Seller Handbook

The following is a transcript of a podcast episode released in October 2018. The transcript has been edited slightly for this format. You can listen to the episode on iTunes, SoundCloud, Spotify, or wherever you get your podcasts.

Tess: For this episode, we talked with two sellers about how they approach pricing their postage. Our first guest will cover how to consider your target market when you're establishing order minimums, how to get ready for the Christmas delivery rush, and how to use dispatch deadlines to create urgency to help drive sales. Our second guest will get into how to negotiate lower postage costs with your delivery carriers.

My first guest today is Melissa from Sweet Water Decor. Melissa has been on Etsy since 2014, and her shop is based in Pittsburgh, Pennsylvania. She sells all types of home decor items from coffee mugs to wooden signs, jewellery dishes to candles. Welcome to the show, Melissa!

Melissa: Hi, Tess. Thanks for having me.

Tess: Are you in the studio today? What are you up to?

Melissa: Yeah, so much going on preparing for Christmas and even designing out until spring. I'm actually pregnant now and I'm due in December. So I'm trying to get as much as I can done now and designed and made before next year.

Tess: That's so exciting. Congratulations! That’s a lot to be working on right now, especially with the holiday season.

Melissa: Yep. Our other son was born in October two years ago. It's like, “Why do I have babies in the busy season for retail?”

Tess: Yeah, not very convenient.

Melissa: No, it's not. [Laughs]

Tess: Let's talk a little bit about how Sweet Water Decor came to be. How did you make the move from a corporate retail career to launching your own business on Etsy?

Melissa: My husband and I were engaged in 2014 and he was studying for the CPA for accounting. I was bored, thinking, "I need something to do while he’s studying, so I might as well start planning our wedding". I went on Etsy and started looking for wedding invitations and I thought to myself, "I could just make these myself".

So I started using Photoshop, designing wedding invitations, and listing them on Etsy. I listed some print art and really the rest is history. I started from something digital then started printing them off and then we started in coffee mugs. So I was actually sublimating coffee mugs in my basement doing a lot of custom work for custom coffee mugs on Etsy. That really took off, and within nine months I was able to quit my corporate job in retail and run my shop full-time. And my husband actually just quit this past year too, so he's full-time with us as well.

Tess: Wow, that’s an incredible story. So, you have a variety of products in different sizes and weights. How does postage factor into your pricing strategy?

Melissa: One of the great things about Etsy is you can actually put in weights and see how much it would cost to send it to somewhere close to you, to somewhere very far away, or even across the world. I utilise that a lot, and let Etsy calculate it for me. But we also pair that with the rates that ShipStation has, that we end up using to deliver all of our products. We use that third-party platform to deliver all of our products. I think that helps out so much, because sometimes customers order more than one thing from you. You want to make sure you're charging enough for postage. Just double-checking that and using both platforms is what's really helping us out.

Tess: And you're talking about using calculated postage right?

Melissa: Yes, that’s correct. We used to do flat rate. Say they got a travel mug, [the postage would] be $3.99 or something like that, but we realised that if people order maybe 20 travel mugs that $4.00 times 20 is the real price. So I like the calculated postage aspect of it, that it can just calculate it for us.

Tess: So how do you work in parts of your postage costs into your item price? I'm wondering about the math around that.

Melissa: One of the great things that I created is an Excel spreadsheet where I have every single product, the cost to make it, and then cost for say thank-you notes, the box, the label, part of how much we pay ShipStation, all that calculated out. So we know all of our margins for every single product. That's just something we want to keep in mind to make sure that we're actually making money, and we're making enough to be able to sustain us and not have to overcharge our customers for postage. Just give them that bare minimum.

Because even whenever I shop online shop on Etsy, I know how much things weigh and how much they should probably be from doing this for so long. So if I see something that's too high as a postage cost I'm going to go the next shop. I think that that's what a lot of customers are doing. So calculating postage and just not charging them too much for postage is definitely key. You might just have to eat a little bit of the cost, but you end up getting more sales that way too.

I feel like if you want to do free delivery I would definitely make sure to have a free delivery minimum of $50 or something like that. That way you're increasing the amount of units that you're selling most likely, and you're making sure that you're going to be controlling your costs. You can add more units to the product that really whenever it's going to dispatch out it's not going to raise the price too much more for it to be a little bit more in weight. So that's another way that we manage that free delivery aspect, because you really wouldn't want to dispatch something for free if it's, say, under $15, because you're really not going to make much in a margin.

