How to Start Making Money on Etsy: From Idea to Shop

Making Money, Personal Finance
Start Making Money on Etsy

If you’re wondering whether you can turn your creative passion into profit on Etsy, here are some statistics to consider: The site had more than 30 million active buyers and almost $3 billion in gross merchandise sales in 2016.

But creativity and passion aren’t enough to succeed on the online marketplace, which is dedicated to art, crafts and vintage items. Here are other factors to consider if you’re trying to figure out how to make money on Etsy.

Make sure your idea can be profitable

It’s important to sell a product you care about. But before diving in, make sure it’ll actually sell. You can do some quick market research using Etsy’s search bar. Be as specific in your query as possible and click through to the different shop pages to see the number of sales made since opening.

If it seems that there’s enough interest in your product idea, then you can move on to the next step: making sure the product will earn you money. Here’s how to do the math.

Figure out the cost to make each item. First, figure out what costs, such as materials or labor, are involved in production. If you want to sell handmade jewelry, for example, look up prices for the gems and earring hooks you’d use to make each piece. Then calculate the cost of making a single item.

Research the competition. Scope out prices for similar items on Etsy. It’s also a good idea to consider prices on other marketplaces, such as Amazon or local stores, to increase your chances of selling.

Factor in Etsy’s fees. Selling through Etsy isn’t free. The site charges 20 cents to list an item and there’s a 3.5% fee for each item sold. That excludes shipping, so if you’re selling physical products, you’ll have to estimate those costs as well. On top of that, Etsy Payments, the site’s payment processing system, costs an additional 3% of the total sale price, plus 25 cents.

If you expect to owe more than $1,000 in taxes on your earnings, you should probably set aside money for estimated quarterly tax payments — Etsy suggests saving a fourth of your earnings. But 25% might not be enough, and there might be state, local or other taxes. Estimate your tax liability to find a more accurate figure.

Evaluate the numbers. Take the price-per-item you’ve picked and deduct the associated costs — including fees, taxes and production expenses — then see what’s left over. If you can’t turn a profit while maintaining a competitive price, you might want to try another sales venue or a different product.

Learn more about making money selling stuff online here.

Set up a successful Etsy shop

Once you’ve identified a solid idea, it’s time to create your shop. It’s a simple process: Sign up, click the “Sell on Etsy” button and fill in the details, such as your shop name, listings and billing information.

Once your shop is online, check out Etsy’s seller handbook and consider joining a team to help you learn the basics from other shop owners, such as how to take great photos of your items or write your shop description. Then you can focus on one of the most challenging parts of being an online entrepreneur: marketing your products.

Start with free methods. Creating a Facebook page or Instagram account for your shop is a good place to start. Check out similar accounts to find relevant hashtags and ideas for posts. Then post regularly and interact with followers to maximize your reach.

You could also start a blog about a topic that’s relevant to your buyers. If you have a vintage clothing shop, for instance, you could write about how to style clothes or repair older pieces. If you can afford to invest some money, consider paid methods, such as Etsy’s Promoted Listings product or Google’s Shopping ads tool, to showcase your items.

As the business grows, set sales goals and take advantage of Etsy’s web analytics tool. That way, you can gauge if your marketing tactics are working or it’s time to try something new.

More money-making tips from NerdWallet

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