Making Passive Income on Etsy: Guide to Generating Revenue on Autopilot This 2023

Are you eager to turn your creative skills into a source of passive income? Or, if you have a passion project idea that can be translated to generating passive income on Etsy, get ready. This year is gonna be your year of making a passive buck from Etsy.

Etsy, the renowned online marketplace, offers an excellent platform to monetize your talents and generate revenue while you sleep. In this comprehensive guide, we’ll walk you through the essential steps to make passive income on Etsy.

From creating high-quality digital products to optimizing your shop, implementing effective SEO strategies, and automating your sales process, we’ll cover everything you need to know. Get ready to unlock the potential of Etsy and discover how to build a sustainable source of passive income.

Let’s dive in!


Disclosure: This page contains affiliate links. I’ll receive a commission if you purchase through my links at no cost to you.

Table of Contents

What is passive income?

Passive income is the income that is acquired automatically with minimal labour to earn or maintain.

In simpler terms, you don’t have to be actively doing work at that time to get the money.*

(* You still have to do the work upfront, before you reap the benefit passively)

Usually, the passive income terms are used in terms of investment, where you get the annual dividend from the funds that you purchase. That is completely passive

But who are we fooling right now, we don’t have bucks, let alone to buy the funds with annual dividends.

Let’s be real.

So the passive income that I refer to is Creating a digital product.

It’s not entirely PASSIVE, because you need to pour on your hard work first. But once you have created your digital product, it’s entirely passive.

Just imagine, you are creating a one-time product, and the possibilities of it getting purchased are endless and totally passive.

If you are itching to join to create a side hustle, but you are busy with your 9-5, this business design is for you.

It doesn’t matter if you are a school teacher, college student, nurse, or anyone, you can do this.

What is a Digital Product?

Digital products are anything that you can purchase and download without any physical copy.

This can be in PDF, Doc or Excel form or even PNG and JPEG for image

Why sell digital Products on Etsy?

1. Low to minimal startup cost

You don’t have to prepare a huge budget like any other type of business. 

You might need a laptop or an Ipad to create and maybe need to purchase certain software, and that’s it.

So since the budget require is free and not much, this can be a good business idea for most people

2. It can be a source of passive income. 

 It’s not entirely passive as you need to spend some time creating it first, but after that, you don’t have to do anything.

You can create it one time and sell it multiple time

3. No inventory, drop shipping required. 

Everything is stored on your laptop.

The transaction is fast, easy and smooth

4. Vast customers on Etsy

People from everywhere around the world use Etsy for craft sources. 

5. Cheap to get started on Etsy

It’s fairly easy to get started and sell items on Etsy so it fits beginner

What to sell as a digital download on Etsy?

Anything that can be digitalised.

One of the most famous digital downloads is a digital planner and wall art. But don’t limit yourself there as with your creativity, the creation is endless

  • Wedding Invitation
  • Resume Template
  • Instagram icons

This post has listed endless ideas for your digital download on Etsy.

Is it easy to make passive income on Etsy?


And it’s not entirely PASSIVE. You have to do the hard work and put in the sweats and hours on it.

I will not sugarcoat and say that it is easy.

However, with the right steps and approach you will make the passive income on Etsy in no time

Think about it, any business required effort, and it is not going to be easy at first. But once you get the hang of it, it’ll become easier

But generating passive income on Etsy is relatively easier compared to the rest of the business model:

  • You don’t have a large amount of capital to start the business
  • Just create the product ONCE
  • Don’t have to store the product and worry about shipping
  • You can start anytime, anywhere, and just need a laptop (or Ipad) 

Tips: Once you start making money passively on Etsy, you can create a youtube channel or social media platform such as Tik Tok or Instagram and teach people your way of doing it.

Why? Because you can make your next passive income through Affiliate marketing. 

So get this, not only do you get PAID for your digital products, you double the chances of getting passive income by affiliate marketing.


Trust me it’s not easy (at first) but it will be worth it

How to create passive income from Etsy digital products?

