Starting a Dropshipping Etsy Shop: What You Need to Know

Interested in starting an Etsy shop? Check out these helpful tips and you'll be selling dropship products in no time!

Disclosure: some of the links below are affiliate links. If you purchase a linked item, I will make a commission, at no extra charge to you. As an Amazon Associate, I earn from qualifying purchases. My experience is not indication that you will have similar, or any, success. Consult an accountant or attorney for questions relating to tax and business creation issues.

Interested in starting an Etsy Shop?

Seen your friends selling cute mugs on Etsy and wondering how to do it yourself? If you choose to start an Etsy shop, you'll be joining a community of millions of small creators who are leveraging the internet to connect themselves with buyers throughout the world!

I, like many people, assumed I would never start an Etsy shop because I'm not "crafty." While it's true that many Etsy shops sell content created by their owners and mailed themselves, a growing number of Etsy shops operate on a "dropshipping" model, which means the items are created by the shop owners, and then manufactured by printing companies when they are purchased by a customer, and not before.

Pints, Pounds, & Pate Etsy Shop

In the depths of 2020, I took the plunge and started my own dropshipping Etsy shop, where I sell Anglophile products and floral political mugs. By the end of the year, I had listed over 300 separate items, and made more than 350 sales! Some products soared, others flopped, I dealt with some of the nicest people on the internet, and, of course, customer snafus. So, I'm here to share everything I've learned!

Starting an Etsy Shop: What is Etsy?

Etsy is an incredible online market place, where small creators (like you and me!) can access the resources to run our own internet-based businesses. There are many benefits to running a shop through Etsy, rather than handling it all through your own website, which we'll discuss later in this post. One of the most important is access to customers, who flock to Etsy. Etsy has been making headlines in 2020 - check out this interesting segment from the CBS Sunday Morning Show for a bit more background.

A few benefits of using Etsy to sell goods

Millions of people come to Etsy every year looking for *unique* products. Quirky mugs, joke t-shirts, creative wooden products, and everything in between. Etsy is more than a "middleman" - the online marketplace provides the forum for your sales, and tons of automations and connections with companies that, to me, make the fees Etsy charges its sellers more than worth it, in my opinion.

Ready-made customer base

One of the hardest parts of getting a small business off the ground is finding the customers. With an Etsy shop, this issue is completely solved. You'll have millions of shoppers, ready to buy, at your finger tips, if you can temp them!

Automations and integrations

Etsy offers a number of time-saving tools and automations (such as shipping notifications), to save you time dealing with high volumes of customers. Perhaps more importantly, in the drop-shipping context, Etsy has "integrations" with a number of drop shipping companies who you can make accounts with to print and ship your items. They are fully plugged into Etsy, so it's all pretty seamless.

Etsy (mostly) handles taxes

As Etsy has grown, so has its involvement in sales tax collection on behalf of its shops, partially because many US states recently started taxing Etsy sales, rather than leaving it up to a geographical relationship between seller and client. So, for sales to most states, Etsy collects and remits sales tax. As always, if you have tax questions, do consult your own accountant or attorney to be sure you aren't creating a mess with your new little shop (and I'm not that attorney!)

For more from Etsy, check out this helpful sales tax article.

Starting an Etsy Shop: The Basics

What is dropshipping?

Dropshipping is a business model where a creator (such as myself), makes a design and displays that design for sale through Etsy (or another online venue). The shop is connected to a "drop shipping" company (such as Printful or Gooten). When a customer buys an item, the drop shipping company prints and ships the item, and then charges the Etsy shop owner the cost. The Etsy shop owner never sees or handles that item.

Finding the right drop shipping integration for your Etsy store

Printful

Printful is my #1 drop shipping partner. Their website is easy to navigate, and the products are well-printed, ship quickly, and arrive safely. Printful's team is responsive to issues and they integrate very well with Etsy.

For drop shipping beginners, I'd recommend using Printful's white mugs as your first product, while you learn the ins and outs. They're easy to design, print clearly, and sell well.

Gooten

Gooten is my other main drop shipping partner. Gooten offers a wider variety of printable items. I particularly use Gooten for wine tumblers, Viking coffee mugs, tea towels, and a wider variety of mug colors, all of which are high-quality are more affordable than many of their competitors.​

What are the pros and cons of dropshipping?

Like all business models, dropshipping has ups and downs. The most significant pro, in my opinion, is that an item is being created that I could *never* make myself! The second is that you don't have to pay to create items until they are ordered. You won't be left with tons of excess stock if you create an item that doesn't sell well. Additionally, once an item is ordered, it requires very little (almost no) work on your end to get it sent out. You don't have to really do anything, aside from correspond with customers and keep an eye on your orders.

