Etsy is raising transaction fees from 3.5% to 5%. That's still a low commission fee compared to Amazon Handmade and eBay, but what sellers are likely to zero in on is the fact the fee will now include shipping. To this day sellers bemoan eBay's move to charge commission fees (FVFs) on shipping - a much-hated move.
In dollars and cents, today's announcement means an Etsy seller who lists an item for $30 and charges $3 for shipping and currently pays $1.05 in transaction fees will pay $1.65 under the new fee structure - 60 cents more, or an increase of 57% in this case.
That's significant, and some sellers may revisit their own pricing to see if they should raise prices - and determine if they should raise prices to build free shipping into any of their products. They have until July 16th before the new fees take effect.
To put it in perspective, the average commission fee on eBay is 10% of the selling price plus shipping - so that $30 item with $3 shipping would incur commission fees of $3.30, while Amazon Handmade charges a 15% ($1 minimum) "referral" fee - and beginning in 2019, Amazon will require sellers to pay $39.99/month for a Professional selling plan. (Note that only sellers who participate in Amazon Handmade have access to the fees page.)
Etsy explained the reasoning behind the move in today's announcement:
Why is Etsy raising fees?
We're updating our transaction fee to help us invest more in bringing buyers to Etsy, building tools that make it easier for sellers like you to run your shop, and providing the support you need to grow. As always, our goal is to make Etsy the best place for running a creative business online, and we think these changes will make Etsy even better.
Etsy said it plans to increase its marketing budget this year by at least 40%. In 2017, Etsy spent $78 million in marketing to bring buyers to the site; it plans to spend over $110 million in 2018.
The bulk of Etsy's marketing investment currently goes to performance marketing and tactics like Google shopping ads. Etsy will invest more in performance marketing, which it says is directly tied to securing more sales for sellers.
It won't cost sellers more to list on the site. The question is whether Etsy's increased marketing budget will benefit every seller equally - or if some sellers will simply pay more in commission fees for the same amount of sales they're already getting.
One thing eBay learned when it began charging commission on shipping is that every year, it gets a fee increase without having to announce a rate hike. That's because every year, all major shipping carriers raise their shipping rates. Etsy will likewise benefit by receiving more in fees every time shipping rates increase - which is a double-whammy for sellers.