Will Etsy Embolden Bad Buyers as It Promotes New Policy? - EcommerceBytes

Summary

Etsy executives told Wall Street analysts on Wednesday it would begin promoting the new purchase protection policy that's rolling out to the site on Monday, August 1st.

Etsy executives told Wall Street analysts on Wednesday it would begin promoting the new purchase protection policy that's rolling out to the site on Monday, August 1st.

"You'll see us get louder on these polices as we go through the rest of the year building up to the all-important holiday season," Etsy CEO Josh Silverman said in his presentation during the company's 2nd-quarter earnings call on Wednesday.

But will that embolden bad buyers to make claims knowing Etsy will issue full refunds for claims of non-delivery or not as described?

The June 6th press release announcing the new policy explained: "Starting August 1, buyers will receive a full refund for purchases on Etsy.com in the rare cases that they don't match the item description, arrive damaged, or never arrive."

Etsy told sellers it would not hold them responsible for refunds for orders that meet its requirements and earmarked $25 million/year toward covering the cost of refunds to buyers under the program.

Etsy acknowledged possible abuse of the program in a FAQ on this June 6th Seller Handbook article : "Q. Is Etsy managing buyer fraud? A. Yes, we'll monitor for buyer abuse of Etsy's Purchase Protection program to protect the seller community. Buyers who abuse the program could lose access to Etsy Purchase Protection."

But how? How will Etsy know whether to believe the buyer or the seller?

For example, with the new policy, Etsy tells buyers it will provide a full refund when an item doesn't match the item description - but it tells sellers it will protect them for orders that match the listing description and photos, where a buyer claims it does not.

So how does Etsy know if the seller actually sent an item that matches the description and if the buyer didn't receive an item that matches the description? If it can't make that determination, it may need more than $25 million/year (which is being funded by the April fee increase , according to Josh Silverman's response to a question from Piper Sandler analyst Edward Yruma during Wednesday's earnings call).

In May, Etsy's Chief Financial Officer Rachel Glaser had teased the purchase protection program at a Wall Street presentation (the Needham Technology & Media Conference) on May 16, 2022.

She said Etsy had a support process to support claims, "but for the most part, we send buyers back to the seller to figure out where their item went, and most sellers will work with the buyer to make it right. But not always. And so we're now investing in what we think is necessary to really enforce out trusted brand concept. That we have a buyer's back."

Silverman told analysts on Wednesday the new buyer protection program was not a "silver bullet." But, he said, "Brands that are known to have your back engender loyalty and frequency. We know that nagging voice in your head, "what if it doesn't arrive, what if I don't like it," can be a real friction point. The nature of Etsy is that you're buying an unbranded product from a non-branded seller. So we think that by backing it with the full faith and trust of Etsy can give you the confidence."

Etsy is hoping that by marketing new Purchase Protection program to buyers, it will result in more sales.

That's a good thing, as long as buyers don't see it as an invitation to get goods "for free." After all, if it were easy to resolve disputes between buyers and sellers, wouldn't Etsy and other marketplaces (eBay) have already perfected such a program?

The new program goes live Monday. When you start to see Etsy market the purchase protection plan to buyers, let us know what you think of its approach.

Will Etsy Embolden Bad Buyers as It Promotes New Policy? - EcommerceBytes
Photo Credit: EcommerceBytes

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