New Economic Realities   //   March 16, 2023

‘Icing on the cake’: Silicon Valley Bank fallout fuels further distrust among Etsy and some of its sellers

There is a growing sense of distrust among some Etsy sellers after the marketplace experienced payment delays linked to the Silicon Valley Bank collapse last week.

At least two sellers Modern Retail spoke with are considering shutting their stores, including one as early as the end of March. They say this is due to an accumulation of factors, including but not limited to the Silicon Valley Bank fallout that left sellers uncertain about the future of their payments when the institution collapsed on March 10. Etsy used Silicon Valley Bank to issue payments to some of its U.S. sellers, as noted by COO Raina Moskowitz in a company blog. An Etsy spokesperson told Modern Retail that only 0.5% of its active 5.4 million sellers were affected by the Silicon Valley Bank collapse and their payments “were delayed by one business day.”

But the Silicon Valley Bank fallout, according to sellers Modern Retail spoke with, was just the latest snafu to add to their list of mounting concerns. The platform has seen a huge influx of non-handmade items that are flooding the market, which has forced a lot of sellers to bring their prices down to fight competition. In addition, the company has been pressuring sellers to offer free shipping, which many said is just not feasible for small businesses. That, among other mounting fees, led some Etsy sellers to participate in a strike last April — though not everyone’s concerns have dissipated since then.

“My issues are overall [is that] it doesn’t give me a lot of trust in how they are operating at this point, [now] that so many people have had [payment] issues,” said Kelsey, a seller of festive clothing on Etsy based in Canada, who asked to be referred to only by her first name.

In an emailed statement, Etsy said it started processing payments on a normal schedule on March 13. “While the number of impacted sellers was relatively small, we take any disruption to our seller community very seriously,” Moskowitz wrote in the blog post. Etsy said it also provided sellers with relevant updates around the Silicon Valley Bank situation starting Friday including emails, notifications and posts in seller forums.

“Our teams worked around the clock to implement a solution and, as a result, we were able to issue the deposits the following business day. We do not expect the payment delay to have a material impact on our quarter ending March 31, 2023,” wrote an Etsy spokesperson.

But to sellers like Kelsey, “the SVB issue is just further evidence that it’s time for me to move from the platform.” She said that March will be her last month with Etsy, because of “the many issues sellers have been facing over the past couple of years.” Kelsey said she had previously sold through Etsy for 14 years, but is planning to sell directly through her own website going forward.

“I know many people who still don’t have their money at this point,” she said. Kelsey, who spoke with Modern Retail on Wednesday afternoon, said her friend who sells art and aromatherapy oils on Etsy has still not received her money.

An Etsy spokesperson told Modern Retail the company started processing payments on Monday that had been delayed by the Silicon Valley Bank collapse. And, that the company is processing payments normally now. The company also noted that it can take several business days for funds to be available in a seller’s bank account, which can also be dependent on a sellers bank.

“A lot of people have been facing issues of seller fees and payments and they just keep taking money from sellers. And now to add to that not being able to pay them is causing a lot of distrust in where the money is going and and how they’re operating as a business,” Kelsey added in an interview with Modern Retail.

Illinois-based Etsy seller Joanna Marie, who sells prints on demand, was one of the sellers whose payments were delayed because of the Silicon Valley Bank collapse.

“Last week, sellers received emails that payments are delayed. I tried contacting the company and they were overwhelmed with support tickets,” said Marie. An Etsy spokesperson said the company received a relatively low volume of support tickets around this issue and responded to them within normal processing times

On Monday, Marie said she complained on Twitter “and magically I received a message from Etsy that my payment is on the way.”

Still, “it’s uncertain as to how sellers will trust Etsy in the future,” Marie said. “Etsy provides a good platform to sell on, but it was scary not knowing if I would receive pay for sales I already spent money on.”

Renee Donohue, a long standing beauty and wellness products seller on Etsy since 2014, said she had also been considering shutting her store on Etsy. While Donohue’s seller funds were not affected by the collapse of Silicon Valley Bank, she said Etsy’s lack of communication was very concerning.

“We kind of found this out through other sellers sharing this information on social media. And we were concerned because it’s been a very slow winter, probably due to the economy — and we do have other means of selling besides Etsy. So we made a decision to shut down our Etsy website… just to see how it would all play out,” explained Donohue. As a result, she put her Etsy website on “vacation mode” this past weekend on Saturday, but turned it back on after she received her seller disbursement earlier this week.

Etsy reported gross merchandise sales of $13.3 billion at the end of the fourth quarter. In 2021, sellers on Etsy sold around $12.2 billion worth of goods, up from $5 billion in 2019.

“Just having the anxiety not knowing if it was going to hurt us or not. That is kind of the icing on the cake with all the other problems,” said Donohue.

Donohue listed some of the concerns she has dealt with as a seller, including Etsy’s rising fees and demand for free shipping. Some merchants went on strike to fight against the company’s proposed adjustments and higher fees in April of last year. “Fees have been increasing rapidly and that’s not good for small businesses. They [Etsy] try to get you to also provide free shipping and discounts and everything so it almost feels like you’re working for free,” she added.

Donohue added she was thinking about shutting her store down permanently by June because of these many different problems sellers face, “but this [Silicon Valley Bank] was kind of the icing on the cake because there was a bit of uncertainty, whether we were going to receive our seller disbursement or not, which causes anxiety.”

Bella Stander, a publisher of maps, guidebooks and other items on Etsy, who was part of the Etsy seller strike last year, said her problem with the platform is that it has opened itself to selling mass produced goods and “there’s no customer service for sellers. You cannot reach a human.”

An Etsy spokesperson noted that the company expanded its live chat help center chat support to be available to all sellers 24 hours a day. And, that most sellers wait less than one minute to be connected with an agent.

“You’re allowed to resell stuff, that becomes like eBay… They’ve got all this mass produced stuff coming in from overseas with knockoffs of handbags and shoes from China too, so it’s not just for handmade and DIY goods anymore,” added Stander.

Etsy said it has quadrupled investments in the trust and safety of its marketplace and spent $50 million in 2022 towards these efforts. “We added sophisticated tools to help automatically detect problematic listings and we have dedicated teams that work to remove infringing items,” an Etsy spokesperson wrote in an emailed statement.

This story has been updated to add additional information from Etsy about how many support tickets the company received in response to issues with deposits impacted by the Silicon Valley Bank collapse. And, what customer service support the company offers for sellers.

Gabriela Barkho contributed reporting to this story.