A seller reported that Etsy is holding 75% of their funds in reserve, leaving them struggling to pay their bills. Reserves are normal for new sellers or for those who have received a warning for a policy violation, but a rumor is circulating that Etsy is testing a new, more aggressive practice of holding funds of well-established sellers.
Anecdotal reports popped up on Reddit and Etsy discussion boards, and we've heard from several sellers who say they were impacted.
The timing, coming in early October, may indicate Etsy is trying to reduce risk ahead of the busy holiday-shopping period. But that's when cash flow issues can hit sellers particularly hard as they incur upfront product-sourcing and shipping expenses before receiving payments they use to pay their bills.
One seller forwarded to EcommerceBytes the email they received from Etsy on October 5th informing them of a reserve on their payment account:
Hey there (shop name redacted),
We're writing to let you know that we've placed a reserve on your payment account. That means that 75% of the funds you receive from each order will be held in your account for up to 45 days from the date of the sale - just in case there are any issues with your orders.
Want your funds earlier? When you add tracking information for an order, the funds in your reserve are made available when the package shows that it's in transit.
Reserves are placed on accounts based on different risk factors, such as, but not limited to, if you recently made your first sale on Etsy or have received a communication from our Trust & Safety team for a policy violation. Payment account reserves are temporary. This reserve will be removed from your account in 90 days, unless there are additional policy infractions with your account. We'll let you know when the reserve is removed from your account.
Payment account reserves protect your business by helping to keep your account from going into the negative if you have unexpected charges or refunds. If you give your customer a refund or their money is refunded by their credit card company after a dispute, your reserve has you covered. The money in reserve is yours. If you don't have any disputes or refunds during the reserve period, it will be available to deposit to your bank account (minus any applicable seller fees, which will be deducted from your reserve funds) after the reserve period.
View your payment account
Here are a few tips to help you stay on top of your orders and keep delighting customers:
- Ship your orders on time and adjust your processing times if you need more time for future orders.
- Provide tracking to your buyers whenever possible.
- Don't mark items as shipped before they're dropped off with your carrier.
- Respond to any messages from customers quickly - within 24 hours if you can.
Get more details about payment account reserves in our Etsy Payments Policy and in Etsy's Help Center.
Another reader who had a reserve placed on their shop told EcommerceBytes they received no explanation for the sudden change. "As a Star Seller who has been selling on Etsy since 2006, with nearly 1,100 sales, it's rather perplexing," the seller said. "If you know why Etsy has rolled out this questionable practice (other than prolonging their access to my money), please let us know."
And another EcommerceBytes reader, "Unhappy in Ottawa, Canada," wrote: "I'm one of the longtime sellers impacted by this. Two weeks ago, I received a notice out of the blue, that for the next 3 months, Etsy would be holding 75% of my payout. WTH? I've been selling since 2013 and have 3 successful shops. I sell more than $100,000 of goods. No answer to my queries from Etsy. I don't know what they are trying to achieve but in this case, it's one less store. My inventory is for sale and I'm out."
The issue came to our attention this week when a reader forwarded a link to a Reddit thread
started on October 8th about a more aggressive Reserve policy where the original poster wrote in part, "I've heard more and more rumblings that established sellers with no history of violations or poor service are now starting to have reserves put up on their store as part of an Etsy test. One guy in another group I'm in says Etsy are now trialing this out with more established stores basically to see what would happen- I.e. do we continue to trade, do we shut shop, go on holiday mode, basically would we make them LESS money. They seemed to think payment reserves for all are on the horizon."
The seller, based in London, UK, said she had been on Etsy for over 2 years and had made £80.000 in sales in 2020. "I'm not a new seller, I earn money for Etsy all year round. I work hard to find new clients and make my shop bigger. This is how Etsy thanks me!"
"Last week, they transfer me £14.99!!!! For 15 open orders - the shipping cost is worth over £100 !!!! How can I keep my business on track with this kind of policy," she asked. "How can I pay salaries? How can I pay my suppliers? Any podcast maybe?"
A visit to her shop on Thursday shows Etsy displaying the following praise for the seller: "Buyers are raving! This shop got multiple 5-star reviews in the past 7 days."
"Kindly know that we are unable to remove a reserve once it has been placed on a shop. For most sellers, the reserve will be removed within 90 days and you’ll be notified that it has been removed. However, we will monitor the shop during this time and if there are concerns with order fulfillment, the reserve could be extended up to 180 days. We will send you an email to let you know once the reserve is removed from your shop."
If Etsy has informed you it will begin holding a portion of your funds in reserve, please forward the email to us and leave a comment below.