Another day, another payment problem

This time, it’s online marketplace Etsy facing controversy.

Etsy, an online marketplace, is facing a boycott by sellers over withheld cash it’s holding for its new reserve system. In response, Etsy has said it is “substantially decreasing” the amount of money it would put on hold, but did not state the new rate or time frame.

Some sellers had 75% of their takings frozen for 45 days, leaving them struggling to trade and pay suppliers.

Etsy allows independent sellers to set up their own shop. It specialises in bespoke items, handicrafts or things not usually available in high street shops. It has six million sellers worldwide and just under a million based in the UK.

It’s a US-based company which trades its shares on the NASDAQ stock exchange in New York, where it listed its stock in 2015. Etsy’s shares are currently trading at $99 – a far cry from an all-time high of $294 during the Covid pandemic in 2021. Its biggest shareholders are major financial institutions such as Vanguard Group, BlackRock and JP Morgan.

The problem created for sellers

A reserve system it introduced meant some sellers had 75% of their takings frozen for 45 days, leaving them struggling to trade and pay suppliers. Etsy also charges sales commission fees and advertising, which came out of the remaining 25%, leaving sellers with little.

“A lot of people set up in the pandemic and Etsy is their only source of income,” Small Business Commissioner Liz Barclay told the BBC. “Women, ethnic minority and neurodiverse people found that Etsy’s way of working really fits them and their lifestyle – they are going to find it really very difficult to carry on.”

During the strike, sellers would put their store on ‘holiday mode’, stopping people from purchasing.

What can be done?

AAT has long campaigned for three simple changes to the UK payment regime:

• for the Prompt Payment Code to be compulsory for large organisations
• for the maximum payment terms under the Code to be halved from 60 to 30 days
• for the SBC to have the power to impose financial penalties on those who persistently pay more than 95% of their invoices in more than 30 days.

AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.