Selling on Etsy — The Long, Rattling Death March

Copyright © 2019 SYDNEY SCHUSTER — All Rights Reserved

My last post, Everything You Never Wanted to Know About What’s Wrong With Etsy, explains why your inventory there never moves. This one is about how Etsy rips you off. Be sure to read part 3: Etsy – Elevating Douchebaggery to New and Dizzying Heights, where we follow the money.

Worst eCommerce Nightmare Ever
On February 15, 2019, Etsy hoovered millions of unowed dollars from sellers’ bank accounts and credit cards. The first 87 sellers reporting to Etsy’s forum cited individual amounts ranging from $265 to $144,000. They collectively lost a half million dollars.

Said one seller: “I went from owing no Etsy bill to owing $1,200 in the blink of an eye. Even though billing said I owed nothing, I couldn’t print any shipping labels because it said I had to pay at least half of a $1,200 bill I didn’t owe.”

Below is a screencap of a post from Etsy’s forum tallying damages reported in the first few hours. Etsy provided no information and has since removed the post.

On February 16 Etsy pronounced the problem solved and said no more sellers would be affected, brushing off the impacted sellers as “a small group.” It turns out the original 87 sellers who reported the problem were just the tip of the iceberg.

By February 17, 101 sellers reported in the forum they’d lost $640,000. An additional 70 sellers reported Etsy thefts in their Facebook groups, along with more on Reddit, eCommerceBytes, and Twitter.

Five sellers interviewed by Newsweek requested anonymity, and many more didn’t report publicly for fear of retaliation from Etsy.

On February 18 an Etsy spox informed BoingBoing that “all cards have been refunded.” They hadn’t.

On February 22 Etsy issued another statement after five days of silence declaring the problem solved (again), even though sellers claimed otherwise. They were still reporting muggings on February 18, 19, 20, 21, 22, and 23. On March 3 a seller’s credit card was charged four times for a total of $1,231 for one $307 monthly bill. Etsy blew it off. Another seller whose shop was on hiatus since January said Etsy suspended it on March 9 and demanded $20 she didn’t owe.

Etsy claimed “approximately 0.1% of total active sellers had incorrect charges go through to their payment card on file.” Nobody but Etsy knows exactly how many sellers that is. Interestingly, this figure overlooks sellers without debit cards on file whose checking accounts were raided. “They did not charge my debit or charge cards. They took the money straight out of my personal bank account,” said one.

The 0.1% figure also excludes an underscrutinized contingent of buyers without bank accounts on file who reported being double billed for purchases or billed for purchases they never made, or their payments were accepted by Etsy for purchases never reported to sellers.

Some suggest the problem started before the February 15 deluge. An Australian seller claims this crap’s been going on since November 2018. A Better Business Bureau complaint claimed Etsy tried to charge their credit card for seller fees they didn’t owe in November 2018:

Another seller said: “Our Etsy payment account logs are so convoluted and cumbersome, I would be willing to bet a majority of Etsy sellers don’t even notice unless it was a really large amount of money.”

From Reddit: “I’d definitely notice a few thousand taken from my account, but what about a few dollars skimmed every month for a year? [See Dirty Foreigner fee, below.]

How much did Etsy steal? Well, 0.1% of Etsy’s 7.2 million sellers is 7,200 sellers. Let’s add the sellers with non-card checking accounts and the buggered buyers and crank up the total to .2%. Number of sellers who got shanked: 14,400. Dollar average from the first sellers who got shanked: $640,000 ÷ 101 sellers = $6,336. Multiply that by 14,400 and the amount Etsy theoretically plundered is — ding ding ding!


The cash Etsy scored on the service fees alone was (by my chainsaw estimate) $6,158,600.

Fun Coincidence! Etsy’s 2018 Q3 financial report states Etsy’s monthly rent at Jared Kushner’s Watchtower Palace of Pain is $6,666,666. (I am not making this up.) If Etsy punts, will it become the Satriale’s Pork Store of Brooklyn?

