Hundreds of small businesses at risk of being 'destroyed' as Etsy holds up to 75 per cent of earnings

Ceramics seller Rachel Collyer said that Etsy were holding £899 of her money.

This means she is unable to continue her business, as she cannot afford to buy any more materials to keep producing.

According to Etsy’s terms of service, placing accounts on reserve is done to protect buyers and make sure sellers can keep up with their orders.

The system has been put in place to “keep the market safe” and cover refund costs, according to the online marketplace.

Etsy’s system appears to incentivise sellers to address their backlog of orders and ship purchases, so that their full funds will be released to them.

Collyer has been a seller on Etsy since 2021. She says that she was only given a few hours’ notice before her money was put on reserve.

She said: “This is ruining my business – I can’t afford to buy any clay or glazes. We might have to move house because I can’t pay any bills”.

Some sellers on the platform said that two reserve periods were imposed on them consecutively.

A former Etsy seller, Joanna, was shocked at her funds being withheld.

"I have been selling [on Etsy] for four years," she said. "I woke up to a communication... stating that my account has been put on a 90-day period of reserve whereby they will hold 75 per cent of my sales.

"We have no cases against us, we have performed no malpractice in any way," said Joanna, who ran a bespoke underwear shop on the platform.

She said that even after following the guidance from Etsy on how to lift the reserve, her account was not restored to normal.

Joanna, 62, would have made £5,000 this month and is unable to take out a loan whilst she waits for the money to come in.

"I cancelled all my on-reserve orders and put my shop on vacation. I won't trade with them. I can't afford to," she said.

Another seller, Dan, has told the BBC that he was confused as to the reasons why his money was being held.

Dan makes and sells made-to-order wood furniture on the site.

“Etsy are holding around £7,000 of my money, leaving us to use credit cards and family loans to try and keep our business running and keep food on the table”, Dan said.

His partner Sam commented: “There is no ability to have the reserve lifted within 90 days, you must see out the full period. It’s destroyed my business”.

Many sellers wished to remain anonymous for fear of having their shops removed from the platform.

"If you challenge them or speak out, or don't accept their terms and conditions, your account becomes disabled," one independent UK seller told us.

Etsy has disputed this and has said it wouldn’t take action against a seller for speaking their opinions.

Hundreds of sellers are planning to “strike”.

The Small Business Commissioner, Liz Barclay, said Etsy's "level of reserve is new to us".

She added that while she had no remit across complaints made against non-UK companies, "there have been more complaints recently" made against the US-based firm.

"My big worry is that for hundreds of thousands of businesses, this is their only source of income. Anecdotally, we hear that many sellers are women or minority groups and they need this money to pay the bills," Ms Barclay said.

Amazon‘s level or reserve is much lower, at around 3% for established sellers until any disputes are resolved.