How to Get Listings Back Up on Etsy After False Dmca

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Blog posts from Cindy Lou Who 2 - eCommerce & SEO, including detailed coverage of Etsy news. Help with running a small business.

Etsy Payment Account Reserves: What Every Seller Needs To Know

This is one of the messages that Etsy sellers with payment reserves will see on their shop dashboard.

It Isn't Just New Shops Or Vintage Sellers Who Need To Be Worried - This Could Happen To Anyone, Even If You Have Done Nothing Wrong

Etsy shop owners have been abuzz lately over having their earnings held in Payment Account Reserves - and it isn't a good kind of buzz.

When Etsy initially introduced payment reserves earlier this year, they were only for new shops. The announcement also stated that " [r]eserves help to keep a shop's balance from going into the negative if they receive a chargeback from a customer's credit card company." While holding most of the balance from each sale is quite onerous for some newcomers on Etsy, many established sellers understood that Etsy's two-fold growth in 2020 had brought an increase in scammers on the site, and that these policy changes were likely justified for at least a few shops. Some but not all new shops have been placed in reserves since then, and many have already had the reserve listed.

When Etsy expanded the program in April, they didn't emphasize the fact that older shops who take Etsy Payments would now be subject to reserves, stating only that "[s]ellers may have a reserve placed on their account if they recently made their first sale and have earnings above a certain threshold." The linked legal policy changes told a different story, however, noting that a "Reserve will be placed on your account if we believe there may be a high level of financial risk associated with you, your account, your business model, or your transactions." [my emphasis]

I suspect the vast majority of experienced Etsy shop owners do not believe their accounts have "a high level of financial risk", and therefore few said much about the announcement at the time. That has changed in the last several weeks, as Etsy has suddenly begun placing reserves on shops that have operated on the site for over a decade, have tens of thousands of sales and sometimes high yearly gross income, but have no history of fraud or high levels of customer service issues. Several dozen such sellers have communicated with me over the past few weeks, giving me a better picture of how random the process can sometimes be, and how no shop is truly safe from Etsy's reserve program. (Please note that none were willing to allow their names to be used, fearing retribution from Etsy, so some of this post may be a little more vague than would be ideal.)

What Happens to Established Shops with Payment Reserves?

Although Etsy's Help article on reserves gives examples of different reserve percentages, every business owner I talked to that didn't have a new shop had a 75% hold placed on their Etsy Payment accounts, with all Etsy fees, refunds and chargebacks being paid out of the remaining 25%.

Almost all of the sellers I've talked to have been told that they will be in payment reserve for 90 days, so long as no further issues arise; 75% of each payment received during that 90 days is held by Etsy for 45 days, or less if Etsy releases it due to tracking showing the order is on its way to the customer. All of this is automated, so if your tracking methods don't work with Etsy's systems, you will have to wait 45 days to receive any of that 75%. Proof of shipping, often available in countries that have very expensive tracking, is not accepted, and the customer leaving 5-star feedback doesn't seem to matter either (in the few examples I was given).

Sellers whose reserves are ended are seeing the following message:

Why has Etsy Put Well-Established Shops On Reserve?

According to Etsy's Legal Policy on Etsy Payments, the official criteria include:

• "How long you've been in business on Etsy (including how long since you've made your first sale)

• Details of your sales (including volume and average sales earnings)

• The extent of any backlog of orders from your shop

• Availability of shipping tracking information

• Types of goods you sell (whether they're ready to ship or made to order)

• Ratio of cases (disputes) opened by buyers in respect of your sales

• Suspensions or warnings already received

• Estimated delivery times; and

• Shipping status of active orders"

However, many of those examples aren't very specific and are clearly not triggering reserves for everyone (e.g., I ship over 90% of orders without tracking via Canada Post, but have no payment reserve), plus Etsy's policies are so voluminous and scattered these days that many sellers had no idea they had even come close to breaking a rule. Some factors are probably only matter if other conditions also exist.

So below I have put together the most common reasons I have seen sellers get hit with an Etsy payment reserve. The following list should not be considered exclusive. Most sellers just receive a generic cut and paste of the rules which does not indicate which rule applied to them, so sometimes we've been left guessing. Some report never receiving an email at all; their first notification is when they open their dashboard and see the banner. (I've had years of problems receiving certain Etsy emails to my Yahoo email account, so I can believe that some never show up.)