Etsy refused to reveal the number of people it burned. My estimate may be optimistic (which is what happens, Etsy, when you bullshit everyone about how many sellers you really have).

Look, even if we believe Etsy’s own murky figures (.1% of 2.1 million seller debit/credit cards, a figure nobody should believe because it’s murky for a reason and you know what it is), the “small group” of sellers Etsy robbed is still a minimum of 2,100. And .1% of 2.1 million sellers X $6,336 is still $13,305,600 that Etsy embezzled from them. And THAT doesn’t include checking accounts sacked directly, money stolen from buyers, bank interest Etsy collected on the haul, or approximately $1,796,250 in “seller fees” Etsy skimmed off the $13.3 million.

Did Etsy reverse the bogus charges? Lol! No. It applied a store credit to sellers’ Etsy payment accounts — minus 8.5% in “sales” fees on the credit card charges and 5% for the checking account withdrawals. Sellers’ “refunds” could be used only to pay Etsy fees. Their bank accounts remained empty and credit card accounts overcharged.

Sellers couldn’t recover the remaining cash because Etsy stopped ALL legit funds transfers from their Etsy payment accounts to their banks, repeatedly; transfers were still being reversed and/or canceled as of February 27, including normal deposits by sellers whose bank accounts weren’t tapped.

Fun Fraud Fact! “Refunds” sellers can’t touch is an old eBay trick. After losing a fee-overcharging class action in 2011, eBay paid claimants $30 million in refunds they could use only to pay eBay seller fees.

More Fun! The dollar amounts Etsy stole would’ve been exponentially greater had many charges and withdrawals not bounced. Some sellers were hit up to a dozen times.

One seller told BoingBoing their bank rejected multiple attempts by Etsy to withdraw tens of thousands of dollars. The story below is from a seller charged $4,532 twice:

Even if we cut Etsy some slack and chalk everything up to a sprawling, tragic yet ultimately profitable error, the company still needs to address what one seller called “forcing [sellers] to deal with the consequences because Etsy doesn’t want to pay the fees associated with a reversal.” Chargeback fees range from $25 to $100 per transaction.

Because this assholery started on the Friday before a federal holiday, sellers initially were told they’d have to wait until February 19 for their refunds because of the three-day banking blackout, during which time Etsy had access to their cash and they didn’t. Then on February 19, Etsy’s website was down for half the day.

Sellers are still waiting. One received this message from Etsy on February 19 instead of money: “…you’ll see the funds post to your bank within the next few days.” Another said on February 26: “I have received nothing except for a weak apology.” And on February 27: “Nope, it hasn’t been resolved. I chose to go the legal route and file a claim with my bank.”

Sellers lost their shit over drained bank accounts, overdraft and over-limit fees, credit card interest charges and cancellations, account flagging and shutdowns for suspicious transactions, bounced bill payments, potentially ruined credit ratings, and how f∪cked-up their 1099-Ks will be when refunds to their Etsy payment accounts are reported as taxable income. Etsy blocked angry sellers from posting in the forum and deleted unflattering comments.

From Reddit: “They tagged me with a $4,168 charge. What is weird is this: If they caught the error the same day, why didn’t they just cancel the pending charge? Instead they issued a credit to my Etsy deposit account. Then they reversed that and issued a credit to my card. So on my credit card statement it shows a charge for $4,168 and then a credit for $4,168. … Now it looks like I move money around like a drug dealer.”

Etsy said what happened was “an error related to a site change” and “a bill payment error.” A Reddit commenter said Etsy’s responses were lame damage control boilerplates that “deliberately miss [the point] and are dismissive as f∪ck.”

Others say it’s an inside job. It’s speculated Etsy did this to obtain an interest-free quickie loan. From the forum: “Sounds like somebody needed A LOT of money today and borrowed it without asking from a whole bunch of shops’ personal bank accounts.”

Now if I may point out the obvious, what has transpired here is NOT a “bill payment error.” It’s classic check kiting. One tweet called it Class B felony theft: “Multiple attempts were made on some people’s cards. A glitch doesn’t do that.”

