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HomeTechEtsy sellers say a fraud protection program is destabilizing their businesses

Etsy sellers say a fraud protection program is destabilizing their businesses


D., a woodworker and Etsy seller for several years, recently sold a custom-built piece of furniture for about $150. The sale itself was business as usual for his shop, but it came with a sense of exasperation. His earnings would be tied up for weeks as bills, rent and expenses pile up.

Since the end of June, Etsy has had D.’s account under restrictive settings, which hold most of the money coming in as customers place orders. In D.’s case, Etsy holds 75 percent of the earnings from a $150 order, for example, in what’s known as a “payment reserve,” for between two weeks and 45 days. After fees, taxes, and other Etsy expenses are taken out of the remaining 25 percent that D. has access to, only about $13 remains.

“I’m in stress mode right now,” says D. “I wake up at 4 in the morning and I’m sitting in bed thinking about this.”

D., who asked that the edge not identifying them for fear of retaliation, he is far from alone. A moderator of the r/EtsySellers subreddit says the group has seen an increase in questions about shops being put in reserve. Chiarra Lohr, secretary and treasurer of the Indie Sellers Guild, which represents artisans including Etsy sellers, says the organization has heard from dozens of veteran sellers whose accounts have been put on hold in recent months. And by the end of May, the chorus of questions about paid reservations grew enough that Etsy felt compelled to respond publicly: post a short message about the system

According Etsy Terms of Service, placing accounts in reserve is intended to protect buyers and make sure that sellers can keep up with the flow of orders; the idea seems to be that it will push sellers to work on their backlog and ship purchases so that their full funds are released. to them Stores may have a reserve placed on your account if they just started selling in the marketplace, received an influx of orders, or if orders are consistently shipped without tracking.

An r/EtsySellers moderator said the edge They have observed that most hold cases stem from orders being shipped without tracking information. They also noted that buyers are cheated by new stores popping up, they take an order and remove their storefront. Holds mitigate this problem by keeping customers’ money in Etsy’s hands so that if problems arise, it can be returned quickly. If scammers can’t access the funds for a certain period of time, it could discourage this type of fraud. (Etsy did not respond to specific questions about whether recent bookings are connected to this.)

But sellers like D. say Etsy has been holding stores in good standing for a long time, and they haven’t been able to get answers from Etsy about why their money is being held. D. says his store hasn’t had an influx of orders or refunds, and out of hundreds of orders this year, only one has shipped without tracking. More than $3,000 of D.’s earnings are being held in reserve, according to a screenshot they shared; they have access to about 1 percent of that after deducting fees, taxes and other costs.

“I pay my rent, I pay my purchases, I live off Etsy’s money.”

The change in the way they get paid has been stressful for D. and other vendors who make custom products that take longer to produce and mail.

“When I ship those orders, I get (that $3,000). But because my items are made to order, I need the cash flow,” says D. “I pay my rent, I pay my purchases, I live off Etsy money. And then $3,000 that I otherwise would have had here, just five days before the rent was due, I don’t have.”

Many Etsy sellers live from hand to mouth, as D. says, although they may stock pre-made products in their shop, they often use the money from a sale to purchase materials for that order. The delivery time for orders from D.’s workshop is about two weeks; meanwhile, they are forced to resort to savings and credit to finance their business and personal expenses.

Less than 2 percent of shops currently have a payment reserve in their accounts, and for most of those shops, the amount held is less than $50, says Chirag Patel, Etsy’s head of payments. The company says that, on average, funds on hold are released to sellers within two weeks.

“In some cases, we will delay a portion of the funds from a sale until we can confirm that the order has shipped. This allows us to continue paying sellers in a timely manner while taking the necessary steps to help keep our marketplace safe and protect our customers when there are unexpected issues with their order,” Patel said. the edge via email.

Although reservations affect only a fraction of total sellers on Etsy, those subject to the rules may have a hard time sustaining their business with the delayed cash flow. Another seller, Y., had a payment reservation placed on his account in mid-May without prior notice. Y., a goldsmith who makes high-quality custom jewelry, has made tens of thousands of sales and maintains a high customer rating. (Y. also requested anonymity, fearing retaliation for speaking out.)

Y. orders were sometimes delayed in shipping and they acknowledge that the payment reservation in their account may be due to this. However, his focus has been to bring the best to his customers by custom prototyping and testing products before shipping. The unexpected withholding of a large portion of his profits means that his business has, ironically, become less stable than it was.

The situation can quickly get worse for sellers who don’t have funds in storage.

Y. uses precious metals in his work, such as gold, and prices custom items for clients based on that day’s gold price. When their account was not in reserve, the difference of approximately five days between the purchase of materials and the time the money was transferred to them was manageable; now, that difference can extend to two weeks or more. Y. says that the delay in payments has forced them to reduce replenishments and they cannot keep as much inventory. They are also turning down high-value custom work.

“It’s incredibly frustrating for both me and my clients who desperately want me to restock,” says Y.

While the reservation system may prevent scammers from taking customers’ money, it has created a situation that can quickly worsen for legitimate sellers who don’t have accumulated funds to cover operating costs. The system is more complicated than Etsy, owning 75 percent of the total amount a buyer paid.

Every time a sale is made, the seller’s reserve minimum, that 75 percent portion of the sale, increases accordingly, creating a rolling count that the seller must meet. If a seller purchases a shipping label, pays for Etsy listings, or otherwise reduces the 25 percent portion that is available to them to zero, the remaining balance is taken from the 75 percent reserved. Subsequent proceeds from sales first go toward replenishing the reserve minimum before the money is available for deposit into the seller’s account.

“I had to take out a personal loan to pay people for the first few weeks, because I had just restocked and it was a complete surprise to suddenly receive zero dollars from my payment account,” Y said. the edge via text message.

Y. says that they are not upset by the payment reservation system in the market; the most disruptive part is the way Etsy has designed it. They point to the role Etsy has played in providing job flexibility for them and other disabled artisans and small sellers who feel increasingly distant. Independent crafters have long complained that it’s getting harder to support themselves through Etsy sales, as the company has relaxed rules about the definition of handmade, increased fees, and pressured sellers to offer services like shipment tracking and 24-hour customer support.

One way some sellers have been told they can avoid reservations is to comply with the Star Seller Program Requirementsa designation awarded by Etsy that rewards shops that meet shipping and customer service standards.

But for some Etsy shops, it is not feasible to reply to messages within 24 hours and ship according to Etsy’s requirements. Lohr of the Indie Sellers Guild says the group heard of a baked goods vendor, for example, who ships orders just before a customer’s event. But customers can place orders months in advance, and Etsy’s processing time only extends up to 10 weeks.

“You’re doing what’s best for your customers and your business, but in the Etsy system, it shows that you have backorders that haven’t been processed,” says Lohr. The Guild of Independent Sellers recently started a petition imploring Etsy to work with sellers affected by reservations.

D., the custom furniture seller, is desperately trying to achieve Star Seller status so that his reservation will be removed in August. Orders must be shipped on time, and messages from customers must be returned within 24 hours. D. considers himself lucky: they can operate a smartphone at lightning speeds and quickly communicate with customers. But not everyone who depends on Etsy is in that position.

“There are people out there who are not digital natives, who are not native English speakers, who are older, who actually make a living out of this,” says D. “I have all of those things going for me, and (if) I still It’s hard for me, it’s 10 times harder for anybody who can’t navigate these systems successfully.”

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