Intellectual Property (IP) Infringement

This is the most common cause of a payment reserve for the shop owners I have communicated with in the past few weeks: the IP owner filed a copyright or trademark claim against the seller, and Etsy removed the reported listings. Within 48 hours, the shop then goes into the reserve process. From some people, it was only one listing and they had never experienced an IP case before in any shop, while others did have previous issues.

Items removed by Etsy's Automated Systems

For years, Etsy has deactivated certain types of items automatically pending human review, and the list of reasons has grown a lot in the past year. Etsy recently added many brand names to the list as a way to sniff out counterfeit items, including many designer and luxury brands that are highly sought by vintage buyers: e.g., Chanel and Louis Vuitton, as well as less exclusive companies such as Adidas. I'm calling this "the counterfeit bot". Some vintage sellers have had to wait over a month for Etsy to review their listings and approve them for sale, and in that time, almost all have faced a reserve hold of 75%. The good news for these business owners is that Etsy does remove the reserve once the item is approved - but if you have to wait 5 weeks for the massively-backlogged Etsy Support departments to reply, can it ever be good news?

High Value of Outstanding orders relative to the shop's normal traffic

While I have seen a few examples that seem to fit this, it is hard to be completely certain, as the affected shops don't have particularly high numbers of orders, or a truly high total order value compared to their past years on Etsy. In 2020, Etsy began removing shops from search, and even placing them in vacation mode, when they had "too many" unshipped orders, especially if they were expensive items, yet none of the shop owners I spoke with ever had that happen, even though at least one previously had many more open orders than when the reserve was triggered. These shops have been on Etsy many years, and have thousands of sales with 5-star feedback and no other issues. All of their items shipped within their processing times as required, and they didn't describe any of the other common reserve reasons.

Other Possible Reasons

Since I have not been able to substantiate the facts in every case I have come across, we can't be sure that the following situations can currently trigger a reserve, but they seem to have affected at least one shop each. Those reasons are:

• shipping later than your stated processing time

• changing shipping methods from tracked to untracked

• selling "adult" items

• selling personalized items with at least one other factor in play

So, Why Should I care? I Follow the Rules

Now, I know what some folks are going to think about this: "risky" shops can't really complain about all of this, and that as long as you follow the rules (and have access to affordable tracking), this isn't going to hurt "good" sellers. In fact, some will be cheering that there is now a significant Etsy penalty for having even one intellectual property infringement. The rest of us don't really need to worry about this, right?

Unfortunately, that's not true. I've come across numerous examples that make no sense based on Etsy's own statements, and others that seem to be overkill, as well as a few that are confirmed errors by Etsy's automated systems. The truth is, anyone could be hit with a 90 day reserve at any time, even shops that appear to be as close to zero risk as possible. Let's look at why every Etsy shop owner should be very concerned about payment reserves as Etsy current applies them.

Anyone can file false IP claims

Filing an intellectual property takedown, especially for copyright, has been a common way to sabotage competitors on Etsy for many years now. Etsy's systems automatically take the items down, even when the claim is ridiculous on its face. For example, earlier this year some one filed false copyright cases against numerous shops that sell search engine optimization books and critiques. (My second shop was one of the dozens affected.) The takedowns were clearly factually incorrect, as they claimed copyright infringement but submitted links for trademark registrations (that did not apply to the words claimed). They should never have got by Etsy Legal, but embarrassingly, they did.

There have already been innocent shops slapped with a reserve due to bogus IP cases. In one case, we're waiting to see if Etsy removes the payment reserve once the 10 day waiting period for a DMCA counterclaim goes through. Another shop convinced the rights owner to withdraw their claims, but the reserve was not lifted. For complaints that are more difficult to for non-legal professionals to handle, unfortunately not everyone can find or afford a lawyer to challenge the fake cases, plus legal remedies almost always take longer than 90 days.

Once the word gets out, this will be weaponized.

Etsy search showing items without all of the search terms has led to erroneous IP claims

A search for my jewellery shop name on Etsy; only one of the items is mine, and none of the other listings uses that name.

