UK: Etsy Criticized for Withholding Retailers' Money

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The Facts

  • Etsy — an online marketplace used by millions of independent businesses to sell goods — has been accused of placing up to 75% of retailers' sales takings for up to 45 days in a "reserve system." However, Etsy has defended the practice, saying it is used to "keep the marketplace safe."

  • Several sellers have reported being unable to access thousands of dollars, after reserves were imposed on their accounts without prior warning. Statements from retailers suggest some were left unable to pay their bills.

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The Spin

Narrative A

Though the reasoning behind placing accounts on reserve is well-intended — as online marketplaces must take action to disincentivize fraudsters — Etsy's execution has been a complete disaster. It's unacceptable that longtime sellers in good standing are being forced to resort to savings and credit to keep their businesses afloat. Etsy cannot continue to hold back money without any explanation.

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Narrative B

A lack of reputation and small processing volumes can prevent tiny businesses from being profitable, but Etsy makes this kind of artisanship a feasible full-time living. However, like many other payment aggregators, the platform has had to establish a reserve to deal with trust issues and minimize the risks associated with transactions involving small scale businesses. Those mulling about shutting an Etsy shop down because of a reserve should educate themselves on the reality of cash flow management.

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