Etsy, an e-commerce website, is now prioritizing sellers who offer free shipping to the U.S. for purchases over $35. The company said items or shops with a free shipping option will be displayed first in Etsy search results and showcased on e-mail, social media, and TV ads.
The new policy went into effect on July 30th – and many sellers aren’t happy.
To be clear, sellers aren’t mandated to offer free shipping. However, if they want a coveted search result placement, they will have to abide by the company’s new free-shipping policy.
Etsy’s CEO, Josh Silverman, has suggested that sellers absorb the shipping price by raising the price of their items. Doing that, however, is not easy – especially if a significant percentage of a seller’s market is international.
Etsy is different than other e-commerce websites. Etsy primarily sells handmade, unique, or vintage goods from artists and small businesses. It’s a platform for small, home-based shops. The company currently has 2.2 million sellers and 41 million active buyers. Why, then, is Etsy making this change?
Etsy is attempting to broaden its customer base and encourage one-time customers to become return customers. Etsy defines active customers – or buyers – as individuals who used the platform to shop at least once in the past year. Currently, only 40 percent of active customers have shopped more than once a year. Esty is determined to change that.
Internal company research suggests that customers are 20 percent more likely to complete a transaction when shipping is free. Etsy’s leadership is aware that customers dislike shipping fees shoved in their face, and are less likely to return if they are. They also know that a bad experience with one seller colors a user’s perception of the entire platform. With this new change, Etsy hopes to improve the customer experience and meet ever-evolving customer expectations.
Many consumers in the U.S. expect free shipping at this point. Target, Walmart, Amazon, and eBay – to name just a few online retailers – all offer free shipping on qualified products or products above a certain price.
Big retailers try to outdo each other with their competitive shipping policies. Amazon reported in April that it would attempt to make one-day shipping standard on Amazon Prime, and Walmart has rolled out next-day delivery for over 220,000 items.
It can be argued that free shipping has become the norm in the U.S. and Etsy’s leadership recognizes that to effectively compete against the retail giants, it needs to up its game. Prior to Etsy’s free shipping announcement, roughly 70 percent of items sold on Etsy weren’t available for free shipping. The company wants that number diminished significantly.
From a business perspective, Etsy’s decision makes sense. On the other hand, Etsy is not Walmart, Target, or Amazon. Most of its sellers are “little guys.” Is it possible for “little guys” to effectively compete in such a climate?
Hiking up prices or absorbing the cost of shipping isn’t easy for a “mom and pop” shop for whom every dollar counts. Will Etsy’s new shipping policy help small shops and artists in the long run by forcing them to become competitive or will it contribute to big retail taking an even greater share of the retail market?