As I reported earlier this year, Etsy search shows many items in the search results that do not have some or all of the queried terms. Just look through your search analytics to see all of the inaccurate keyword phrases your listings now show up for, or check out the threads with sellers complaining that other sellers are showing up for the poster's shop names (e.g., here and here). This has led to some trademark claims being filed against shops that never infringed. Many people enforcing IP registrations will either manually search Etsy for violations, or will have a bot do it. Since some site visitors can no longer see all of the tags on a listing, they may have no idea that the shop owner never used the protected name or phrase. It's an innocent mistake.

Etsy has told sellers who complained about other shops showing up for the first shop's names that nothing can be done to change this; it is the way search works now. That means any business owner could be in trouble with a trademark owner who files a takedown - and it won't be anyone's fault, except Etsy's. Then the shop will be hit with a payment reserve while they try to clear their name.

Etsy continuously changes its prohibited items and related bots

The situation described above regarding the counterfeit bot has affected many honest sellers of legitimate vintage branded goods, without any warning. One day, items they had listed before, or items they had just renewed, were deactivated by Etsy's automated systems. It isn't the only example of this type of removal. Goods have been (temporarily) removed for years for using prohibited words such as "Cuba" (despite being legitimate vintage or artistic items about Cuba, as opposed to items shipping from Cuba).

Another example: early in the pandemic, Etsy was removing listings that used the word "mask", which caught sellers of facial treatments and vintage goalie memorabilia, among other things. Just a few weeks later, Etsy sent every shop owner an email telling them to make fabric masks to sell if they had the skills, but some of those masks still ended up removed by the medical claims bot - because the description stated they were "not making any medical claims."

One business owner who contacted me had an item removed by the counterfeit bot, even though it wasn't a designer or brand name. The problem? The model number used in the tags just happened to include the initials of a famous designer whose items are subject to the counterfeit bot. There was really no reason for the seller to know this; they don't sell designer vintage, and there was nothing wrong with the listing, which has since been reinstated. A coincidence of a few letters resulted in a reserve hold on their payments.

In short, it's hard to keep up with Etsy's whims. We don't know what the next taboo word is going to be, or if Etsy's automated systems will identify it correctly. We do know that Etsy will definitely slap a reserve on you if they remove one of your items this way.

Etsy is riddled with faulty automations which they don't fix when notified

This topic needs a lengthy blog post of its own, but I will try to keep it short for the moment.

It seems that all of these payment account reserves were triggered automatically, but Etsy has a less-than-stellar record with this type of programming in the past few years. For example, let's look at the rollout of their Star Seller Program (SSP) this summer, a massive technical embarrassment for a company that loves to brag about its technical achievements. Both the Message response rate and the "ships on time" score have numerous bugs in their calculation, only some of which have been fixed months later. I reported the issue about Message response rates being incorrect in January, and again after Etsy acknowledged some errors in the Star Seller Program, and have been told that the false "typically responds within a few days" notice on my listings cannot be changed, as it is all automated. So Etsy is still driving buyers away from shops by incorrectly stating the sellers provide poor customer service - and Etsy can't/won't/doesn't know how to fix their issue.

Other merchants have complained of order processing times being incorrect on their listings for well over a year now, and of Etsy telling people they are shipping late when they are in fact always shipping on time. Then of course there are the times that Etsy puts the wrong date on shipping labels and can't correct the problem in Etsy's records after the fact. Message response rate and shipping on time are both requirements under Etsy's Seller Customer Service Standards, and failing either can contribute to Etsy putting a payment reserve on a shop, or even worse. The fact none of these automations work correctly means some sellers are unfairly penalized.

Tracking is key to assessing both shipping on time and in getting money released from the reserve, yet there are numerous problems with the way Etsy systems update tracking. For example, if you ship two orders in the same package, one order will often permanently show as being "pre-transit". That bug has been reported for several years, but Etsy has failed to fix it. Other times, the postal service simply won't scan the package at each stage, so items that have already been delivered appear to be "pre-transit" when checked on Etsy. Shop owners in these situations won't see the rest of their money for at least 45 days, even if the carrier's site shows the item as delivered; Etsy only relies on its own flawed automated systems.

Some Sellers are far more affected than others

For various reasons, the payment account reserves place uneven burdens on shop owners around the world. That can be based on what they sell, where they live, the resources available to them, and the mistakes Etsy makes.

