Etsy accused of withholding payments from sellers

Online marketplace Etsy has faced criticism from its sellers after implementing a "reserve system" that withholds 75 percent of their earnings for 45 days. Hundreds of small businesses received an email from Etsy regarding this new policy, leading to significant financial difficulties for sellers who rely on the funds for materials and daily expenses, said a report by the BBC. The reserve system is intended to safeguard the marketplace and cover potential refunds, but sellers are expressing frustration and confusion as to why their money is being held. Some sellers reported having two consecutive reserve periods imposed on them.

Etsy is a key marketplace for many young fashion designers and small businesses. In the last quarter of 2022 Etsy said it had 93.9 million active users. The company also acquired Depop, Elo7, and Reverb, further expanding its reach.

Sellers interviewed by the BBC expressed their distress, with many unable to comprehend the reasons behind Etsy's decision to withhold their funds.

Numerous sellers are now planning a "strike" in protest, said the BBC, organizing on various online platforms. The reserve system's implementation has sparked concerns among small business advocates, with the Small Business Commissioner expressing alarm at the increasing number of complaints against Etsy.

Online retail expert Martyn James criticized Etsy's practice of holding sellers' money for an extended period, said the BBC, emphasizing the need for transparency and stability in dealing with sellers' funds.

While Etsy maintains that the vast majority of sellers receive their funds upon sale, sellers are calling for changes to the reserve system. The Federation of Small Businesses emphasizes the responsibility of online platforms in handling sellers' finances and urges them to use their power responsibly. Etsy has indicated its commitment to improving its programs, including payment reserves, but its actions have prompted discussions with UK government officials.

The situation underscores how online platforms can impact the livelihoods of small businesses, necessitating greater scrutiny and regulation in the sector.