Do you have a product that you want to sell, and you’re looking for the right place to sell it? All sorts of people look to Etsy to find creative products to purchase. Maybe you make jewelry or t-shirts or sell vintage items or something else entirely. You can start your own Etsy store easily and start selling your products immediately.
An Etsy store can be a great way to turn your crafting hobby or passion into extra income or even a full-time business. Launching a successful Etsy shop involves more than just creating and listing your products, though, and our guide is here to help by providing an overview of how to start an Etsy shop.
Business Overview
Etsy is a unique platform that connects sellers of handmade, vintage, and craft supply items with buyers who value creativity and originality. The platform operates on a shop-based model, where each seller sets up their individual store, lists their products, and ships to their buyers.
Related: What are the most popular items on Etsy?
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Industry Summary
E-commerce has been steadily growing, and platforms like Etsy make it easier for small businesses to get a slice of the pie. In 2022, Etsy reported gross merchandise sales of approximately $13.3 billion and 7.47 million sellers, a testament to the platform’s reach and impact. While the site hosts a wide variety of product categories, there’s a special focus on unique, handcrafted items that offer something distinct compared to what you’d find in regular retail stores.
Steps To Start An Etsy Store
Step 1: Market Research
It’s easy to see the appeal of starting an online store on Etsy. With millions of shoppers browsing the site for unique handcrafted items, the popular e-commerce platform offers a lucrative opportunity for crafters to turn their hobbies into a thriving business. However, before you put in the time, effort, and resources to open up your own Etsy store, it’s important to conduct market research first. There’s no point pouring your heart into something that nobody wants to buy.
The first step to determining whether your Etsy store can be successful is to look at market demand. Start with Etsy’s search tool and Google Trends to see what items have high search volume and are trending. This can help put the spotlight on any profitable niches and products that you may be interested in selling. Check out what product categories are popular and analyze competitor listings. Researching customer reviews and seller feedback can also provide valuable insights into what is driving sales and what can be done to improve your offerings.
It’s unlikely that you will find something to sell that nobody else is, so you need to know what sets the high-performing competitors apart. Take the time to identify the top competitors in your niche and analyze their products, sales, and pricing, as well as customer feedback. Use tools such as EtsyHunt and eRank to conduct an Etsy Competitor Analysis. By understanding the strengths and weaknesses of your competitors and identifying the gaps in the market, you can tailor your offerings to stand out from the crowd.
Another smart way to stay on top of demand and identify new product opportunities is by signing up for Etsy’s email alerts. These alerts will keep you informed about top search terms and trending products in your niche so you can keep up with customer preferences and demand. Additionally, Etsy’s Marketplace Insights reports provide insights on the products that shoppers are likely to be searching for on Etsy in the upcoming season.
Step 2: Write a Business Plan
Starting a business is always a risk, and an Etsy store is no exception. When you’re starting an Etsy store, it’s important to have a plan, and that plan should be in the form of a business plan. This is an important step that helps clarify your vision and gives you a better understanding of the potential of your business.
Another reason to write a business plan is to estimate your income and expenses and take into account everything from material costs to Etsy’s fees to shipping expenses. This exercise is helpful because it gives you a snapshot of whether your business is likely feasible or not.
Related: How to write a business plan
Step 3: Register the Business
If you’re considering opening an Etsy store, there’s more to think about than just your products and how to market them. It’s also necessary to make sure the business is legally set up.
Choose a business structure: Your first task is to decide on a business structure. The structure you choose will affect your taxes, how you report income, and your level of personal liability. Four common types of business structures are:
- Sole proprietorship: This is the simplest and least expensive structure. As a sole proprietor, you and your business are one and the same legally. This structure is common for individual sellers on Etsy because it’s easy to start up.
- General partnership: If you’re starting the business with someone else, a general partnership is an option. Each partner is responsible for the business’s debts and actions.
- Corporation: A corporation is a separate legal entity from its owners, providing them with personal liability protection. However, it’s more complex and expensive to set up.
- Limited Liability Company (LLC): An LLC combines the liability protection of a corporation with the simplicity and flexibility of a sole proprietorship or partnership
Related: Comparison of business structures
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!
Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!
Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.
In addition to the legal name of the business, you will need to pick a unique Etsy shop name. Etsy limits names to 4 to 20 characters, which can be challenging, but while it’s best if you can, your Etsy shop name doesn’t have to be the same as your business name.
Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits any business will need before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Related: Do you need a business license to sell on Etsy?
Step 4: Source Suppliers
Sourcing reliable suppliers is an important step in starting an Etsy business. Before you jump into finding suppliers, you need to plan out your product line and have a clear idea of what you want to sell. By planning your product line, you can set up accounts with suppliers, finalize manufacturing costs, and ensure that you have sufficient inventory to meet customer demand.
It’s easy to think that everyone will love your product as much as you do. However, investing in bulk materials or a large inventory without any market validation is risky. Start small. Create some prototypes or limited runs and start selling them. Collect feedback and be willing to make adjustments. This step could save you a lot of money and stress down the line by ensuring you’re creating a product people actually want.
Next, make sure your materials are readily available and at a price point that makes your business viable. If you’re planning to offer custom or personalized items, your material sourcing becomes even more critical. Some materials might be seasonal or subject to market fluctuations, so make sure you have a reliable source. Look into the shipping and handling fees, too, as these can sometimes turn a profitable item into something unprofitable.
