18
votes
UK vendors started boycotting the Etsy platform over its payment reserves system
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- Title
- Etsy is scrambling to avert a widespread sellers' strike
- Published
- Aug 3 2023
- Word count
- 708 words
I used to run a keycap shop on Etsy making resin keycaps with little cherry blossom branches and coffee beans and stuff in them. It was growing nicely to the point where I was renting a small building for it and making as much doing casting on weekends as I was at my day job. I used their automatic advertisement system to push some of the proceeds back into ads and it seemed to have a quite viable return to it.
They then made some changes to the advertisement and search algorithms. Orders crashed from like 10-20 per day to 1 or 2 overnight. For the next six months or so I just lost money until I could finally close the place up. Luckily I was pretty tired of it anyway by then so the timing did work out, but it was crazy seeing just how drastically my shop's viability went from awesome to completely unmaintainable in the blink of an eye.
I haven't shopped there since, but it was already filling up with obvious Amazon and Alibaba dropshippers and retail products. I can only imagine that by now handmade goods are few and far between, especially if they're holding reserves like this.
Etsy used to be a place where I could easily find unique and wonderful handmade gifts for people. That isn't the case anymore. It's become harder and harder to discover real artists and crafts people. I don't even try anymore.
Oh, man, this is bad. I take it you can't take external payments on Etsy, either.
I'm really struggling to find a single instance of a payment reserve system being good for consumers. Thinking back, I have several accounts with companies that have less than $20 on them. I've got 3-4 EV charging companies who do that, there's Microsoft (remember when you had to get Microsoft Points to pay for Xbox games?), and then there's Nintendo's eShop which doesn't even exist anymore. And then there's the agency that controls the toll roads which I eventually realized I never use.
I know it's a relatively tiny amount of money, but it's money I gave away for essentially nothing.
I'm slightly less upset at the EV charging ones, because most of the times I have used them they were tiny charges and I'd be paying even more for credit card processing fees. But I kind of wish I were dealing with a slightly higher cost upfront.
I think you're thinking of the wrong thing. You don't buy "etsy points" or something to buy something from etsy. You just pay with your credit card, or paypal, or whatever.
What the article is talking about is that Etsy is freezing money that customers are paying the merchant, and not allowing the merchant to withdraw that money into their bank account.
The reason for this actually is for the consumer's benefit - or the end effect of something for the consumer's benefit, rather. This is a side effect of being able to do chargebacks on credit cards. When you chargeback, the payment processor or merchant, if the merchant directly integrates with Visa/MC/etc, is on the hook for the money.
Let's say you make a scam shop on Etsy. You sell a bunch of jewelry, but actually ship rocks to the users. You withdraw your money from Etsy and disappear into the shadows. The users find out they got rocks, and make chargebacks.
Where did all that money come from that you gained? You have more money. The consumers have their money back. It comes from Etsy. Visa will claw back the money from Etsy, and Etsy will just take an L.
As a countermeasure, payment processors or platforms will freeze merchant accounts they suspect of having high chargeback or fraud rates, until they are confident the end users won't chargeback. The amount and duration will depend on their policies.
Yeah so on paper, sure. That's what Etsy are doing. Sounds perfectly reasonable, right?
Except in (non-etsy-hosted) seller's groups I've heard so many horror stories from people who have been selling for years, have hundreds or thousands of sales, getting hit with this. Those people are not a fraud risk and not even the stupidest automated system should ever have flagged them as such. There is almost no way to contact Etsy to appeal, they've long since given up having company representative reachable via their seller forum or via support. It's all automated and useless. I've had more luck contacting a human at Google than Etsy and that's saying something.
I try not to be too paranoid about corporate motivations but Etsy do seem to have been getting slowly worse and worse from seller's point of view from as soon as the idea of an IPO came along. Most things they have done in recent years seem more focussed on "shareholder value" than providing the kind of marketplace that Rob Kalin etc initially envisioned. Rumours from staff/past staff about the corporate culture getting increasingly cutthroat and unpleasant also reflect this downhill slide.
This latest move reads a hell of a lot more like they're just hanging on to people's money to earn interest on it than trying to protect customers. I believe the current term is "enshittification"
Not any more. They used to let you take paypal directly but ditched it a while back so they could take all the payment processing fees for themselves (and throw in a bunch of new fees just for funsies).
If you get caught trying to direct customers outside Etsy for payment they will smack you hard, up to and including deleting your shop entirely.
If I get hit with this reserve stuff I'm screwed. I simply cannot afford to buy material up front for some of my higher end pieces. There's a reason I don't keep gold lying around just in case I need it - that stuff is worth it's weight in gold.
I do make sales through other channels but they just don't do the numbers Etsy does.
I can imagine. Even if you had the funds you could tie up in that kind of material inventory, that requires you to take on a HUGE theft risk. Big jewelry factories can afford to hire some very heavily armed, very angry-looking men to keep people from breaking in and carting off their raw material stores. But that's not really practical for any small-scale etsy shop.
Mirror for those hit by the paywall:
https://archive.is/k0XN1