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Is Etsy Dropshipping really profitable?
Etsy dropshipping can be profitable, with the potential varying based on the chosen method. Dropshipping Etsy products from other sellers simplifies operations with low overhead and a quick setup, but comes with limited control over product quality and competition. On the other hand, opening an Etsy storefront and outsourcing production to non-Etsy makers offers more control over branding and potential for higher margins, yet involves a more complex setup and higher initial overhead costs. Success hinges on strategic niche selection, strong supplier relationships, effective marketing, and attentive customer service, while adaptability to market trends is crucial for sustained profitability in the dynamic landscape of Etsy dropshipping.
If you're like me, your understanding of Etsy might be limited. You might picture it as a quirky online marketplace flooded with all kinds of eccentric goods like an octopus in resin and bars of soap in the shape of body parts (yes, it is a real thing, and yes, you really can find it on Etsy). While it is a household name, it hardly sells essential, day-to-day products. No one needs to shop on Etsy in the way that they need to shop on Amazon or eBay. It's not a platform that offers game-changing bargains, universal two-day shipping, or doorstep grocery delivery.
When you think about it, it's a mystery as to how Etsy is still around. It's crazy to think that Etsy could fit in comfortably with today's technology-driven, 21st-century eCommerce experience, right?
Well, maybe not.
What is Etsy?
Etsy is actually a formidable foe in the growing eCommerce world. If you don't already know, it's a global online platform dedicated to the sharing and selling of handcrafted goods. There was a time when Etsy might have seemed a little bit archaic because customers often waited a long time to receive products and makers didn’t have endless stocks of goods. Etsy is having a moment right now, though.
Have you seen the rising trends in supporting small businesses, shopping locally, and making things by hand? Small business Saturday and the Makers Movement, for example, have spread rapidly across social media and online platforms. My point is, Etsy practically invented shopping small and locally via eCommerce - decades ago - and now it's only expanding its command of the marketplace.
It's been around since 2005 and generated a whopping $200 million in revenue in 2019. Even more importantly, it has over 40 million buyers to date. Despite all of these numbers, it's been underestimated by plenty of business owners, consumers, and makers alike. The thing is, though, Etsy has untapped potential, particularly as eCommerce gets closer and closer to being the primary retail experience.
Navigating Etsy's online platform takes, well, a little bit of creativity. You might not need to produce whatever you sell by hand, in-house, but dropshipping on Etsy demands a creatively-minded and crafty entrepreneur. If you can crack the Etsy code, though, you hold the promise of high-profit margins, a loyal customer base, a positive, established marketplace, and financial longevity.
Dropshipping is a form of eCommerce sales that has risen steadily in the last few years. Essentially, it's the digital equivalent of brick-and-mortar shopkeepers. Dropshipping business owners fill their shelves with small business stockists and hand off the production, packaging, and shipment of each order to the maker. When a customer orders through your platform, you buy that one particular product from your stockist at an agreed-upon rate, and they take care of getting it to your customer. A big upside of dropshipping is how easy it can be to set up.
Your job is to create an online storefront (WooCommerce, Shopify, Squarespace, etc.) and curate a list of products from all over the internet to resell them at a higher price. It's about establishing a compelling brand identity, knowing your target market, and savvy advertising.
The Major Ways of Etsy Dropshipping:
Etsy deviates from the mainstream dropshipping process a bit, which tends to scare people off. It shouldn't, though. Here I'll breakdown everything you need to know so that you can tap into Etsy's market and grow your dropshipping business.
There are two methods of dropshipping with Etsy:
1. Dropship Etsy Products from Another Seller's Etsy Store to Your Online Storefront:
- Identify popular and in-demand products on Etsy that align with your niche.
- Establish partnerships with Etsy sellers willing to dropship their products to your customers.
- Negotiate terms such as pricing, shipping, and product availability with the Etsy seller.
- Create an online storefront, such as a Shopify store, and list these Etsy products for sale.
- When a customer places an order, purchase the product from the Etsy seller and have it shipped directly to your customer.
- Benefits include a curated product selection from Etsy's unique offerings without managing inventory.
2. Open an Etsy Storefront Yourself and Outsource Production to Non-Etsy Makers:
- Create your own Etsy storefront and customize it with branding elements that resonate with your target audience.
- Research and identify non-Etsy makers or suppliers capable of producing your chosen products.
- Negotiate agreements with these external suppliers regarding pricing, MOQs, and customization options.
