How to Calculate Profit? How Much are Etsy Commissions and Fees?
After finding several suitable manufacturers and getting price quotes from them, you must calculate your profit margin and compare it with your competitors’ prices. It is only after this stage that deciding to sell becomes beneficial. Because you can not establish a healthy pricing policy or compete without accurately calculating the full production cost. These issues are highly interrelated.
You need to perform a profit analysis by calculating your own costs using the prices obtained from manufacturers. You should begin selling only after calculating your profit.
To calculate how much profit you will make on Etsy, you first need to know how much Etsy deducts. After discussing Etsy’s fees, we will make profit calculation through an example. Afterward, you will be able to calculate the profit yourself according to your product’s category.
Fees on Etsy vary. For instance, fees change based on your answers to headings such as “Shop Currency,” “Shop Owner Location,” “Tax ID,” “Offsite Ads,” and “Free Listing.” You need to enter your information into these fields. That is, if the shop is in your name and located in Turkey, you must select Turkey as the “Shop Owner Location.” You must select the location where your bank is situated. I have researched many software tools like Erank or Marmalead, and many of them do not include these specific details.
You can use this Google Chrome extension for profit calculation: https://chromewebstore.google.com/detail/rexven/
Understanding the Fees
To speak of the fees, Etsy has a 6.5% Transaction Fee. This includes the sale price, shipping, and gift-wrapping fees. The product listing fee is $0.20 per item. Etsy deducts this fee for every sale. To avoid this fee initially, you can use a link shared by another shop; this way, Etsy gives both parties 40 free listing credits.
Another fee is the Regulatory Operating Fee. This varies according to the “seller location,” i.e., the location of the shop owner. Depending on which country the shop owner is located in (United Kingdom: 0.32%, France: 0.47%, Italy: 0.32%, Spain: 0.72%, Turkey: 2.27%), Etsy’s fees change. Etsy does not take this deduction from the USA; it only applies to specific countries.
Thirdly, there is the Payment Processing Fee. This varies based on the bank location. You need to make your calculations according to these rates. While the Payment Processing Fee in Turkey is 6.5% + 14 TRY, in the USA it is 3% + 0.25 USD.
Another issue is the Currency Conversion Fee. If your shop currency and your bank location currency are different, Etsy deducts 2.5%. In our case, this applies as follows: our shop currency is USD, but the bank location is Turkey (TL). Therefore, it performs these fees in TL. It is applied over the total of the discounted “Sale Price,” “Shipping Fee,” “Gift Wrapping Fee,” and “Sales Tax.”
The VAT issue can be calculated easily. If the shop owner’s location is Turkey, it is 20%; in the UK, it is 20%. In some countries like the USA, VAT is not deducted even if you do not have a tax number. This actually changes according to the shop owner’s location. It applies this to all deductions in their VAT-inclusive form. If you have a VAT number, you can easily calculate this by entering it into the Rexven panel.
Profit Calculation Example
Calculating profit can be confusing when details like production, packaging, shipping, and taxes are involved. Therefore, we developed a completely free profit calculation tool at Rexven. When you enter the necessary data, your profit is calculated with one click.
Let’s examine an example product. Suppose you sell a necklace for $100 (assuming you collect $5 in sales tax) and let’s add your hypothetical costs:
$30 product cost
$5 labor cost
$2 packaging cost
$7.5 shipping cost
$3 advertising cost
After entering your shop currency as USD and your shop owner location as Turkey, you can click the “calculate” button to find out how much Etsy deducts from you.
If your shop currency is USD and your shop owner bank location is Turkey, Etsy makes deductions and your profit margin is 23.6%.
On the other hand, when you set your bank location to the USA, the payment processing fee becomes 3% + $0.25, and all fees are processed in dollars. Additionally, since your shop currency and your bank location’s currency are the same, it does not charge a currency conversion fee.
Consequently, your profit margin increases. Similarly, when your shop owner location is the USA instead of Turkey, the 2.27% regulatory operating fee is not deducted, and no VAT is charged in the USA. Furthermore, when you add the free listing credits, your profit margin increases significantly.
When I set your bank location to the USA, the payment processing fee is 3% + $0.25, and all fees are in dollars.
Also, since your shop currency and bank location currency are identical, it does not deduct a currency conversion fee. Your profit margin reaches 29.76%.
When your shop owner location is the USA instead of Turkey, the 2.27% regulatory operating fee is not deducted, and no VAT is charged in the USA.
If you have free listing credits, the $0.20 fee is not charged, and your profit margin reaches 33.43%.
By changing data such as the bank owner location and shop location, you can clearly calculate exactly how much your Etsy deductions vary. I see many sellers making mistakes in this regard because they start selling without calculating their profit first. As a result, they can not determine the correct price. Because they fail to set the right price, they realize after selling for a while that they aren’t actually making a profit. I know many sellers who have experienced this. Unfortunately, this is a common issue also faced by Etsy sellers. You can easily calculate whether you are making a profit or not for free on the Rexven panel and proceed accordingly.
Click and fill the application form to start selling on Etsy with the Rexven supply system: Special appointment link