- What is Etsy, and how does Etsy work?
- How does Etsy make money?
- Transaction Fees (Commission Fees)
- Etsy Payments (Processing Fees)
- Listing Fees
- Advertising (Etsy Ads and Offsite Ads)
- Shipping Label Revenue
- Etsy subsidiaries, acquisitions, and exits
- Etsy profit and revenue
- What is the Etsy business and revenue model?
- Etsy funding, net worth and market cap
How does Etsy make money? Here is a full, in depth, breakdown of their five (5) revenue streams and the different products and services they offer, as well as the Etsy business and revenue model, how much Etsy makes per year, and how Etsy works.
What is Etsy, and how does Etsy work?
Etsy is an e-commerce marketplace that connects buyers and sellers for the purchase and sale of vintage items, handmade items, and more.
Founded in 2005 by Robert Kalin, Chris Maguire, Haim Schoppik, and Jared Tarbell, Etsy began trading on the NASDAQ on April 21, 2015, under the ticker symbol “ETSY”.
Since that time, Etsy now has over 7.52 million active sellers and more than 96.33 million active buyers on its marketplace.
So, how does Etsy work? To use Etsy, users can simply either download their mobile app from the Apple App Store or Google Play store; or visit their website.
Once there, Etsy users can browse from over an estimated 100 million products listed on the marketplace. Once a user is ready to purchase, they can either create an account or checkout as a guest.
Some of Etsy’s competitors include Poshmark, Vinted, Mercari, Depop, OfferUp, The RealReal, Facebook Marketplace, eBay, Nextdoor, Amazon, and other marketplace apps.
How does Etsy make money?
According to Etsy’s 2021 Form 10-K, Etsy has more than 7.52 million active sellers and 96.33 million active buyers. As well as handling more than $13.5 billion in gross merchandise sales (GMS) in 2021.
So how does Etsy make money off of all those active sellers, buyers, and gross merchandise sales made on the platform?
Below is a breakdown of how much money Etsy makes and its revenue model. Including their revenue streams and how much they make from their services.
Here are the 5 ways of how Etsy makes money in 2022
Etsy has a revenue model that makes money in five (5) ways; transaction fees, processing fees, from Etsy Payments, listing fees, ad revenue, and shipping label revenue.
#1. Transaction Fees (Commission Fees)
Etsy makes most of its money through the transaction fees or “commission fees” they charge sellers.
As mentioned above, Etsy processed over $13.5 billion of Gross merchandise sales (“GMS”) on its platform in 2021. Of which, Etsy takes a 5% transaction fee on each of those transactions.
Etsy Transaction Fee:
- 6.5% of each completed transaction
#2. Etsy Payments (Processing Fees)
In addition to the 6.5% transaction fee. Etsy also collects a 3% + $0.25 payment processing fee on each item sold if a seller accepts payments through Etsy Payments.
In fact, 92% of Etsy’s $13.5 billion of gross merchandise sales (GMS) on the marketplace were processed through Etsy Payments in 2021.
Etsy Payment Processing Fee:
- 3% + $0.25 on each item sold uisng Etsy Payments
Note: 92% of Etsy’s total gross merchandise sales were processed through Etsy Payments in 2021.
#3. Listing Fees
Another fee Etsy makes money from is the listing fees they charge every time a seller renews or creates a new listing.
The way Etsy listing fees work is: Whenever a seller creates or renews a listing, they will be charged a $0.20 listing fee. Listings last for four (4) months or until the item is sold, whichever comes first.
Etsy Listing Fee:
- $0.20 listing fee (up to four months or until the item is sold)
Note: Listing fees, transaction fees, processing fees, and Offsite Ads are all a part of Etsy’s marketplace revenue segment. Which made up for a combined $1.3 billion or 75.5% of Etsy’s total revenue in 2020.
#4. Advertising (Etsy Ads and Offsite Ads)
In addition to Etsy fee revenues, Etsy also makes money through advertising – which they have two (2) forms of, Etsy Ads and Offsite Ads.
Etsy Ads, formally known as Promoted Listings, works off of a cost-per-click (CPC) advertising model. Meaning, sellers only get charged when the advertised listing is clicked on.
In May 2020, Etsy launched another ad program, called Offsite Ads, for sellers. These ads run off of Etsy and all costs are fronted by Etsy to promote the sellers’ listings. Once the item sells, they charge the seller 12% to 15% of the total sales price.
Etsy Ads Cost:
- Offsite Ads: 12% to 15% of the sales price
#5. Shipping Label Revenue
Etsy also makes money through the shipping labels they provide at a discount to sellers.
How does Etsy make money on shipping labels? Etsy acts as an agent between the purchase and sale of each shipping label by a seller. Once a label is purchased on the Etsy platform, Etsy then keeps the net difference between the cost of the shipping label paid to the shipping provider and the label cost paid by the buyer or seller as revenue.
Etsy subsidiaries, acquisitions, and exits
To date, Etsy, Inc. has made a total of 9 acquisitions.
Etsy profit and revenue
In 2021, Etsy reported $2.33 billion in revenue.
Note: Because Etsy, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Etsy’s publicly released financial reports, including annual reports, through Etsy’s investor section on their website.
What is the Etsy business and revenue model?
Etsy makes money through a few revenue models that they combine within their company, they are:
- Commission based business model
- Fee for service (FFS) business model
- Advertising based business model
- Mergers and acquisitions (M&A) business model
Etsy funding, net worth, and market cap
According to Etsy’s Crunchbase profile, Etsy raised $97.3 million over 9 rounds and has a market cap of $27 billion as of September 2021.
