 52% of sellers site marketing as their greatest challenge.
The main way that successful Etsy Sellers are adapting to the increased competition in a post lockdown economy is that they’re turning to new, unsaturated social media platforms such as TikTok and (not quite as new) Snapchat, to promote their business.
Many are also turning to the global market in order to beat the local competition that’s growing around them. This is reflected in the recent study by Flow.io which showed 76% of online shoppers had made a recent purchase from outside of their country.
Like Etsy’s focus on marketing for growth and retention, its sellers should work too on customer relationship when answering questions from buyers and interacting with them.
It has been tough for sellers with Etsy’s second increase in its transaction fee, and sellers have been vocal in opposing this. Hopefully the increased investment from Etsy in resources does provide more customers and therefore more revenue and profit for sellers.
- Etsy’s share price is in a current dip but is forecast to recover.
- Etsy saw a surge in growth during the pandemic. And sellers also saw increased business.
- Etsy sellers are seeing the same level of customers, but an increased level of competition.
- Sellers are turning to new social media activity to increase their brand following.
- Etsy itself looks to be focusing on growth for the future with no signs of concern about stability.