In early July Etsy’s CEO Josh Silverman wrote a letter to the Etsy seller community about their new free delivery guarantee trial for US customers starting July 30th. Detailed in this letter was the idea of their new policy and the incentive that they would give priority search placement to those sellers who took up the free shipping guarantee for buyers who spent $35 USD or more.
As you can imagine since then there has been a huge online debate among sellers expressing their anger and concern at feeling ‘forced’ into making financial decisions about their business in order to remain on Etsy’s platform.
Today in the podcast I want to talk about what the new policy means and lay out options and opportunities I see for Etsy sellers going forward.
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What is Etsy's free delivery guarantee policy?
On the 9th of July, to go along with Josh Silverman’s email letter to sellers, Etsy posted an article ‘Get priority placement in US search with a free delivery guarantee’ detailing how the new policy would work. Here is a brief outline;
Sellers are urged to offer a free shipping guarantee for orders over $35 USD to help put Etsy in line with other ecommerce platforms and meet the expectations of 20% of shoppers surveyed who said that this would help complete their buying decision as they often looked for minimum order values in order to get free shipping.
The first trial will start from 30th July for US buyers only
US buyers will see items that ship for free and shops that offer free shipping over £35 USD in their search first (a free boost to SEO site rankings)
Shipping costs should now be factored into unit costs in order to give free shipping and avoid customer surprises at the checkout, leading to abandoned carts
The new policy aims to help to make shipping clear and simple for customers who buy more than one item from a seller
On top of the free SEO boost participating listings and shops will get, they will also be eligible for inclusion in online, email, TV and print marketing Etsy produce.
To go along with this policy change Etsy are working to produce helpful educational tools for sellers as well as a fully operational pricing tool within your shop’s dashboard to help you manage listings and comply easily.
Why are sellers so angry with Etsy?
Many Etsy sellers are solopreneurs and further still their products made by hand. They chose Etsy specifically because it was a platform originally built to champion the ‘handmade’ movement. Since 2015 CEOs have made major changes to the platform that have unsettled what sellers felt was a ‘non-negotiable’ for the site, which was to allow sellers to take on staff, manufacture goods and drop ship with third party solutions. This saw a massive shift from Etsy being a champion for ‘handmade’ to a champion of any small business and reseller.
With an already deepening sour taste in their mouths, handmade designers are now facing policy changes that deeply affect their financial buoyancy. Here’s a taste of the conversations I am seeing online and in the Etsy forums;
Worry that raising prices beyond yearly inflation will mean a vast decrease in sales – raising prices beyond those governed by annual supplier increases can be a dangerous game for small businesses and often only happens with total rebrands. Yes, some can gain from raising prices, but sellers are concerned that this will not be the case for all and if sellers aren’t rebranding it will confuse and offend repeat buyers.
Worry over deep margin loss from factoring in shipping – depending on your industry niche margin can be a very precarious thing, especially when you hand produce most, or all of, the elements that make up your design, and so factoring in free shipping as an alternative to raising RRPs can destroy any chance sellers have to earn a wage.
Shipping is complicated and simplifying it can often lead to margin loss unless you get to a scale in business – here in the UK for example shipping carriers base shipping costs on size, weight and value of shipments. This can make shipping a headache to work out for sellers on an annual basis. The worry is that by offering one simple shipping plan at some point there will be a loss in profit to cover any shortfalls this strategy might pose and this may not be bearable for businesses that do not see scale in sales as a result of shipping price simplification.
Worry that during the trial period orders may fall off from other countries.
Worry that during the trial period sellers may lose US buyers once and for all.
Worry that if shipping from outside the US that orders from countries who’s shipping is far less than that to the US will falter, because price hikes are more than they were when shipping was paid separately – I hope that Etsy invest some time in creating a shipping tool that allows sellers to separate US RRP and shipping from the rest of the world, as this will make a big difference here.
Worry that if they don’t offer free shipping, then their promoted ads will not be visible in search – actually from what I understand Etsy aren’t planning to make changes to promoted listings in favour of boosting those with free shipping over those who don’t offer the service. In just the same way Etsy still allow you to offer shipping ‘upgrades’ at cost to the buyer.
Worry that not offering free shipping will mean you never get found in Etsy search – we know from Etsy that those who offer free shipping already get an SEO site boost on their listings (see issue 5 May Craft Biz Magazine – Simple Etsy SEO), so in theory if you aren’t already offering free or lower shipping costs then you are being penalised in search results.
Worry that offering free shipping will mean that we have to refund the item price, plus the shipping cost in the result of a return – basically yes, this is exactly what will be expected of you if you receive a return under the new policy. If you are in the EU, or serve customers there, then read this EU directive on returns.
Distrust that Etsy are profiteering to please investors and shareholders – Since floating their stock Etsy have made some dramatic changes to fees and in 2018 raised their transaction fee from 3.5% to 5% and included a 5% fee based on shipping costs. They claimed this would help fund seller education and external marketing, but sellers feel they haven’t seen the benefits of this.