Making passive income on Etsy can be an exciting opportunity to generate revenue while leveraging your creative skills and digital products. Here are some steps to help you get started:

1. Choose the right digital products

Select digital products that have the potential to generate passive income. These could include printables, planner, graphics, stickers, digital art, patterns, or any other downloadable products that can be sold repeatedly without requiring additional effort for each sale.

Choose the digital products or digital downloads that you enjoy creating. Don’t do major mistakes that many people by copying EXACTLY what other people did on Etsy.

Find your interest and start exploring from there. I have a huge interest in creating digital stickers. So when I start my Etsy shop, I start selling those. Truth be told, it doesn’t work well for my first shop. It’s mainly because I didn’t find the right niche and I don’t know exactly what I am doing.

You can avoid my mistake by learning directly from the expert with Creative Fabrica. You can save time by learning the correct way how to do it in this class. Pssstt.. you will get a clipart set ready to download from this session!

2. Create a specific product for that ONE customer

Imagine your potential product with your potential customer design specifically for them. Identify their pain point and design products that answer their problem.

This is the most important step, I must say.

One of the great mistakes done by beginners is they try to create products for EVERYONE. As the store is brand new, it will be difficult to stand out among more experience, seasoned Etsy stores.

To increase the chances of standing out, use a 1-to-1 approach.

1 product, 1 customer

3. Proper market research by doing SEO

As lucrative as it might sound, digital products are quite competitive. And on top of that, you have to compete with the BestSeller account with lots of reviews

How can you make your digital product stand out from the rest?

You do proper ETSY SEO

Etsy SEO or search engine optimisation is a way of finding the user intent when they search for the listing.

Your aim should be those of high volume (lots of people search for it) but low competition (not many people selling it)

By doing research and implementing effective search engine optimization (SEO) techniques, you can improve your shop’s visibility. Identify relevant keywords and incorporate them naturally into your product titles, descriptions, and tags. This will increase the chances of your products being found by potential customers.

But if you are just about to begin and dont want to spend on the Etsy SEO tool, you can just use the Etsy toolbar to search for the auto-suggestion. This might take some time, but it’s going to be worth your time

Spend some time finding the market gap that can make your product desirable and stand out among the rest

Go for the longtail keyword when you search for the listing

This is extremely important so that you don’t create similar products in similar niches. The competition will be too high. Consider investing in keyword search tools to help you with the process.

Etsy Keyword Research Tool


EverBee is one of the best and most popular keyword tools used for Etsy. You can do product research on trending or high-demand products on Etsy. You also can see other listings’ revenue performance to see what type of products will give you high revenue.

The free version will only allow 10 searches per month. The paid version will give 30 to unlimited searches per month depending on the plan.

Sign up EverBee here to search for the best keyword for your Etsy store.

EverBee also has a chrome extension that you can download below:

EverBee Chrome Extension

2. Mangools or KWFinder

One of the best SEO tools with a lot of features that you can use to help improve your Etsy shop performance. Aside from keyword analysis, you also can do research on your competitors which will show you what is your competitors’ best keywords that they rank for. Mangool or KWfinder keywords tool also allows you to search location-specific-longtail-keywords if you would like to market and focus on a specific location.

You can try to use their keyword tool below:

Pricing starts from USD 29.90 up to USD 89.90 per month depending on the plans and features.

Sign up Mangools / KWFinder here to search for the best keyword for your Etsy store.

3. Keyword Everywhere Chrome extension

Tips: If you don’t have any budget (yet) to purchase the keyword search tool, you can use the Keyword Everywhere chrome extension and use the free version.

4. Autofilled Etsy Search Bar

Another tip, you can use the Etsy search bar and start typing your desired product. The autosuggestion will give you an idea of what actually people are searching for. 

Try to create a product that is wanted by your potential customer. Study a few competitive stores within your niche and find out what has not been created yet.

That’s the opportunity

In this super helpful video, Brenon Dopp explains how well digital products are doing and how well your competitor is doing.

You can ease your research process by getting the Everbee like what he did in the video. It’s a small investment to your passive income Etsy business.

3. Create high-quality digital products

Once you are done with the research process, now it’s time to actually create the product.

Based on your current skills, pick on apps or software you can use to create a digital product to make your passive income on Etsy.

Tip: Sketch your design in your journal or notebook first. This is to avoid getting paralyzed by the endless option of design once you start creating.

