Match made in heaven: Etsy targets gen Z with $1.6 billion Depop acquisition
The past year has been a roller-coaster ride for e-commerce giants. Although the pandemic ignited an e-commerce boom, it was chased up by a younger demographic preferring to shop locally in support of small businesses and countering overproduction. Among the transition was a broader shift from e-commerce to re-commerce—with a focus on fashion resale platforms like Depop. But what happens if an e-commerce website with a similar operating model acquires the coveted fashion resale marketplace in a $1.6 billion deal? What does the acquisition have in store for both the platforms and its audience?
The biggest news shaking up the e-commerce world today involves Etsy, a Brooklyn-based marketplace synonymous with handmade, DIY and vintage wares, and Depop, a London-based fashion resale platform, in an acquisition deal. According to Etsy, the Depop deal is worth “$1.625 billion consisting primarily of cash, subjected to various adjustments.”
“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’s CEO Josh Silverman in a press release statement. “Depop is a vibrant, two-sided marketplace with a passionate community, a highly-differentiated offering of unique items, and we believe in the significant potential to further scale.” Silverman also added how Depop’s management team and employees have succeeded in nurturing a community and driving organic growth in a way that aligns with Etsy’s DNA and mission of “Keeping Commerce Human.”
How does this acquisition benefit Etsy exactly?
Etsy, with the chart-breaking acquisition, essentially aims to tap two major cultural collaterals: Depop’s gen Z audience and the second-hand market which is projected to reach $64 billion by 2024—growing twice the size of fast fashion on a global basis.
On these terms, Depop currently boasts a community of 30 million users across 150 countries, including 4 million active buyers and 2 million active sellers. As of 2020, the resale platform also reported Gross Merchandise Sales (GMS) and revenue of approximately $650 million and $70 million respectively—each increasing over 100 per cent year-on-year. Etsy also highlighted how approximately 90 per cent of Depop’s active users are under the age of 26. Given the fact that this younger demographic is adopting second-hand fashion faster than any other audience, it further pushes Depop under the booming limelight.
“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 e-commerce brands,” Etsy’s CEO added. Following the closing of the acquisition, currently anticipated to occur during the third quarter of 2021, Etsy’s ‘House of Brands’ will operate three brands in total: Etsy Marketplace, Depop and Reverb (a peer-to-peer marketplace for musical instruments that Etsy acquired in 2019). According to the platform, all three share “similar levels of growth to unlock value—including improving search and discovery, building human connections, and making selling and buying easier.”
In the press release, Etsy further summed up how the Depop transaction is an ideal fit for the company’s Mergers & Acquisitions criteria in terms of mission and value alignment, expansion into a fast-growing market, deepening market leadership with organic brand traction and sharing their peer-to-peer business model.
What's in store for Depop?
Before we dive into the potential benefits in the mix for Depop, it’s essential to note that Depop will continue to be headquartered in London and operate as an independent marketplace run by its existing leadership team. In this regard, Depop essentially benefits from Etsy’s shared expertise in areas such as product, marketing, technology and customer support to drive further growth and profitability.
“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’s CEO Maria Raga. According to Raga, Depop’s community is made up of users who come to Depop for the clothes but stay for the culture. “We’ll now take an exciting leap forward as part of the Etsy family, benefiting from Josh and his team’s expertise, and the resources of a much larger company whose values are so aligned with ours here at Depop.”
In terms of Etsy’s pandemic-propelled success, the company reported profits of $1.73 billion for 2020—nearly double of its revenue in 2019. The platform’s stocks jumped more than 10 per cent after Elon Musk shared his experience on Twitter after purchasing a hand-knit wool, “Marvin the Martian helm” for his dog earlier this year.
As Etsy, the 5th most popular online marketplace in the US, pairs up with Depop, the 10th most visited shopping site among Gen Z consumers in the US, the ‘match made in heaven’ undoubtedly offers a huge draw for younger consumers. The transaction not only places a bet on the future of second-hand fashion but also spells out an era where brands are willing to go lengths to access the gen Z consumer base. It also fosters a highly competitive environment for the growing field of contenders in the coveted category. Second-hand fashion is finally big business, if you ask me.
I kinda love Etsy
— Elon Musk (@elonmusk) January 26, 2021
Looking to land a job at Depop yourself? Access our Screen Shot Pro special article in conversation with Kelliesha White, Depop’s global brand and cultural impact manager.