For the downsides, while it's great how little work is required for an "easy" order to be sold, you have very little control over the quality of the items, or to intervene if a client needs changes. Dropshipping is a well-oiled machine, and you just aren't a huge part of it. Consequently, there are not huge profit margins. These are inexpensive items, being sold without much mark-up, so you need to sell a lot! Finally, you don't see items before they do out, so you don't know if a customer is receiving a damaged or sub-par product.

Building your Etsy store

Now the fun part: it's time to design your Etsy shop! You can customize a number of parts of your shop, from banner images, to creating a profile for yourself, and uploading a logo. Take time to make the shop look professional. Use a picture of yourself as the shop owner. People like to know who they're dealing with on Etsy.

Etsy Announcements and Policies

While you're setting up your store, pay special attention to your store's policies and announcement. Be honest about shipping timelines, and whether you accept customizations (you don't have to). Good policies can help you avoid debacles down the line- more on that later.

Advertising on Etsy

There are two types of advertising on Etsy, neither of which is mandatory.

Etsy Ads

"Etsy ads" are what you probably expected when you think about advertising on Etsy. You set a budget cap of a certain spend per day, and when a customer searches for relevant terms, your items will come up more highly in the search. If the customer clicks on your product, you will be charged a small fee (but not a percentage of the sale).

Offsite Ads (run by Etsy)

Unless you turn it off, Etsy will also advertise your products outside of Etsy (for example, on Google and social media platforms). Etsy does not charge you up front for this, but if an item is sold through this method, Etsy takes a hefty fee (usually 15%). I would recommend leaving this feature enabled, and making sure that your prices are high enough that you don't *lose* money on these transactions.

So you actually want to make a profit?

Now that you mention it...So your store is all set up and you've sold a few items! But...after all the fees and paying shipping...I LOST MONEY?

It happens. It takes times - and a bit of math - to get your prices right. So let's walk through a few of the calculations you need to make, to actually make a profit on Etsy.

Drop shipping company charges

Both Gooten and Printful are up-front with me about their charges. They both charge me for the product and shipping. I pay less for shipping a second item to the same customer.

Etsy charges fees

But wait! Etsy charges fees. And, though I personally consider the fees to be more than worth it, for all the help Etsy provides, it might be a bit more than you'd expect. In addition to the $0.20 to list an item (which is nonrefundable and must be renewed every 4 months), Etsy charges you to relist an item after each one sells, a "transaction" fee for both the sale and a separate one if you charge for shipping, and a small multi-quantity charge. All of these fees are small, but they do add up, particularly on items with small profit margins.

Do I have to offer free shipping on Etsy?

No. You do not have to offer free shipping on Etsy. Etsy recommends a "free shipping guarantee," which is free shipping on orders over $35. Most stores charge shipping on single items (as do I). Make sure there is enough profit in individual items to cover shipping if someone does spend over $35.

Make it searchable

The same principles that apply to writing blog posts apply to Etsy product creation. Design items that people can search for and buy. Cute, floral mug? Might be great, but someone has to come across it. Cute, floral mug that says "Mr. Vice President, I'm Speaking" the night of the VP debate? Best selling item in my shop. Search terms are *key*.

Pick your bread-winners

Not all items are created equal. Some items cost more from your drop shipper. Some cost more to ship. Customers are only willing to pay so much for a mug. Have a mix in your store of items that are high-earners and items that are large quantity sellers.

Dealing with ​Customer Service Snafus

Before we wrap up, let's discuss what happens when you start selling...and running into customer conflict! People on Etsy are, overall, extremely nice and considerate, but you'll run into a few difficulties.

 Make sure you have enough money in your business to offer refunds when it's truly needed.

Step 1: Clear Policies

As we discussed earlier, having clear policies in your shop will help you both avoid issues and deal with them when they arise. I would also recommend reiterating important policies to clients in the follow-up email they receive after they make a purchase, including mundane items such as the fact items may arrive in separate boxes or cannot be guaranteed by Christmas.

Step 2: Be responsive

Always respond promptly and politely to customer concerns. Be professional and ask for more information. Let them know you'll do what you can.

Step 3: Help within reason

For people who are not experienced in customer service and who are feeling delicate about opening their own store, many first reactions can be anxiety or a desire to give the customer a full refund, etc. Sometimes, this is the right answer (more below), and sometimes it's OK to protect your shop.

​If a customer doesn't like their item (but there's nothing wrong with it), maybe tell them you'll accept a return (if they pay the postage). If an item arrived late because it was delayed in the mail, and it's not your fault, see if the customer will calm down if you offer a coupon.

Step 4: Don't waste too much time

Sometimes we make mistakes. Sometimes, customers are unreasonable. Know when to cut your losses. I often have customers have items sent to the wrong address and demand I send them another one. These days, I just do it, and have the lost product returned to me, and I resell or gift it.

Thanks for stopping by!

Good luck with your Etsy shop! Feel free to drop thoughts, comments, and questions below.

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