NewsMaking It In San Diego


Making It In San Diego: People with online side hustles feel the pinch of rising costs

Sellers deal with inflation and higher fees
Posted at 7:29 AM, Apr 01, 2022
and last updated 2022-04-01 10:29:21-04

SAN DIEGO (KGTV) - Inflation and rising fees have put the pinch on people who use side hustles to make extra cash.

"Everything just keeps ratcheting up across the board," says Dave Stencil, who runs the Etsy store "Oliver Stuff." He sells handmade wooden gifts. It started as a side project 7 years ago and has evolved into his primary business.

But now, Stencil says it's a struggle to keep up with rising costs.

"The price of wood has probably doubled. The price of my glue is probably up 30 to 40%. The price of my shop in the past 7 years is up 50%," he says.

That's the reality facing many people who sell items online as a way to supplement their income. Inflation cuts into their profit, as sellers have to pay more for supplies, shipping, and other business expenses.

According to a recent "Seller Census" by Etsy, 29% of the people who sell on the site use it as their primary source of income. Among the others, money from Etsy sales accounts for 9.3% of their household income. And 35% of sellers on Etsy use the money from sales to cover household essentials like rent, food, or other bills.

"I just think it's been brutal. It's been really hard on small business owners," says Priya Kannan, a professor of Strategic Management, Innovation, and Entrepreneurship at the University of San Diego.

She says business owners, no matter how large or small, need to focus on the value they bring to a customer. They should also get creative with how they use data and how they position their products in the marketplace.

"It could be changes in the way they do the processes, the way they do their products, how they're pricing it, how they're coming forward, how they're bundling it," Prof. Kannan says. "You can have innovations in each of these different aspects."

In addition to the rising costs from inflation, sellers on Etsy also have to deal with rising fees from the website. The company announced a near-30% increase to their "transaction fee," from 5% to 6.5%.

In their most recent earnings report, Etsy wrote they plan to "invest most of the incremental revenue from this fee increase in marketing, seller tools, and creating world-class customer experiences." CEO Josh Silverman added, "Our new transaction fee will enable us to invest in key areas like marketing and support to further extend our strong momentum.”

But some sellers see this as another problem that will force them to either raise costs or sacrifice profit. They've started a petition asking Etsy to cancel the fee increase. They also want the company to institute a handful of other changes to the way it works with sellers. As of Thursday, the petition has around 20,000 signatures.

Stencil says he's not opposed to the fee increase. He believes it can bring in more business if Etsy follows through on its promise to increase marketing and customer service.

To deal with the extra costs, he looks for ways to make the most out of his materials. Since Stencil works with wood, he is always trying to create new, smaller products that can be made from the scraps and clippings of his other items.

"I can make it into money, and then I can trim that and make those trimmings into money," he says. "I just try to see how far I can break things down and still make them into a useable product. I'm throwing away the tiniest scraps possible, so mostly just sawdust is going to the dumpster while everything else becomes something," Stencil says.

He also searches sites like Craigslist for free cabinets or tables that he can break down into useable wood. And he has started a YouTube channel with videos of his projects to expand his footprint and bring in more customers.

Prof. Kannan says those are better options than passing higher costs along to customers. Doing that, she says, could backfire and result in fewer sales.

"Customers are price-sensitive," she says. "Instead of going back on anchoring on the price and saying should it go up or down based on inflation, I think you have to take one step back and ask, 'What are my customers paying for? What's the value proposition and how can I change that?'"

For Stencil, it all boils down to perseverance."You just gotta be smart," Stencil says. "I know it's tough, especially with side hustles, to make it. But you just gotta keep trying. Keep trying to be better."