Online crafts marketplace Etsy announced Wednesday that it’s buying the fashion resale website Depop for $1.625 billion in a bid to bolster its wallet share among Gen Z shoppers.
Founded in 2011 and headquartered in London, Depop is a fast growing apparel resale marketplace popular among the under 26 crowd. In 2020, Depop’s gross merchandise sales (GMS) increased 100% year-over-year and the company’s revenue climbed to $70 million. Etsy said Depop is the tenth most visited shopping site among Gen Z consumers in the US.
Etsy and Depop share a number of similarities in terms of business models and strategies. Both companies are built around individual sellers and unique merchandise, and both companies utilize a two-sided marketplace business model. Etsy also highlighted Depop’s capital-light operating structure and financial characteristics as further strategic rationale behind the acquisition.
Looking at the bigger picture, it’s clear that Etsy sees Depop as a means to long-term relevance in the apparel sector. Gen Z shoppers are quickly replacing Millennials as the premier target demographic for emerging brands, and Depop already has the loyalty and name recognition among that age group, with 4 million active buyers and 2 million active sellers globally in 2020. Etsy’s active seller count sits at around 4.7 million, with roughly 90 million active buyers at the end of its most recent quarter.
“We love Depop’s rapidly growing GMS and loyal and engaged customer base, excellent user engagement and unit economics, opportunities to expand value added seller services, clear path for geographic expansion, and highly scalable, ‘capital light’ operating model,” said Etsy CFO Rachel Glaser. “We’re excited to build a ‘house of brands’ where the whole is greater than the sum of its parts.”
Following the close of this transaction, Etsy Inc. will operate three differentiated e-commerce brands: Etsy, Reverb, and Depop. Etsy plans to operate the marketplaces independently, while utilizing Etsy’s existing capabilities in product, marketing, technology, and customer support. Depop’s existing leadership team will remain in place once the acquisition closes, Etsy said.