If you thought the new Order Defect Rate policy had everyone in a tizzy, wait until you hear about the new Off-Site Ads coming down the pike. I’m not going to lie, I’m not super excited about this one – but when you use someone else’s platform your hands are tied. It may turn out to be a great system, I just don’t particularly like being told that I am being forced to do something and have no control in the matter. If you have spent any time on the forums over the last couple of days, the Etsy admins have made it abundantly clear that they are not concerned about push back from sellers. This change is not open for discussion.
So, let’s dive in and figure out what Etsy’s doing this time…
You should have received an email with information about the new advertisement system to the email address associated with your Etsy shop. Later in the discussion, we will discuss compulsory participation in the new system. This email from Etsy will notify you of whether your participation is mandatory or not.
The new plan is called Etsy Off-Site Ads – as the name suggests, this will include advertisements on non-Etsy platforms. Those off-site platforms will include Facebook, Instagram, Pinterest, Bing, and Google. Etsy is also reinstituting an updated version of their old Etsy ads program for advertising solely on Etsy. That part is a positive. We will have control over our Etsy ads again. Woohoo!
Shops Generating More Than $10,000 Per Year
The way that this Off-Site Ads program is implemented and the amount that you pay depends on the amount of sales you generate per year. If you’re shop has a total sales amount in the past 12 months over $10,000 your participation is mandatory – forever. You can’t opt out – ever. If you fall into this over $10,000 per year category and a customer clicks on an off-site ad from your shop, then purchases anything from your shop in the next 30 days, you will be charged an additional 12% in fees on top of your total commission amounts with Etsy. Fun, right?
Shops Generating Less Than $10,000 Per Year
If you’re shop has a total sales amount in the past 12 months less than $10,000 you can opt-out of the Off-Site Ads. If you fall in this second category, your fee when a product sells from the ads will be 15%. Keep in mind that once your shop reaches the $10,000 threshold, you will be automatically enrolled and unable to opt-out as well. Your fee will then become 12% at that point. Even if you fall below the $10,000 per year threshold later, you will still be unable to opt-out. Enrollment is permanent once you meet the $10,000 amount for a 12-month period.
I spent hours combing through the Etsy official statement, Etsy forum, and the Etsy Q4 Revenue Report transcript and never found a clear explanation as to why there is a difference in fee amounts. So, your guess is as good as mine.
When Does It Start
The Off-Site Ads system is set to go into effect on March 27, 2020. Etsy has stated, “Until April 14, 2020, you won’t be charged a fee for any orders that result from Offsite Ads.”
Per Etsy admin responses on the forums, we will have access to advertisement data on our seller stats in the time frame between March 27thand April 14thso that we can see where traffic is coming from and how it is converting before we are responsible for covering charges. My sense is that this is when we will really see if more shops will jump on board with the changes or decide to close down in response to the conversion rates and potential charges.
Is It Legal
First let me start of by saying my educational training is in nursing. I have a Bachelor’s Degree in Nursing, so I am not an attorney and cannot provide legal advice. With that being said, there is quite a bit of outrage about the increase of fees and sellers wanting to ban together to sue Etsy, so I want to interject this bit of information. Per Etsy’s terms of use, if they provide thirty-day notice, fees may be increased. As much as we don’t like the new fees, we agreed to accepting such notice when we signed up to sell on Etsy.
How Does it Work
Etsy will handle all of the off-site advertising and then we (the sellers) will pay the 12-15% fee if something in our shop sells. The statement released from Etsy regarding how the promotions work states, “Etsy works with sites like Google and Facebook to promote your listings on their pages. We send them all listing inventory information on Etsy, including the listings’ descriptions, photos, titles, and more. The site’s advertising algorithm uses those details to match a user’s search or profile info to your listing ad. They make sure to show the most relevant items for every user profile and/or search query.” There’s been a bit of outrage about sharing photos and information with these platforms, we agreed to this in the terms of use, too.
Two additional things to keep in mind.
- Etsy tracks the Off-Site Ad click for thirty days. This means that all sales you make to that same customer within that thirty-day window will be subject to the 12-15% fees.
- The 12-15% fee applies to the order total including shipping and gift wrap charges. It’s not just the product price. So, keep that in mind if you are adjusting your pricing model.
