What should I do on Etsy if a customer's inbound package is damaged in transit?

Hi! In this situation I’d treat the Etsy order as “not started / waiting on customer materials”: keep the order open for now, update the ship-by date (with the buyer’s agreement) so you don’t go late, and only cancel/refund if the buyer can’t (or doesn’t want to) resend an item. There isn’t really a true “pause/hold” status on Etsy orders, so your best “on-platform” tool is communicating in Etsy Messages and adjusting the ship timeline (or canceling if you can’t fulfill).

A few important points (that help you set expectations nicely):

• Since the buyer shipped the item to you, they’re the one who typically has to deal with UPS (they’re the shipper on that label, unless you bought/provided the label). Etsy’s seller protection language also generally treats buyer-sent items for modification as the buyer’s risk while shipping to you, so you’re not expected to refund for something you never received.
• Don’t mark anything as shipped/completed and don’t start work (obviously) until a replacement item is actually in hand.

What I’d do (simple, buyer-friendly workflow)

1. Reply once, clearly, in Etsy Messages: you didn’t receive it; UPS shows “damaged/contents discarded”; you can proceed as soon as a replacement arrives. Ask them what they prefer:
   • Option A (most common): they file the UPS claim and resend another item, and you continue the Etsy order.
   • Option B: if they can’t replace it, you cancel and fully refund the Etsy order (since you can’t perform the custom service without the item).
2. Protect your ship-by date: ask the buyer to confirm in writing that they want to wait/resend, then update the order’s ship-by date and add a short note like “Waiting on replacement item due to carrier damage on inbound shipment; buyer approved new timeline on (date).”
3. Set a reasonable deadline so the order doesn’t sit open forever (example: “If a replacement isn’t on the way within X days, I’ll go ahead and cancel/refund and you’re welcome to reorder when ready.”). Pick a timeframe that fits your workflow.

When to cancel/refund vs wait

• Wait / extend ship-by if the buyer can resend soon and you still have enough time to complete the work once it arrives.
• Cancel + refund if (a) the buyer can’t replace the item, (b) the timeline will blow way past what you can comfortably manage, or (c) you’re getting close to the latest ship-by Etsy will reasonably allow you to set for that order. In that case, the cleanest path is: refund now, and have them place a new order when the replacement is actually en route.

One more practical tip: if you want to reduce this happening again, consider adding a line to your listing description/FAQ that inbound shipments should be packed well and insured, and that the buyer is responsible for inbound shipping to your studio (you’re responsible once you ship the finished piece back).