Sellers have been urging Etsy to reconsider, but I think we know that this trial is the precursor to a full site wide launch and so we need to buckle up and work out what we as sellers are going to do for our business’ sake.
Gosh, yes, I feel your pain… I can honestly say that when it happened to me over on eBay I was as worried as you are today. Having been through it and experimented myself I do have some insight for you that I think you will find interesting…
Three thoughts customers have on the concept of 'free shipping'
Having been through this type of policy introduction when I sold my crafts on eBay, I found three fundamental things that are non-negotiables for customers when entertaining items listed with ‘free shipping’;
Products have a ‘ceiling limit’ on RRP – customers have in mind a limit for what they expect to pay for items and depending on what market your serve, adding the cost of shipping into your items may take you over the limit customers expect to pay.
Increased ‘shopping around’ to find the best deal – customers aren’t stupid, they know that ‘free shipping’ means that costs are hidden in item prices and so they will shop around more to get the best offer for their ideal order.
Profiteering on ‘free shipping’- when customers buy several items from you that are marked ‘free shipping’ they know that they are paying over the odds and in my experience, this leads to smaller orders and less repeat purchases and dis-trust is a big reason for that.
My solution in my situation where I was working at the lower priced end of the creative market with my craft supplies was to trial free shipping for 3 months and see what changes I needed to make in the long-term. My impressions from that experiment were this; firstly offering free shipping doesn’t always increase sales (especially if you include shipping in every item cost), secondly absorbing costs is extremely dangerous because whilst it raises sales, you need vast volumes to maintain overall monthly profitability which is your business’s life line and finally, actually customers are quite happy to pay for shipping if they feel it is fair. In my case returning to shipping at a cost to buyers (and taking a hit on the SEO ranking benefits offered by the platform) and offering a special shipping rate based on weight, or order value gave my customers and my business a fairer service offer. That’s what I eventually stuck too, and it worked for me.
What simple options do you have as an Etsy seller?
I mentioned that I have been through this type of policy change when I originally sold my crafts on eBay and having been through the policy change and seeking my own path through it, I can tell you that there are options out there for you… you just need to make some considerations. Let me talk you through what I can see as a next step for you;
Decide about offering a free shipping guarantee – before you rush into making a decision based on the email you got from Etsy, I think it is worth spending some time with your products and costings to understand what your options really are;
Can you afford to absorb costs, or partially absorb costs based on a minimum order value of $35 USD?
How will a change in shipping on Etsy affect your customers elsewhere?
Will raising prices to include shipping per item breach your customers’ ‘ceiling limit’?
What are your competitors trying?
Ask your customers for feedback – ask them on social, or in your private groups, newsletters and face to face at shows. What do they think of a shipping change? How do they currently prefer to shop and pay for shipping?
Work out your strategy – spend some time considering how to implement a trial before you go ahead so that you have thought of every angle.
Trialing a free shipping guarantee –
Remember to use the ‘free shipping guarantee tool’ – because otherwise listings that offer free shipping, shipping sales, or coupons off shipping will not be included in the new search boost (according to Etsy). This tool may well mark your entire shop as part of this offer, so…
Make your trial small to start – offer free shipping on a small number of best-selling items, even if that means scaling down your shop to start the trial in order to turn on the free shipping tool and benefit from the SEO boost.
Ask your customers for feedback – seek out customer feedback on your trial. Did it work for them? Was the offer of free shipping, but raising RRPs workable for customers?
Using marketing to combat SEO disadvantages of not offering free shipping – When a policy is introduced by platforms that infers compliance gives SEO advantages and non-compliance means disadvantage in SEO, then you must consider how you drive traffic to your shop. It is not ok, nor has it ever been to rely solely on traffic driven to your shop by a platform… you MUST market your shop! When you do this effectively you will soon find that any SEO disadvantages pale in comparison to the traffic you personally draw in.
Learning that you don’t have to offer free shipping – At the moment the new policy has not been rolled out across the board and even when it is, it has not been discussed whether this may ever become a compulsory requirement. My thoughts are that it won’t be. If you have worked through your finances and realise that this is something you cannot offer, then it is ok not to offer it!
Spread your online retail offer – Having started on eBay I quickly learnt that tying my business up to one platform meant that my online business lived or died with that platform. Spreading my offer across other platforms and my own website allowed me to move some of my business eggs from one basket to several. This allowed me to make decisions on new policies like this based on what was right for my business, not on just remaining to be ‘seen’ on one platform.
Seek alternatives to Etsy – Etsy has changed in the last 14 years I have been selling on the site, dramatically so and it will continue to do so. As it moves into a new dawn of e-retailing, I must ask myself if my values and hopes as a business owner are being as fulfilled as I hoped they would be. Learning about and trialling shops with alternative platforms is never a bad thing. Here are some alternatives I have looked at here on the blog;
Whilst the new free shipping guarantee has posed lots of questions for sellers, some of which we may not be able to answer fully until the trial period is over, I do believe that there are opportunities for handmade businesses who wish to remain on Etsy and do well. So, take some time to work on what your strategy is, engage with your customers to let them know what you are changing and why and then implement what is right for you.