Etsy announced that it will launch a new purchase protection program for sellers for eligible sellers starting on August 1, 2022.
This program will protect sellers from when the unexpected happens that is out of their control.
The new seller protection program will cover qualifying orders up to $250, including shipping and taxes when an item is lost in transit or damaged (see note*) during transit.
For orders to be eligible, sellers must be in good standing with Etsy (not violate any policies) and the shipment must meet the following criteria:
- Valid tracking information or shipped using a shipping label purchased on Etsy (recommended).
- An estimated delivery date was shown to buyers on the item listing page.
- Shipped on time within the seller’s stated processing time.
- Item was carefully packaged for shipping.
- Listing included accurate photos and description.
* Note: Etsy will only cover the first instance per calendar year on damage claims.
This new purchase protection program is secondary coverage for lower valued items and therefore, primary coverage from carriers or payment processors will have to be obtained first.
For example, if an Etsy seller sells a $15 item and sends the order with USPS Priority Mail, that service domestically includes standard insurance coverage of $50. In that case, the seller has to file the claim with USPS.
Etsy does not treat its new seller protection program like typical third-party (non-carrier) insurance. Generally, with third-party insurance options, senders have to first file with the carrier and the third-party insurance covers the remaining expense. This concept is known as stacked insurance.
For example, on an item worth $150 that was shipped with USPS Priority Mail, USPS would cover the first $50 and the third-party insurance would cover the remaining $100.
Also, when filing insurance claims with carriers, the carrier typically reimburses the cost of shipping (postage) as well.
However, a caveat that many sellers don’t realize is that carrier and third-party insurance only cover the seller’s cost of a product, not the price it was sold at.
This means an item that was sold for $200, but the seller only paid $50 to acquire or make it, the carrier and most third-party insurance would cover the $50 only.
That is different from Etsy which will cover the earnings (or sales price).
Another limitation that Etsy is placing on this new program is that it will not cover any part of an item with a total value (shipping and taxes included) that is over $250. To clarify this a bit, if a seller sells an item that is worth $300, Etsy will not cover the first $250.
With higher-priced items, it will be the seller’s responsibility to cover the item using a carrier or third-party insurance.
Etsy Purchase Protection Program – Details are Important
The details and limitations of this new program are very important. The headline that Etsy will cover order of up to $250 are basically correct, but there are some scenarios that could leave sellers holding the bag.
Sellers that use shipping services that do not include automatic basic insurance coverage such as USPS First-Class Package Service will be the biggest benefactors of this program.
Many other shipping services such as USPS Priority Mail, UPS Ground, FedEx Ground, and virtually any express level service will include some automatic insurance from the carrier.
In this case, Etsy is considering those insurance coverages primary, and it will not cover those orders under its new Purchase Protection Program.
To further illustrate a trap here with this new program, take a $150 handmade item that has a material cost of $50, but was shipped with UPS Ground the seller will have to file the claim with UPS, not Etsy, and UPS is likely only going to pay the material cost, not the cost of labor. In other words, the seller would only get $50 (plus shipping costs) reimbursed.
And there is another area of this policy that is a bit unclear. For example, if a seller sells an item for $240 with free shipping and sends it with First Class Package Mail (no carrier insurance), but the buyer pays the sales tax, is that item now no longer eligible as the Etsy policy clearly states that taxes are part of the total value covered.
It also appears the program will be available for international sellers as the company’s description of the program says, “qualifying orders up to $250 USD (or the equivalent of your local currency),” but with foreign exchange fluctuations, it seems it would make more sense to have specific threshold values for each country in their currency.
This new program is free for sellers, so there are no additional fees. Although it can also be argued that the fee increase from April offsets some of the costs associated with the new program, it still represents a new benefit for sellers.
However, sellers need to evaluate the details and consider how their selling prices and fulfillment options (carrier choices) may impact the eligibility of their items.
We raised some gaps here that are a bit nebulous in the Etsy description of the program and we will try to get some additional information from the company and update this post if we receive some clarifying details.
To learn more about the program benefits that will become available on August 1, click here.
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