- List the products on your Etsy store, providing detailed descriptions and appealing visuals.
- When a customer places an order on your Etsy store, coordinate with your chosen supplier for production and fulfillment.
- Manage customer communication, order tracking, and customer service through your Etsy storefront.
- Benefits include greater control over branding, product quality, and the potential for higher profit margins.
Whether dropshipping Etsy products directly from other sellers or managing your Etsy storefront with outsourced production, both methods offer unique advantages in terms of flexibility, product variety, and operational control. Choosing the right approach depends on your business goals, resources, and preferred level of involvement in the production process.
How to Dropship Products from Etsy
Despite jumping through an extra few hoops here and there, setting up your dropshipping business is reasonably straightforward. For Etsy dropshipping, you just have to set up the proper channels and relationships from the get-go.
Step 1: Comprehensive Market Research and Supplier Selection
- Thoroughly research Etsy for products with high demand and potential profit margins.
- Explore Etsy makers and external suppliers to diversify your product range.
- Evaluate suppliers based on product quality, shipping times, and reliability.
Step 2: Establish Supplier Relationships and Negotiate Favorable Terms
- Initiate contact with potential suppliers, introducing your dropshipping business model.
- Negotiate pricing, minimum order quantities (MOQs), and any customization options.
- Seek exclusivity agreements or discounts for larger order volumes to enhance profitability.
Step 3: Optimize Product Selection for Cross-Platform Selling
- Choose products that align with the target audience and regulations of your desired selling platform.
- Consider adapting product titles, descriptions, and images to cater to the specific audience on your chosen platform.
- Ensure that products comply with any platform-specific guidelines and policies.
Step 4: Develop a Centralized Inventory Management System
- Implement an inventory management system that synchronizes stock levels between Etsy and your target platform (e.g., Shopify).
- Regularly update product availability and ensure accurate tracking of inventory changes.
- Utilize software solutions or apps to automate inventory syncing and reduce manual effort.
Step 5: Create a Professional Storefront on Your Chosen Platform
- Set up a storefront on your selected platform (e.g., Shopify) with a user-friendly design - or you can open an Etsy store (and still outsource production of your products to non-Etsy suppliers).
- Customize the storefront with high-quality visuals, branding elements, and a compelling product description.
- Implement a seamless navigation structure to enhance the overall shopping experience.
Step 6: Optimize Product Listings for SEO and Conversions
- Conduct keyword research to optimize product titles, descriptions, and tags for better search visibility.
- Craft persuasive and informative product descriptions that highlight unique selling points.
- Use high-resolution images and videos to showcase products effectively.
Step 7: Implement Multichannel Marketing Strategies
- Leverage social media, email marketing, and other channels to drive traffic to your Shopify store.
- Create platform-specific promotions or discounts to encourage cross-channel engagement.
- Utilize advertising options provided by the chosen platform to increase visibility.
Step 8: Implement Transparent and Efficient Order Fulfillment
- Establish clear communication channels with suppliers to facilitate efficient order fulfillment.
- Regularly update customers on order status, tracking information, and shipping times.
- Set realistic delivery expectations and provide excellent customer support.
Step 9: Monitor Performance Metrics and Iterate Strategies
- Analyze sales data, customer feedback, and conversion rates to assess performance.
- Iterate product listings, pricing, and marketing strategies based on analytics insights.
- Stay informed about industry trends and adapt your approach to evolving market dynamics.
By meticulously following these steps, you can successfully dropship Etsy products to another platform, ensuring a seamless and profitable cross-channel selling experience.
The Pros & Cons of Dropshipping from Etsy:
There are pros and cons to both forms of dropshipping, and I'll break it all down for you.
The pros include:
1. Conscious (and patient) consumers
If you decide to open a storefront through Etsy, you have the benefit of selling directly to Etsy users. Since its start, the platform has cultivated a unique community of both makers and consumers that value craftsmanship, human-centric shopping, and uniqueness. If you join a platform with such overarching core values, your customers likely share those values. Etsy's customers are accustomed to longer production times and much more willing to pay a premium for their purchase.
Etsy is different from its competitors in that its unifying, core values are relatively altruistic. Amazon, for example, has been built on convenience and expedience. There's no chance of Etsy's large price tags and slow production times surviving on a platform like Amazon. That gives entrepreneurs some leniency and flexibility in how they want to operate.
Trust me, the value of a patient and a loyal customer base cannot be underestimated.
