Etsy.com is known as the go-to online marketplace for high-quality handmade items. With a community focused on handmade products, authentic vintage items, and pure random whimsy, selling on Etsy can be a great way to start or expand an online business.
Setting up an Etsy shop can be done effectively in a single afternoon, and can help put cash in your pocket. Whether your goal is to give your bricks-and-mortar business an online presence, sell your handmade wares on the side, or rehome your vintage collectibles, Etsy can help you reach a new audience.
Is Etsy Still Profitable in 2023?
As Etsy has grown in popularity, so has competition on the platform. That means it can be more challenging to stand out than in the past. However, the company has made a public effort to make it “the best place to sell online.” In 2022, Etsy sellers made nearly $12 billion in sales.
It is focusing on three key areas to support sellers in 2023:
- Helping sellers get discovered by more buyers, more frequently. This includes global advertising.
- Improving the tools and resources to help sellers run their businesses. This includes adding new features to the Etsy Sellers app and making it easier to list items and to find the right pricing strategy.
- Building a community to support sellers as they grow. This includes investing in events, awards, member support and protecting selling from what Etsy calls “bad actors.”
Whether you will be able to build a successful and profitable business on Etsy depends on lots of factors, including what you sell and whether it is priced and promoted well. But it generally costs very little to get started, and there is still lots of potential upside.
What Are the Advantages/Disadvantages of Selling on Etsy?
- Established ecommerce marketplace
- Easy to use tools for sellers
- List for just 20 cents
- Get advice from Etsy and other sellers
- Competition can be fierce
- Other sellers may imitate best sellers
- Fees ad up
- Platform changes can impact sales
How Do I Start a New Etsy Shop in an Afternoon?
If you want to start selling items on Etsy, here’s a step-by-step guide to get started.
Sign up on Etsy.com
Go to the Etsy Sellers page at etsy.com/sell. Log in with your Google account, Facebook account, Apple account, or with your email address and a new password. You’ll receive an email to confirm your account, which will bring you to a new page on the site.
Once you’ve registered, you’ll be prompted to answer some questions about your business and its goals. You can skip them, but it’s best to answer them accurately so you can get personalized resources for your stage in the selling journey.
Set Up Your Shop
First, you’ll need to create a unique Etsy shop name. Etsy will provide the guidelines and will tell you if the name is already taken. (As with your business name, it’s always a good idea to check whether your business name is available, and make sure it doesn’t violate any trademarks.)
In the next step, you’ll be promoted to add product photos, videos (if available) and listing details, including detailed product descriptions and pricing. If you’re stymied,
You’ll also need to fill in shipping details, plus set up your shop policies, such as your return and exchange policy. Remember, the more detail the better!
Add Banking Details
After adding your first product for sale in your Etsy shop, you’ll need to add banking details to your private profile. This also includes other validating information, such as your address and phone number. Finally, you’ll be asked for a valid credit card to pay for listing fees (which start at just $0.20).
You’ll want to decide whether to enroll in Etsy payments if you’re eligible. Etsy payments will give your US buyers several payment methods, including debit/bank cards, Etsy Gift Cards and Etsy Credits, PayPal, Apple Pay, Google Pay and Klarna.
Open Your Etsy Shop
Once you’re verified, you can get busy promoting and selling. You can spend as much time as you’d like to create a great experience for your customers. Create and add new products for sale, a logo, and add information to your profile so that your customers can connect with you.
Similar to setting up a crowdfunding page for your business, when you’re setting up your Etsy shop it may help attract customers if you tell your business’s story in addition to getting your products listed. Remember, Etsy shoppers are looking for unique items that they can’t find in a department store. Don’t distract from what you want customers to do (make a purchase), but consider adding a blurb about the origin story of your product to the details section of your shop.
Etsy’s Shop Manager makes it easy to track sales, revenue, and more.
Market Your Items
Successful Etsy shop owners rarely just put an item up for sale and forget about it. Instead, they carefully research Etsy search terms to help sellers find their Etsy listings. They learn about product photography to make their listings more appealing.
Many successful sellers also run Etsy ads, which are paid ads for their shop. Some run paid ads on other platforms.
They may also actively market their items to potential customers on social media, their website, email list etc. They learn the basics of search engine optimization (SEO) to help people who are searching for their product, on or off Etsy, find them.
Customer service is part of marketing, so you’ll need to respond quickly to customer questions and feedback. You will want to frequently review your products and/or pricing and look for ways to increase sales.
If you’re serious about your business, you may want to consider Etsy Plus. This subscription service offers listing and ad credits, advanced store customization, discounts on shipping boxes and other benefits.
Do I Need an LLC To Sell on Etsy?
You do not need an LLC to sell on Etsy. You can sell as a sole proprietorship. However, in general, it’s a good idea to form an LLC (or other business entity such as a corporation) as soon as it’s feasible. In some states, it’s very cheap to register a business entity, but in others it may be cost prohibitive while you’re trying to get your business off the ground and decide whether to go all in.
Should I Get an EIN for My Etsy Shop?
An Employer Identification Number (EIN) is a taxpayer identification number, similar to your Social Security number but for your business. EIN’s aren’t required for all businesses, and if you are operating your Etsy shop as a sole proprietorship, you may not need one yet. That’s especially true if you haven’t made any sales yet and don’t know if you will continue your Etsy business.
