How to Build an Online Marketplace Like Etsy: Features and Cost Estimate

While there are many e-commerce online marketplaces, only a few cater to sellers looking to sell handmade and one-of-a-kind products. Etsy is one of the most fascinating examples of creating a global handicraft business.

For 17 years, Etsy has been a platform to sell products like sculptures and handwritten recipes. In general, it is an e-commerce website that focuses on selling handmade or vintage goods from individuals.

In this article, we will figure out how to create a website like Etsy. You will learn how this two-sided, e-commerce online marketplace works, and how it makes money. Moreover, you will find out how much it costs to create a platform similar to Etsy, and which core features it should have.

What is the Etsy online store and how does it work?

The Etsy project was started in 2005. Today, it is a huge online marketplace with over 5 million active sellers and over 60 million products. The site allows sellers to equip their own "shops" and sell directly.

What can buyers look for on Etsy's website? Everything! Unique designer things, creative gifts, vintage items - customers will find it all here.

Source: Etsy.com

How it started

The idea of ​​the e-commerce website launching belongs to the artist and photographer Rob Kalin. Kalin says the idea of ​​​​developing the Etsy online marketplace came to his mind when he realized that there was no appropriate site on the market for selling handmade goods.

The businessman's partners were his two friends Chris Maguire and Haim Schoppic. The originality of the idea and the presence of a free niche led the friends to set about implementing the project. None of them was an expert in the web development domain, but everyone was fond of creativity and wanted to make the world a better place.

Three months later, a prototype of the platform, which received the name Etsy, was ready. Kalin said the online marketplace received such a name because it sounds great and it is convenient to build a brand with unique features around such an original word. Interestingly, “Etsy” comes from the Italian “еh, si”.

Gradually, the service began to significantly increase the target audience and attract sellers. In July 2007, the millionth sale was made on the Etsy handmade marketplace. And in November of the same year, more than 300,000 purchases worth over $4.3 million were made on the marketplace.

The high growth rate of the service's audience soon attracted the attention of venture capital funds. So, in January 2008, Etsy received a $27 million investment.

Nowadays, Etsy is a super-successful e-commerce company, and many are wondering: how to create an online marketplace like Etsy? Interestingly, this selling platform has benefited from the COVID-19 pandemic. People are staying at home, and “furniture has become the top-selling category during the pandemic,” Etsy CEO Josh Silverman told CNBC’s Mad Money.

Key Etsy facts

If you are wondering how to create a website like Etsy, let's quickly look at the key Etsy facts.

• Founder: Rob Kalin, Jared Tarbell, Haim Schoppic, and Chris Maguire
• Year founded: 2005
• Funding received: a total of $97.3 million in 9 rounds
• Number of users: over 80 million of users
• Number of sellers: over 5 million of active sellers
• Number of employees: 1400 employees
• Etsy’s competitors: eBay, ArtFire, Aftcra, Ruby Lane.

Business model

Etsy's business model is similar to other online marketplaces such as eBay, and Amazon. It is a two-sided P2P marketplace for selling and buying precise, unique, and creative items.

What sets Etsy apart from the rest of the platforms? It is the vertical approach to Etsy’s business model. In general, the marketplace focuses on selling crafts in very specific categories. Simply put, this marketplace is the home to a whole universe of special, out-of-the-ordinary items. For example, these can be unique handcrafted items or vintage treasures.

Source: Etsy.com

To compare, Amazon-like sites have a horizontal business model where almost everything is for sale.

You may also like: How Much Does It Cost to Build a Website Like Amazon?

Etsy’s payment gateways

There are dozens of gateways providers. However, the Etsy marketplace cooperates with such licensed providers as:

• PayPal,
• Worldpay,
• Adyen,
• Stripe Connect.

Of course, PayPal is the most famous and popular payment solution. It had over 426 million users worldwide in 2021. So, using PayPal you can expand the audience for your own site.

Source: Statista.com

Besides, users of the Etsy marketplace can pay by credit cards, debit, bank cards, Etsy Gift Card, Etsy Credits, etc.

How can a platform like Etsy make money?

Now, let's discuss details of how you can monetize the marketplace similar to Etsy, and how Etsy does it.

• Transaction fees

Etsy charges sellers a transaction fee of 5 percent of the price for every successful sale through its platform.

• Subscription fees

Often, sellers on the websites like Etsy can sign-up for a package that offers multiple additional tools to boost sales. These can be advanced shop customization or access to discounts. For example, the Etsy marketplace charges a monthly subscription on the Etsy Plus package fee of $10.

• Pattern tool fees

Pattern is a website builder by the Etsy marketplace intended for its sellers. It enables merchants to build their online shops on domains that are independent of Etsy’s platform. The first thirty days of Pattern’s use are free. Then, Etsy charges a monthly subscription fee of $15.

• Listing fees

Etsy charges vendors at least $0.20 for each item they list on the platform. Nevertheless, that’s a profitable revenue model for a marketplace like Etsy. Why? Because thousands of products are listed regularly on it.