Last, don’t overlook the time it will take to produce each item. Whether you’re hand-knitting scarves or assembling intricate jewelry, time is a factor that needs to be accounted for in your pricing. While you may be the only person making the item now, if you don’t account for your time and down the road, the business needs to hire employees to assist in the production, you may not be charging enough to hire.
Step 5: Create & Set Up your Etsy Shop
Setting up an Etsy store involves several key steps, including listing your products, setting up payment methods, creating shipping profiles, and optimizing your listings for SEO.
Listing Your Products
The first step in setting up your Etsy store is to list your products. Each product listing should include a detailed description of the item, its price, and shipping information. The description should clearly communicate what the product is, how it’s made, and who it’s for. It’s also important to use all of the tags for each listing, as each tag is an opportunity for your product to appear in a shopper’s search. Also, check out Etsy’s Keyword 101 article to learn the tips on using the right keywords in your listings.
Setting Up Payment Methods
Etsy Payments is a convenient feature that allows buyers to use various payment methods, including credit and debit cards, Etsy Gift Cards and Etsy Credits, Apple Pay, Google Pay, and PayPal. When you sign up for Etsy Payments, all transactions will be processed by Etsy directly, so you don’t need to worry about setting up a separate PayPal account or dealing with extra fees.
Creating Shipping Profiles
Shipping profiles can save you time when adding shipping prices to products in your shop. With shipping profiles, you can use the same shipping settings for multiple listings, which can save you time when adding products to your shop. You can also offer discounted rates for buyers purchasing multiple items.
Related: How to start selling on Etsy
Step 6: Prepare to Launch!
From securing business insurance to creating a robust marketing strategy, there are several steps you may need to consider when starting your business. The needs of each Etsy store owner will be different, so these steps may vary based on your specific situation. However, these are some common areas to consider when starting your Etsy store.
Business insurance: It’s worth considering protecting your business with the appropriate insurance. This could include product liability insurance to cover damages resulting from faulty products or home business insurance if you’re operating from your home.
Setting up bookkeeping: Keeping track of your income and expenses is needed for tax purposes and understanding your business’s financial health. Consider using bookkeeping software like Wave Accounting (FREE) or Quickbooks to help manage this.
Opening a business bank account: A separate business bank account can help you keep your personal and business finances separate, making bookkeeping and tax preparation easier.
Creating a marketing strategy: To attract customers to your Etsy store, you’ll need a solid marketing strategy. This could involve designing a catchy logo, building a user-friendly website, and leveraging social media platforms to reach your target audience. While listing your products and advertising on Etsy will bring shoppers, promoting your store on social media platforms like Facebook, Pinterest, Instagram, and others will help drive more traffic to your store.
Common Questions When Starting An Etsy Store
How much does it cost to start an Etsy store?
Starting an Etsy store involves various costs, and it’s a good idea to have a good understanding of these expenses to plan effectively. While the total costs can vary depending on your business model and scale, you can generally expect to spend between $300 to $2,000 initially to get everything up and running. Here’s a breakdown to help you plan:
Business registration: In most areas, you’ll need to register your business and possibly obtain a license. Costs can range from $50 to $200 depending on your location and the type of business structure you choose.
Initial inventory: The cost here will vary based on the type of products you’re selling. For handmade goods, you’ll need materials. If you’re reselling, you’ll need to buy stock. This could range from $100 to $500 to start.
Photography: High-quality photos are essential for online selling. If you don’t have a good camera, you might need one, or you could pay for a professional photo shoot. Costs could range from $50 to $300.
Etsy listing fees: Etsy charges $0.20 per listing, and if you start with around 20 items, that’s $4.
Insurance: Basic business insurance can cost around $250 to $500 initially, though this depends on your specific needs and location.
Marketing: Your initial marketing push might include creating a logo and paid Etsy ads or ads on social media. Expect to spend around $100 to $200 initially.
Shipping supplies: Boxes, tape, and packing materials could cost you around $50 to start.
Other tools and software: Whether it’s bookkeeping software or design tools for your listings, you may need to make initial purchases or subscriptions, which could add up to $50 to $100.
How profitable is an Etsy store?
The profit you can make as an Etsy seller varies widely based on several factors like product type, pricing, and volume of sales. However, let’s consider a common scenario to break down potential profit.
If you’re estimating 100 sales per month with an average order value of $30, you’re looking at a monthly revenue of 100 sales x $30/sale = $3,000.
For Etsy’s fees, a 6.5% transaction fee on each $30 sale amounts to $1.95. The payment processing fee of 3% + $0.25 adds up to $1.15. Altogether, that’s $1.95 (transaction fee) + $1.15 (processing fee) = $3.10 in fees per sale. Multiplied by 100 sales, this results in $310 in total Etsy fees for the month.
In this example, we will estimate that material costs at 25% of the selling price would be 25% x $30 = $7.50 per item, or $750 for 100 items in a month.
For packing materials and shipping, let’s add in $200 as your monthly expense.
Adding all these together: $310 (Etsy fees) + $750 (material costs) + $200 (packing and shipping) = $1,260 in total expenses for the month.
To find your monthly profit, you’d subtract your expenses from your revenue: $3,000 (revenue) – $1,260 (expenses) = $1,740.
What should I include in my Etsy shop policies?
While Etsy shop policies are optional, they protect not only the customer, but also the shop owner. Learn how to set up your Etsy shop policies.
What is the NAICS code for an Etsy store?
The NAICS code for a freelance writing business is 454110, which is classified under Online Stores.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