2. There’s room to get creative.
Entrepreneurs never lack ideas, and some thrive when they can get more involved with their products without taking on the burden of production, packaging, and logistics. Etsy is an ideal place to do just that. Dropshipping via Etsy demands that entrepreneurs take more of an active, participatory role in designing without handling manufacturing. Selling under the Etsy umbrella allows you to craft your brand in a new way.
3. Differentiate your product base
As dropshipping becomes more rampant in eCommerce, it gets harder and harder for business owners to stock goods that stand out in a crowd. Etsy gives you the chance to fill your virtual shelves with original, one-of-a-kind pieces that you could neither produce nor sell in any other context.
4. Etsy is the land of the niches.
I say this in the most literal sense possible. If you're trying to operate your dropshipping business within a specific pocket of the eCommerce world, Etsy is the perfect place for you. Home to a lot of home decor dropshipping stores, weddings, clothing, baby products and more there are many stores thriving in Etsy's world. Better yet, people know that Etsy is a premier place to buy niche goods, so both makers and customers flock to the platform whenever they have or need a specialty item. Etsy has invested the time and energy it takes to establish a reputation for unusual and specialty goods so that you don't have to.
5. High-profit margins
A lot of skeptics cite Etsy's high retail prices as a reason to avoid applying a dropshipping business model to the platform. And it's true: many of the goods being sold are priced above market values. Sellers, however, have the benefit of an established community that has a proven track record of paying those prices.
What does that mean for dropshipping businesses? There's potential for significant profit margins. As is true with pricing in most creative industries, there is much more wiggle room in how you position your products in the marketplace. You can price high, still move plenty of product, and have a profit margin of 40% or higher.
6. Transparency
Okay, some might consider this more of a downside, but I see this as a glass-half-full situation. Etsy's guidelines require you to disclose where you are located as well as where your production occurs. There's no chance of hiding that you aren't the one physically making your products.
This level of honesty and transparency has made Etsy quietly, continually successful. Customers don't feel hoodwinked or trapped in the endless eCommerce game of selling and reselling products from all over the world. People often have no idea where products are actually produced in today's increasingly complex and global online marketplace. You just order something off the internet and, within a few days, it's sitting in a box on your doorstep.
While Etsy doesn’t show customers exactly how your business is set up, they collect that information from you in order to verify that your shop produces handmade goods and supports makers. Customers can rest easy knowing that their purchases have been approved by a larger platform with certain ethical production standards.
Now, before you get too excited, Etsy has some downfalls to consider.
Here are some of the cons:
1. More fees than you realize
As with any large online retail platform, you're subject to some hefty fees when listing and selling on Etsy. There are a few kinds of fees you have to be aware of when opening a dropshipping shop with Etsy.
For starters, there is a $0.20 listing fee, and listings expire every four months. It doesn't sound like much, but it can certainly eat away at profit margins. While you can choose to set up automatic listing renewals, you'll be charged every four months for every expiring listing. If you opt for manual listing renewals, you have put in that much additional time and effort to keep your listings up-to-date.
Secondly, they have a processing fee of 5% for each product sold. Keep in mind that neither of these fees includes shipping costs.
Etsy has also developed and released many add-on tools and resources for sellers, including ad fees, pattern fees, and in-person fees. I'll leave the analysis of those resources for another article.
2. Intense guidelines for dropshipping business models
As far as the internet goes, Etsy is a highly regulated platform. Their so-called "House Rules" spell out in detail their stances on everything from buyer/seller communications to seller handmade policies to supplier codes of conduct. It is as extensive and dense as it sounds, but here's the gist of it.
Etsy has some pretty specific language around the selling and reselling of goods. While the reselling of handmade products is not allowed, you can dropship vintage goods or craft supplies, no problem.
Production assistance for original designs is also allowed. They explain it as a spectrum, where some businesses handmake each product with their own hands and tools in-housewhile others design a product but do not have the means or skills necessary to create themselves. Both ends of the spectrum are welcome on Etsy, which is excellent news for dropshippers.
If your product cannot be made without your thoughts, creativity, or input, then you're in the clear. Of course, there are some parameters around how and to whom you outsource your production. As I mentioned, you are required to disclose the location of your manufacturer and some details of the production process to Etsy. Not all of your business and logistical details will be public, though. Etsy is very clear about what is public information and what isn't.
3. Extensive community policing for Etsy sellers
Etsy likes policing users, which is useful in the sense that they keep operations fair, uniform, and running smoothly. Still, it also means that you have to be aware of their policies. Otherwise, you're vulnerable to all kinds of fees and penalties.
