The following is written by guest blogger Robert H. Wright. Robert is a writer and editor who has worked in the advertising and marketing fields for over a decade. Full disclosure, he is also is my husband. We were recently discussing one of the changes Etsy.com is implementing concerning their makers (of which I am one), and what it may mean for their businesses. I asked if he would share his thoughts with you, and this is the result.
As always, questions and constructive comments are welcome and appreciated.
Why this may not be a great deal
A few days ago, Etsy shop owners began receiving emails informing them about the wonderful new expanded advertising service called Offsite Ads. Everyone wants to be noticed and sell more items, but digital advertising can be daunting, especially for small business owners. It’s time-consuming. It’s technical. And mistakes, often costly ones, are easy to make.
So, the friendly folks at Etsy just want to help you out, right? Well…
Let’s start with the potential positives. If you don’t have the time or inclination to deal with digital advertising, Etsy will handle the headaches. For a fee. They’ll worry about bringing more traffic to your page and you only pay them when it results in a sale. You (hopefully) sell more, they earn more transaction fees. It’s a win-win.
Or maybe not.
In addition to their standard 5% transaction fee, if one of their offsite ads for one of your listings leads to a purchase from your shop in the next 30 days, Etsy gets a 15% “advertising fee”. Even if the purchased item was not the one advertised. Right there, that’s a hard chunk to swallow. 20% of the transaction going right to the platform.
Yes, this fee is intended to cover Etsy’s costs. They have to set up and run the advertising. There are related costs when people click on the ads. Etsy only charges you if they make a purchase, so your fee covers their expenses from non-purchasers.
The first real problem is that this program is automatic opt-in. This sends up a red flag for me and is not a cool way to roll out anything. You can opt out, unless of course you make real money on Etsy. Anyone with annual sales of $10,000 or more is required to be part of the program. I don’t know how many are in that bracket. But Etsy just told them, “instead of taking $500 of your $10K, now we’re taking $2000.”
Let that math sink in. Scale it for the size of your shop. Doesn’t sound so great now, does it?
Another big point is control. Shop owners will have no control over what listings are advertised, how often, and with what budget. There are numerous other factors that go into setting up and running effective digital advertising. The program spares shop owners the technical details, but puts all the control in Etsy’s hands. All with zero visibility of the advertising program and zero promises, other than it’s “risk free.”
But there is a real risk. A risk that you will make less money with your shop. Etsy isn’t going to roll this out without making sure they are making money. They take care of themselves first. If you happen to make some money, too, that’s great. You are their revenue source. But their risk is spread out across their user base. So their interest in seeing your particular shop succeed is effectively nil.
I’m not saying don’t do it. I’m saying proceed with caution. Assume the maximum scenario: every transaction in your shop gets an extra 15% fee. Is the advertising going to drive more than the extra 15% increase in sales to cover the expense? More importantly, will it do enough above that, so that it actually grows your business?
Advertising is an investment. But you should see a good return on that investment. Each shop owner has to decide if Etsy can provide that for them.
As someone who has done digital advertising and marketing for a living for over a decade, my view is that better returns are there when you have visibility and control. That means your own e-commerce website and an advertising program with a budget that works for you.
Having your own site and handling the advertising is technical. But it is possible to learn the basics you need to start with Google, Facebook, and other popular platforms. It’s an investment in time and energy running your business, instead of doing the parts that sparked your passion in the beginning. However, marketing and advertising your business will pay off in the long run, if you carefully plan the attention you give to it. It’s not especially glamorous or fun, but it seems better than just trusting Etsy to do it for you.