On February 21, 2024, Etsy posted the article “Strengthening New-Shop Onboarding to Keep Our Community Safe”. The article lists changes that will apply to new shops created on Etsy, and it says the reason for the changes is to “better protect the amazing marketplace, and community, we’ve built together.”
On reading the article, the ISG leadership found yet another announcement full of vague promises and even more unclear changes. We fear that this is an easier way to introduce policies they intend to apply more broadly and think they can get away with now because they only apply to new shops.
Below we’ll share the questions we have and the red flags we see after hearing about this newest change on Etsy.
1. Adding an enhanced identity check to the shop set-up process
This one seems pretty straight forward, and is intended to prevent fraud, but we are not sure how much it will help. They are going to require new shop owners to upload a picture of a photo ID and then take a picture with their device camera to verify their identity matches the ID they listed. This kind of ID requirement is becoming more commonplace, though there are many issues in this process we are not a fan of, such as how many facial recognition programs have higher error rates for people of color. They have partnered with Persona for these ID verification checks.
Our main question is how exactly this will help stop the fraud that buyers and sellers face. Fraud is a huge issue on Etsy, but most of the stories we hear are not instances where someone made an Etsy shop fraudulently under a false name. Instead, there are stories of real people who made accounts under their name who are fraudulently reselling mass produced items as handmade.
It could help keep dishonest individuals from reopening a new shop if their first one is shut down, and that would certainly be an improvement. But Etsy would have to be doing a good job of shutting down shops for handmade policy violations for this to make a difference. We don’t see how it will prevent a factory from making a shop under an employee’s name to directly sell mass produced products as handmade on Etsy. It also won’t help prevent fraud about the source of items, because while it may verify the location of the shop owner, the location the item ships from is separate and won’t be verified by this process.
2. Introducing a shop set-up fee to support enhanced security and verification
Etsy says they will introduce a one-time set-up fee of $15 for new shops as a “nonrefundable upfront investment [to] help to ensure new shops are committed to running a business on Etsy.” We suppose this could cut down on the lowest level fraud, of people setting up a shop just to take money and close down. But it still does nothing about the main issues of fraud that sellers and buyers have with the platform.
The main red flag here is that Etsy says this fee will apply to “some new shops.” Which shops? How will those shops be chosen? Is it random? Is it based on risk factors? If, so what are those risk factors? Any policy that will apply to some people with no clear indication of how or why those people will be chosen is concerning.
3. Exploring changes to payment schedules for new shops
This change is just the reserve policy in disguise.
“We’re exploring changes to payment schedules for new shops until they have a proven track record of sales on Etsy. These changes may affect how long new shops need to wait for their funds to become available. “
A reserve payment policy on all new shops is not illegal. Amazon places all new shops on a reserve for a year in order to make sure a new seller isn’t going to take money from customers and then not be able to fulfill orders, either as an outright scam or because their legitimate business failed for some reason. If you take into account Etsy’s Purchase Protection Policy – their no-holds-barred, return-not-always-required refund guarantee for shoppers – this could simply be about protecting Etsy from having to cover a bunch of refund requests. But still, totally normal.
Except that Etsy won’t lay out the actual policy. After the reserve payment policy devastated so many sellers in Spring-Summer 2023, we talked extensively with a law firm that specializes in payment processing and payment reserves. Our understanding is that if a company is not going to have a standardized policy (all new shops, same schedule, same percentage), then they have to justify why the shops they chose are high risk and why they chose that percentage to withhold. Listen to our interview with the Global Legal Law Firms podcast to learn more.
Not only is the information provided by Etsy here extremely vague, but new shops won’t even find out their payment schedule until after they complete their setup and are in the Shop Manager.
Takeaways
If Etsy wants to change its policies for new shops, then it should tell us what those policies will be in clear, direct terms.
Our concern is that this is a test to see what they can get away with. If they institute a reserve just for new shops, and they avoid the outcry that happened over the summer because it’s only happening to new shops, they could start applying the policy to more and more shops – especially as genuine handmade, vintage, and craft sellers leave the platform, and new sellers, who either don’t know the risks or are just resellers, get slapped with more and more fees and other policies that keep their money from them.
These vague promises just show how little Etsy understands the real concerns of its sellers, the real fraud that hurts us, and the real ways these policies affect us.
Despite claiming that these changes are to “strengthen the seller community” they still refuse to take the most obvious step to understand how best to help their sellers.
They could just ask us.
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