Etsy Scandal - Collective Lawsuit

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Etsy Scandal - Collective Lawsuit

Etsy Scandal - Collective Lawsuit

Our story

We started selling on Etsy in October 2022; despite gaining quick success related to customer satisfaction, we had a rough first six months with Etsy, primarily associated with profitability and accessing funds.

The first main problem we had with Etsy was that their fees where completely unclear, and as a new merchant, it would take a lot of trial and error to understand how they work.

When we started, we looked at the “Order fee” or “transaction fee,” which is 4%. We uploaded our entire catalog to the store and added 4% to the retail price.

Within the first month, I noticed that the payouts we were getting didn’t add up, and we ended up making severe losses for about 70% of our orders in the first 4-5 months.

The reason is that Etsy charges between 15 and 30% on all orders through various “Fees.” None of these are directly shown on the admin account. The only way to see the proper fees they collect is to download the order history in CSV format, import it into a spreadsheet, and then run calculations. More details on fees

are here⁠

So, despite not noticing it initially, Etsy would take up to 30% of orders, where we accounted for about 30% in profit.

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Above are screenshots showing our account performance. We only lack “On-time dispatch,” but this score is highly misleading.

We make made-to-order furniture with average orders of about $1500. We currently have 3 “unshipped” orders; they are all “behind schedule”; however, 2 of these were purposely delayed by the customers.

One of them was delayed as it took three weeks for the customer to pick a textile, which they postponed because the architect of their project needed more time, and the other order was for a small sink that the customer asked us to hold until her project was ready. The third order is delayed, the customer knows it and has absolutely no problem with it!

There is no way for sellers to “Update” an order’s lead time, all our customers are aware the orders haven’t shipped, and nobody except for Etsy sees it as an issue.

Fee breakdown for a $1500 orders

We sell a $1500 custom marble sink.

Accounted for profit (30%) : $450

We accounted for Etsy’s 4% fee, total: $1440, and our profit: $390 (Fees: $60)

CA Sales tax (Automatically taken by Etsy): 7.25%, total: $1300.8,

Our profit: $190.8 (This was our initially planned profit)

As you can see, our profits are already relatively low, but after several orders, we found out that Etsy deducted the following as well:

“Transaction fee” (6.5%), total: $1203.3., Our profit: $93.3 (Fees: $97.5)

Currency conversion fees, (2.5%) total: $1165.8 Our profit: $55.8 (Fees: $37.5)

In mid-2023, they also started automatically taking an additional 15% for “Offsite ads”, which they automatically enrolled all merchants in, without notification and without the need for them to consent.

They did this for 2 months before we found it out through accounting. So, using the example order above:

“Offsite ad” fee (15%), total: $940.8 , Our profit: $-169.2 (Fees: $225)

Total fees collected by Etsy: $420

This example is an exact breakdown of how Etsy fees work. So for the first 4-5 months, we would end up with a profit of $-169.2 on a $1500 order, while Etsy collects $420 in fees.

If you’re reading this, consider yourself lucky because someone told you exactly how the fee system works. They don’t clearly describe this anywhere, and getting an exact breakdown on the admin without downloading the data is impossible.

And note that these fees are what brings them in almost $3B in revenue and almost $2B in profit a year!

July 2023 - Etsy Payment Reserve Scandal

Explained in detail

here⁠

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In mid-2023, along with most Etsy merchants, Etsy decided to hold on to 75% of the revenue made through sales for 45 days after the order had been shipped.

They ended up holding on to about $4K before we could take action, but as soon as we were made aware, we stopped selling made-to-order items through Etsy as it was impossible for us to fulfill. If we received a $4000 profit of around 25% ($1000), we would need to invest $3000 in material, production, and fulfillment.

Once we shipped the custom item 4-5 weeks later, Etsy would pay us 45 days later with valid tracking. In other words, for a $4000 custom order, we would need to wait 90 days before Etsy sends us the order payment. We must bear all costs of fulfilling the order while Etsy immediately takes its 15-30% fee cut.

We then decided to open a Shopify store for the custom items we used to sell on Etsy and explained the situation to customers. Is this a reason why they suspended our account? Because we gave customers another way of placing orders?

14 months later, Account Suspended

Now, 14 months later, a customer contacted us saying they couldn’t purchase an item from a listing she had been discussing with us for the past few weeks. I went to check our store and noticed a banner saying that the store had been banned.

I immediately went to the help center, where I found a link to “Submit an appeal,” 2 hours later, I received the first email regarding the suspension.

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