Many new Etsy sellers price by adding a markup to their costs and hoping it works out. The problem is that Etsy's fees are a percentage of the final price — so every time you raise the price to cover fees, the fees go up too. The fix is a formula that works backwards from the profit you want. This guide gives you that formula, shows it in action, and explains how to handle free shipping and Offsite Ads.
What's the formula for pricing on Etsy?
To keep a target profit after Etsy's US fees, add up your product cost, shipping label cost, target profit and $0.45 in fixed fees, then divide by 0.905. The result is the order total (price plus any shipping you charge) that leaves exactly your target profit after Etsy's 9.5% in percentage fees.
Written out:
Order total = (product cost + label cost + target profit + $0.45) ÷ 0.905
Where does 0.905 come from? Etsy's transaction fee (6.5%) and payment processing fee (3%) together take 9.5% of the order, so you keep 90.5% (Etsy's fee policy). The $0.45 is the $0.20 listing fee plus the $0.25 fixed part of processing. (This assumes no sales tax; tax slightly increases the processing fee.)
How does the formula work in practice?
Say an item costs you $8 to make (materials and your time), the shipping label costs $5, you offer free shipping, and you want $12 profit per sale:
- ($8 + $5 + $12 + $0.45) ÷ 0.905 = $28.12
Check it: Etsy's fees on $28.12 are $0.45 + 9.5% × $28.12 = $3.12. You keep $25.00, pay $13 in costs and label, and have $12.00 profit. Exactly on target.
Compare that with simply adding costs and profit ($8 + $5 + $12 = $25). At $25, fees would be $2.83, leaving $9.18 profit — nearly 24% less than you planned.
How do you handle free shipping?
With free shipping, the whole order total is your item price — so the $28.12 above is what you list the item at. If you charge shipping separately, the formula gives you the combined total: list the item at the total minus the shipping you charge.
Either way, Etsy's fees apply to shipping too, so there's no fee advantage to one approach over the other. The choice is about how buyers see the price. If you sell downloads, there's no shipping at all, and Etsy's fees for digital products explains why the fixed fees bite hardest on cheap files.
How do you include Offsite Ads?
If a sale comes through an Offsite Ad, Etsy takes an extra 15% (or 12% for larger shops). You can't know which sales will, so price for your average. If roughly 10% of your orders come from Offsite Ads at 15%, your average ad cost is 1.5%, and the divisor becomes 0.89 instead of 0.905:
| Scenario | Divisor | Price for $12 profit (example above) |
|---|---|---|
| No Offsite Ads | 0.905 | $28.12 |
| 10% of orders from Offsite Ads at 15% | 0.890 | $28.60 |
| Every order from Offsite Ads at 15% | 0.755 | $33.71 |
The middle row is the realistic one for most shops — and it only adds about 50 cents. Pricing every item as if every sale were an ad sale would overcharge. Our Offsite Ads guide explains the rates and the opt-out rules.
What should "product cost" include?
Everything it takes to make and send one item, apart from the shipping label:
- Materials — including the small things like tags, thread and glue.
- Your time — hours spent making it, multiplied by an hourly rate you'd actually accept.
- Packaging — mailers, tissue, thank-you cards.
- A share of overhead — tools, equipment wear, photography, craft supplies you use up. Your Etsy shop setup and listing costs are worth spreading across your first sales too.
Leaving out your time is the most common mistake. If you'd like a craft-specific way to work out product cost, our crochet, candle, soap and 3D print pricing calculators each do it for their craft.
It's also worth reading about when to move from Etsy to your own website.
