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Amazon vs Etsy: a comparison for merchants

Ecommerce Platforms|05.01.2015

Amazon vs Etsy. They're both popular with aspiring entrepreneurs looking to start an online business, so in this article we'll outline the various pros and cons of the platforms.

Etsy

We have already written a detailed review of Etsy as a platform, which you can read here.

Etsy is an online marketplace that has a fantastic bustling community of artists, designers and crafters selling their unique hand-crafted or vintage goods. This is all you can buy on Etsy, unlike Amazon where you can sell just about anything. As long as it's legal, that is... 

Products sold on Etsy fall into the category of either arts, crafts, jewellery, homeware or baked goods. Sellers are also encouraged to stock 'vintage' items, which Etsy defines as at least 20 years old. Unless you sell any of these, it would probably be futile to sell on Etsy, as that is what the people visiting Etsy shops are looking for. 

With over 1,000,000 active shops, Etsy is a platform that is always rising in popularity, with more and more online shoppers acknowledging that it is a great place to find unique items and gifts that aren't sold elsewhere.

Here are the main pros and cons for selling on Etsy:

Pros

1. Established community

Image from blog.ecoetsy.com

A very appealing benefits for selling on Etsy is that it can offer you membership in a very large, previously-established community. While any small business should be constantly marketing themselves regardless, knowing that a lot of people visit Etsy could potentially help with having customers find you. Do bear in mind that traffic to Etsy does not equal traffic to your shop. You still have to make your products enticing and try to get featured by Etsy.

While a clear benefit of using Etsy, this is not something that is unique to its platform, with Amazon offering a much higher level of traffic.

2. Sell instantly

"Patience is a virtue, but time is a commodity," a wise person once said, and in the world of e-commerce this often rings true. If you want to begin selling your products as soon as possible, Etsy could be the route for you. It has a really easy and fast sign up process, and even offers a 'Sign Up Using Facebook' button. Once you have your account, you could start selling in just a few hours. If you have your product photography and descriptions ready, that is! Particularly beneficial if you want to start selling during peak shopping times of the year.

If you think of the alternatives for sellers of unique items, like Not On The High Street, or having a bespoke website designed and made for you, neither can offer such a quick way to get selling quite like Etsy can. Not On The High Street takes a while to review your application to sell on their platform, while web design takes multiple weeks.

Amazon also has a quick sign up process, but unlike Etsy it does not offer an option to sign up using Facebook.

3. Offer discount codes and shipping

Image from Etsy.com

One of the best ways to keep customers visiting your online shop time after time is to offer a loyalty incentive. A great thing about Etsy is that it makes it very easy for you to implement various discount codes and shared shipping costs for the same customers. It's an excellent marketing tool that you can use to potentially drive customers back to your shop and gain more repeat orders.

With Amazon, you can create 'Promotions', though there are restrictions on these and they are hard to control and maintain as the discount codes can be used by anyone. This is considered by some Amazon sellers as a flaw in their system.

4. Low cost to get set up

It really does not cost you much to get set up selling on Etsy, especially when you consider the alternatives available to sellers of unique items: Not On The High Street, or a bespoke website for your products. Not On The High Street charges £199 + VAT as their joining fee (around £240), and takes a 25% commission on all sales you make, while having a website designed will cost even more. Etsy, on the other hand, lets you set up your shop for free. However, Etsy does charge $0.20 to list an item and takes 3.5% commission, so while it is low cost, there is not no cost.

Etsy is much cheaper than Amazon. Etsy's commission rates are much lower - and are standardised regardless of category - and does not charge a monthly fee to maintain your shop like Amazon does.

Cons

1. Expansion has damaged its support service

Screenshot from Etsy's forum

Etsy used to offer live chat to all of their sellers, but unfortunately the fast-expanding nature of the platform meant that they were forced to put a stop to this service in 2011, after not being able to cope with the demands of their sellers. A lot of people on Etsy's forum have expressed a lot of anger and upset over this, claiming that the live chat feature was their lifeline when they first started their online shop and now their problems aren't dealt with as efficiently as they once were. You can see this in the screenshot above. It seems that Etsy was not prepared for its increase in users and has thus had to dilute its existing resources to make them stretch.

2. Oversaturated

An issue that is universally deplored by all those that sell on Etsy is that there is far too much competition. This is worrying enough in itself, before you learn that it's estimated that there are more sellers on Etsy than there are buyers. The number of sellers is also rising all the time. With so many of your competitors selling on the same platform as you, it may be hard for you to stand out and make many sales on Etsy.

Amazon is also oversaturated, with far more active sellers than Etsy, but there is also nearly ten times more traffic and consumer demand on Amazon, so while still an issue, it is generally less prevalent.

You can overcome this by putting more time and money into marketing, and generally sharpening and honing the elements of your marketing mix, which is discussed in more detail in our Etsy review.