• Order fees

Also, Etsy monetizes its marketplace through charges via the processing of payments. The total amount of fee per order varies depending on the seller's bank account location.

• Advertising fees

Usually, online shops like Etsy offer an array of promotional services to help their vendors increase sales. The advertisements are charged through a cost-per-click (CPC) approach. Notably, CPC rates differ depending on the category and the country of advertisement.

• Currency conversion fees

It is also a popular revenue model for websites similar to Etsy. For instance, Etsy charges 2.5 percent of the total sale amount, when converting the currency.

So, we have discussed what types of monetization strategies can use websites like Etsy. can use. However, depending on the niche, there can be other methods of fee-charging.

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How to build P2P e-commerce websites like Etsy?

Now let’s see what questions you need to consider before starting to build a marketplace like Etsy.

Step 1. Define your niche and audience

Obviously, the most essential rule of commerce is to offer people what they need. Without any doubt, the demand for goods characterizes a successful marketplace. For example, CB Insights research showed that the main reason for startup failure is a lack of customers' interest.

Source: Statista.com

If the niche in which you are going to work is overcrowded, you need to think about how you can interest buyers. Maybe, your future Etsy-like site requires some unique e-commerce features. And also, how to stand out from the competition with your peer-to-peer marketplace.

Step 2. Solve the chicken-and-egg problem

The crux of the problem is that no one will make a purchase without sellers. And without goods or services to buy, there will be no buyers. So, to develop your marketplace, you should attract both sellers and buyers to come to your own website.

Do you know how the Etsy online marketplace fixed the chicken-and-egg problem? At the initial stage, Rob Kalin and his team faced the question: how to find people who will sell their handmade goods on their site?

Interestingly, the solution was to go beyond the World Wide Web.

Etsy representatives began to regularly visit various arts and crafts exhibitions in the US and Canada. At that time, the anti-consumer movement was gaining popularity. So, the number of various fairs where you could buy or sell handmade things grew by leaps and bounds.

To put it short, the Etsy team aimed to attract the most influential artists and vintage collectors. They believed that their followers would follow them. So, the followers could be potential customers interested in buying handmade items. Meanwhile, leading artists, artisans, and collectors didn't mind expanding their audience.

Thus, the "recruited" sellers referred their customers to the Etsy site. In such a way, they provided an additional influx of potential buyers.

Certainly, attracting new sellers and buyers is a real challenge for all startups. However, Etsy successfully solved this problem.

Related reading: 7 Smart Ways to Solve Chicken and Egg Problem for Online Marketplaces

Step 3. Choose a revenue model

We have already discussed what monetization strategies the Etsy marketplace uses. These revenue models are transaction, subscription, listing, advertising, fees per order, and currency conversion fees.

Certainly, you can monetize your Etsy’s clone website in different ways. However, the choice of monetization methods is of great importance.

The main mistake of the development process is to choose a monetization model and stubbornly develop a product without testing it on a “live” audience. As a result, the marketplace fails because it does not provide the desired value for the consumer. Also, the monetization model may not work. Therefore, efforts, time, and budget resources will be wasted.

If hypotheses are regularly tested, there is practically no way to make a false step. So, you need to try to sell the product from the very start with the help of a minimum viable product (MVP).

Notably, building an MVP is the best way to determine the interest of the audience. Thus, you will determine its needs, and the correct revenue model for startups, including craft websites like Etsy.

You may also like: How to Create a Minimum Viable Product (MVP): Best Examples and Key Benefits

Step 4. Identify the basic functionality

If you are wondering how to create a website like Etsy, your P2P e-commerce marketplace should include the following features of Etsy:

• Original, and unique web design:

• Pages and goods’ convenient administration;
• Catalog of products:

• Email or SMS notifications;
• Feedback form:

• Multiple payments methods;
• Shopping cart:

• Multilingual web layout;
• Enhanced search filters:

• Goods ratings and the possibility to compare them.

You may also like: 14 Quick Ways to Attract Sellers and Buyers to P2P Marketplace Platform

Step 5. Select the right tech stack

Notably, choosing the technology stack can affect the development budget, time, web application quality, and scalability of your own marketplace. To build a scalable, secure, and reliable platform like Etsy, we recommend you to use the right technology stack.

Let's take a look at the two main parts of the Etsy tech stack: front-end (client-side) and back-end (server-side). Each of the two parts implements specific functions and comprises a relevant set of tools.

• Front-end or client-side

React is the choice of the Etsy marketplace for its client-side. Nevertheless, you can choose any other technology stack you require for your website development. At Codica, we prefer React, JavaScript, Vue.js, Gatsby, and HTML5 for building web projects.

• Back-end or server-side

As for the server-side, Etsy uses Python and Java programming languages. For instance, you can also choose Ruby on Rails and Ruby for the Etsy-like marketplace development.

