In this post, we’ll talk about how we came up with our sales commissions, and what they are.
Sales commissions are the Coop’s primary source of income. When setting fees, it was important for Artisans Cooperative to weigh the marketing and financial risks of high and low fees, for both the longevity of the cooperative but also fairness and transparency for the artisan. Our research, poll results, and experience indicate that artisans consider multiple factors beyond just the fee when choosing a platform to sell their handmade goods.
Artisans Cooperative Sales Commissions
For our marketplace launch, we have set the following commissions and fees.
- No listing fees
- No fee to open a shop
- No subscription fees
- No dues
- One simple sales commission, charged on the sales of products, not shipping. Sales commission varies by membership status and special promotions, as described below, including Founders Circle, Members, Non-Member Early Birds, and Non-Members.
- Payment processing fees charged separately by the processor,* generally industry-standard at about 3%
- Currency conversion fees from USD$ charged separately by the processor*
As of this writing, our primary payment processor is Paypal but we are reviewing and adding an alternative. Contact us for more information.
How We Came Up With Our Sales Commissions
To begin, we conducted research. First, we held a community poll on priorities. At the top of the list, prioritized above lower fees, was “simple fee structure.” Artisans are tired of “death by fees”: listing fees, re-listing fees, regulatory fees, marketing fees, and more, on top of a sales commission. And notably, artisans weren’t that concerned about fees being higher (within reason, of course) so long as the fees were simple to understand, transparent, and met their other needs, notably a more ethical marketplace that creates a social good and is a consistent source of sales.
Next, we studied our competition and their pricing strategies. We observed that larger competitors with substantial customer bases tend to charge higher fees, while smaller competitors with limited customer bases charged very low fees. We believe that the smaller competitors may not be charging enough to cover the cost of adequate marketing to attract a larger audience.
To further inform our decision, we consulted the ShareTribe Marketplace Academy. ShareTribe makes an “off-the-shelf” marketplace tech package which we considered using for our marketplace. The academy indicated that their marketplaces charge a total average of around 9.5% on each sale.
We then conducted a second poll of our community, specifically asking about financial expectations, to gauge tolerance for sales commissions. The poll results showed that as long as the fees were straightforward, transparent, and the marketplace was trustworthy, artisans were generally open to higher sales commissions than what Etsy charges. The poll of our followers also teased out the breaking point: double digits (or over 10%) was problematic for artisans.
Now that we understood the lay of the land for our community’s needs and expectations, we began to look at the cooperative’s financial needs. We set up a three-year breakeven financial model with in-house expertise from our incredibly talented team. For projections, we researched approximately 100 of our members who sell on Etsy to estimate their average sales figures, and incorporated that analysis into our financial model to assess how different commission amounts would impact our breakeven point.
Finally, we organized a large leadership meeting to discuss various revenue structures. After careful deliberation and multiple straw polls, the group decided on 8% for members and 9.5% for non-members.
Founders Circle Promotion May-July 2023
In May, we introduced a promotional sales commission of 6.5% exclusively for “Founders Circle” members for their first two years. This was a special incentive during our initial Capital Campaign. This rate aligns with Etsy’s transaction fee (this is one of 12+ different fees Etsy charges, yet it is the nominal one that many sellers consider to be the “the fee.”) Founders were our very critical early “true believers” who fully paid their co-op membership buy-ins (with cash or points pledge) by the July 31st deadline. They provided the seed money and talent we needed to launch the marketplace. This is an elite group, and the financial model anticipates that they comprise a small percentage of our overall artisan sales commissions.
Non-Member Early Bird Promotion Fall-Winter 2023
In August, after our successful Capital Campaign raised $50,000, we posed a question to our new membership, who, as the co-op’s owners, set the direction of our cooperative: should the leadership team focus on pursuing outside capital to make a big and well-funded launch, or should we “bootstrap” our cooperative using membership seed money, and each pitch in more of our time and talents? The vote was decisive: with just about 50% membership turnout, over 75% were in favor of “bootstrapping.” [Member-Only Post]
With clear direction from our membership, we revisited and fine-tuned our financial model, assuming more moderate growth. For a successful bootstrapped approach, we identified one area for potential adjustment: sales commissions for non-members. We posed a second question to our new membership: should we raise the sales commission for non-members from 9.5% to 12%?
The outcome of this poll was more nuanced. The result was clear: with about 40% membership turnout, 65% were in favor of raising the commission. But the many thoughtful comments, which debated in both directions, gave us a lot of food for thought. [Member-Only Post]
After a preponderance of the earlier research and polls, our new financial needs as a bootstrapping cooperative, and the insightful survey results, leadership voted unanimously to offer the 9.5% non-member sales commission as an “early bird” promotion for sellers who are not co-op members. The promotion will be offered for the first two months after non-member seller onboarding is made available, which is expected to be later this autumn, and that rate will be “locked in” for the first two years, same as the Founders Circle promotion. For sellers who open a shop on the marketplace after the two-month promotional period, the non-member sales commission will be 12%.
Looking towards the long-term future, we aspire to become champions in the industry by eventually lowering our fees. As a cooperatively-owned business, we want to demonstrate a stark contrast to the practices of big tech firms and Wall Street corporations. It is necessary to start high to achieve that critical mass of funds and users, and those funds will be put to good use in marketing (not CEO bonuses) to perpetuate a better alternative for us all.
About Artisans Cooperative
We are growing an online handmade marketplace for an inclusive network of creatives: a co-op alternative to Etsy.
Shop the marketplace!