Tess: Right. It sounds like you're landing on a postage price that's fair and feasible for you as a seller, but still appeals to buyers.

Melissa: Definitely, and I think they're willing to spend up to that amount. I think if it's $75 or more, they might be wary. But you want to entice them in a way that you get them to be like, "OK, I'll just add 15 more dollars to my order and then that way I get free delivery."

Tess: What's your strategy for offering expedited and bulk options for delivery?

Melissa: They just have to pay for that. Around Christmas, customers want it the next day and they're on the other side of the States. It's like, "No, that can't happen unless if you pay maybe $75". Honestly, sometimes they'll do it. We just end up charging them whatever the price would be if they want next-day air from FedEx.

What's great about ShipStation is that it's integrated within Etsy so it talks to each other. That has been such a godsend for us. We're able to go in there and calculate the price. We know, "OK, our travel mugs are eight ounces". We go in there, check it out. If a customer wants something expedited we can make sure that we have the correct rates for them and we’re not overcharging them because ShipStation gives you real-time rates as well. So say if you do have the postal service, if you have UPS, if you have FedEx rates, it's all right there. That way you can just create a listing on Etsy and say, "It's $5 more, $10 more for postage. Sure, we'll send it out next-day air for you".

Tess: I wanted to shift back to the order minimums that we were talking about a second ago. I was wondering if you could talk a little bit about what you've learned there. How did you calculate the right order minimum for your business?

Melissa: It's really seeing what the market is doing. If we go in other shops sometimes they're $75 or more, and that's just a little bit too high of a price point. But thinking about our target market, our target customer: She’s 18 to 24 years old, just really getting started in her career. She's probably not wanting to spend $75 to get free delivery. We figured on an under $50 price point. And when you see $49, you think "Oh, that’s under $50!". Well it’s basically $50.

For us, it's really about the psychology of it. We've learned that so much about our customer and just seeing that nine. Even our price points that we have, we use $19.99 instead of $20, because that one penny makes a huge difference. They think, "Oh, it's under $20!". So that's the same thing we do for delivery. It's like, "Over $50, free delivery, perfect! I only spent $49". So they're thinking they're getting a really good deal with that, and they are, but really it's that $50. We settled on that price point for our target market and because of our price points too. For instance, our coffee mugs are $24.99, so they'd have to purchase at least two or three products to be able to hit that $49 price point. When you're thinking about UPTs, units per transaction, you want to be able to get as many units per transaction as you can and that also helps out with the postage. You may pay a little bit more in postage, but you're selling more so it's helping your margins.

Tess: It's funny how psychological it can be. Like you said, they're perceiving that it's a deal. It's these small tweaks that you can make to help your customers feel like they're getting a deal. That's really smart.

Melissa: Definitely. And then they get excited about it too, which is always great.

Tess: Can you talk a little bit about how order minimums have helped your business and how your customers have responded to it?

Melissa: Most orders that come through retail, they are probably purchasing one item. But especially whenever you've given that incentive, “Hey, if you had 20 more dollars to your basket you get free delivery”. The dollar minimum that we've gotten has raised from one unit to about two or three units. That has helped increase our sales, and that has been really great. So offering that and pushing your customer to the next level is what's really going to help you grow your business.

Tess: Do you have any advice about dispatching trickier items?

Melissa: Our bread and butter is really our coffee mugs, and you always want to make sure that your product is protected well too. Make sure you have enough padding in your products. All of our coffee mugs now have Styrofoam over everything so that we never have breakage happen for coffee mugs. We tried to figure out all these different ways to dispatch using bubble wrap. There was always at least one or two a week that would break. So check your packaging and try different options.

One of the things that I did, especially when you're starting off dispatching, is I knew to the penny how much we were spending for bags, for boxes and for everything. Try to find the best price but the best quality product for your packaging materials. You want to make sure it's also presented very well to your customer. You may not have a retail store where they can actually walk in and experience that shop experience, but you want them to have a great unboxing experience of your product. Add a marketing thank-you note. Whether it's little maybe pink pill filler, or some craft paper or something like that. Take that extra step and make sure that it's nice, but also try to keep your costs at a good spot too so you're not overspending for that.