Because of this information, I will be removing my repeat customer coupon code from my Etsy shops. As it stands currently, my Etsy customers receive a thank-you email with a discount code to encourage repeat purchases. Now, I will be cancelling that code and directing it strictly to my website. It would be a huge cut into profits for a customer to get free shippingplususe the thank-you coupon plustake 12% from an Off-Site Ad they clicked a couple of weeks earlier. Yikes!
When Will It Not Cost You Money
Believe it or not, there are a few instances where you will not be charged. You are not responsible for the fee if someone clicks on an ad to another Etsy shop first and then ends up buying from you. If you refund your customer for some reason, Etsy will refund a portion or all of the Off-Site Ad fees. There is also a fee cap of $100 per transaction.
Final Thoughts
I did take the time to read the transcript from the Etsy Q4 2019 Earnings Call Transcript. It’s a dry read, but I was interested to see the discussion regarding the new ads system. One of the investors asked about the Off-Site ads and impact on bottom line/ spending, this was Josh Silverman’s response:
“Yes, great question. So the overall philosophy remains the same. That overall, sellers will take on primary funding for advertising their individual listing off-site, and that will allow Etsy to invest more in upper funnel things that only Etsy can do, like advertising the Etsy brand on TV or getting people to download the app or driving people to the homepage. In terms of the structure of the off-site advertising program in particular, we do anticipate that there will continue to be some subsidy of Etsy to the program. So the 15% and 12% fee will cover much, but not all, of the cost. And for example, if somebody clicks on a listing and doesn’t buy, there’s cost in that, and Etsy might absorb better that. And if they land on one seller’s page and they end up buying from another seller. Those are things. But we think that, that’s appropriate because if you think about it, it’s the case that the seller makes an incremental sale, which is great and gets a happy customer that they might be able to resell to. But Etsy also has gained a customer. And so the idea that we are chipping in together with sellers to make this a great program, we think, is important. And we’re really proud of this program. I do want to say that a 6% to 8% ROAS, we think, relative to what sellers would get if they had their own stand-alone shop is a really strong ROAS, and we take on the risk that the money they invest might not convert to a sale. And that’s exactly the kind of thing that a platform can do, is pool the resources of the sellers together to deliver something that they each individually could never get on their own. So we’re excited about this. We think it does deliver great value for sellers, and we think it’s going to be really good for Etsy”.
Essentially, we are being forced to participate in a crummy group project that no one wants to work on. At the end of it, when Etsy’s profits increase next quarter, they are going to be the ones boasting about how much work they did when we (the sellers) are the one’s pitching in the money behind the scenes.
This was a decision made on our behalf and Etsy’s allowed to do it because we use their platform to sell our products. Yet, like Silverman said at the investor meeting, Etsy is still maintaining that it’s our responsibility to drive the majority of traffic to our individual products. So, Etsy’s overall focus remains to get traffic to the platform. They don’t care which product the customer buys or who the customer buys from as long as they shop on Etsy. That money all goes into the same account. Now, if youwant the money to go into your account, you have to take on the responsibility of driving traffic to your listings so they buy your products. Ideally, you are driving the traffic to a platform where you are in control.
All of these uncontrollable changes that cut into our profit margins are more signs that you need to focus on building your business foundations on your own land (i.e. your own .com). If you aren’t quite yet in the position to build your own website at least get to work on growing an email list. If you aren’t sure how to start an email list, Mailchimp is free and easy-to-use. In the interest of transparency, I have been slacking on my email list since the holidays and this is the kick in pants I need to get it fired back up, too. So, I will be focusing more on this just like everyone else.
In an effort to remain cautiously optimistic, let’s try to stay hopeful that Etsy learned from the previous Google Ads program and this Off-Site Ads program is a new and revised edition. In the mean-time, my advice is to continue to expand your own off-site efforts and grow your .com. Josh Silverman said something to the effect of “we’re just getting started” when he was speaking of changes and growth during the Q4 Revenue Report. This means that we are quite likely in for a wild ride in the upcoming year. It’s time to get laser focused on building a business that can function outside of the Etsy platform.
Sources:
Etsy Seller Handbook: https://help.etsy.com/hc/en-us/articles/360000338367
Etsy Inc (ETSY) Q4 2019 Earnings Call Transcript: https://www.fool.com/earnings/call-transcripts/2020/02/26/etsy-inc-etsy-q4-2019-earnings-call-transcript.aspx