By keeping it in your journal, you can document what works and what doesn’t for your reference in the future.

This can help you become more focused and not get distracted once you begin your creation

Invest time in creating high-quality digital products that provide value to customers. Ensure your products are well-designed, visually appealing, and user-friendly. Pay attention to details, such as file formats, resolution, and instructions for use, to enhance the customer experience.

If you are really new to this, I suggest using the Canva platform, as it is easy to navigate and user-friendly.

You can use the Free version and mix and match the different elements to get the desired. The PRO Canva is also available to get unlimited design. 

Sign up Canva here and start creating your design now.

But bear in mind, for digital download, it’s BETTER to use the FREE version to make sure it’s available for your customer who doesn’t have a PRO account. If not, they will end up with a design with a watermark on the background of the design.

Other than Canva you can use

  • Picmonkey
  • Procreate
  • Apple keynote

Tip: You can hire people on Fiver or Upwork if you have the budget and idea but lack of time. It’s a win-win situation, You can start your passive income on Etsy, and they can get paid for their services.

4. Optimize your Etsy shop

Set up an Etsy shop specifically dedicated to your digital products. Optimize your shop’s title, description, tags, and product listings with relevant keywords. This will help your shop appear in search results and attract potential customers.

This is another important step to make sure your product is visible and reachable within the thousand of Etsy listings available

Create an eye-catching mock-up to make sure your product stands out from the rest.

Offer a variety of digital products: Expand your product offerings to attract a broader customer base. Create a diverse range of digital products that cater to different niches and interests. This will increase the likelihood of generating sales across various product categories.

5. Automate your sales process

Streamline your sales process by utilizing Etsy’s automated features. Set up instant digital downloads so that customers can access their purchased files immediately after payment. This eliminates the need for manual delivery and allows for a seamless and efficient customer experience.

5. Engage in marketing and promotion

Promote your Etsy shop and digital products through various channels. Utilize social media platforms, create a blog or website, collaborate with influencers, or run targeted online advertisements to reach a wider audience. Engaging in consistent marketing efforts will help drive traffic to your Etsy shop and increase sales.

Beginner Tip: Promote on your personal social media. Usually, the first few sales are from friendly and friends.

Don’t just upload and wait for people to come to your Etsy store. Invite them.

6. Give them an offer they can’t resist

Provide excellent customer service: Offer exceptional customer service to build trust and maintain positive relationships with your buyers. Respond promptly to customer inquiries, address any issues or concerns, and consider offering customer incentives such as discounts or loyalty programs to encourage repeat purchases.

7. Regularly update and expand your product offerings

Keep your Etsy shop fresh and appealing by regularly adding new digital products and updating existing ones. Stay on top of market trends, customer demands, and emerging niches to ensure you’re offering products that align with current interests.

8. Monitor and analyze the performance

Regularly review your shop’s performance, track sales, analyze customer feedback, and monitor the effectiveness of your marketing efforts. Adjust your strategies as needed to maximize your passive income potential.

Remember, passive income on Etsy is not entirely passive as it requires initial effort in creating and optimizing your digital products. However, once established, your digital products can continue to generate income while allowing you the flexibility to focus on other projects or ventures.

Tips on selling digital downloads on Etsy as a beginner

1. Provide high-quality products but lay low on the price

As many people don’t know about your business (yet) it might be quite difficult to sell your product at a higher price

So as a starter, keep the price low but maintain a high standard of quality to make people trust your brand

2. Friends and family help

Encourage your friends and family to buy your product and leave a good review, this is to help kick-start your Etsy business. No one wants to buy from a seller without any review

3. Create a digital bundle

By creating a bundle, you provide a good chunk of your digital product at a  very good price, and people love discount

4. Good customer service

Give them thank you a message, contact them and ask whether the product is working fine and answer their question as quickest possible.

Good customer service goes a long way. They will tend to give you good reviews and keep coming for your planner

And video assisting on how to use your product is even better!

5. Provide coupon code

This will benefit you in 2 ways: One, it encourages the customer to do another purchase at your store and 2, they will give you a good review.