Make sure that you're dispatching economically. Test things out. Sometimes you can get a box for a product or you can get a bag. For our travel mugs we end up using bags, and that's been perfect instead of using a box. Because a box could add another a quarter of a pound to a product and get you over that dollar rate, and you'd be paying a lot more for postage. So test your product out. Test it out in bags, test it out in boxes. See whatever weight is best, what's going to save you the most money, and what's going to look the best for your customer as well.

Tess: That's really smart. It takes some time but it’s well worth it.

Melissa: Definitely, it is. It'll take time to tweak it. Keep an Excel spreadsheet or Google Docs spreadsheet. Write down your costs and see what works best for you.

Tess: I loved that you brought up thinking about your target customer and how much they would be willing to spend for an order minimum. How have you learned about who your target customer is?

Melissa: I know one of the great things is if you have an Instagram account you can really see who your customer is. It tells you, "Hey, your customer's 18 to 24". Maybe it's an older customer, a younger customer. So you know what their income would be at that age in their life and know if they can afford your product. If it’s for a teenager but it’s a $300 product, they’re not going to be able to afford that. They might ask for it for Christmas or for their birthday. You really have to think about your customer and what they're able to afford, and if it's something that they're desiring at that time of their life.

Tess: How do you establish and share dispatching deadlines?

Melissa: We do a newsletter with Mailchimp, so we always put that in our newsletter. But one of the great things on Etsy is you can have your shop announcement section area and put that right there. Because customers will not read. They will not. They don't do it. Sometimes they may even find you from maybe a Pinterest pin. So they may not actually see your shop page, but have it on the information announcement. Very first part there: “CHRISTMAS DISPATCHING DEADLINES.” Put it in caps.

Tess: That’s about everything from me. Is there anything else you'd like to add?

Melissa: Definitely make sure you are getting all of your box materials, your bags, your thank-you notes. And get more of it than what you would expect now. Start doing this now, start stockpiling everything, and you have no idea what's going to hit you when Cyber Monday hits. It's such a great time of the year. It's about two or three weeks of the most sales you'll probably get the entire year. But have it all ready. Have extra product made. Have it all ready to go.

And get help if you need help dispatching. If you're at that point where you're like, "I can't dispatch another thing. I just don't have time", look for help. If you do a lot of customer service Conversations, I would already have them set up in Excel so you can just copy and paste your deadlines, but also include in there to make sure they know, "Hey, this product may sell out by that time. Purchase it today so you don't have to worry about it". Create that sense of urgency in your customers to make them pay now and get it while it's hot. If they're already wanting your product, get it while they're thinking about it instead of maybe two or three weeks down the road whenever it's the last time to dispatch.

One other thing that I would like to tell all the Etsy sellers out there is that you're going to be sending out so many products, more than what you would during the entire year. Make sure you have an insert in your package that has a thank-you note, a coupon code, or even a coupon code for their friends. Ask them to tag you maybe on Instagram or Facebook, just to really get your product out there even more and more.

When you give those kind of discounts to your customer, it entices them to come back. You can even make it for sometime in February or March. That way maybe they'll come back to your shop and order something more, or give it to a friend that they maybe gave a present to, and maybe they’ll go back and order more product from you. It's all about that reconnecting with your customer and just making sure that they're happy. It's always nice to have a “surprise and delight” [moment] when you open a package. When there's a discount code in there for you, or even just a nice, handwritten thank-you note.

For the shops out there that are just getting started, write those thank-you notes. Thank your customers, because that's what's different about Etsy than any other platform. You're getting something that is handmade. Cultivate those relationships with your customers, and hopefully they'll tag you on Instagram and keep growing your following for you.

And don’t get too stressed out. It's going to be the best time of the year, but you've been waiting all year for this. You can do it!

Tess: My next guest is Mike from the Etsy shop Barn Wood Furniture. Mike is a woodworker based in Front Royal, Virginia, and he's been on Etsy for 10 years. He sells beautiful handcrafted furniture made out of reclaimed wood, making everything from bed frames and dressers to bar stools and dining room tables. Thanks for talking to me today, Mike!

Mike: Hi Tess. Thank you for having me.

