Etsy Business Model & How Does Etsy Make Money in 2022?

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Where can you shop for delicately crafted antique goods? A place where you can find a whole range of handmade goods that are one of a kind?


Let us tell you which business does that – It’s Etsy. The Etsy business model has everything to cater to the needs of the user.

Etsy unique selling point is that it has carved itself into a niche of online e-commerce marketplace. It displays handicrafts and vintage goods from various artists around the world. In 2020 Etsy reported a healthy annual revenue of 1.7 bn USD. This is mainly due to the pandemic which was going on a rampage, disrupting businesses,

The Etsy business model numbers are mind boggling and churning huge numbers. Is your curiosity piqued? Do you want to know what their business model is? Let’s dive into the article to understand! 

Etsy’s Unique Selling Point

As said earlier each business needs to have a USP.

Etsy works on a peer to peer (P2P) basis, i.e one customer to the other – rather than B2B and B2C models which is a common thing amongst most of the other e-commerce giants. This peer to peer networking creates a credible relationship between people who buy and sell on the platform.

P2P focuses on niche-specific consumer targeting. This over time builds long term relationships between these consumers. And this relationship continues long after the purchase is complete. 

The basics of Etsy’s business model is quite simple. It charges the sellers a listing price on every product. It further takes a commission on every successful sale. The important thing to note on Etsy is that everything listed is either handmade, vintage, or a craft supply. 

The model doesn’t just target the customers as the target audience but takes into account its partner’s growth too. Etsy has built up a community where sellers can exchange useful information. This fosters a cordial atmosphere among people who are keen to carry out business. 

How Does The Etsy Business Model Work? 

Etsy has a unique vertical approach towards e-commerce. Unlike Amazon and eBay which offer a horizontal approach with almost everything under the Sun being sold on their platform.

Etsy has builts a unique image by enabling selling and buying of handmade, vintage products and craft supplies. Craft supplies are tools, ingredients, or materials which are used to craft or create another item for a special occasions.

There are ofcourse other businesses such as Etsy that offer  the very same components as other e-commerce websites. However, Etsy displays its ace qualities in some aspects and lets find out what those are in detail. 

#1. Key Partners

Sellers

Etsy’s unique community of sellers constitues of  small business owners, local artisans who either create handmade products or own a vintage item that they want to sell.  They offer personalised made-to-order items.

Buyers

The buyers are those users who are looking for specific kind of goods focused on home decor, outdoor and garden, and storage and organizational items. Personalized items continue to gain popularity. As of 2020, the active number of buyers on Etsy were approximately 82.9mn.who had purchased goods through the Etsy ecosystem.

#2. Key Activities

Etsy’s key activities pertain to marketing and managing the users applicable to both sellers as well as buyers. It also has a key customer help activity where they adress their queries. Etsy’s other important activities include website management and management of the payment infrastructure. 

#3. Customer Segment

Etsy has a two sided business model where it serves both the sellers and the customers as their target audience. Buyers are encouraged to purchase unique products, which may be either craft or vintage items on the platform. Sellers are the people or smalls manufacturers that produce handmade items who are encouraged to open shops for gaining profits.

#4. Key Resources

This includes assets and aids that help grow a business. Etsy comprises a unique artist community which is its strength. It provides them with a platform to connect with like-minded people and in the process, learn new skills through networking. 

Another unique asset for Etsy is the ever-growing number of buyers who are always on the lookout for unique handcrafted or vintage products. The Etsy platform in itself is a big resource centre since it is here where all stakeholders connect. 

#5. Value Proposition

Etsy offers a strong value proposition to both its sellers and buyers. To make it easy for the sellers, it offers easy and secured payouts when they sell their products online. The sellers have the independence of deciding the price of their products and can add tags to their items. The sellers can even create an independent shop on Etsy. 

To the buyers, Etsy offers a one-stop destination for unique goods with worldwide shipping and online payment options. 

#6. Customer Relationship Of Etsy

Etsy manages its customer relationship on an amazing level. This is possible because it provides buyers with a transparent review, rating, and feedback system for the products they buy.  

Besides this, the sellers are offered support and education through local events and the Etsy community platform. 

#7. Revenue Model Of Etsy

Etsy’s business model is proven, tried and tested. You would also be keen to perceive how Etsy actually makes money! The major revenue sources of Etsy include: 

  • Listing charges of $0.20 for each product listed by a seller on Etsy. This listing is valid for 4 months, after which you will have to renew the listing by paying another $0.20. 
  • Commision Charged By Etsy – 3.5℅ of the total amount of sale made by a seller on a single order. 
  • Fees from the sellers from advertising:: Etsy charges a small fee for the sellers in lieu of theeir shop listed on Etsy. These ads are on a cost per click (CPC) basis.  
  • Monthly subscription – A charge of 10$ per month on Etsy plus helps the company generate good profits. The Etsy plus subscription offers additional tools to the users to manage their shops and products efficiently. 
  • These additional tools include a monthly credit for listings and ads, a custom web address for your Etsy shop, and customised shipping boxes for all your orders. 
  • Etsy plus also offers custom business cards and restock alerts for loyal customers when you restock an item. 
  • Etsy charges a nominal fee of $15 per month on a pattern shop. This pattern shop is free-of-cost for one month for new users. 
  • Payment processing charges are not similar for all countries. Each Etsy seller pays a payment processing fee. 
  • Etsy also charges 2.5% of the sale price as per currency conversion charges before converting the entire amount in the user’s preferred choice of currency. 

#8. Cost Structure Of Etsy

Etsy spends the bulk of its revenue on platform development, new technology  and maintenance which will result in better services. Another important part where they spend money is on improving customer service and staff salaries, both of which constitute the backbone of etsy.

Shipping, marketing, and advertising costs also add to Etsy’s expenditure. It also organises certain local events for the welfare of its sellers. 

Conclusion 

A platform like Etsy is the right place and also an exciting way when it comes to selling your art online. They have helped millions of artists and makers conviniently bring their products to market since their launch in 2005. What is striking is their extrenely easy-to-use, user friendly interface which is a perfect way to see if their side hustle can become a success in transform ing it into a full-time career.

The success factor of etsy is because of its dominant and impressive business model that has a unique selling point. Their vertical business approach is what makes all the difference from its competitors. Their attention to handicraft and vintage goods has made them industry leaders in the P2P business model which is quite unique.

Etsy has set sail long ago in the US market and is eyeing the global marketplace for handicrafts and vintage goods. With stronger e-commerce marketplaces thriving, they ahev a great future coming. It would be interesting to see if they can hold on to the present growth curve.


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Disclaimer: The Blog has been created with consideration and care. We strive to ensure that all information is as complete, correct, comprehensible, accurate and up-to-date as possible. Despite our continuing efforts, we cannot guarantee that the information made available is complete, correct, accurate or up-to-date.

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