It’s not a must to provide coupon codes for each listing, but if they purchase, more, give them more discount codes.

6. Create seasonality and evergreen item

Some items sell well during certain seasons like planners during the new year. But to maintain the sales and income from your Etsy store you have to make sure the evergreen products are there in your Etsy store as well.

This will prevent wide fluctuations in your income and keep the income steady

How much money I can make from Etsy passively?

Well, of course, it will depend on the price of your product, how many listings you have, and how many products you sold.

The range can be: $0-$70,000

As a beginner, selling 3-4 products in the first month can be considered a WIN. I know you might think,

Only 3-4 products? But I want to sell more

In the beginning, your shop is not getting much exposure yet. But once you get the traction, Etsy will notice your store, So just keep updating the listing with new, quality digital product

Dina Lu, share her experience of creating a digital product in a brand new Etsy store which makes 24 sales in the first month!

Bear in mind, you have to pay for the listing. So list the product that you think you will purchase as a customer. Don’t just upload the listing for the sake of it.

Another example of a more experienced Etsy seller is Brandon Timothy who makes $18,000 selling digital prints on Etsy.

Again, if you are just about to begin, DON’T COMPARE. Focus on creating your masterpiece and do diligent research.

In a highly competitive niche like selling digital products on Etsy, research is key

FAQ on Passive Income on Etsy by Selling Digital Products

Q: Is selling digital products on Etsy really worth your time?

A: Yes and yes

Don’t be sceptical and get worried if you see thousands of sellers selling products on Etsy. There is a market for everyone

You just need to take the first step and hustle for a few weeks to create your product and really see whether you want to continue selling digital products on Etsy or not

Q: What is passive income on Etsy?

A: Passive income on Etsy refers to earning revenue from digital products that you create and sell on the platform, without requiring continuous effort for each sale. It allows you to generate income while you focus on other projects or activities.

Q: What types of digital products can generate passive income on Etsy?

A: Various digital products can generate passive income on Etsy, such as printables, templates, graphics, fonts, digital art, patterns, and more. These products can be sold repeatedly without the need for manual delivery or additional effort for each sale.

Q: How can I create high-quality digital products for passive income on Etsy?

A: Creating high-quality digital products requires attention to detail. Focus on providing value to customers through well-designed and user-friendly products. Use professional tools and software to ensure high-resolution files and clear instructions for use.

Q: How can I optimize my Etsy shop for passive income?

A: To optimize your Etsy shop, use relevant keywords in your shop title, product titles, descriptions, and tags. Conduct thorough keyword research to understand what potential customers are searching for, and tailor your shop accordingly to improve visibility in search results.

Q: What role does SEO play in generating passive income on Etsy?

A: SEO (Search Engine Optimization) is crucial for attracting organic traffic to your Etsy shop. By implementing effective SEO strategies, such as optimizing your product listings, utilizing relevant keywords, and improving your shop’s overall visibility, you can increase the chances of generating passive income.

Q: How can I automate the sales process on Etsy?

A: Etsy provides features like instant digital downloads, which allow customers to access their purchased files immediately after payment. By setting up automated delivery, you can streamline the sales process, saving time and effort.

Q: How important is marketing in generating passive income on Etsy?

A: Marketing plays a vital role in driving traffic to your Etsy shop. Utilize social media platforms, create engaging content, collaborate with influencers, and run targeted advertisements to promote your digital products and attract potential buyers.

Q: How can I expand my passive income opportunities on Etsy?

A: To expand your passive income opportunities, consider diversifying your product offerings to cater to various niches and interests. Regularly update your shop with new and trending digital products to attract a wider audience and increase sales potential.

Q: Is it necessary to provide customer service for passive income on Etsy?

A: While passive income implies minimal involvement, providing excellent customer service is still crucial for maintaining a positive reputation and encouraging repeat purchases. Respond promptly to customer inquiries and address any issues or concerns to ensure customer satisfaction.

Q: How can I track the performance of my passive income on Etsy?

A: Monitoring your Etsy shop’s performance, tracking sales, analyzing customer feedback, and measuring the effectiveness of your marketing efforts are essential for optimizing your passive income. Regularly review and adjust your strategies to maximize your revenue potential.