Tess: You were making furniture before you launched your shop in 2008. What led you to open an Etsy shop?

Mike: Yeah, Etsy was really a revelation in a lot of ways. I had been making things on a very small scale for a very local market. I wanted to do more, wanted to break out of that, and wanted to go wider, but didn't really know what platform to use to achieve that. Certainly trying to start my own website was an option. But in 2008, through my sister in-law who had posted an article about a friend of hers who was making stuff and selling it on Etsy, I discovered that world.

It was an absolute game changer for us. Just this much broader market of people particularly looking for things that were made by hand, which is exactly what we were doing. It was really exciting to get involved in the Etsy community, and it was the beginning of our growth and our move forward. And it was really where things changed for me, being able to go from a part-time hobbyist to a full-time woodworker.

Tess: And you were working in computer programming before, which is such a leap.

Mike: That was a very big shift from one to the other! It was late in the game too. I was approaching 40 at that point, and not very many people get to easily do that. But Etsy certainly made that possible.

Tess: As a furniture seller you dispatch some very large and heavy items. How does postage factor into your pricing strategy?

Mike: Postage is a really significant portion of our overall expense picture and it's somewhat challenging to predict. We've gotten pretty good at portions of it. You're scaling items all the way from barstools, which are probably the smallest thing that we offer, up to beds, which are probably the largest thing that we offer. And some of those beds can be very complex. They might have a large headboard and drawers, and so can be a very large package.

On the small package end, we're generally using UPS. And that all comes down to volume. When we first started dispatching items via UPS, I didn't have a UPS account. I didn't have a UPS account manager. We just went on the UPS site, typed in the information. "I need it at these dimensions, at this weight, going to this place" and they gave us their standard price and off we went. And that was miserable. It was very expensive. Oftentimes that would be a third or even a half of the money that I was charging to the client.

And so we did our best to make relatively clear what the postage was and provide a range. So we said, "It's going to be something from $35 to $85, depending on where you're located. Please contact us and we'll tell you what to expect". That we quickly got away from. Shoppers don't like that. It's too much work. It's too much unpredictability. They've got to contact you, then you've got to look up a quote, then you've got to get back to them, and then they've got to make the purchase after that. And then you probably have to set up a custom order somewhere outside of that. It's too much back-and-forth. It's too much fussing around. And most people who have grown up in the Amazon Prime age just aren’t going to bother. They'll just move on to somewhere else to find something that they like. Some people will, but a lot of people just won't bother.

So we had to quickly get away from that. The next step was, rather than providing a range and saying, "Hey, contact me", I just came up with a flat rate. So I'm just going to charge $44 to dispatch the stool no matter where it goes. If it goes to New York City, I'm probably doing OK. If it goes to California, I'm getting beat to death but at least we're getting more sales. And I don't have to spend a lot of time thinking about it and they don't have to spend a lot of time wondering exactly what it is they're going to be paying.

That approach lasted us at least a few years. And it was somewhere in there that I finally got ahold of a real person at UPS, and they looked at the number of things that we were sending out on a weekly and monthly basis and said, "You qualify for some volume discounts." And I couldn't believe it that I didn't know that and I hadn’t figured out earlier. It was frustrating to look at how much we've been spending and how much we could have been saving. Eventually that allowed me to have a better idea of what I was actually spending on an average basis.

Those are the two key pieces: Establishing an honest-to-God relationship with particular delivery companies, and then getting your volume to a certain point where you can negotiate a substantial discount. And they can be played against each other too. "Hey, UPS is offering me this. FedEx, what have you got?" And my account representative over at FedEx is saying if we need these things, these are the benefits we can look at. And we had to do that at points because we didn't feel like we were entirely getting everything that we were meriting. A lot of things play into that, but those are all things that you can do when you actually have a relationship with an account manager.

Tess: I notice that you accept returns and exchanges as well. What's your strategy there?

