Etsy Raises Stakes In Apparel Resale Segment With $1.6 Billion Acquisition Of Depop

Etsy Raises Stakes In Apparel Resale Segment With $1.6 Billion Acquisition Of Depop

June 02, 2021 at 04:00PM

Etsy, the self-titled “global marketplace for unique and creative goods,” is set to add secondhand clothing to that list, as the Brooklyn-based platform dives headfirst into retail’s hottest growth segment.

In announcing its $1.6 billion acquisition of the 10-year old London-based resale marketplace Depop, Etsy said it aims to extend its reach into the rapidly growing resale sector, while also gaining access to a new pool of hip, young consumers, 90 percent of whom are under age 26.

“We are simply thrilled to be adding Depop — what we believe to be the resale home for Gen Z consumers — to the Etsy family,” said Etsy CEO Josh Silverman, noting the cultural fit and purpose-driven DNA the two companies share. “We see significant opportunities for shared expertise and growth synergies across what will now be a tremendous ‘house of brands’ portfolio of individually distinct, and very special, eCommerce brands.”

Etsy said the cash deal is targeted to close in the third quarter. The plan is for the site to remain independent, with the existing management team running Depop as a standalone business from its current base in the U.K.

Resale on a Roll

As much as the two platforms share a similar worldview of retail, the deal is, first and foremost, an investment in a stable and growing business.

According to the announcement, Depop did $650 million in gross merchandise sales last year, which generated approximately $70 million in revenue, tallies that both represent 100 percent annual growth. Depop is already the 10th most-visited shopping site among Gen Z consumers in the U.S.

Even so, Etsy said it plans to use its own expertise and financial clout to scale the business, calling Depop an early-stage business in which it expects to drive further growth and profitability, noting the startup’s existing resale partnerships with Adidas, Ralph Lauren and other fashion brands.

“We’re on an incredible journey, building Depop into a place where the next generation comes to explore unique fashion and be part of a community that’s changing the way we shop,” said Depop CEO Maria Raga, before highlighting the platform’s success in creating a new fashion system that elevates the trend of making new looks out of old clothes. “They come to Depop for the clothes, but stay for the culture,” she added.

The Community Effect

Etsy has already built a deep, loyal community of buyers and sellers within its core market of artisan craftsmen making niche handmade goods. While Depop will clearly coattail on the search and discovery skills and scale of its new $20 billion parent company, the Financial Times reports that Etsy is also looking to learn from Depop’s mobile expertise and social media savvy.

The deal comes amid a backdrop that has seen consumers actively shopping again and trying to refresh their looks after more than a year of isolation, amid unprecedented interest in everything secondhand. Whether it’s called resale, reCommerce, thrifting or refurbished, the trend is on the rise with multiple new, well-funded players. Those include apparel site ThredUP, high-end designer platform The RealReal, general merchandise site Poshmark and in-house programs like the one launched by Nike.

“This is a new emerging channel, so when you think about the current channels that exist out there, whether it’s stores or eCommerce or off-price or outlets, we think resale is another meaningful channel for these brands and retailers,” ThredUP CEO James Reinhart said on the earnings call last month, before pointing to Lululemon’s recent entry into resale with the launch of its “Like New” venture to re-sell its premium-priced workout clothes.

After more than doubling over the past year, shares of Etsy have fallen 30 percent in the past three months. Analysts, on average, expect Etsy to generate $2.3 billion in sales this year, up about 32 percent from 2020.