How to offer Free Shipping on Etsy without losing money

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If you have an Etsy shop, I’m sure you’ve heard. Starting in late July, Etsy will be offering priority in their search for any shop that offers free shipping on Etsy to their United States’ customers.

Search priority is like free advertising. And all it’s going to cost you is your business eating the shipping costs.

If you haven’t noticed, shipping costs have increased A LOT this year. It’s kind of interesting because after the USPS postage increases that happened in June, I started to think that free shipping was a bad idea. It was just costing our business – and bottom line – too much money.

Although higher weight priority mail fees seem to have remained stagnant, the lower weight regular postal packages increased. A lot. Suddenly, I was losing a lot of profit on these smaller orders (which make up a lot of our sales). Cost increases in the shop on handcrafted goods were coming. Soon.

But back to Etsy. I do find asking shops to offer free shipping kind of interesting. My stationery shop has always offered free shipping due mostly to convenience.

When I decided to combine the digital and handcrafted listings many years ago, the only way to create a combination listing was to eliminate shipping. This way a person purchasing the digital version of the design wouldn’t be charged shipping.

Although managing free shipping has been pretty easy, the problems arise when USPS raises their shipping fees.

Since the listing is set up with both versions together and I use variations in the listing, I have to manually go in to increase the prices to reflect the new shipping fees. Although you can do a bulk edit on the prices as a group, you have to increase ALL of the prices by a certain percentage or amount.

The problem is that I don’t want to increase the pricing on the digital version. And I also don’t want the numbers to seem off. The lower priced goods actually need to be increased more than the higher ones and the listing set-up makes it impossible to do this.

Free shipping was also one of those things that allowed my shop to stand out. Very few vendors offered free shipping in the past, so that perk gave me a way to differentiate my shop.

But these are the times. And Etsy likes to dictate. Even though they can’t tell your shop that you have to offer free shipping, they might as well. Because if you aren’t getting priority in search, then your shop isn’t being found. If your customers can’t find your shop through search, then you won’t make sales.

And Etsy knows this. Which is why they are going about it the way they are.

Why is Free Shipping on Etsy happening now?

Online shopping has become a competition. Everyone is vying for the next buyer.

Etsy isn’t any different. They are now owned by shareholders and are expected to turn an increased profit. Every quarter.

According to Etsy, they ran a study back in May that showed the impact free shipping has to increase sales. Many buyers will purchase an extra item (or two) in order to meet the free shipping threshold.

This happens on Amazon all of the time. Think back to your last purchase and you only needed $8 more dollars to make free shipping.

Did you go find an item for $8? Probably.

And did you purchase the item any way when it cost $15? Probably.

Free shipping offers work. And Etsy wants to take advantage of this money making opportunity.

The problem is that Etsy needs all of the vendors that sell on their platform to get on board.

But making a handcrafted item is very different than buying a pre-made good from Amazon. On Amazon, you simply go the warehouse and add it to the box.

I’m not positive Etsy realizes the love and care that goes into making the products vendors sell. Etsy shops certainly can’t afford to take any more of a loss (between the increased vendor fees last year and not charging enough to begin with, many vendors are trying to figure out how to continue making a profit on the platform).

It bears to question whether allowing customers to place items into their carts (essentially for free) is the idea.

I consider purchasing a handcrafted item that’s one of a kind to be a very special event. I’m not so sure buying an extra pair of earrings or handmade dish towel is encouraging the right things. Sure sales will increase, but at what cost. And who benefits from this increase?

How to Add Free Shipping on Etsy without Losing Money?

The trick with adding free shipping to your Etsy listings is to roll the shipping fees into the product pricing.

You can calculate the current shipping costs that are charged and add them onto your product costs.

This used to require some calculation by you, but Etsy has created a new shipping calculator to make it easier. You can also checkout the Free Shipping Spreadsheet that I created to keep all of your product pricing organized.

When calculating shipping, it’s important to decide the best way to recoup your costs. Shipping costs are calculated based on your location and the weight of your product. The cost of shipping a product priority mail to a faraway location is very different than somewhere that’s just down the street.

It’s never seemed fair to me to charge someone locally the same amount for shipping as someone very far away. To come up with something in the middle, I find the average of the two costs.

To get started calculating my shippign fees, I weigh each quantity for each product type.

Then I calculate the shipping for the product to California (which is the farthest away from me) and Philadelphia (which is the closest city to me).

I calculate this average for the weights of the different quantities of the product. Then I add that amount to the cost of the product and round up to the nearest dollar.

Here is the formula that I use:

(The cost of shipping to California + the cost of shipping to North Carolina)/2 = The amount you should charge for shipping

After I figure out how much the product costs with shipping costs included, I ask if that’s reasonable.

Even though I might need to sell my favor tags for a certain amount, it doesn’t mean that the price makes sense in the current Etsy marketplace. One of the issues with the Etsy platform is that many vendors try to compete based on price, not quality or maker experience. And it’s only natural for a customer to purchase the lower priced item, no matter how amazing yours is.

