Etsy announced it will revamp its reserve system policies. The news came after days of sellers' calls for a boycott of the online marketplace. Many Etsy UK sellers have complained about the company holding their money.
The issue started after a BBC report revealed some Etsy sellers had 75% of their money frozen by the company. In some cases, these businesses couldn’t access their money for 45 days.
The report noted that hundreds of sellers had received an email from Etsy. It informed them it was putting its “reserve system” in action. The system puts a percentage of funds from sales in reserve. The amount won’t be available for a deposit for a specific duration.
The e-commerce company explained to the BBC how the policy "keeps the marketplace safe.” It’s also used to cover any possible refunds. and cover any potential refunds.
But for many sellers, Etsy holding a large amount of their money puts them in a bind. A vendor who sold custom wood furniture has £7,000 in sales frozen by Etsy. He said a small business like his must now turn to family loans and credit cards to keep the business afloat. Another seller said she can’t buy materials to keep producing the ceramics that is her bread and butter.
The reserve system saw vendors calling for a boycott of the online marketplace. Many went on “holiday mode” or switched to another platform. Handmade goods site Folksy reported a 289% increase in signups.
Small business commissioner Liz Barclay said sellers were all disappointed. Especially by the lack of transparency in Etsy’s statement. She added that she already got in touch with the company and asked for an explanation.
Etsy’s next move was to state that it was decreasing the reserve payment by a large amount. But there was no information on the time frame or the new rates.
Etsy Reveals Decline
Etsy reported a drop in revenue last week. It reported that profits went down to $61.9 million from April to June. That’s a 15% slide when compared to sales within the same time frame last year.
There doesn’t seem to be an end in sight though. The US-based company expects lower revenue in the next few months.
Depop, Etsy’s fashion marketplace app, is seeing its growth decline in the UK year-on-year. Its share prices slipped more than 5% in the stock market.
Uncertain Solution
Etsy issued an update last week about the issue. Chirag Patel said they’ll be addressing the reserve system’s pain points. Etsy’s head of payment policy said improving communications was part of the changes.
Communication was one thing Barclay touched upon when she talked to the company. She noted that many sellers had no direct means to contact Etsy about their complaints.
Minister Kevin Hollinrake also reached out to Etsy’s chief executive. The Minister for Enterprise asked the company to address the issue. He said it’s vital that Etsy’s payment strategy doesn’t endanger the livelihood of small businesses.