Online crafts marketplace
said it is increasing the transaction fees it charges, cheering Wall Street investors but angering some of the merchants that sell on the site.
Starting July 16, the transaction fee charged by Etsy when a seller makes a sale will rise to 5% from 3.5%, the company said Thursday. It also will begin charging sellers a 5% fee on shipping costs. For example, a seller has an item that is $30 with a $3 shipping cost for buyers. Under Etsy’s new fee structure, sellers would pay $1.65 on the transaction–$1.50 for the item and 15 cents for shipping—compared with $1.05 before.
Other fees, including the 20-cent-per-item cost that its more than 2 million active sellers pay to list items for sale on the platform, will remain the same.
As a result of the changes, Etsy raised its forecast for annual revenue growth to a range of 32% to 34%, from 22% to 24%. The company reported 2017 revenue of $441.2 million.
Shares surged 29% to $42.50 in afternoon trading Thursday, putting the stock on track to close at a record. Etsy made its initial public offering in April 2015, and its stock has more than tripled over the past year.
The Brooklyn, N.Y.-based company founded in 2005, said the higher fees will support investments to attract more buyers, build seller tools, revamp its community platforms and enhance customer support. The company also plans to increase its marketing spending by at least 40% this year. Next month, Etsy will run its first national television ads in the U.S. during the new NBC reality crafting competition “Making It.”
The moves come after Etsy last year named a new chief executive,
and slashed its workforce in an attempt to rein in spending.
30 years old, was among sellers who first learned of the fee changes from Etsy in an email Thursday. Ms. West, who launched her shop FutureWorldWest in March, said she doesn’t earn a profit from shipping costs customers pay for her Mickey Mouse-inspired ears and Etsy shouldn’t either.
of Los Angeles, said she is closing her shop and considering going to Etsy competitor
a Canadian e-commerce platform. The writer and television producer has been selling vintage sewing patterns for $8 to $50 each as a hobby on Etsy since 2009.
“I do understand and appreciate that they have to satisfy their shareholders, but what is an Etsy brand if the people who made it special are gone,” she said.
Etsy said it did research with sellers before the announcement and that its shipping changes are in line with industry standards.
“These changes were designed not only with the input of our sellers, but with the benefits to our sellers in mind,” said
Kruti Patel Goyal,
Etsy’s general manager overseeing sellers.
KeyBanc Capital Markets analyst
said the revised pricing model should help Etsy keep up with competitors, which include
and Shopify Inc. Etsy has focused on highlighting its marketplaces as a destination for unique items for holidays including Father’s Day and Mother’s Day, he said.
29, of Beebe, Ark., and his wife Rachel, 26, have been selling baby bedding on Etsy since 2011. Mr. Roberts expects the couple’s business, ModFox, to raise shipping fees for buyers, but it will likely absorb the higher transaction-fee. He said the business generates about $100,000 a year in revenue, down from $250,000 about three years ago due to competition from mass-market sellers.
“Every year for the past few years we have been hit by huge price increases from the Postal Service, and now we are going to get hit for shipping increases from Etsy?” he said.
Write to Aisha Al-Muslim at [email protected]