Selling on Etsy UK is certainly an attractive option for creatives searching for an online craft marketplace. Etsy is platform which shoppers all around the world know about offering sellers a relatively painless shop set up experience. As with any marketplace the interests of Etsy are not always aligned with those of the sellers.  This means there are hidden costs to selling on Etsy UK that you must be aware of.

Selling on Etsy UK: 5 Hidden Costs That No One Tells You About

1. Exchange Rates

The exchange rate is the price at which £1 buys you another currency.  For example £1 today buys you US $1.32.  Everyday the exchange rate changes meaning you may get less dollars for your pound.

The impact of exchange rate fluctuations is a cost few shop owners consider as part of their business planning. Here’s how exchange rate can affect you when selling on Etsy UK:

  • Etsy automatically convert the GBP price of goods into the currency of the country the customer lives in. Etsy use an exchange rate of their choice which may mean it could be less favourable than if you chose to set it for yourself;
  • Exchange rates fluctuate every day for all sorts of reasons that are beyond your control.  An Etsy UK seller can find that the amount they sell a product for on one day can be worth less on another.  That’s an automatic erosion to your margin through no fault of your own;
  • Etsy listing fees are currently $0.20 and are billed in US Dollars.  With daily changes to an exchanges rate listing fees can vary costing more on one day than another.

Before you launch into selling internationally take a detailed look at pricing and margins to understand how you’ll be affected by exchange rate fluctuations.  Try taking a look at historical exchange rates to help with your research and reduce your risk.

2. VAT on Etsy Fees

Etsy UK has come under much scrutiny by HMRC for avoiding VAT.  The result is that Etsy now need to charge VAT on all charges and listing fees.

When you start selling on Etsy UK you are asked to enter a VAT registration number.  If you are really small or in the early stages of your Etsy business it is unlikely that you have a VAT registration number.  In this case Etsy will be charging you VAT of 20% on top of all the charges and listing prices you see.  This hidden cost can come as a surprise to new Etsy UK sellers who then have to re visit their pricing model.

Do I Need to Register My Etsy Shop for VAT?

3. Waiting for Your First Sale

Many Etsy UK Shop owners will talk about how much work they put in when they first started their business. They invested time in getting SEO right, building their following and social media before making their first sale.  A hidden cost of starting an Etsy store is the time you need to invest in getting set up, producing stock and paying for listing renewals.

To protect yourself from this hidden cost set up a cash flow forecast with reasonable estimates of costs and income so you know how long you need to fund your shop for before it makes its first sales.

4. Administrative Costs

Running any business comes with costs above and beyond the price of just making your products.  Whilst making your product is much talked about what Etsy Sellers often overlook is the cost of just being in business.  These are things like needing certain equipment, insurance for your stock and accountants fees.

Setting up a business plan for your Etsy shop will help you prepare for all the costs of running a business.

5. Postage

Postage and packaging can be surprisingly expensive.  If you are selling on Etsy UK it is essential you make sure your customers receive anything they order on time and in one piece.  Boxes, paper and bubble wrap all come at a cost. Choosing for premium postage like recorded delivery can also be costly eroding your margins further.

Research the costs of postage and packing thoroughly before you begin selling on Etsy and incorporate these into your pricing structure and business plan to check that you are charging the right price for your product.

Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.