Etsy sellers plan boycott after marketplace blocks access to funds

Furious Etsy sellers say the site is withholding their money through its controversial reserve system.

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Hundreds of Etsy merchants have vowed to pause selling on the platform, in protest at the online ecommerce marketplace withholding their funds.

This week, BBC News reported that Etsy had informed certain sellers it would hold on to up to 75% of their earnings, with no explanation as to why they were targeted. The measures mean some sellers may not be able to access the funds for up to 90 days.

An Etsy spokesperson has said the “vast majority” of users will not be affected, and that less than 2% of sellers have a reserve on their account. But, with a string of controversies already under the ecommerce heavyweight’s belt, it’s clear that sellers aren’t convinced.

On Facebook, the Etsy Reserve Strike group now has just under 1,000 members, with both buyers and sellers signing up to protest the reserve system and the Etsy platform in general.

“Etsy is destroying businesses”

SME finances are currently in dire straits. The UK’s skyrocketing inflation rate has curbed consumer appetites and sent sales figures tumbling. Accordingly, 52% of SMEs expect a decrease in profits of up to 20% in 2023.

For Etsy merchants, withholding of funds from the platform comes at a time when other business and household expenses are already rising. Such high stakes can have a big impact on both business and personal finances.

Many other online marketplaces, including Amazon, also have a reserve system in place. However, Amazon’s reserve is 3% of daily processed payments, significantly lower than Etsy’s maximum of 75%.

Writing in the Facebook group, Etsy Sellers Support Community, users tell of how the reserve system has impacted them. Some have struggled to pay bills, and many say they no longer trust the platform to look out for their best interests.

One seller told of how the reserve on their family-run business was lifted on Monday after being on for over four weeks. This left them unable to buy stock, and pay rent or employee wages.

“So far this year I have paid them over £30,000 in fees and yet I cannot even speak to them on live chat,” they wrote.

Susan Bonnar is founder of The British Craft House, which she describes as ‘the UK’s all-British alternative to Etsy’. Bonnar originally joined the Etsy platform back in 2010. She says that sellers are often placed on reserve with often very little or no notice, making it impossible for them to continue running their online store.

“For businesses where their Etsy shop is their only source of income, [the reserve system] is devastating and destroying their businesses,” she adds.

Sellers on reserve are being ‘unfairly targeted’

Etsy’s website says it uses reserves to make sure there is a minimum balance in a seller’s Payment account to cover any unexpected refunds or charges from a sale. This, it claims, helps to keep the market safe for buyers.

Under the Consumer Rights Act, one of many protections for consumers, buyers have the right to a return or refund if something they buy is faulty or unfit for purpose. However, according to Bonnar, good sellers are being unfairly targeted by the system.

“After being placed on Reserve there is an automated system and guidance on how to reverse the decision but more often than not – the ‘bot’ says no,” she explains. “Sellers struggle to be able to communicate with a human to get their case reviewed.”

The issue could be due to Etsy’s software, which Bonnar says is set up for the US market. She says it often does not recognise independent couriers based in the UK, which can lead to the proof of delivery not being what it should be to be accepted on the system.

“Items are deemed undelivered even though the customer could have left glowing 5* feedback,” Bonnar states. “The reality is that the sellers affected most often have an unblemished track record of customer service.”

What customer support?

Etsy has been racking up complaints from merchants over the past few years, facing a number of accusations of poor treatment of sellers.

In the spring of 2022, Etsy sellers protested a transaction fee increase from 5% to 6.5%, a move which all but torpedoed many merchant’s bottom lines. At the time, thousands of sellers moved their online shops to “vacation mode” to protest the changes.

Etsy does have a Purchase Protection programme for its shops. If a seller does everything right, but something goes wrong during the shipping process, Etsy will take care of the refunds for buyers on orders under $250 USD (around £195).

Nonetheless, a recurring problem that sellers report is that, when they do encounter a problem, they are unable to speak to support teams.

Svea Isaacs used to own an Etsy shop where she sold candles. However, after her account was hacked, she quit the platform having spent months emailing Etsy but received no response.

“It’s impossible to speak to anyone at Etsy,” she says. “They just send you to FAQ pages, so you can’t get a real response. Eventually I just gave up and I closed down my shop.”

What are the alternatives for online sellers?

Angry Etsy merchants might instead explore the many alternative marketplaces that have cropped up in the last few years.

Brands like Creoate provide one antidote to corporations like Etsy, which has somewhat lost its way from the authentic handmade platform it started as in 2005. Bonnar says The British Craft House is small enough to review any issues on a one-to-one basis.

“We have had no issues whatsoever with refunds needing to be forced through the system, which is effectively what the Etsy Reserve is there to do,” Bonnar relays. “We would never withhold any money from our sellers.”

Another option for the brands that have outgrown Etsy is to turn to an ecommerce platform, for example Shopify. For a monthly subscription fee, merchants can also access marketing and accounting tools to scale-up their business through the software.

There is no denying the monopoly that Etsy has on the ecommerce sector, however. According to its last 2023 Q1 report, the number of active buyers on the site is currently 89 million – an audience base that doubtlessly benefits SMEs with limited brand awareness.

Plus, some Etsy merchants have sold their products through the marketplace for years. They make their living on the platform, and cannot afford to shut up shop in protest until a solution is reached. Their biggest hope now is for a reform of the reserve system, and quickly.

“I do not believe it will be the end of Etsy,” Bonnar states. “They are a huge juggernaut with such a global audience base and they will continue on their retail mission without worrying about the collateral damage.”

Fed up of marketplaces charging extortionate transaction fees? Read our guide to the  best ecommerce platforms for SMEs.

Written by:
Helena Young
Helena is Lead Writer at Startups. As resident people and premises expert, she's an authority on topics such as business energy, office and coworking spaces, and project management software. With a background in PR and marketing, Helena also manages the Startups 100 Index and is passionate about giving early-stage startups a platform to boost their brands. From interviewing Wetherspoon's boss Tim Martin to spotting data-led working from home trends, her insight has been featured by major trade publications including the ICAEW, and news outlets like the BBC, ITV News, Daily Express, and HuffPost UK.

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