Let's start with the high percentage (75%) of seller income that Etsy is holding for up to 45 days. The math works as follows: for every sale made, Etsy charges a minimum of 8% in payment processing and final value fees (depending on the home country and the buyer's country), but there are set fees for listing an item and the payment processing of each order, so the actual amount is always more than 8%. If the sale was made through Etsy's Offsite Ads, the seller will pay an additional 12 or 15%, meaning that they may have over 23% taken in fees and have no money left to deposit, and of course any shop that has ever made over $10,000 USD in a 12 month span cannot opt out of that 12%.

Then there are people who pay for Etsy Ads on the site, or those who use shipping labels through Etsy. Those fees also come out of the 25%. Members who sell large or heavy items may end up with shipping label expenses that are close to the item price, meaning they always owe Etsy more than 25%. Numerous sellers told me that they had not received any of their money from Etsy since being put on reserve, since any fees above the 25% are drawn out of the 75% reserve; by the time the reserve money is 'released', it has already been spent on fees.

A few people who contacted me had no reserve money released, despite shipping tracked orders several days ago. Sometimes this was due to Etsy not recording the item as having shipped, but other times Etsy's records showed several scans. Sellers who have been on reserve for a month told me that Etsy seems to be waiting almost until the order is delivered early in the 90 days, but the money is released more quickly as the reserve period goes on. Shops that have a long processing time (perhaps due to the intensive work their products demand) also get caught here, because they usually have at least a few weeks of orders in their production queue before being slapped with a reserve. That drops their cash flow to zero unless they process the new orders first and ship them with tracking, making the previous customers wait even longer.

The lack of Etsy Support responses for some shops is also leading to inequities, and often that is for the shops who really haven't done anything wrong. Etsy is currently taking over 5 weeks to reinstate some of the non-counterfeit items the bot took down, and those sellers are stuck with a reserve until Support takes a look at the item in question. For reasons I cannot determine, other sellers can get Support to reinstate their listings within a week. No one knows which group they will be in until it happens to them. Etsy Support has become so hard to access that shop owners regularly start petitions at Change.org requesting basic improvements; see here and here for examples.

The reserve rules also have a harsher effect on non-US sellers, many of whom do not have access to any tracking that Etsy's system will read, for example, people in Colombia. Still others live in countries where tracking is far more expensive than untracked mail; tracking my small Canadian orders costs 5 to 10 times as much as untracked shipping, and very few buyers opt to pay for it. Meanwhile, Americans can get tracking on every type of order, even envelopes with greeting cards in them, as long as they use Etsy Labels. There is really no reason that Etsy cannot accept our proof of mailing (detailed receipts from the post office, stamped Customs forms etc.) in lieu of tracking - except that they want everything automated, completely removed from human involvement.

Needless to say, when a microbusiness has even some of its cash flow halted, that can cause severe financial distress. While it is usually suggested that self-employed people keep enough money aside to pay 6 to 12 months of basic expenses, we know that more than half of Americans do not have enough money saved to cover the 90 days an Etsy reserve will last, and one in four have zero emergency savings. Etsy's 2019 census of sellers found that "44% of sellers use income from their creative business to cover necessary household expenses like bills, rent, and food." In the past two weeks, I have talked to so many business people for whom Etsy is their main or even sole income, who now do not have any money to pay their rent, mortgages, credit card bills or medications, because Etsy is holding 75% of what they earn. There is also a trickle-down effect as some also need to lay off employees.

CEO Josh Silverman has bragged that:

"…we think Etsy is the easiest path to entrepreneurship for anyone," Silverman added. "With 20 cents and creative energy, you can start a shop on Etsy and you can run it from your living room."

but that is simply no longer true. Many new shops have a reserve now, enough to slow their growth significantly, or even destroy them entirely. Most of the reserves are too large, held for too long, or simply unfair based on whatever algorithm Etsy is using to determine that you have too many open orders compared to usual.

What Can Shops with a Reserve do to improve their cash flow?

Currently, the only reserves that Etsy is lifting before 90 days are those due to the counterfeit bot and other incorrect removals, so if you are in that situation, you have to try to get Etsy to review the removed listing/s. This link goes directly to Support. However, many people have had more luck with escalating their tickets through live chat or a callback, and some are doing it by contacting Support as if they were a buyer instead of a seller, testing any of the options until they bring up live chat or a phone call back. I think Etsy might be on to that trick now, though, as many sellers report waiting in Support queues without being able to open a ticket in the past week or so. You can see if your previous tickets are still open here. Don't give up!

