Friday, February 20, 2009

Won't be quitting my day job

As promised, I am now going to reveal the data from my analysis of the Quit Your Day Job (QYDJ) feature on the Etsy blog. I think there are some really interesting observations in all of this, the most important being that I probably enjoy making spreadsheets in Excel too much. You should note that I was also somewhat of a math geek in high school so I'm going to explain some of my statistical points to you along the way.

My disclaimer...
- I love my day job. I've been working here for coming on 8 years and I've met some of my best friends here. I've watched romance bloom between co-workers, learned to knit, been to a lot of concerts, and eaten way too much in this office. There is no way I'd give it up anytime soon (unless you want to offer me a couple million dollars and a free vacation to Italy).
- The reason I decided to do this study was not out of jealousy or snarkiness to the artists featured by Etsy in the QYDJ series. If they have been able to find themselves a career doing what they love, then I am all for it. This really was spurred by my own curiosity.

The basics...
- The sample size for this was 36 sellers, each of which were featured in the QYDJ series. I'm going to keep this vague when it comes to identifying individual sellers.
- The numbers I crunched are entirely based on what is currently available in their Etsy shops. We can't see the price of sold items or anything like that, so what I did was take a weighted average of all the items currently in their store. (If you're wondering what the hell a weighted average is, see footnote). I then multiplied this by the number of sales they have to come up with a gross income estimate.
- Based on the number of sales and the gross income estimate, I deducted the cost of listing each item ($0.20), the 3.5% Etsy fees from the sale prices, the Paypal transaction fees ($0.30), and the lowest Paypal merchant fee of 1.9% per transaction.
- To obtain an average monthly income, I figured out how many months the seller was on Etsy, and averaged their gross income by that number of months.

My assumptions (because there's absolutely no way I could find this stuff out)...
- I can only assume that each item had a listing price of $0.20. It's just not possible to take the cost of relisting into consideration here. As I said, I can only make observations based on the information readily available to me.
- The averages are based on the items in the shop on the day that I ran the numbers. It's definitely possible that the shop has increased or decreased their prices since opening.
- The income I'm noting is gross income. I can't make estimates of materials, taxes or other overhead the seller might have to account for.
- The monthly average gross income is based on the number of months since the seller joined Etsy. It's possible that they were a buyer only prior to opening shop.
- All income is based on USD. There were some sellers who were not US based.
- I do not take into consideration whether any of these sellers have a shop outside of Etsy. This is based entirely on Etsy sales.

Now for the fun stuff...

The lowest average selling price was $3.45, with the highest being $515.89. I should note that I'm pretty sure the high was an anomaly because their median selling price was $220 and that seemed more likely. (My statistics teacher would be proud of me for remembering that even with statistical outliers, consistency is a good thing!) The average selling price for this sample of shops was $52.45. I have heard a lot about handmade work being devalued and complaints that many prices on Etsy are just too low. This gives me comfort to know that higher priced goods really do sell!

As for how many sales these sellers have had? The range was 209 sales to 10,373, with the average being 2215 sales. To put this in perspective, I went ahead and looked up the top seller on Etsy, who has a whopping 42,600 sales. Now, that definitely sounds like a full time job, but they weren't interviewed for the Storque, so I digress.

The 36 sellers included in my study have an average of 26 months on Etsy and (this leads me to the part you probably wish I'd mentioned 3 paragraphs ago) - an average monthly gross income of $2,238.27 (after Etsy and Paypal fees). That doesn't sound too bad, until you realize that only 13 of the 36 included in this were even making over $2000/month and there were a couple of sellers who seriously skewed the numbers upward (2 in particular making upward of $7K a month and I give them a round of applause for having both an awesome product and a solid business). The most interesting thing for me was that one of the featured sellers had an average monthly income of only $155.38.

My conclusion...
It seems to me that if the mythbusters had something to say about whether it's possible to quit your day job and make a living on Etsy, it would be "plausible". My biggest concern is that from what I can tell, some of the sellers featured in the QYDJ series definitely couldn't quit their day jobs unless there is somebody else at home bringing home a decent sized income. For sure, once the cost of materials, taxes and other business overhead (marketing, business cards, shipping materials, etc) have been taken into consideration, their net income is likely to be less than $15,000 a year. I do realize I live in an incredibly expensive state (CA) but that would be considered low nationally. Without another income at home, the chances are many of these sellers may not be able to afford health insurance based on these numbers.

Perhaps it's not a question of whether someone can quit their day job and sell on Etsy full time, which I believe is definitely possible for some. It's more a question of those that Etsy is featuring and how many of them are legitimately able to support themselves on their Etsy earnings. Looking over the many Etsy sellers who have sales into the tens of thousands, there are obviously those that are "stop working for the man and be your own boss" successful; however, I think the QYDJ feature doesn't necessarily provide the best representation of sellers who are able to do so.

My footnote on "weighted averages"...
If a shop has 20 items for sale at $10, and one item at $50, a standard average would calculate as $30.
With a weighted average, it takes into consideration that most of the items are $10, therefore the weighted average is $11.90. This is far more representative of the average price.


HollyLynne said...

I know you've been working hard on this and I'm glad to see you put it all together. I agree, quitting the dayjob is only really possible if all your ducks are seriously in a row (and it would be most reasonable if that row included a secondary income / spouse with family insurance coverage /possibly a paid off home, etc.) I like that Etsy is giving us ideas and things to aspire to, but I'm with you: I'm not convinced.

The Funny One said...

Very interesting, but I do think that the QYDJ sellers need to account (somewhere) for the fact that they are getting many thousands of dollars of free ads, marketing, and active promotions on Etsy for several months. In a few cases, the biggest sellers on the site have been promoted constantly since Etsy picked them to be a favored store for continuous and aggressive promotion by Etsy without paying for those marketing and promotion services. One of the major reasons QYDJ stores are being singled out is because Etsy has chosen to provide them with free marketing and promotion.

ebbandflo said...

Great number crunching! and good observation on the second income support. A lot of these interviews are completely erroneous about quitting your day job anyway - no mums interviewed have mentioned employing a fulltime nanny and housekeeper from their Etsy earnings thus quitting their own day jobs.
What the Etsy QYDJ are really reporting on in many cases is the rise of the raccoon mum, as explained in this Globe and Mail article .