3. They take some of your profit

Image from Etsy.com

Etsy's fees are $0.20 to list each item, which is only listed for four months. They also charge 3.5% of the product's price price when it sells. When you consider the previous point, that it's already hard to find customers because of the saturated nature of the platform, it's frustrating that when you do start making sales Etsy also profits off of your success.

This obviously has to be mentioned in the 'cons' section of this article, but at the same time, you're going to find costs anywhere you decide to sell your products online, so this isn't necessarily a flaw that is unique to Etsy, and shouldn't be viewed as a reason to not use them. They have to make their profit somehow, and they are allowing you to access their wide customer portfolio.

4. Not that customisable

Selling on Etsy is not nearly as personalised as having your own beskpoke e-commerce shop. The platform does offer some customisation tools, but they aren't extensive. You can add a banner to your shop and write up shop policies, but your URL will end in '.etsy.com', which can make your business seem less professional. Etsy does not offer HTML customisation, so the customisation of your shopfront is always going to be limited.

Amazon does not offer any shopfront customisation, though, so Etsy wins this one.

If you want your shopfront to be completely bespoke to your business's brand, you will need a website designed for you. Etsy is a marketplace aimed at many different kinds of sellers, and doesn't offer the level of customisation that you may be looking for.

5. No independence

Extract from Etsy's Terms of Use

If you're a bit of a control freak – and let's face it, who isn't? – then you might find being at the mercy of Etsy slightly unnerving. They reserve the right to suddenly shut your store down or change their fees without notice, so you never have the security of knowing that your business is safe. If Etsy put their fees up and you could no longer afford to run your business and make a profit, you could end up in a difficult situation.

You can see this plainly written in Etsy's Terms of Use in the extract pictured above.

Amazon also reserves the same right, which can be seen in their Participation Agreement here:

Again, the only way to have absolute control over your business's future is to sell independently from Etsy and Amazon, by starting up your own online shop.

Amazon Marketplace

Amazon.com has not been around for long, only since 1994, and yet is the largest Internet-based company in the world. It completely dominates search engines. In fact, typing 'Amazon' into Google will give you 9 pages of sites relating to Amazon.com, with only one link on the 10th page being for the Amazon rainforest. The rainforest has been around for 55 million years, the website for 20. It's safe to say that Amazon.com has been, and still is, a massive influence in e-commerce.

Originally operating from Jeff Bezos's garage – yes, it's one of those success stories – the company started as a small online bookshop, before developing into the fully fledged wide-ranging conglomerate it is today.

In recent years, Amazon has also begun competing with Apple by delving into the world of consumer electronics. The most popular is their Kindle e-book readers, but they also produce tablets, televisions, and more recently, mobile phones.

Amazon has two main options available for those wishing to start an e-commerce business. One being Amazon Webstore, which is a hosted e-commerce solution. It is not nearly as customisable as its competitors like Shopify, though, and does not give you Amazon.com's stature or name. Alternatively, if you want to actually sell on Amazon, we would recommend Amazon Marketplace. It is a fixed-price system where you can sell used and new items alongside the existing listings on Amazon.com. For example, if you wanted to buy the Barnes & Noble edition of 'Romeo and Juliet', Amazon would charge you £12.99. On the same page, though, there are sellers offering the book in 'new' condition from £5.86.

Here are the main pros and cons of selling on Amazon Marketplace:

Pros

1. Join the largest Internet & e-commerce business in the world

In the list of the world's largest Internet companies, Amazon is number 1. In the 2014 financial year it received a whopping $74.45bn in revenue, far surpassing the next e-commerce site on the list, eBay, which was third and raked in $16.05bn.

Etsy does not appear on the list.

If you are looking to join an already-established e-commerce company, then there is no platform more successful than Amazon. Quantcast reports that Amazon receives an average of 82,727,848 visitors per month.

If you have the right marketing mix, your business has the potential to be seen by a large proportion of those visitors.

2. Strong seach engine optimisation (SEO)

Often, if a customer searches for a product on a search engine there will be an Amazon listing somewhere on the first page. This is probably the largest benefit to Marketplace sellers being listed on the same product pages that Amazon uses for themselves; Amazon will be constantly optimising their own SEO, which will result in a high amount of exposure to your own listing of the product too.

By comparison, Etsy's SEO is much weaker. Because they are not trying to sell any of their own products, they rather opt to advise sellers on how to optimise their shopfronts for search engines, instead of doing it themselves. You have much more of an obligation to get your business name out there when you sell on Etsy.

3. Repeat customers

Image taken from Customer Service Guru

A large part of Amazon's success owes to their fantastic ability to build and nurture relationships with their customers. Because of this, they often have their customers return at a later date and buy more products from them. In fact, it was reported way back in 1998 that a massive two thirds of Amazon's customers made repeat purchases.

