Etsy is overhauling its Insider buyer membership program, replacing its ambitious free shipping benefits with a 5% Etsy credit on purchases starting November 4th. Under the new plan:
- Members will earn 5% back in Etsy credit on every purchase to use on a future order. The credits, which cap at $2,000 earned, do not expire as long as you continue paying the annual membership fee.
- Etsy will cover up to $6 in shipping costs on the least expensive U.S. domestic shipping option for orders over $15, with the buyer paying the difference. (Previously, Etsy covered up to $20 worth of shipping for all Insider orders.)
- Plus other “Insider” perks like “personalized offers” and “special savings.”
Liz Morton of Value Added Resource points out:
“And it's likely no coincidence they set it at $6 – Etsy changed their search algorithm last year to prioritize items which show a shipping cost of $6 or less, saying their data shows that once shipping prices are $6 or above, buyers are less likely to make a purchase.”
Chief Growth Officer Kruti Patel Goyal announced in August:
“We're evolving our Etsy Insider beta loyalty program, which has shown excellent results of driving frequency and consideration, yet didn't provide scalable economics in its V1 iteration. So by this holiday season, we'll launch a V2 program to an expanded buyer set, including our top buyers enabling us to test and iterate on a refreshed set of rewards and benefits.”
Wait, so Etsy Insider wasn't a profitable endeavor for the company? Who could've predicted that?
Me. I predicted that.
In August 2024, when first covering Etsy's original Insider membership program, I wrote:
Can Etsy afford to do that?
Are they aware that Amazon effectively loses money by offering free shipping with its Prime Membership?
In 2023, global revenue from Amazon Prime subscription fees totaled $12.4B, but the company spent around $89.5B on delivery (some of which includes its warehousing and other logistics expenses).
And we're talking about Amazon here — meaning they do things to scale like no other. Plus they run their own warehouses and fulfillment network.
Are we about to see brightly colored Etsy trucks delivering to neighborhoods nationwide this year? Of course not!
Etsy will likely be reimbursing their sellers for the delivery fees they spend at couriers like USPS, UPS, FedEx, and DHL — which means they won't have anywhere near the operational efficiency of Amazon when it comes to fulfillment. It'll be an absolute money pit — and one that Etsy can't afford given that the company is barely profitable.
I applaud the effort, but I don't see this being a viable plan for the company (at least the free shipping part). Nor do I envision that enough Etsy shoppers will purchase the membership to make it a significant source of revenue for the company. But prove me wrong Etsy! I'm rooting for you.
This new Insider program will be less costly for Etsy, but it appears too restrictive to be embraced by customers. They need to step away from their free / subsidized shipping ambitions, which is a money pit no matter what angle they dig at it from.
The model simply doesn't make sense for a marketplace that sells non-essential goods like gifts and novelty items and doesn't fulfill any of the orders themselves. I don't have to shop at Etsy, but I need to buy groceries and other household goods regularly from Amazon and Walmart — which is why their Prime and Plus memberships make economic sense for consumers in terms of a return-of-value.
Instead, Etsy should focus on creating a sticky shopping experience for ALL SHOPPERS that doesn't involve a membership fee. For example, the 5% credit on purchases is great for promoting future purchases, but why should customers have to pay for that perk? Introducing a cashback program across the board to all customers (without opt-in or membership) would likely drive more additional revenue for Etsy than the Insider membership fees themselves.
99% of customers earning cashback sounds like it'd encourage more repeat patronage (especially if the credits expire) than just offering cashback to the less than 1% of customers that already shop with you enough to warrant paying for a membership. Then they could dial up that cashback throughout the year to incentivize purchases at key moments, or to encourage customers to add their friends and family's birthdays to their shopping calendars.
Honestly, there are so many things that Etsy could do to thrive — with or without an Insider program — that it'd take a whole edition for me to cover them. Right now though, I'll just say that Etsy simply isn't getting it. You're not Amazon. You're not Temu. Just be ETSY and be damn good at it! As always, I'm rooting for you.