If your reserve was caused by intellectual property claims or some mystery "risk" factor, Etsy is currently not ending those reserves early, no matter how much you beg. You might benefit from legal help; if you can't afford it, there is often pro bono legal support available for artisans and small businesses in many areas. Here is a somewhat out-of-date list for the US; I have an unpublished list of lawyers that can help in various other places, so please contact me if you can't find anything local.

To reduce the reserves impact, try to cut your Etsy fees as much as possible, so that more of the 25% reaches your bank quickly. Buy your shipping labels outside of Etsy (unless you need the cheap tracked envelopes only available through Etsy's US labels), cut your ad spend, and cancel Etsy Plus and Pattern. If you are permitted, opt out of Etsy's Offsite Ads, as the 15% charged to the non-compulsory group will eat most of your 25%. A few sellers have opted to go into vacation mode on Etsy, or remove heavy and expensive items that will cost them more to ship than 25% of the total sale, because they can't afford to have that money tied up.

If you sell anywhere else, now is the time to ramp that up and increase your other income.

I am concerned about Etsy's reserve program - what should I do?

• First and most important: share this post around, in forums and on social media. Make sure every Etsy seller knows the risk. Getting media attention would also be useful, as Etsy does sometimes reverse their mistakes once they are widely publicized.

• Tell Etsy what you think by filling out their survey on reserves.

• Don't list any designer vintage or major brand vintage on Etsy. Even experienced sellers can't predict what is going to be caught by the counterfeit bot. There are many other places to sell vintage, such as eBay, Mercari, your own website, Instagram and Facebook.

• Don't promote your Etsy shop anywhere, or buy outside ads for it. If your promotion is successful and you get a rush of sales, Etsy may deem your shop risky and place a reserve on it. (Remember, some shops are being dinged for having a slight uptick that is still far less than their historic highs; the new calculation is much stricter than the one used to deindex and suspend shops with too many outstanding orders.)

• Make the time to read through Etsy's seller policies again, to make sure you haven't missed anything. That's difficult, of course, because Etsy Seller Policies are now a haphazard maze with many links hard to find. Don't ship late, don't reply to Messages late, and needless to say, don't infringe on someone else's intellectual property.

• Do not rely on Etsy for all of your business income. I've been saying this for years, and it is now more true than ever. It broke my heart to have to talk to so many people in such a short space of time that are truly regretting never opening a website, or selling on eBay etc. Set aside an emergency fund if you can.

What does all of this mean for the future?

It's very clear that there are lots of types of sellers that Etsy doesn't really want any more. This started with the shop suspensions in April, and the banning of new shops from countries that do not have Etsy Payments, even if the business owner already had other successful shops on Etsy. Etsy stated that "new shops are temporarily unable to onboard to Etsy. As of April 26, 2021…" [my emphasis] but that was 6 months ago. Half a year is not temporary.

Etsy is also pushing away vintage shops, merchants outside of the US, sellers of heavy items, and low-income people without a savings safety net. Sure, they are also scaring many scammers, infringers, and complete incompetents, but they could have drawn that line much more carefully, and could do more to ameliorate the effects of the reserve on particular individuals. In some examples, Etsy's heartlessness is shocking (and I thought I was long past being shocked by Etsy). Completely oblivious Support staff saying "oh, this isn't a punishment!" then ending their email with the hashtag #StandWithSmall is beyond ironic, given that the company is, in effect, standing on top of small businesses, and crushing them. Etsy has apparently decided that their catch phrase "Keep Commerce Human" should be replaced with "Keep Commerce Automated, American, and Financially Well-Off".

There are rumours about Etsy surveying sellers about how they would handle a reserve, and about sellers being told that everyone will eventually be placed on a reserve. I am unable to substantiate any of those rumours, but a reserve for everyone would not surprise me in the future. I can't imagine they are going to be able to put it at 75% for 90 days, though, as that is ridiculously unnecessary, and would likely trigger the largest exodus of Etsy sellers to date.

This post will be updated with any new developments, so please contact me if you have a story to share.

UPDATED: October 24, 2021.

How to Get Listings Back Up on Etsy After False Dmca

Source: https://www.cindylouwho2.com/blog/2021/10/22/etsy-payment-account-reserves-what-every-seller-needs-to-know

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