From Reddit: “They wanted an immediate injection of extra cash flow (it had to be in the millions), felt entitled to it, capitalized on the holiday weekend that gave them 5 full days to replenish, using funds from purchases made during those days for refunds to sellers accounts. … and taking it against the will and without consent from sellers.”

“These are the desperate moves of a company that needs money to pay its bills,” said an eCommerceBytes commenter. “Etsy needed to cover payroll on the 15th [or alternatively, the rent, or an unexpectedly large tax bill] and this was the only way they could manage to do it. This appears to be a company right on the verge of bankruptcy.”

Blackmail Bonus! Etsy is forcing NDAs on sellers, who won’t be reimbursed for overdraft charges Etsy saddled them with if they violate the gag agreement.

Is it a coincidence this happened ten days before the Big Conference Call celebrating the release of Etsy’s 2018 annual report on February 25? I don’t believe in coincidences, so I’m going with no. Anyway, good luck to CEO Josh Silverman explaining to shareholders why Etsy had 7.2 million sellers in January and only 1.4 million shops (one seller each, per Etsy rules) on February 21.

Investor Conference Call Update! On February 25 Etsy claimed it miraculously went from having 1.4 million shops to 2.1 million active sellers in four days. 2018 revenue was up 47% year-over-year. Etsy shares rose 8% on the announcement.

Silverman et al also said they expect a big dent in 2019 gross marketplace sales. That’s kinda what happens when your customers flee. Etsy never discussed the stolen funds during the conference call, nor the $200 million revolving line of credit it obtained from Citibank that day.

From Reddit: “Of course they are not going to address the fact they took clean funds directly from sellers’ bank accounts and turned around and deposited them into their payment accounts that is reported as revenue.”

Lately there’ve been rumors that the juiciest thing for sale at Etsy is Etsy. Geekwire called Etsy — Amazon Handmade’s biggest competitor — a likely Amazon M&A target. eCommercebytes thinks eBay might acquire Etsy. Was the February 15 heist a dumb Hail Mary stunt to make Etsy’s bottom line look better to them? Such a windfall might fool takeover vultures into actually still finding Etsy attractive.

That said, it’s still hard to ignore how much this smells like plain old pump-and-dump stock fraud. (eBay, the CEO’s previous place of employment, is infamous for it, doing things like goosing share prices with sensational fake “news” — Google to buy eBay! Carl Icahn to buy eBay! eBay to accept Bitcoin! — followed by massive unburdenings of executive shares). On February 27, two days after shouting that revenue was up 47%, Etsy farted out a spinerific announcement about a phony green initiative (Etsy’s just throwing money at a for-profit consulting firm and freely misrepresenting it as environmental activism). Etsy’s share price on February 15 (“Error Day”): $50. On March 1: $73.

Are Etsy’s suits cashing out? On January 1, 2019, their executive golden parachutes were ramped up to include full salary and healthcare benefits paid for a year beyond termination. To bail with that and a 50% stock profit would be pretty comfy. Ask Michael T. Fisher, Etsy’s chief technology officer, who unloaded 46,874 shares for $3,046,810 in one day, February 26, and another 2,604 shares for $176,238 on March 4. Two Etsy directors, M. Michele Burns and Jonathan Klein, sold 40,000 shares each over two days in March after the share price spiked to over $70, Burns for $2,830,900 and Klein for $2,844,900, just before the shares dropped into the $60s. Etsy general counsel Jill Simeone couldn’t wait and got off the train at Willoughby, selling 12,866 shares in January at $47-50 each. You can track Etsy insider trading here.

eCommerce Hackarama
So could the theft have resulted from a hack?

You bet. It would explain why Etsy had to hustle so hard to replace a bunch of suddenly missing millions. And it sure would be embarrassing for Etsy to have to admit it allows a vast number of people, any of whom could be responsible, unfettered access to its databases: 874 employees (including 318 staff engineers); independent app developers; freelance bug hunters; and outside testers testing things like Facebook integration.
Fun Fact! Etsy applied for 124 H1B visas for guest workers since 2016.