So, let’s look at an example on how this works. You sell an item currently for $45. Due to its weight, you have to send it priority mail. Calculate the average priority mail shipping costs for that weight. Then add this amount to the price of your item. After you have this amount, round up to the nearest dollar (if it’s under ten cents or so, I usually round down). This is the new price of your product.

If your price seems high, research what other shops are selling a similar product for. But wait until after this free shipping change goes into effect. Many shops will probably raise their prices significantly to make up for the shipping costs if they decide to make join the free shipping on Etsy program.

Also if you feel that the shipping costs are too high (or not high enough), you don’t have to take the average of the two shipping costs to find the middle one. You can also choose to use the farthest buyer, the closest buyer or even a flat rate number.

Once you decide on the best new product prices, you can update them on your listings using Etsy’s smart pricing tool. This tool allows you to make bulk changes to your product costs much easier than before. Although I’m not sure it works for variations yet.

What if I’m Going to Lose Money?

Although the title of this blog post is how to offer free shipping on Etsy without losing money, this is, of course, not a guarantee. Which is why you need to complete all of your calculations carefully before jumping onto the free shipping boat.

If you find that you have to raise your prices too high to offer free shipping and your customers are going to be turned off by the price increases, then free shipping on Etsy might not be right for your shop.

Many times it’s better to do what’s right for your brand and not because a sales platform is highly suggesting it.

Although you may feel like you’re not always in control on Etsy (and many times your not), it’s still your shop and you are still the business owner. You need to make decisions based on what’s right for your business.

One solution is to consider making it a gradual change. You could mark up the prices halfway instead of the full amount. That way your customers don’t have sticker shock. Some might not care as much about free shipping on Etsy as they do feeling like they paid a reasonable price on a handcrafted good.

After a couple of months at the new pricing levels, you could increase prices the rest of the way.

How do I handle international shipping?

Etsy has made it clear that US Etsy shops need to only offer free shipping to US customers to receive priority in the Etsy search.

International shipping is extremely expensive. If you do ship internationally, I recommend not offering free shipping to these customers. At least not yet.

It will be very hard to calculate and international shipping fees are always changing. You’d spend more of your time constantly updating your prices than actually selling your products.

What if you don’t want to offer free shipping on Etsy?

As with every big change Etsy makes, there are going to be some shop owners that are not happy. It’s always important to remember that Etsy was created like a co-op in the beginning. And it can be kind of frustrating when it feels like you don’t have any control over your own shop.

Not to be harsh, but you’re going to have to get used to it or get out.

As much as I love the Etsy platform and enjoy teaching creative business owners how to establish their shops on it, I still believe it’s only a place to get started. Long term growth can be difficult to maintain (although, I’m working on that formula right now) due to many of the rules.

If you aren’t loving all of the new shipping changes and your shop is pretty established (at least 1,000 sales), maybe it’s time to consider your own independent shop.

You could expand your shop onto your own website with WooCommerce or create a Shopify shop.

Just make sure that you have a solid marketing plan in place. One thing that the Etsy platform does really well is send potential customers to your store. Make sure you know how to market your shop before jumping completely off Etsy.

Another idea is to explore other platforms for creative business owners. Creative Market, Maker Faire, Society 6 and many more are other places where you could consider opening a shop.

But before expanding to a new shop, consider your business goals. If you really want to grow a brand that’s all your own, establishing your own website and shop platform will be really important.

You can find out more information how to grow beyond Etsy here.

If you decide to stay on Etsy and not offer free shipping, expect your views and sales to decrease. At least for a little bit. Since your products won’t be found in organic search as easily, not as many potential customers will be able to click through.

Take this time to build up other marketing channels (which you should be doing any way). Create pins for your products, write blog posts and share your work on social media.

Relying solely on Etsy to drive traffic to your Etsy shop has been a bit precarious for awhile now. Cultivating other marketing sources protects you from any of the Etsy changes that are brewing ahead.

So, develop an effective marketing plan that you have time to implement and USE IT. It will make you more in control of your Etsy shop. Remember, Etsy’s just a sales platform. You own your shop and brand.

Final Thoughts…

As you already know, Etsy and I have become good friends over the last decade. It’s the place where I decided to establish my shop and start it’s business journey.

I have offered my customers free shipping on Etsy for years and have liked the results. Customers are more likely to purchase and enjoy this little perk.

If you are looking for an easy way to grow your creative business, consider offering free shipping in your Etsy shop. But this doesn’t mean that your business should eat these extra costs.

The trick with offering free shipping on Etsy is to roll the extra costs into the price of the product. So use our Free Shipping Spreadsheet or Etsy’s free pricing tool to calculate the cost of your different types of products. Then decide if you think your customers will pay the increased fees.

If you aren’t sure, test it. Try a few products or a category of products at the new prices for a month and see if sales of those products change. Then, decide whether you want to make the changes to your entire store. Etsy isn’t announcing the free shipping changes to customers until September. So you have some time.

You can find more information on setting up free shipping on Etsy here. And if you need help creating a shipping station that saves you time, check out our post here. Happy selling!

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