• Third-party tools and integrations

Also, there are utilities that Etsy uses, such as Google Analytics, AfterShip, AppThwack. Moreover, it uses such apps as Apache HTTP Server, Amazon S3, Amazon EC2, Amazon CloudFront, Amazon EBS, Amazon EMR, and business tool G Suite.

Step 6. Pick a design that works

To create the right design for your marketplace software, similar to Etsy's website design, it is important to look at your site from the users’ point of view. We will try to answer the question about how to create a website like Etsy, and share some rules that help you to create an excellent user experience:

• Convenient navigation

Your site’s interface should be understandable and simple. Furthermore, users should reach their goals with a minimum number of actions. It is crucial to develop the app’s blueprint in such a way as to make it clear for users and reduce their operational actions.

Surely, the best way to do it is to hire qualified user experience and user interface designers.

• Enhanced readability

We recommend you use one font in the design, a maximum of two: one font for headers and one for text. Also, make the font size comfortable for reading.

• Mobile design

Nowadays, people spend many hours a day searching on the Internet. So, it is also essential to understand that modern business needs an adaptive design for tablets and mobiles.

At Codica, we develop progressive web apps (PWA) and cross-platform mobile applications, depending on the customer’s request.

Notably, Progressive Web Apps combine the best from a website and an app. Also, they are much easier to create than regular mobile applications. In addition, they improve SEO performance, which will help your site rank higher in Google. Furthermore, they can work offline or with a slow internet connection.

For example, Etsy’s PWA enables users to monitor their account activity and chat with other sellers and buyers, without relying on a network connection.

You may also like: 5 Major Principles for a User-Friendly Website You Need to Know

Step 7. Choose a development approach

If you are looking for how to create an online marketplace like Etsy, you can use a marketplace builder or order custom web development.

The choice depends on:

• Your idea of a website and all the features it requires;
• The budget you have to invest in your idea;
• Your time frame.

By focusing on these criteria, you will narrow down your search and increase your chances of finding the right technology partner.

If you need to receive a ready product faster, you can build a site with the help of a construction template such as WordPress or Magento. However, if you are looking for how to create an online marketplace like Etsy, we recommend you choose a custom software development.

Although the development price of collaborating with an agency can be higher, it is the best option for building profitable websites of high quality.

At Codica, we are proud of our successfully completed projects. For example, we helped our customer to create a personalized and attractive web solution for the PlanMyKids online service marketplace. The task was to create a user-friendly web application that helps busy parents plan and book activities for their kids.

Thanks to Codica’s team of professionals, our client received a convenient and user-oriented MVP of the online marketplace.

How much does it cost to build a website like Etsy?

Now, we have come to an interesting question about the cost of Etsy's website.

To put it short, the main aspects that have an impact on the final price are:

• The development approach: out-of-box solution vs custom web development;
• The required functionality you want to implement.

Obviously, the ready solution costs lower than custom development. However, for complex projects like building Etsy’s clone, we recommend you choose an experienced agency and build a custom website.

Below you can see a table that shows the rough estimate of the total cost to build a marketplace like Etsy. To receive the final prices, we used the average rate of Eastern European development agencies which is $50 per hour.

So, if you are looking for how much does it cost to create a website like Etsy, the approximate estimate is $78,300. Please, consider that the final price will depend on your web development partner.

Undoubtedly, the creators of Etsy invested significant sums in their web development. So, it is important to understand that building a marketplace like Etsy will cost not a small amount.

You may also like: How Much Does it Cost to Build a Website in 2022?

How can Codica help to develop a marketplace like Etsy?

Since 2015, the Codica team has been delivering high-quality and powerful e-commerce solutions in different domains. In particular, we will help you to build an online marketplace like Etsy. Over the years, we have successfully launched many e-commerce platforms that help our customers grow their online marketplace business, receive high traffic, and increase sales.

One of the e-commerce projects our team is proud of is a collaboration marketplace case study for Digital Village. Our client wanted us to establish a platform for collaboration between entrepreneurs and specialists for creating excellent software products.

Our team worked thoroughly to implement all required functionality for the e-commerce marketplace. As a result, our customer got a fast-loading, fully functional website with a smooth UX, and advanced search filters, thanks to ours:

• Project managers,
• UX/UI designers,
• Developers,
• QA engineers.

We are always glad to share our successful results with our readers. If you are looking for an experienced web development company to build a handmade website like Etsy, find a minute to look in our portfolio.

Building a handmade marketplace: final thoughts

So, we have discussed all points you should consider before building a platform like Etsy. We got acquainted with Etsy's success story, discovered this marketplace business model and monetization strategies. Moreover, you got the picture of how to create a website like Etsy. Now, you have this essential information that will help you to launch a successful P2P marketplace.

If you are wondering how to create a website like Etsy, but don't know where to start, our team will be happy to assist. Contact us and we will create a high-quality, user-friendly, and successful e-commerce marketplace for you.