- Sellers’ Funds Withheld: Etsy accused of holding thousands of pounds from small businesses with reserves on accounts
- Financial Struggles: Sellers unable to access their earnings, impacting families during the cost-of-living crisis
- Growing Complaints: Small business owners raise concerns about online platforms holding funds in reserve for extended periods
According to sellers, the online marketplace is instituting a temporary reserve on their sales as part of its new ‘purchase protection program’, which aims to make it simpler for customers to request refunds if their products are lost or stolen.
Etsy, a global online marketplace used by millions, is being accused by sellers of withholding thousands of pounds from small businesses by imposing reserves on accounts that deduct 75% of merchants’ earnings for 45 days without notice.
According to sellers, the company is retaining its income regardless of how it will affect families during a cost-of-living crisis.
A Miami-based Etsy seller, Pietra (her last name is omitted for fear of Etsy closing her account), was informed that she cannot access more than $20,000 (£15,463) retained in two of her accounts as an enforced reserve.
She has designed wedding favors for sale on the platform full-time since 2015, juggling work and being a single mother.
Her company received orders worth over $30,000 (£23,195) per month. After deducting production and transportation costs, she is left with a profit of $8,000 (£6,185).
However, after a reserve was set on her account on May 18, her June income decreased to $444 (£343).
She said, “It’s unfathomable that in two months my entire life descended into hell because of this.” “They are holding my $20,000 (£15,000) and I am essentially unable to purchase sustenance.
“I’m currently two months behind on my rent, and I’ve maxed out two credit cards, one for $5,000 and the other for $6,000.” It has been nearly impossible to rise from bed.”
We’ve been unable to pay our expenses.
Dan (his surname is omitted for fear of Etsy closing his account) from Aylesbury, Buckinghamshire, operates a furniture business on Etsy that was thriving until a reserve was imposed on his account without warning on June 14.
“We presently have a reserve of over $5,000, and it appears to be growing. This is our only source of income, yet we’ve been unable to pay our expenses.
The items take a long time to produce, have high material costs, and Etsy is holding all of our funds, so we are unable to begin production when orders come in.
“I was forced to retrain”
Anthony Whitworth of Tadcaster, North Yorkshire, operates the Etsy shop The Bizzy Box and is ranked among the top three Etsy sellers in the United Kingdom.
Since seven years ago, he has been able to support his Multiple Sclerosis-afflicted wife through a prospering online marketplace business.
His company pays Etsy over £35,000 in annual fees and has a 5-star rating based on over 63,500 transactions, but since May his account has been placed on hold, consuming his revenue.
It’s shocking to hear that 75% of the funds would be retained in reserve.
“Very shocking”
The Small Business Commissioner, Liz Barclay, told that she has received a growing number of complaints from small business owners over the past few months, alleging that online platforms are holding their funds in reserve for extended periods than in the past.
“Until now, we have heard of online platforms holding back lesser sums of money. It’s shocking to hear that 75% of the funds would be retained in reserve.”
“These modest suppliers are the driving force behind the success of your business. They must be paid as soon as feasible, or they may go bankrupt.”
Ms. Barclay stated that the government has no authority over non-UK-based online marketplaces such as Etsy.
The official expects an autumn report on the government’s efforts to help small firms be paid faster.
Etsy covers refunds for qualified orders, protecting customers and sellers. Since the program’s inception last year, we have received positive feedback.
“Although we acknowledge that payment reserves can cause short-term disruptions to a seller’s payment schedule, these temporary holds are a common occurrence on marketplaces.”
I am concerned that I will lose many purchases.
Reserves are widespread on vendor platforms.
Transaction disputes will take 3% of Amazon sellers’ daily payments after a year and 100 orders.
After the product is made and dispatched, the funds to pay for it and ship it are received.
Numerous sellers do not want to require consumers to pay for tracked shipping, as international tracking can be extremely expensive.
Steen Ross from Norwich has a reserve of £1,800 on her Etsy account.
For a decade, she offered personalised costumes to American customers on Etsy.
“The majority of my sales are in the United States, and about 90 percent of my customers do not want to pay the additional cost of tracking because it is so costly; they are content with proof of postage.
“I’m worried that if I raise prices to include tracking, I’ll lose a lot of sales. But if I don’t, Etsy won’t release funds from my reserve before 45 days.”
The Etsy purchasing protection scheme
In June 2022, Etsy introduced a “purchase protection programme” that lets buyers simply request refunds for lost or stolen items.
Since then, Pietra, Steen Ross, and Dan claim to have encountered no-challenge refunds, in which funds appear to leave their reserve automatically when a claim is submitted.
Hundreds of online users have tweeted these complaints to Etsy CEO John Silverman, and a Facebook group called “Etsy Reserve Strike” has been created in the last month to coordinate a strike among sellers.
In 2017, Etsy lost users and sellers for the first time since 2012.
Since the beginning of February, Mr. Silverman has sold off $24.4m (£18.7m) worth of his company shares.
Etsy’s share price was $85.83 (£65.56) as of 10 July, compared to $297 (the all-time high) in 2021.
