back to top

Demystified: How Does Etsy Work?

demystified how does etsy work

In this world full of technology and inventions coming up every day, we are forgetting our core handicrafts. Etsy began as a revolution, a place where people could sell their DIYs. What makes Etsy different than other e-commerce platforms is the products! Etsy is a well-known platform that sells DIYs, crafts, and handmade products.

The name of the company is derived from the Italian word “etsi” that means “oh yes”. In Latin and French, etsi means “what if”. Etsy connects artists around the world to sell their unique handmade products on its e-commerce platform. It started 14 years ago, focusing on handmade, vintage, and craft items. It went public in 2015 and today, it is listed as a public company with over $360 mn total funding. Let us find out more about it!

What is Etsy?

With the increasing hype of authentic, unique and local good, Etsy has won all the hearts and wallets. Etsy is an e-commerce marketplace that has over 2.1 million sellers with 39.4 million buyers. Etsy declares itself as a P2P e-commerce website focused on creative handmade goods. Etsy is built on a vertical model, unlike Amazon or eBay, as it focuses on a niche audience.

demystified how does etsy work

According to a survey of 4000 U.S. based Etsy sellers, many of their sellers pay some or all of their household bills through their earnings on the platform. Product under the category of arts, crafts, jewelry, paper goods, housewares, and artisan candies or baked goods are sold the most till date. To include any Vintage item on the Etsy market, it must be at least 20 years old and can range from costumes to jewelry to housewares or clothing.

Lets read more about how does Etsy work and Etsy business model.

How Does Etsy Work?

Etsy works just like any other online shop. However, when any customer makes a purchase on Etsy, they’re actually buying it from the independent sellers and Etsy just works as a medium or a meeting place between the two as it is a marketplace. So how does Etsy work? It works on a marketplace business model. Unlike other e-commerce platforms, Etsy aims at re-imagining the industry verticals and works in a different way than other marketplace platforms. Etsy is one of the easiest platforms for sellers to start their online business. However, there are several criteria that we will discuss under “how does Etsy work for sellers?”.

Etsy also runs affiliate programs on commissions to drive sales on their site. Etsy offers global shipping and this way, it offers great exposure with its brand name to the sellers. Below are the steps explaining how does Etsy work?

  • Sellers can sign up and list their items on the platform for sale. Listing on Etsy is not free.
  • Buyers can browse and filter the products. They can ask questions to the seller if needed or can simply add the products to their cart.
  • The buyer can then do the payment on the Etsy platform. All the transactions are done on the platform and the sellers are sent the amount after deduction of commission for every successful sale.
  • The buyers can rate and review the products that they bought which could be helpful for other interested buyers. It could also help the sellers to build a reputation.

Let us see how does Etsy work for sellers now;

How Does Etsy Work for Sellers?

Not everyone can sell on Etsy! The sellers and their products have to meet Etsy’s selling standards first. It has verified and categorized sellers.

demystified how does etsy work

The biggest advantage the Etsy sellers get is the filtered crowd to which they can display their products. Etsy has built a brand identity that invites only handpicked sellers as well as target the niche audience.

Etsy enables artists to put their items on sale giving them a global audience and interested buyers. The sellers decide the price of their products and they can also give tags to their products to ease the search of the buyers. The reviews of the customers can help the sellers attract other potential customers. The Etsy sellers can also run their marketing campaigns on social platforms like Pinterest, Twitter, Facebook, Instagram, and other such platforms. Read more Etsy as Amazon competitor.

How Does Etsy Work for Buyers?

The customers can get a good variety of unique that they may never get at any other website. With the predefined structure of Etsy, the buyers get a selective bunch of goods under different categories that offer one of a kind goods.

demystified how does etsy work

The answer to the question of how does Etsy make money from the buyers is through the transaction fees and the subscription plans offered by Etsy. Buyers can browse items and place an order and also talk to the seller about the product. They can, later, add reviews and rate the items purchased by them.

After knowing all about the flow of Etsy, let us take a look at “how does Etsy make money”

How does Etsy Make Money?

The key role players for Etsy’s revenue are the sellers on Etsy that sell their artwork and vintage items. Etsy is a peer-to-peer (P2P) e-commerce website as the platform has two types of customers, the ones who are buyers and the other ones who actually are sellers but customers for the platform as Etsy generates revenue from the sellers as well.

Etsy Revenue Model

  • It charges $0.25 per item as a listing fee.
  • It charges a 5% transaction fee on every sale.
  • It also earns revenue through the subscription plans like Etsy Plus.
  • It also charges promotional fees and advertising fees.
  • It also earns revenue from the transactions taking place on the Etsy platform as processing fees.

The Gospel of Etsy’s Success Story

What makes Etsy so successful? The Etsy business model works in a unique way. It works in the same way as any other e-commerce marketplace but the major factor of why Etsy stands out from other such business platforms is that it curates the products before listing them on the marketplace. The items sold on Etsy are also sold on other platforms such as eBay and Amazon, but the fact that they gain popularity on this platform is because Etsy has attracted a niche audience who are buyers looking for the exact same products sold on the Etsy platform.

Other than this, there are many other factors that affect the Etsy business model and in a way, have become a part of Etsy’s huge success. Word of Mouth Advertising, Extended APIs, Offline support and Support to artists are some of those factors that play a major role in Etsy’s success. Reports suggest that 67% of sellers on Etsy are women and at the time when Etsy stepped in the market, there were no other platforms as such, that gave rise to handmade and vintage products.

The company doesn’t leave a single table unturned in its approach. Etsy is not just an online marketplace but has also been to the ground, helping local crafters through workshops and giving them business advice and loans to the artists as well.

Etsy’s success proves that to be truly successful in business, one needs to work in all directions and aspects possible.

How to start a business like Etsy?

After knowing all about how does Etsy work and how does Etsy make money, if you’re inspired by the Etsy business model and want to start a similar business, you’re at the right place. NCrypted Websites can help you build an Etsy Clone. Never heard of clones? Read our blog to know all about clones and clone websites.

If you have an idea for an e-commerce startup and want to build a custom website, we can help you with that as well. We offer custom solutions as well as customizations in our ready-to-deploy products. Get in touch to kickstart your business.

Share your thoughts with us!

Did you find out all the things you wanted to know in our blog “Demystified: How Does Etsy Work?” Let us know what next you want to read about in the comment section below!

Himani Ramvani
Himani Ramvani
Himani is versatile, an innovator who wears many hats including a Content writer. Her educational background and her artistic inclination makes her different in spirit and curious to know about everything new.

Related posts



Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Building a Startup?

Get advice from our experienced team building award-winning applications and scaling successful startups for over 20 years. Contact for a no-obligation proposal.Contact NCrypted