Small Business

How to Start an Etsy Shop

Starting an Etsy shop could be the option you are looking for if you're looking to sell handmade goods or things you make as a hobby. Outlined in this guide are the correct procedures and certain practices to keep in mind when opening the shop. With this, you could see yourself leading a successful online business, whether it be a passion project, or your main source of income.

In order to start an Etsy shop, you'll need to visit Etsy.com to register as a seller and choose a unique name for your shop. You can then create listings for your products or services, and once you set up your payment and billing preferences, you’ll be ready to start selling your crafts.

Despite competition and changes to the platform, Etsy still holds massive potential for sellers; 31.7 million buyers visit the marketplace to purchase handmade goods, craft supplies and vintage items. While the process of actually setting up your shop is pretty simple, it can be difficult to get noticed among the other nearly two million sellers. Here’s how to set up your online Etsy shop, plus tips on how to start driving sales.

5 steps to opening an Etsy store/shop

Once you’ve decided to sell your goods on Etsy, it’s easy to set up your shop online:

1. Create an account

First, go to Etsy.com and click "Sell on Etsy" in the top right corner, which will take you to the forms you need to fill out to get started.

2. Set your preferences

Fill out the shop preferences section, where you indicate the language you speak, country you’re based in and currency you want to use.

3. Name your shop

Give your shop a unique name. You must use something that hasn’t been claimed by another seller. Etsy will let you know if it’s available. Choose something that reflects your brand and is memorable for buyers. If you’re struggling to come up with one you like that isn’t taken, check out Etsy’s tips on choosing a name .

4. Stock your shop

You’ll create your initial listings for the goods or services you will sell. Etsy recommends starting with at least 10 if possible. Make sure to have professional photos taken of each item since that’s a key selling factor for online marketplaces, and it also reflects well upon your brand. Also, make sure to fill out detailed product descriptions in addition to keywords and tags for each listing to make it easier for prospective customers to find your goods.

5. Set billing preferences

Once you’ve created your initial listings, indicate how you want to get paid and your billing preferences. Be aware of Etsy’s costs:

  • 20 cents per listing
  • 5% transaction fee when an item is sold
  • 3% payment processing fee plus 25 cents on every sale

There are no monthly fees for using Standard Etsy. However, Etsy launched a Plus program for $10 a month that offers additional customization and promotion tools, and later this year, it’s launching Etsy Premium with even more seller tools and features.

You may also want to opt for paid ad campaigns on Etsy called Promoted Listings or Etsy Pattern, a service that offers businesses their own websites but allows Etsy shop owners to sync inventory there and on the Etsy marketplace. Cost: Free for 30 days, then $15 per month.

Expert tips for success

Keep in mind that opening your online shop doesn’t guarantee sales will start rolling in overnight. Etsy requires patience, said Gail Oliver, owner of Attention Getting Marketing, a consulting firm for small businesses.

Oliver works with many e-commerce clients who sell on Etsy, where she’s sold more than 6,000 of her guides and other services. "The marketplace has gotten quite large, so Etsy will drive some traffic to your shop, but you have to expect to drive the bulk of it through your own efforts such as email marketing, advertising, publicity and social media to name a few, and this can take time," she said.

As Etsy has grown in popularity, it’s harder for sellers to stand out and attract customers. Here are some proven ways to increase your chances of success.

Don’t expect immediate or easy success

Once you set up your shop, don’t plan for your shop to take off overnight. It’s a mistake to jump in and expect huge results, said Nancy Wagner, who opened Needle Case Goodies on Etsy in 2014. While her Etsy needlework shop became her full-time job in the past 2½ years and she’s made close to 76,000 sales, it took a lot of work to get to that point.

"Take time to grow your inventory to see what items will be successful," she said. "There are thousands of Etsy sellers, and you need to stand out from the others." Wagner also said it’s vital for new Etsy shop owners to study similar Etsy shops and promote themselves on social media.

Be thoughtful about branding

While it’s tempting to start an Etsy shop as soon as you have a new business idea, Oliver said it’s best to wait until you have a defined brand. "Have a graphic designer create a brand identity for you that is consistent with your shop banner, shop avatar and product packaging, otherwise you will just blend in with the marketplace and not be memorable," she said. This includes high-quality photos, too.

Think carefully about pricing

Put a lot of thought and research into how you’ll price the items you sell on Etsy. "Price to be competitive with similar products being sold on Etsy, but be sure to account for your labor, or you will find yourself working very hard to make little money," Oliver said.

Sellers shouldn’t assume that shoppers will only buy the lowest-price items, she said, especially since pricing too low means you won’t make a profit. She added that sellers should aim to offer free shipping and have a reasonable return and exchange policy to make the shop more customer-friendly and appealing. Etsy recently announced that sellers offering free shipping will be given preference in the site’s search results.

Avoid common mistakes

In addition to expecting unrealistic overnight success, Oliver said new Etsy sellers commonly make other mistakes, such as selling products that have copyright restrictions or paying for third-party traffic "services" that she said are really just fake traffic bots that don’t convert into sales.

She also cautioned new sellers against changing their Etsy search information, such as your listings’ keywords and tags, too frequently, since it can make it harder for Etsy to send would-be buyers your way.

Benefits of selling on Etsy

While you can always open your own e-commerce website instead, it can be expensive to have a website designed and hosted, and you’re on the hook for dealing with tech issues and promoting yourself. Etsy does a lot of this work for you. "When I think about the credit card fees, the website hosting, website design and now Etsy is doing some national advertising, the Etsy fees are well worth it," Wagner said.

Etsy vs. brick-and-mortar stores

Etsy also takes a lower fee than some of the other e-commerce sites out there, Oliver said. "If you are just starting out and have no money to invest in a business, Etsy is the ideal solution as start-up costs are minimal and the risk is minimal," she said. "It doesn’t even compare to a brick-and-mortar store where the initial investment and risk would be so much higher."