Also, Etsy introduced a new forum format with DM on January 22, whereupon participants were bombarded with phish asking for credentials and personal info. It’s entirely possible many responded to scam messages that let in cybercreeps. A forum commenter who was robbed received a “weird email” afterward from “someone stating they knew my Etsy password and then QUOTED my actual password to me” to prove it.

Even before the forum DM sadness, Etsy’s user security was crap. A member who spent no time on the forum says her account was hijacked by someone who simply changed her email address. “I did *not* make this change. My account (which is linked to my credit cards and PayPal) is being used by someone else now. Why is there no step that involves sending a confirmation email to the *old* email address so that I can confirm before the account email is changed? This seems like a pretty fundamental security oversight. I’m honestly very surprised to see this in the year 2019.”

She never gave out her credentials and hadn’t even logged into Etsy for months, ruling out a password grab over public wifi. Such an unauthorized account change could only have originated from inside Etsy, or by someone who had access to Etsy’s database. Etsy wouldn’t respond to her until she went public with her story.

Of course, Etsy’s “bill payment error” could’ve just been caused by bad management and lousy programming.

From Reddit: “Who the Fork decided it would be a good idea to update the billing system on … the Friday before a holiday weekend! Lord, do these people not have any IT experience? … You do that shit at 3a on Tuesday, so when it borks (and it will bork) the fewest people are impacted, and you don’t have to wait 3 days to fix it.”

From Etsy’s forum: “This is a perfect example of cowboy coders that … don’t bother to debug before it's initiated ... without a supervisor approving everything." An Etsy engineer verified that. "We deploy our site code and our site configuration somewhere in the order of 60 to 70 times a day." Yeesh.

What the Incident Didn't Result From
Etsy's calling it a "bll payment error" doesn't change or hide what it really was: a massive theft. Etsy gave a vague explanation about how an update to its billing system "contained an error" related to credit card billing. It was brief and lame on purpose.

Be assured this problem was not caused by one little limited-range accidental coding error — a one instead of a zero, a plus instead of a minus, a line of code incorrectly cut and pasted or deleted — an explanation that overlooks all the other error events that took place simultaneously: withdrawals from accounts not associated with credit or debit cards, multiple withdrawals from the same bank account, double-billed purchases, not notifying sellers of paid purchases, all of which would have to be coded differently, and deliberately.

So just to clarify: On February 15 Etsy (or someone) withdrew millions of dollars in random unowed amounts from thousands of sellers' checking and credit card accounts. Etsy "refunded" the unauthorized withdrawals to a slush account Etsy owns and controls, instead of to the accounts from which the money was taken, effectively making it available to the sellers for one thing only: paying Etsy fees. Etsy prevented them from collecting their "refunds" while skimming 5% or 8.5% off them. On February 19 sellers began receiving threats from Etsy not to blab to the media if they ever want to see their money again.

A lawyer/Etsy seller said on Reddit that Etsy violated deceptive trade practices statutes and the federal Fair Credit Billing Act, noting that "a class action is absolutely the correct way to fix this."

At least one state attorney general is investigating Etsy. I'll update when I learn more. Feel free to contact me with any information you might have. If you got skunked, tell your state's attorney general. Etsy's contact info appears at the end of this post.

The truth is, Etsy doesn’t care if you never sell anything.
Tricking you into endless cycles of paying extra for nothing is Etsy’s bread and butter. More than half its revenue comes from services sold to sellers (not commissions from their sales).

Fun Facts! Etsy reported its 2017 marketplace revenue was up 14.1% thanks to Seller Services revenue growth of 28.7%. The half of its Q4 income not derived from seller services came from a $26.5 million tax benefit courtesy of the US Tax Cuts and Jobs Act.

There's no comprehensive list of fees on Etsy's website, so I'm posting them here. Let’s review the ways Etsy profits off your misery (besides stealing $91.2 million in bullshit charges)!

