Etsy, the online craft marketplace, has announced that it will decrease the amount of sellers’ funds held in reserve globally. This decision comes as UK vendors have been boycotting the platform due to delays in payments. Many sellers have been putting their Etsy shops on hold and switching to rival platforms such as Folksy, Shopify, and Facebook Marketplace. The reserve system, which was implemented at the end of May, held back up to 75% of sellers’ takings for at least 45 days. This left small businesses with limited cashflow to pay themselves or suppliers after deducting Etsy’s fees. Sellers have also expressed frustration over the lack of transparency in understanding why their funds were placed on reserve.
In response to these concerns, the UK government’s small business minister Kevin Hollinrake sent a letter to Etsy requesting clarification on how the company plans to address sellers’ complaints. Chirag Patel, the head of payments and risk at Etsy, acknowledged the disruptions caused by the reserve system in a blog post. He stated that Etsy will be reducing the amount held in reserve globally and making the scheme more dynamic. Patel also promised improvements in communication to sellers and adjustments to address issues beyond sellers’ control, such as a lack of tracking on shipments.
Etsy expects that the majority of sellers with a reserve will see the percentage of funds held cut by at least half. However, some sellers remain skeptical and believe that Etsy’s adjustments were a result of the backlash and media coverage. Despite this, many continue to express frustration and disappointment and have closed their Etsy stores for good.
Daniel Vass, a seller on Etsy, shared his experiences with the reserve measures and mentioned that Etsy is still holding back roughly £6,000 of his income without providing a clear reason for the delay. He expressed concerns about his ability to sustain his business and the impracticality of switching to rival platforms at such short notice.
Etsy claims that on average, funds held in reserve become available within two weeks of the order date, and less than 2% of active sellers currently have a reserve on their account. Furthermore, for 70% of those sellers, the funds on hold are worth less than $50 (£39). However, sellers argue that this means approximately 140,000 sellers worldwide could have been affected, with $7m of cash being put on hold in Etsy’s account.
The UK’s small business commissioner, Liz Barclay, has raised concerns about this issue and has been awaiting a direct communication channel from Etsy to refer sellers seeking help. The delay in establishing this channel has raised concerns about the fate of small and micro-businesses that heavily rely on Etsy’s platform.
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