With such high levels of customer loyalty, Amazon certainly presents itself as a medium that can ramp up the amount of sales you receive.

Do bear in mind, however, that sellers on Amazon Marketplace tend to be seen by customers as a cheap alternative to buying the product directly from Amazon, so it is much harder to build customer loyalty. There are ways, like personalised packaging and thank you notes, but it can still be difficult.

4. There is no limit on what you can sell

Etsy has a very strict list of items that people are permitted to sell on their website. If you're not selling something handmade, arty, crafty or vintage, then Etsy will not allow you to list your products on their site.

Amazon, on the other hand, doesn't really impose any limits on what you can and cannot sell. Like eBay, as long as the item can be legally sold, and cannot be deemed as unsafe, it can be listed on Amazon.

Because of this, you're given much more freedom to sell without worrying about whether you are meeting the guidelines of the platform. Also, there is a higher chance that your business idea will be viable on Amazon Marketplace, and it will be easier to compete with other sellers selling a much wider range of items.

5. Reliability

Image from Amazon Web Services

If you are trying to decide whether or not to host your e-commerce shop yourself, bear in mind that any servers you buy will never be as reliable as the ones that Amazon employs. As the world's leading e-commerce site, Amazon's servers rarely ever fail. ('Rarely', mind you, not never.)

People often report that trying to maintain their own servers can be a real hassle, often having to call in engineers when their site goes down, which is never practical. An online business cannot afford to not have a reliable, functioning website. Without this security in place, you could be losing revenue.

However, if you start up your own e-commerce site, you don't necessarily have to host the site on your own servers. Using an e-commerce platform like Shopify gives you the freedom of running your own site, while taking care of the hassle that comes with hosting it.

Cons

1. Very high commission fees

Much like eBay, Amazon charges different commission rates based on the category that the item is sold in. There is both a percentage and a minimum fee for each category, with the seller being forced to pay more.

For example, the 'Clothing' category has either a 15% fee or a 40p minimum fee. If your product sold for £2, 15% would only be 30p, so you would instead have to pay the 40p minimum fee.

Amazon's referral fee rates range from 7% for the 'Computers' category, to 45% for the 'Amazon Device Accessories' category.

In addition to these referral fees, Amazon charges a £0.75 per-item fee to their 'Individual' sellers. The only way to avoid this extra cost is to become a 'Pro-Merchant' seller, which is a subscription service charged at £25 a month and allows you to sell more than 35 items a month.

These fees are much higher than Etsy's.

2. They own the customer

As previously stated in this article, a very impressive two thirds of Amazon’s total orders are made by repeat customers. There is a downside hidden here though: these customers are never truly yours. Amazon makes it very clear in their terms of service that they own the customer, and that in certain scenarios sellers are not allowed to make any contact with the customer.

If you opt to use Amazon's delivery service, Fulfilment by Amazon, in which Amazon handles shipping for you, you know virtually nothing about your customer. In this case, Amazon owns all the data and the customer relationship, while all the only information have access to is your revenue.

3. No store customisation

Unlike Etsy, which at least offers some customisation, Amazon offers none. Instead, your profile just has the name of your shop in a default font, a small description on the sidebar, and the products that you are selling.

Most, if not all, e-tailers will be looking to create a brand for their business, and in no sense does Amazon allow you to do that.

This seems to be a weak trait amongst many online marketplace platforms. Because you are selling through them, companies like Etsy and Amazon do not seem to want their sellers to appear too dissimilar from themselves. The only way to construct a genuinely recognisable brand for your business is to start it up on your own, with a hosted e-commerce site that is unique to you, rather than an online marketplace.

4. Amazon may become your competitor

If you end up being successful selling on Amazon Marketplace, Amazon could start to compete with you. People often wonder why Amazon introduced the Marketplace, as it seemingly creates more competition for them, but they gain by using these external merchants so they can provide their customers with niche items while not having to hold the stock themselves. This wider selection of products also makes them more competitive as a company.

However, if your products start selling well and creating a good profit, then Amazon uses that data to decide what it should focus on stocking next. This is a prominent reason for Amazon to allow third-party e-tailers to sell on their site; these sellers help Amazon to recognise gaps in the market and areas that are proving to be profitable. In this sense, you are like a guinea pig for Amazon – a part of a collective market research group.

Conclusion

If you are selling handmade, craft-related, or vintage items, Etsy again proves to be the cheapest option to get your online shop set up. It is only accessible to sellers of those kinds of products, and if you are selling something more mass-produced then Amazon may be more appropriate. Also, bear in mind that Amazon receives much more traffic than Etsy, but traffic to Etsy is of a higher quality. Consider these trade-offs when deciding which platform you opt for!

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