Service fees
● Etsy Standard — Sellers minimally pay Etsy a 20¢ listing fee, a 5% sales commission, a 5% shipping charge fee, and a 3.5%+25¢ payment processing fee. (BTW, Etsy jacked up seller fees 30-40% in 2018. Because hey, why not?)
💩 Because their listings won’t get traction any other way, sellers also pay fees for optional services Etsy swears will help but don’t:
Etsy Plus$20/month to buy discounted business cards and rearrange your shop.
● Etsy Premium — Standard + Plus + extra useless stuff for more money. Details TBA.
● Promoted Listings — a variable-rate pay-per-click (PPC) service that briefly shoves listings to the front of search results, when it works at all. In January 2019 Etsy disabled the function that turns off Promoted Listings, and sellers were charged lavishly for PPC fees they thought they'd canceled.

Fun Facts! It’s widely suspected that Etsy has hitbots that click on promoted listings to trigger PPC fees. Coincidentally, just before its periodic financial reports are due, Etsy deactivates title hoverability in search, forcing shoppers to click listings just to read more than “AMAZING RARE FANTASTIC…” in thumbnails — clicks that Promoted Listings subscribers have to pay Etsy for. Sellers use hitbots, too, to deplete the PPC advertising payout budgets of their competitors. Otherwise known as click fraud.

Fun Criminal Fact! Click fraud is illegal. No increase in sales during peaks in impressions or clicks is a warning sign of click fraud. Google and Yahoo have already lost lawsuits.

But wait, there’s more fees!
● Fees from manual-renew listings mysteriously converted to auto-renew.
● Fees to automate your social media posts.
Fees from 1969.
● Fees for web storefronts ($15/month). When Pattern was introduced in 2016, Etsy offered free! 30-day looksies to help sellers decide if they wanted to subscribe, and then — surprise! — billed them.
● Fees for internet domains you don't own. Sellers without standalone or Etsy Pattern websites report being billed a $13 "domain renewal fee."
● Fees for sales completely unrelated to Etsy. If you use the Square card payment processing app and ever activated Etsy on it, Etsy scores a commission off your craft show, antique fair, art show, flea market, garage sale, and Facebook sales, too.
● Fees for obsessive list renewals. Many sellers pay to renew listings DAILY to keep them on the first pages of search results (the success of which is debatable).
● Fee You Pay to Finance Etsy's Advertising Instead of Etsy. On February 25 CEO Silverman told investors about a new plan to charge sellers to advertise their Etsy shops offsite — ie, they'll pay Etsy for the privilege of driving traffic to Etsy. He called it "a rich opportunity going forward."
● Fee to manage sales taxes. In June 2018 the US Supreme Court ruled that online sellers must pay sales taxes due wherever purchases are shipped in the US. That's 10,814 US sales tax jurisdictions. So far, Etsy has managed to comply with eleven. That is not a typo.

If you think Etsy will calculate, collect, and disburse money to all 10,814 jurisdictions, don’t hold your breath. Etsy can’t even write search code that works.

Predictably, Etsy did find a way to charge you to calculate taxes for the other 10,803 jurisdictions your damn self using an Etsy partner app, TaxJar, to help you pay those taxes out of your net profits.

Fun Fact! Etsy is domiciled in Ireland because the corporate tax rate there is just 12.5%. (In 'Murica it's 21%.) Next time you gag doing your tax return, try to forget Etsy's effective tax rate is only 11.2%.

And Even More Fees!
💩 Dirty Foreigner fee: Etsy extralegally overcharges UK and other non-US sellers. All often pay unrequired VAT and always pay an extra .2% because of the idiotic way Etsy calculates foreign currency commissions. Etsy hoped they wouldn't notice. They did. In 2018 Etsy promised to fix the problem and refund overcharges. It didn't, except for a few sellers who directly complained to Etsy repeatedly. Some non-US sellers pay 33% in fees out of their sales.

