Online marketplace Etsy has announced plans to acquire Depop, the Gen-Z favourite second hand fashion app, for $1.6 billion in a deal expected to close in the third quarter of 2021.
The move is the latest sign of growing interest in the burgeoning fashion resale market, expected to be worth $51 billion in 2023, according to market research firm Global Data. Resale was already a fast-growing space, but the pandemic sent the buying and selling of second hand fashion goods surging.
Earlier this year, both Poshmark and ThredUp went public, while Vestiaire Collective and Vinted, which last year acquired competitor United Wardrobe, raised nine-figure funding rounds. Brands including Gucci, Alexander McQueen, Levi’s and Ralph Lauren have also announced the launch of resale initiatives.
Depop has posted 100 percent year-on-year growth over the course of the pandemic, with a revenue of $70 million in 2020. During the same period, gross merchandise sales on the app doubled to $650 million. Following the acquisition, the company will remain in its London headquarters with its existing team in place.
Founded in 2011 by Simon Beckerman, Depop has established itself as one of the leading peer-to-peer resale platforms with an overwhelmingly Gen-Z audience. According to company data, about 90 percent of active users are under the age of 26. Those qualities, as well as Depop’s mobile-first user experience and community-centric platform, likely made it a valuable acquisition target, particularly for players in the resale, marketplace and peer-to-peer business.
Etsy, by contrast, offers access to a complementary demographic with its broader, Millennial-skewed consumer base (with an average age of 39), as well as an international market and expertise in leveraging and managing its community of 90 million active buyers.
With its acquisition of Depop, the company said it expects to see a gradual increase to rate of top-line growth, but a slight dilution of its EBITDA margins.
The acquisition “allows Etsy to deepen its penetration in Gen-Z, which is a really exciting and important demographic,” said chief executive Josh Silverman in an investor relations call on June 2. However, the company said it has no plans to merge platforms, instead drawing from each one’s relative strengths, such as Depop’s engaged audience, buyer retention and purchase frequency, and Etsy’s development in areas such as machine learning, product search and discovery and user experience.
“Etsy stands for something very distinct: it’s handmade and it’s vintage,” said Silverman. “Depop stands for something very distinct: it’s [fashion] for Gen-Z consumers.”