It's also worth mentioning that Etsy allows third party payment gateways to monitor your activity. (If you don't know what payment gateways are, check out our crash course on them). Basically, users are subject to companies like PayPal looking at your transactions and accounts to see if anything violates their policies.
Dropshipping on Etsy ultimately comes with much higher levels of scrutiny than dropshipping via your e-store or other platforms might. While Etsy's readymade customer base, high-profit margins, and creative freedom are attractive, consider what you sacrifice to gain access to it.
4. Operates according to economic sanctions and trade restrictions
Okay, I know that sounds wordy, but hear me out. Etsy is a global marketplace, but it's based in the United States. This means that Etsy follows government and economic sanctions; they restrict account usage in some geographic regions and prohibit the sale of goods that originate in sanctioned areas.
Be aware that selling on Etsy comes with some red tape that's out of your control; it could impact your sales and profit margins.
5. Tedious listing process
Now, this isn't unique to Etsy, but the process of listing your products on the site is exhausting, to say the least. Because the marketplace caters to handmade goods and small businesses, there are endless product variations. Etsy has developed requirements for product listings that give consumers the most information and uniformity as possible. That, however, can be taxing on shop keepers trying to list and maintain multiple products.
Listing on Etsy is similar to listing on Amazon Handmade, to give you a frame of reference. It just comes with more significant effort than listing on an independently operated storefront through Wix, Squarespace, or Shopify would.
6. Potential profit sharing
You need to be prepared to compensate whatever seller from which you choose to source your products. It is up to you to negotiate a fair deal that gives you a cushy profit margin while also paying the seller for their work.
Etsy Dropshipping FAQs
If you're still a little bit fuzzy about how dropshipping on Etsy works, you're not alone. Its rigorous dedication to handmade products and specific community guidelines make it a pretty daunting place at times.
The short answer is kind of. That's not helpful, I know.
Here's the deal: you can only drop-ship products in one direction when dealing with Etsy. As long as you have an agreement with a seller, you can stock their vintage goods and craft supplies on your virtual shelves. Just remember that you cannot resell handmade items that you didn't help make.
If you are operating an Etsy storefront, keep in mind that it delineates the difference between reselling a finished product and selling a product that you designed, but did not physically make. Only the latter is allowed. You can only legally sell a product if you have a role in developing it. You need to tell buyers where you are and where your production happens so that they are fully aware of where their product is coming from.
If you're establishing an Etsy shop and outsourcing the production of your idea, remember that Etsy only permits production assistance when your partner makes your designs themselves. No third party companies can get involved.
In other words, the Etsy store policies do not allow any outsourcing of the outsourced work.
There are companies like Art of Where and Printful that are studios and warehouses dedicated to making products and integrating with online platforms like Etsy and Shopify. If you want to sell directly to Etsy consumers, you can reach out to them and establish a partnership; you design the goods they make and ship them. They can bring your ideas to life with expertise and specialized equipment, and then take care of all of the logistics for you. Bringing on expert manufacturers will save you many headaches and sleeps nights.
While it is impossible to know for sure if a seller is using a dropshipping model, sellers like ThreadDomain, that move such high volumes of the same clothing products in endless patterns, are likely capitalizing on dropshipping possibilities.
If you want to source products for your e-store from Etsy, approach sellers you'd want to work with and see if they'd be willing to supply and ship products with you. For companies looking for greater exposure, dropshipping is a fantastic way to increase sales and visibility. Sellers will often give you discounted rates. Either way, you must contact and disclose your plan before uploading their products to your store.
The numbers vary from brand to brand, and product to product. Bigger companies like Art of Where have set commission, wholesale, and dropshipping rates that they won’t budge on, while other smaller sellers or manufacturers might have lots of flexibility in their price points.
Smaller Etsy sellers are often excited. about extra exposure and give you a great deal on a dropshipping deal.
A Final Note
Perhaps Etsy requires a bit more ingenuity on your part, but there's never been a better time to adopt a dropshipping model to the platform. With growing concerns about sustainability, shopping locally, and making goods by hand, Etsy was tailor-made for this cultural and economic moment.
Think carefully about the goals for your brand and business, and make sure you're prepared to take on a more active role in its operation. Dropshipping companies are a breeze to set up on all kinds of eCommerce platforms, and you can source products from all over the online marketplace. So, if Etsy isn't for you, that's okay - there are plenty of other solutions to your eCommerce conundrums out there.
