E-commerce giant Etsy is facing severe criticism from sellers as it implements a controversial “reserve system.” Hundreds of small businesses have received emails notifying them of the company’s decision to hold 75% of their takings for 45 days. While Etsy claims that the payment reserves are intended to keep the marketplace safe and protect against potential refunds, sellers argue that the policy is crippling their businesses and causing financial distress. This article explores the sellers’ grievances, the company’s response, and the potential implications for Etsy’s reputation and business model.
The Impact on Sellers
Numerous sellers have voiced their distress over the sudden implementation of the reserve system. Rachel Collyer, a ceramics seller, shared that Etsy’s withholding of £899 of her money has left her unable to purchase materials for her business, jeopardizing her ability to continue producing ceramics. Similarly, Dan, who sells made-to-order wood furniture, revealed that Etsy has withheld around £7,000, forcing him and his partner to resort to credit cards and family loans to keep their business running and cover basic necessities.
Unexplained Reserves and Lack of Communication
Some sellers reported being placed on consecutive reserve periods with no clear explanation from Etsy. Joanna, who ran a bespoke underwear shop on the platform for four years, woke up to find her account subjected to a 90-day reserve, despite no policy violations or risk factors. She, too, struggled to understand the reasoning behind the decision and was left in financial limbo, unable to access her potential earnings of £5,000 for the month.
Boycott and Seller Fears
The discontent among affected sellers has led to the organization of a planned “strike” or boycott against Etsy. However, many sellers fear reprisals from the platform, including potential account suspension or termination if they voice their concerns or refuse to accept Etsy’s terms and conditions.
Etsy’s Response
Etsy maintains that the vast majority of sellers receive their funds promptly upon making a sale, and the reserve system is a common practice among online sellers. The company contends that it does not retaliate against sellers for expressing their opinions and values seller feedback. However, the lack of specific reasons given to sellers for holding their funds has intensified the frustration and mistrust among the seller community.
Comparison with Other Platforms
Comparisons have been drawn between Etsy’s reserve policy and those of other e-commerce platforms. Amazon, for instance, imposes a much lower reserve of approximately 3% for established sellers until any disputes are resolved. This disparity raises questions about Etsy’s approach and its impact on small businesses heavily reliant on the platform for income.
Criticism from Small Business Commissioner
The Small Business Commissioner, Liz Barclay, expressed concern over the level of reserve imposed by Etsy, noting an increase in complaints against the company. Many small businesses, especially those owned by women or minority groups, depend on Etsy as their sole source of income, making delayed funds particularly challenging amid rising living costs and business expenses.
Etsy’s decision to implement a reserve system, holding 75% of sellers’ funds for 45 days, has triggered a wave of discontent among its seller community. With numerous small businesses facing financial hardships and uncertainties, the company is under mounting pressure to address sellers’ grievances and provide transparent explanations for its actions. As the boycott gains momentum, Etsy’s reputation and business model may face significant challenges if the issue remains unresolved.