💩 Double Dip fee: Sellers who have PayPal accounts report Etsy bills their PayPal accounts for seller fees they already paid through their Etsy payment accounts.

💩 VATshit Crazy fee: Etsy assesses and collects UK-style value added tax on USA-to-USA transactions. No explanation, no recourse. Good luck trying to get it back.

💩 Future fee: Etsy badgered sellers to offer free shipping throughout 2017-2018, claiming it would improve search placement. (It didn't. The real reason: Shipping costs built into sales prices jacks up gross merchandise sales numbers.) In 2019 Etsy tested Canadian free shipping, with disastrous results (sellers who can't absorb $17-20 postal costs were dropped from search). Now Etsy wants to sell annual free-shipping subscriptions to buyers, à la Amazon Prime, for $50, $100, or $150. That’s a lotta extra cash for Etsy but a mystery as to how it would benefit sellers, who'd still have to cover fulfillment their damn selves because Etsy has no pack-and-ship facilities like Amazon does. Plus who buys so much on Etsy in a year that it would cost $150 to ship?

💩 We Hass You Money fee: Etsy regularly confiscates sellers’ money without notice. One told Sitejabber how a buyer filed a non-receipt claim three months after purchase. The first time the seller heard about it was when “I find my account suspended and entire seller balance TAKEN by ETSY. They STOLE ALL MY MONEY!!!”

💩 Fascist fee: To sell to Germany you must buy a 200€ VAT license and report monthly to the German government, otherwise the German postal service may destroy your shipments. Okay, not Etsy's fault. But if you want to sell your Etsy stuff everywhere in Europe but Germany, you must delete the "EU" shipping profile and list the other 27 countries individually, then delete the "Everywhere Else" profile and list all the other countries in the world individually. Can you say "time suck"?

💩 Worse than a fee: In 2018 Etsy announced a new policy allowing it to keep sellers’ funds for 180 days without warning or explanation. A SiteJabber reviewer called Etsy "Perfect for sellers who like their money held."

💩 Worse than all of the above: In January 2019 an Etsy seller told Consumer Affairs how a buyer filed an “unauthorized purchase” claim and was refunded $650 for a purchase without returning it. Etsy fought with the seller and charged $650 plus fees to her credit card. The credit card company backed the seller and reversed the charge. The seller cancelled the credit card and closed her Etsy account. Nine months later Etsy got the seller’s new credit card number (she doesn’t know how) and charged her $650 again.

Fun Facts!
💩 If you close your shop, first transfer to your bank any money remaining in your shop account. I know that sounds like a no-brainer, but ex-seller Kelly of New York told Consumer Affairs that Etsy is holding her money for six months for no reason. Etsy refused to credit the credit the card, bank, or Paypal account of seller @JessMorelli1984 and said if she wanted her money, she'd have to buy an Etsy gift card or open a new Etsy shop.
💩 You can’t really permanently close your Etsy account or delete your credit card on file. Etsy needs it to keep saying it has 7.2 million sellers.

In other words, Etsy games the stock market the same way it manipulates seller behavior — with artificially inflated counts and fake stats. While Etsy claims to have 7.2 million sellers, only 2.1 million (as I type this) are deemed "active," meaning 5.1 million are sellers with defunct shops who fled (or tried to).

Selling on Etsy is like Carousel in Logan’s Run, where hopeful naïfs think they’re headed for spiritual redemption (or at least modest small business success) and get blown up instead.

To contact Etsy about a problem and/or file a crime report with law enforcement, here's the address you won't find on Etsy's website:

Josh Silverman, CEO
Etsy, Inc.
117 Adams Street
Brooklyn, New York 11201
718 855-7955 corporate
800 328-5933 customer support
844 659-3879 customer support
844 336-1040 customer support

Full disclosure: Yes, I sold on Etsy but now I don't.

Read part 1 of this story, Everything You Never Wanted to Know About What’s Wrong With Etsy.

More links to reports on this story:

Copyright © 2019 SYDNEY SCHUSTER — All Rights Reserved

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