Mike: I don't know that that's necessarily the best economic move that anybody could make, but for me it's a question of integrity. We really want our customers to be happy. We want them to like what they've gotten, and to be overall excited and ready to pass word to other people. "Hey, I got this really great stuff here and you should too". I began on Etsy 10 years ago. I didn't have any reputation at that point. I didn't have any sales. I didn't have any reviews. I didn't have anything. So to ask somebody to plunk down several hundred dollars, or maybe even a couple thousand dollars for a larger item, I wanted there to be a lot of trust there. I wanted them to know that regardless of the situation, I was not going to make a fuss if they wanted to cancel. No questions asked. If they didn't like it and they just wanted to send it back, OK. If it was damaged in transit, I was either going to make it right or take it back and refund them. I didn't want them to have to wonder or for there to be any confusion or any fear involved in that.

And I think it’s paid off. Even from an economic point of view, although it can be painful in the short-term. I had someone call up and ask for a cancellation a couple of days ago, and it was a bed and a coffee table. And together that was probably, $1,800 worth of sale. And there were promises of, "I just need to take care of this one thing and then certainly we're going to come back and finish the sale". And I'm thinking, "OK. Maybe they do. Maybe they don't, but I'm going to be true to my word in any event." And despite that painful moment, overall I think it has been a very positive thing for the 10 years that we've been in business.

We've garnered a large number of five-star reviews, people who have been very happy with what we have provided. I know that there are sales that happened because people read that and had a certain amount of comfort level. This is maybe a bit of an unknown, they're new to Etsy, or at the very least they're new to me. And it seems like he is offering nice stuff, and it seems like it's quality, and the pictures look good, but it's a buy over the internet. It's not the same as being able to walk over and pick something up off the showroom floor and say, "Yeah, this is exactly what I want". And so it provides a comfort level to be able to say, "Yes, that's what I want to do". And so I think all-in, it has definitely been in our favour.

Tess: Definitely, it's a really helpful customer service practice. And you're right: There are new buyers coming to Etsy and they're not familiar with the site. It's something that puts their mind at ease and makes them feel like they can trust you.

Mike: Yep.

Tess: I know you touched on this earlier, but can you talk a little bit about packaging your items? Do you have any tips for packaging tricky-to-dispatch items?

Mike: Oh boy. Pretend like your package is going to be dealt with by a half asleep football player who doesn't care very much, and you're probably going to be more or less in the right ballpark at that point. When we think of sending something by UPS, we think like “Oh, here's this nice, pleasant guy in a brown suit who shows up at the door and he sets our package there.” That's the last and smallest part of the delivery. Everything up to that point was conveyor belts, thousands of packages, many different sizes, drops as much as five or six feet. And somebody else's big package dropping on top of yours. It's the automated world. Nobody is taking your precious thing that you made by hand and treating it like you would. They just aren't. For them it's one of a million packages that they've just got to get out the door and on the truck and delivered that day.

So it's got to be relatively robust. Unless you want to spend an awful lot of time, and probably futile time, following up with claims and hoping against hope that you'll actually get some money back, package them tough. Put a lot of padding, and a lot of cardboard, a lot of tape.

Tess: And as you're thinking about the margins for your delivery expenses, is that also where you’re accounting for those costs of boxes, tape, packaging, things like that?

Mike: Yes, absolutely. All of that. When I say I'm looking at my aggregate postage cost, it's not just what I've shelled out to UPS or FedEx. It's what I had to pay for boxes. It's what I had to pay for tape. And we do our best to get good deals on that. We're buying in quantity and our boxes we get from a couple of different places. And again, if we’re buying in quantity the price goes down.

We're usually trying to buy enough boxes to cover us for at least a couple of months, and usually more like four to six months. We're going to need them, we're going to use them anyway, and if you can buy them a couple thousand at a time as opposed to a hundred at a time, you're going to get a much better price. And then that becomes part of your aggregate postage picture. So when I say delivery expenses and then I'm dividing it by the number of bar stools or whatever it is that we've sold, that's part of it. It's a small number compared to what you're paying out to UPS, but it's still a significant number.

Tess: Do you have any last tips about delivery during the Christmas season?

Mike: During the Christmas season have plenty of stuff on hand ahead of time. I don't know if it's the same for everybody, but we're catching our breath right now. Between now and Thanksgiving it's going to be a run, and between Thanksgiving and Christmas it's just a flat-out sprint trying to keep up with everything. So we stock up, make sure that we have lots of material on hand so that we're not running out at a critical moment when we've got too many other things to think about. And just having stuff ready to go so that you can handle all of that quickly and efficiently and focus on getting the orders out.