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Etsy Payment Account Reserves: What We’ve Learned

A couple weeks ago, we shared these images to social media:

We’ve been collecting responses ever since (and still are, feel free to reach out!)  Here is what we’ve learned about Etsy payment account reserves, so far.

Etsy put a reserve on my account! What do I do now?

We are so sorry. We know this is a devastating situation for creative indie sellers. We have been researching this issue and are sharing what we’ve learned in this blog post.

What does it even mean that a reserve was placed on my account?

When Etsy places a reserve on an account or a specific order, it means that instead of transferring the full amount from a sale or sales to the seller, Etsy will only transfer 25% of the total, placing the rest in a reserve account. Sellers are able to see how much there is, but cannot access that money. According to Etsy, sellers on reserve are meant to process and ship orders with tracking in order to release the remaining 75% balance. Otherwise the funds will be released after 45 days.

Of course, what is actually happening is a very different story. For many sellers, especially made-to-order shops, 25% is not enough to process and ship an item, much less buy the materials if the item still has to be made. And regardless, many shops don’t have the cash reserves to get by with only a quarter of their own income for 45 days. 

But it gets worse. Etsy still collects taxes and all of their fees on the total sale amount, and they take it all out of the 25% released to the seller. We’ve heard of sellers actually owing money to the reserve on a sale, because the taxes and fees taken out were higher than the 25%.

Why was a reserve placed on my shop?

There are various reasons why a shop may be put in reserve, but it seems most often connected to orders that were not shipped within the posted processing time, or orders that were shipped without tracking numbers. According to our research, it seems to be something that automatically happens once a shop hits certain metrics, though Etsy claims there are manual checks in place. 

These are the risk factors Etsy states may cause them to place a seller in reserve:

  • A sudden sharp increase in orders.
  • Orders consistently missing tracking information.
  • Orders are not shipped on time.
  • A recent increase in refunds.
  • If a shop is new on the marketplace.

Etsy also states that those who qualify for Star Seller badges do not get placed in reserve. But we’ve seen cases where sellers were placed in reserve immediately after losing their Star Seller status.

Besides what Etsy states, we’ve noticed some patterns in the stories we see from sellers. Most of the sellers we’ve heard have something less common about their processing time or shipping methods. Many operate as made-to-order, with processing times beyond the 8 weeks Etsy will allow a seller to set. Many others make something time sensitive like food for events. If a buyer pre-orders a food item for delivery at a certain date in the future, sellers risk being put on reserve if this date is farther out than the maximum Etsy processing time.. Sellers whose products require specialized shipping and can’t use Etsy-compatible tracking numbers are also at risk. These reasons seem to trigger the reserve regardless of whether there have been any actual complaints by customers about delays or shipping. In fact, most sellers in these situations report that once they simply explain their process to their customers, they never have any customer complaints. In addition to processing time and shipping, we’ve heard of many new shops being automatically placed on reserve just by virtue of being new and receiving orders. Finally, some sellers don’t meet these criteria at all and can’t figure out any reason they were placed in reserve.

Factors like shop location, buyer location, and customer ratings don’t seem to have much of an effect on whether a shop will be placed on reserve or not. We have heard from shops placed in reserve in several different countries, shipping both domestically and internationally, many of them very established shops of several years with high ratings. 

Should I contact Etsy support?

It certainly couldn’t hurt. But unfortunately, from what we’ve learned it’s unlikely to help much. We’ve collected dozens of stories from sellers and none of them have had success contacting Etsy support to lift a shop reserve. We have condensed the generic information sellers received from support in this article, so that you can skip the hours of frustration.

If you make it past the automatic responses, Etsy representatives state they are unable to tell you the specific reason your shop was placed on reserve. They also state they are unable to manually take your account off reserve or manually release funds from a specific sale before the 45 day period. This is the case even if a seller submits proof that the item was delivered. It seems everything is automated and you have to submit tracking through Etsy. Support cannot manually remove the reserve even if it appears to be applied by mistake and none of the possible reasons apply to that shop.

What can I do to get out of reserve?

We are so sorry to say that at this point we are not sure. The best suggestion is to ship any late orders as soon as possible, and ship all orders with tracking through one of Etsy’s approved carriers. Etsy says they will release the rest of the funds from a sale as soon as they have proof that the order has shipped. Unfortunately, that does not work for all sellers. Some sellers report that Etsy put their account in reserve even though nothing has changed and they didn’t have any late orders. One seller even said they only sell digital items, so the shipping and tracking issues make no sense. Other sellers said they did ship the order with tracking from one of the carriers on Etsy’s list and the funds for the order were still not released. 

How long will this last?

Etsy states that for most sellers, the reserve on the whole account will be released within 90 days, however they say they can extend it. For each individual sale, the funds should be released when the order is dispatched with tracking input on Etsy, or after 45 days.

This is the last straw, I am done with Etsy! How do I move my business elsewhere?

We understand the feeling! And we have several resources that can help you decide whether and where to move, and how best to do so.

Here is a link to our Etsy Alternatives spreadsheet, a crowdsourced list of different marketplaces and shop-hosting platforms with details about them.

ISG President Kristi wrote a series of blog posts both on Etsy alternatives and steps to moving your business. Here are the links to those:

Can we build an Etsy Alternative Marketplace? This article talks about the challenges facing competitors to Etsy and some of our favorite options out there.

The first steps towards freedom from Etsy

Freedom from Etsy: A Practical Guide

5 Quick Ways to Grow and Leave Etsy

Our series on the pros and cons of different platforms:

Ko-fi – An All-In-One Solution for Donations and a Shop

Square Marketplace – A quick-to-set-up free alternative to Etsy

What is the Guild doing?

We have reached out to our legal contacts to see what, if anything, can be done. It looks like placing an account on reserve in this context is legal in the United States. In addition, since sellers are small businesses, issues with Etsy are governed by contract or business law and consumer protection laws do not apply. However, the lawyer we spoke with still suggested that sellers file a complaint with the Consumer Financial Protection Bureau. She explained that filing complaints help raise awareness of the issue, hurt the company’s reputation, and show a paper trail of trying to address this issue if legal action is eventually taken in the future.

Our next step is to reach out to our media contacts, especially those that focus on businesses. In the meantime, we are collecting stories from sellers and reaching out to other people organizing action.

Long term, we are building a Marketplace Accreditation Program, to vet and hold marketplaces accountable for how they treat their sellers. Our first step is a research study done in collaboration with Dr. Samantha Close at DePaul University. Click here to take the survey. We are working on a page explaining our Marketplace Accreditation Program in detail, which will be ready to share soon!

What else can I do?

Sign up for the Guild! It’s free to join and you get to be a part of a great community of sellers all working together to help each other, share resources, and advocate for ourselves. We are a volunteer run, grassroots nonprofit where everyone’s voice can be heard. And the more members we have, the more likely we can get media attention and other things done on behalf of sellers. We are stronger together, so join here! And if you are not ready to do that, follow us on social media to keep receiving the latest updates. 

Then make sure you opt out of Etsy’s arbitration clause so that you retain your legal rights to a class action lawsuit. Read this blog post for instructions on how to do so. 

Finally, we are still collecting stories from sellers who have been placed on reserve. If you would like to share, please use the form in this blog post. Please include the details of when it happened, how much money has been withheld, any response you received from Etsy support, what country you are in, and if you would be comfortable talking to a journalist about your experience.

We hope this has been helpful and we will fight this together!

Finally, here’s an image you can download if you wish to share this post:

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