However, an EIN can be helpful for several reasons, and you can get an EIN for free:
- It can provide a start date for your business. If you haven’t formed a business entity, you may want to use the day your business received an EIN as your start date. This can be helpful when you are asked the date your business was started on loan applications or in other business situations.
- It helps to separate your business and personal finances. Anything you can do to draw a clear line between your personal and business finances is helpful for budgeting, tax, and planning purposes.
In some states you may also need a business license; be sure to check.
How Can I Handle Financial Management for My Store?
Etsy provides tools to make it easy for entrepreneurs to manage their account, and you will want to supplement them with additional financial management tools for your business.
Your Etsy Account Summary will show you sales you’ve made, refunds, fees and credits, and sales tax paid by the buyer.
Seller services will detail ads you’ve paid for on the Etsy platform as well as any offsite ads you’ve purchased through Etsy.
You’ll need to make sure you price your products so they are competitive, but also so that you don’t lose money after you take into account costs, transaction fees, shipping costs, etc.
In addition to the information Etsy provides, it’s a good idea to also:
Open a business bank account. A business checking account can be used to deposit the money you earn from your business as well as to pay expenses not deducted from your sales.
Use a business credit card. If you’ll have business expenses outside Etsy fees (such as craft supplies, business formation costs, digital marketing expenses, etc.), a business credit card may be a good way to cover those expenses.
Set up accounting software. The sooner you set up a business accounting system, the better. Keep your bookkeeping up to date so you can stay on top of your business finances. Even if you don’t expect to make Etsy your full-time business, you’ll likely need to pay taxes and keeping your bookkeeping up to date will be very helpful in meeting tax filing requirements.
How Can I Finance My Shop?
Every business starts somewhere. Plenty of people on Etsy get their start by bootstrapping themselves and paying in advance for everything they plan on selling. If you want to take your presence from casual to serious, you might need more supplies than you can afford at once.
Here are some ways to do that:
Use a Business Credit Card. Business credit cards aren’t just great for earning credit card rewards. Most cards offer a line of credit that can be used for short-term borrowing. Interest rates are usually high, so running up a lot of debt is risky. A 0% intro APR business credit card may help you finance some costs over time, at no extra cost, provided you pay off the balance in full before the intro period ends.
The good news is that business credit cards are available to new businesses as well as more established ones. Good to excellent personal credit scores are usually required.
Get Vendor Credit. Another way to get your shop stocked is to use trade credit, which is the world’s biggest business lending resource. In fact, about half of the 28 million small businesses in the United States use some form of trade credit, and you may want to, too.
Get a Line of Credit. A business line of credit is a popular type of business loan. Once you get approved, you can borrow against your line of credit as needed. Pay back your debt and borrow again. It can be very flexible and helpful for times when you need to add inventory, scale up production or advertising, or get ready for a busy season.
When Is My Etsy Store a Hobby or Business?
For tax purposes, it’s important to distinguish between a hobby and a business. The first thing you’ll want to do is review the IRS guidelines for hobby vs business.
Whether it’s a hobby or business may affect your ability to take certain tax deductions.
Here are a few factors to consider in determining whether your Etsy store is a hobby or a business, based on the IRS guidelines. The more of these questions you can say “yes” to, the more likely you have a business rather than a hobby.
Be sure to talk with a tax professional for advice about your individual situation.
1.Business approach: Are you running your Etsy business in a professional manner? Are you maintaining accurate books and records? If you run your store in a professional, business-like manner, for example maintaining good records and following best business practices, it’s more likely to be considered a business.
2. Time and effort: Are you putting in regular time and effort to make it profitable?
3. Dependence on income: Are you dependent on income from your Etsy store for your livelihood?
4. Losses are normal. It’s not unusual for small business owners to have losses as they get going, for example. Are your losses normal or out of your control? (For example, due to a pandemic.)
5. Striving to improve. Are you making changes to improve the profitability of your business?
6. Expertise: You don’t have to be an expert in e-commerce businesses, but if you lack knowledge or skills you should be leveraging your skills or those of advisers to help you turn a profit. The IRS may also look at whether you’ve been successful in similar businesses in the past.
7. Profitability: Have you made a profit in at least three of the last five years, including the current year? (New businesses may not meet this test, of course, but tax deductions for startups have special rules.)
8. Financial investment: Have you invested significant financial resources in your Etsy store, expecting it will be profitable?
Frequently Asked Questions About Opening an Etsy Shop
Is Etsy More Popular Than Amazon?
When it comes to Etsy vs. Amazon, Amazon is the larger platform overall for online selling, but Etsy targets a customer looking for certain types of products, including handmade goods or vintage goods. Etsy can also be an excellent platform for selling digital goods (like planners). Depending on the product you sell, you may want to start with one or the other.
Can I Sell on Etsy and Amazon?
The good news is that you don’t have to choose between Amazon and Etsy. Amazon’s Handmade for Creators also allows sellers to sell more unique items, including handmade items. Amazon Merch on Demand is also popular for creating and selling t-shirts.
However, before you try to master two different platforms, new sellers may want to focus on one at a time to learn it well and take advantage of features.
How Hard Is It To Start an Etsy Shop?
It’s not hard to start an Etsy shop. What’s more challenging is running your Etsy business. That includes marketing, customer support and fulfilling orders. It means making sure you set aside money for taxes and stay on top of tax filing deadlines. It’s a lot of work to run a business, but it can also be incredibly rewarding.
This article was originally written on June 13, 2017 and updated on July 18, 2023.