Thinking about opening an Etsy shop? If you’re an artist, designer, or crafter, Etsy can be a great way to profit off of your talents! Whether you want to make some extra cash, start a new side hustle, or replace your 9-5 job, opening an Etsy shop can help you achieve your goals!
(P.S. Once you finish learning about how to open an Etsy shop, read my article here on How to List Your First Product on Etsy, which will walk you through listing your first product and opening your shop!)
First things first. What is Etsy?
Etsy is an online marketplace for creatives and makers (think Amazon or eBay). The difference between Etsy and other online marketplaces is that Etsy focuses solely on handmade goods, vintage items, and craft supplies. Now, Etsy has some leeway when defining what “handmade” means. According to Etsy, “handmade items are items that are made and/or designed by you, the seller.”
That and/or is important. A few years ago, Etsy started to allow drop shipping. Drop shipping is a business model in which a seller uses a production partner to manufacture and ship their items. This means that as long as you personally create the design, you are allowed to use a production partner to help you manufacture, or physically produce, and ship your products. For example, you are allowed to design t-shirts and use a production partner to print and ship your t-shirts for you.
Some examples of items selling on Etsy are:
- handmade soaps, lotions, and beauty products
- printed t-shirts (whether handmade or drop shipped)
- baked goods
- handmade jewelry
- vintage clothing, accessories, and home decor
- crocheted hats, scarves, and blankets
- handmade wreaths and floral arrangements
- printable or digital products
- craft supplies (ribbon, beads, paper, etc)
This is just the beginning! When it comes to selling are Etsy, your options are almost endless! As long as your item is within Etsy’s definition of handmade, you’re free to sell!
How does Etsy work?
Etsy is simply the marketplace for all of it’s online sellers. Etsy doesn’t sell anything on their own. There is no Etsy warehouse. Etsy is entirely made up of sellers. Each seller (you) opens their own shop on Etsy. Within your own Etsy shop, you can post your products for sale, communicate with buyers, and receive payments. There are literally millions of shops on Etsy. 2.4 million to be exact. Please don’t let this intimidate you! Five years ago, I was just like you! I opened my first Etsy shop in 2015, and today, my shop is in the top 1% of all Etsy shops. With some hard work and determination, you too can succeed on Etsy. I’m here to help you out!
Okay, now lets get to the good stuff. How do you get paid?
When a buyer places an order with your shop, they are technically paying Etsy. Etsy handles all of your payments and transactions. Etsy will take out your seller fees, and pay you the remaining balance. Etsy currently charges $0.20 to put up a listing. This fee is added to your Etsy bill, or payment account, when your product is listed. You will owe this fee whether you sell your product or not. Etsy also has transaction fees. This is the fee you pay once your product is sold. Etsy’s current transaction fee is 5% of your product’s total cost. Etsy also charges a shipping fee, which is 5% of your shipping cost.
Here’s an example breakdown:
You list a t-shirt on your shop for $25. You decide to charge $5 for shipping.
It costs you $0.20 to post your listing right off the bat. Whether you sell this shirt or not, you will still owe Etsy $0.20.
Once you sell your shirt, Etsy will take 5% from total of the t-shirt ($25), which would be $1.25. Since you also charged $5 for shipping, Etsy will also take 5% from your shipping total, which would be $0.25. The total Etsy takes is $1.50, plus your original $0.20 listing fee. You sold your shirt for $30 (including shipping), and you take home $28.30. You will need to price your shirt to cover supplies, shipping costs, and seller fees, so that you are taking home a good profit from each sale.
What do I need to open an Etsy shop?
The good news is, you don’t need much! You probably have most of the things you need to get your Etsy shop up and running. Here’s what you’ll need in order to open your shop:
- An email address. You will need an email address to set up and Etsy account in order to open an Etsy shop.
- A product to sell!
- A shop name. Each Etsy shop has it’s own shop name. You can choose whatever name you’d like! You will need to make sure your name isn’t already taken (I talk more about this in How to List a Product on Etsy).
- At least one photo of your product. Buyers want to know what they’re buying! If you’re just starting out, you can simply use your phone to take a photo of your product.
- A bank account. You need to get paid, girl! Etsy needs a bank account so they can deposit your funds from your sales.
- A business license. Now this varies from state to state. In my state, I had to apply for a business license called a DBA (Doing Business As). This lets my state know that I, Rebecca, am running a business under the name The Modish Maker. I am doing business as The Modish Maker. Don’t let this scare you! Getting a business license was actually super easy, and only cost me $25. I just went to my local county clerk to fill out a one-page application, and voila! I had my business license! You will need to do some research to find out if your state requires a business license. I would start by doing a quick Google search of “business license (your state)”. It should bring you to your states government page with information on how and if you need to apply for a business license.
- A sales tax permit. If you are making money from selling a product, you will need to apply for a sales tax permit. When you go to the store to buy a dress, for example, the store will usually charge you sales tax. This is an extra tax that the store needs to pay their city and state from their store sales (it is usually around 8-9%). In many states, even if you sell a digital product, you will still need a sales tax permit. Again, don’t let this scare you! I was actually able to apply for my sales tax permit online, and received it in the mail! I would recommend doing a Google search of “sales tax permit (your state) to find out more information on how to apply.
I created a free printable checklist that you can use to check off your to-dos as you go! Enter your email below to get your free printable checklist.
Congrats! If you’ve completed the checklist above, you’re ready to open your shop! You can head over to my article here to learn How to List Your First Product on Etsy.
The information provided above is for informational purposes only and should not be taken as legal advice. Please consult with your lawyer and personal accountant for legal advice.