Wagner first ran her needlework business as a brick-and-mortar store for 16 years, but she had to cease operations to fight cancer. When she was ready to get back into business, going online-only made more sense. "I had sold all my fixtures, display furniture, etc., so it would have been like starting all over," she said. "Set-up for an online business seemed less overwhelming." She also found Etsy easy to navigate and get started, especially when she compared it to eBay.

Etsy also provides many seller-friendly tools, such an app you can use to manage your shop and orders. It also allows you to create a custom website powered by your Etsy shop (for a fee), and you can buy and print discounted postage from your Etsy account. Additionally, Etsy has policies in place to protect sellers in the event of a buyer dispute.

Alternatives to selling on Etsy

Etsy is far from the only online marketplace out there, and Oliver believes sellers shouldn’t be on it exclusively. "You should never put all of your eggs in one basket, so to speak, as the market can quickly change, companies can get sold or reposition themselves, and you are very vulnerable if you just sell in one place," Oliver said.

"So sell on other online platforms, sell off your blog or social media sites, sell your products wholesale if your margins allow for this, ask local stores to carry your products, or even sell out of a U-Haul if you have to, but sell as many places as possible," she said.

The other online platforms you should sell on depends on your business. Here are a few to consider:

Uncommon Goods

For unique, artisan-type items, Oliver said the two top marketplaces are Etsy and Uncommon Goods. However, with Uncommon Goods, you can’t automatically list your item for sale; you have to submit your items for consideration from their buyers, so there’s not a guarantee you can sell there.

Society6, Zazzle

If you create artwork that you’d like to license but have someone else do the production and selling, Oliver suggested print-on-demand sites like Society6 or Zazzle, but she said the artist’s cut is very slim. Society6 pays artists 10% for any sales, with an option to increase the markup on framed prints. Zazzle lets you choose your royalty rate anywhere from 5% to 99%, but it adjusts the price of your goods accordingly, meaning if you want a high royalty, your items could potentially be priced too high to actually sell.

Amazon Handmade

If you’re selling more general merchandise, there’s always Amazon, Oliver said. You could sell on the general Amazon marketplace or Amazon Handmade, which is aimed at artists only. "But they [Handmade] take a higher percentage than Etsy does and you have way more competition [on the marketplace]." You can also try general marketplaces like eBay, but it’s not focused on artisan or handmade goods, so it may be harder to find your audience.

There are many other smaller marketplaces out there — retail chain A.C. Moore recently launched its own marketplace — but Etsy is a tried-and-true favorite for many sellers. "In my opinion, Etsy is by far the best deal financially," Oliver said. "With no setup fee, no monthly fee, and only a 5% commission, you would be hard-pressed to find a better deal." Wagner said she tried selling on several different online alternatives to Etsy, but the traffic wasn’t there.

E-commerce stores

Oliver adds that you can always set up your own e-commerce store using Shopify, an e-commerce platform. However, it doesn’t bring you customers via a marketplace or provide marketing assistance like Etsy does, Oliver said, and it charges a monthly fee on top of sales commission. But in order to diversify your business, you might want to do this in addition to Etsy.

FAQ

Here are the answers to some common questions for new sellers on Etsy.

Are Etsy’s fees worth it?

Etsy’s fees can be worth it when you look at the costs of running and promoting your own website, Oliver said, and Etsy’s fees are minimal compared with competitors. "You choose to pay extra for other things like the Etsy promoted listings, but even then, if you set up the ads properly, they are still very profitable," she said.

Do you need a business license?

While Etsy doesn’t require it, you might need a permit or license if you’re making products in your home. Depending on where you live or the type of product, some cities may require a health and safety permit or general business license. Consider contacting your local government or a small business lawyer to find out if there are any licenses or permits you need in order to operate within the law.

Do you have to pay taxes?

Yes; you have to report any earnings on your income tax return, even if you consider it a hobby rather than a business. Additionally, some states require business owners based there to collect and remit sales tax, while others only require it if the sale is to someone within the state. Check your state’s laws, and contact an accountant if you need help determining if you need to pay sales taxes. Be aware that some states also have laws that require sellers on online marketplaces to pay state taxes when they make a sale to someone residing in that state, even if you’re not based in that state. But for these internet sales taxes, Etsy will actually collect and remit the tax on your behalf.

Is hobby income taxable?

Yes; the IRS requires hobby income to be reported on your tax return. However, you don’t have to pay self-employment tax income, and you can make some deductions from your expenses. Meet with an accountant if you need help understanding your tax obligations.

Can you make a living selling on Etsy?

It’s definitely possible to make a living selling on Etsy, Oliver said, and Wagner is proof. But Oliver said it depends on what you sell: "Certain product categories do better than others, and it also comes down to the labor involved."

For example, Oliver said if you sell jewelry and you’re the only creator, how much you can make depends on how much jewelry you can make in a day. If you’re selling upscale items, that’s one thing, but if you sell $20 necklaces and can only make 10 a day, you can’t make more than $200 gross per day, she said.

"You still have to deduct your material costs, Etsy fees, packaging, shipping charges and other business expenses to determine what you will really end up making in a day. So it comes down to what you sell, what the market will pay for what you sell, the number of competitors who might be driving down prices and the labor and other costs involved in producing and shipping the item."

As you begin your new adventure as an Etsy seller, make sure to reference Etsy’s Seller Handbook, which is filled with hundreds of articles to help you make the most of your shop and increase your sales.

Emily Starbuck Gerson

Emily Starbuck Gerson is a freelance writer with over a decade of journalism experience. She's currently based in San Antonio, Texas, and specializes in writing about personal finance, small business, and LGBTQ issues.