Have you crunched your Heartsy numbers?
An offer which can be too good to be true can be just that. Featured Heartsy shops have said that their views have increased enormously on the day of their feature. But for the practical minded, we ask, will you be making any profit from the Heartsy feature? Or is the Heartsy deal a loss leader but what you get in advertising will be enough for your time. If you don’t crunch your shop's real numbers, there is actual money that will be need to be spent at the end of your Heartsy feature which may end up coming out of your own pocket.
Here is an example:
Your Heartsy Deal is $18 for $45 = 60%
Average Sale Price for Items Sold in Your Shop is $40 (the current Etsy average)
Heartsy Deals You Commit To Sell is 50 Vouchers
Calculations for Example Above:
Pay Out by Heartsy
A. $18.00 x 50 vouchers = $900.00
Paypal Fees for being paid by Heartsy
B. $26.40 (A x 2.9% +.30 = B)
Items Shown Sold on Etsy (if no one buys over the voucher amount)
C. $45.00 x 50 vouchers = $2,250.00
Etsy Fees
D. $2,250.00 x .035 % = $78.75 ( C x .035% = D)
Shipping Fees
E. $5.00 (average cost to ship item sold) x 50 = $250.00
Cost To Make Items
F. $45.00/3 = $15.00 (for this example, I am using a seller who multiplies their cost of materials by 3 to get their Etsy retail cost)
Cost to Replace Items Sold
G. $15.00 x 50 vouchers = $750.00 (F x 50 = G)
Put it all together:
Money Made from Heartsy Feature
$18.00 x 50 vouchers = $900.00 Heartsy Pay Out
Money Spent for Heartsy Feature
B = $26.40 Paypal Fee
D = $78.75 Etsy Fee
E = $250.00 Shipping Fee
G = $750.00 Cost to Replace Items Sold
$1105.15 Total Monies Spent
Heartsy Profit Versus Monies to Payout
$900.00 - $1105.15 = -$205.15 Loss from Heartsy Deal
This means for a day's worth of advertising, you need to pay $205.15 out of pocket.
A More Positive Outlook
That is some rough math! It is indeed a grim scenario. So, let's be a little more positive and figure in a more successful Heartsy day. Let's say each person who purchased a voucher spent an average of $5.00 over the voucher amount.
Customers Spend $5 over Voucher
H. $5.00 x 50 vouchers = $250.00
Paypal Fees for $5 over the deal multiplied by 50 vouchers
I. $7.55 (H x 2.9% +.30 = I)
Put it all together (again):
Money Made from Heartsy Feature (initial voucher pay out plus overage amount)
$900.00 + $250.00 = $1150.00
Subtract All Fees Above Including Paypal Fees for Vouchers Going Over
B = $26.40 Paypal Fee
D = $78.75 Etsy Fee
E = $250.00 Shipping Fee
G = $750.00 Cost to Replace Items Sold
I = $7.55 Pay Pal Fees for Voucher Overage
$1112.70 Total Monies Spent
Heartsy Profit Versus Monies To Payout
$1150.00 - $1112.50 = +$37.50 Gain from Heartsy Deal
This means for a day's worth of advertising, you gained $37.50. However, you also just sold 50 items for a profit of .75 cents per item.
Conclusion:
So in conclusion, plug in your own shop's numbers. You need to figure out which is the best "voucher amount" to offer in order to entice your possible clients to purchase over the voucher amount. Also, what is the absolute highest discount can you afford. Lastly, you need to know your shipping costs and your cost to replace materials. Then, you will see if the one day Hearty feature is worth your time.
Last Suggestion:
For a successful Heartsy feature what you need is to fully understand your business inside and out. This means you should be able to answer the questions below without hesitation or "ball parking" it. Here are some helpful questions to ask yourself.
1. What is the average selling price of items in my shop
2. What is the average return rate of customers who have purchased from my shop
3. What is my cost to make my items and will this change if I have to replace 50 or more items in my shop
4. How will I cope with increased activity for one week with packaging, answering questions, and keeping up to date with regular clients, shop activity and life in general.
5. If I spent the amount of money I spent on Heartsy for other advertising venues, will the profits be the same, higher or lower.
Thank you for reading. If you found this article helpful, link to it on Facebook, Tweet it, or e-mail it.
Interesting numbers, always good to see it in black and white. I don't think that Heartsy is something that would work for me right now! :)
ReplyDeleteYeah, I am very visual so I did the numbers for my shop and then decided to do a "generic Etsy shop" version. I just hope people crunch the numbers before jumping in.
ReplyDeleteI tried heartsy and wasn't impressed. There were too many b&b sellers before me and they ran my deal at the same time as another b&b seller offering a larger discount. Unless you can sell an astronomical number of vouchers AND have a product that people come back to buy again and again, it's just not worth it. Selling 50 vouchers at a loss really doesn't expand your customer base enough to compensate in my opinion and it devalues your product. I also found the people at heartsy pushy at asking for steeper discounts though I heard they may be changing this??
ReplyDeleteHi Soapdeli. I agree. It is not as lucrative as some shops promote it to be. I think that is why I finally had to write the numbers down for all to see. Unless shops have a huge profit margin on what they sell on Etsy (and you and I know that is NOT typical on E), then a shop would really have to look to clients to buy way over the voucher amount to compensate for their "losses". Thanks for sharing your experience candidly here.
ReplyDeleteThis is all great to know. My small profit margin would make this very not worth it, I'd probably lost tons. Some things sound great until you see the numbers in black and white. Definitely appreciate the info.
ReplyDeleteGreat article...:) Interesting to see just how small that profit is compared to the loss. Would be interesting to do the math for different vouchers.
ReplyDeleteI've been tempted to try this to see how OOAK, higher-priced pieces would do so I could have a different perspective. Because my items do not get replaced, the time after the deal would not be spent in remaking merchandise that sold...it would be my regular creation process of creating unique things...so that aspect of my business is different and I would probably end up using less of the money you included for supplies purchase in the end.
That said, I also START with less inventory than the average Heartsy shop.
I suppose that's why I think it would be an interesting experiment to do, but I am not sure I'm willing to lose money over it...I'll have to crunch the numbers seriously and we'll see.
Oh and it depends on if Heartsy accepts other venues.
Hi Gifted. I actually came from the very same idea. If I sold my ooak stuff (goodness knows I have supplies coming out of my ears), so technically, I don't have to have a huge "recovery" amount. But since silver and gold are at an all time high and using them is what I do love about what I do, then I decided I didn't want to take a huge hit anywhere at all.
ReplyDeleteYour article is great! I'm happy to see that more people are starting to think about the math behind it. I wrote a similar article not too long ago: http://pepidesigns.blogspot.com/2011/03/doing-math-on-heartsy-deal.html
ReplyDeleteThe key thing is pricing and having a wholesale price and a retail price. Some sellers are already selling at their wholesale price (thinking that it's their retail price), so a huge Heartsy discount would not be good.
I really want to hear from sellers who've already participated and how the numbers turned out.