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Etsy is raising seller fees to spend more on marketing, customer support

The Brooklyn-based crafts vendor expects the fee hike to provide a substantial boost to its revenue.

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Etsy broke the news to sellers on Thursday that it plans to increase the per-sale transaction fee from 3.5 percent to 5 percent. The fee hike is the first-ever by Etsy and will take effect July 16.

The Brooklyn-based crafts vendor said the new fee structure will allow Etsy to invest in marketing strategies that attract more buyers, improve customer support, and drive product innovation. The fee increase also applies to the cost of shipping.

"Our revised fee structure will allow us to make more meaningful investments on behalf of our sellers while remaining what we believe is the best value for entrepreneurs looking to start, manage and grow a creative business," Rachel Glaser, Etsy's chief financial officer, said in a statement.

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Glaser noted that Etsy plans to increase direct marketing spend by at least 40 percent this year, as well as revamp Etsy's community platforms, "and execute against an exciting product roadmap" to help fuel near-term growth.

Etsy, which has 2 million active sellers and almost 35 million active buyers, expects the fee hike to provide a substantial boost to its revenue. The company increased its 2018 revenue guidance and now projects growth between 32 percent and 34 percent, up from its previous forecast of 22 percent to 24 percent growth.

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Share of Etsy rose as much as 35 percent after today's announcements.

Last year Etsy announced a series of layoffs in an effort to create a more nimble cost structure. Esty later said the layoffs helped the company identify about $20 million in 2017 expense reductions, which it expected to lead to $35 million in annualized cost savings.

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