As Gen Z continues to turn its back on ‘fast fashion’, Etsy hopes its acquisition of Depop will deliver a new generation of online shoppers.
On Wednesday (2 June), online marketplace Etsy announced that it would acquire fashion resale platform Depop for $1.625bn.
The move saw Etsy’s stock price skyrocket from less than $12 to more than $175, according to The Washington Post.
Etsy pitched the acquisition as a move to capitalise on the growing resale market and, in particular, Gen Z’s appetite for secondhand clothing and accessories.
“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.
“Depop is a vibrant, two-sided marketplace with a passionate community, a highly differentiated offering of unique items and, we believe, significant potential to further scale.”
Why Etsy shopped secondhand
Etsy’s own online marketplace is something of an internet veteran. Founded in 2005, the platform offers buyers a place to purchase crafted and curated items from independent sellers. These sellers come to Etsy for the tools and services the platform offers them to reach customers and generate sales.
The Brooklyn-headquartered company went public in 2015, with its valuation almost doubling to $3.5bn. Within two years, however, the company’s stock was struggling and losses mounted. Significant downsizing at the company and the appointment of Silverman in 2017 aimed to turn its fortunes around.
Depop presents both enough similarities and differences to Etsy to provide a golden opportunity for the company. Both are marketplaces servicing buyers and sellers in a community-led fashion. However, Depop specialises in apparel, which is a just a segment of Etsy’s broader marketplace, and the younger company also attracts a younger audience.
Founded in 2011 by Simon Beckerman, Depop has seen a decade of changing attitudes to what is described as ‘fast fashion’. Increasing environmental and ethical concerns around the impact of garment production and the waste associated with the high-volume output of fashion brands has driven interest in the secondhand market.
Citing Wall Street research, Etsy claimed that the market for secondhand clothing in the US is set to reach $64bn by 2024.
Depop is a key player in this market. Headquartered in London and with bases in the US and Australia, the company achieved about $70m in revenue in 2020, marking a 100pc increase year-on-year.
About 30m users in almost 150 countries have registered with Depop. In 2020, the company reached 4m active buyers and 2m active sellers on the platform.
Crucial to Etsy’s Gen Z play, 90pc of Depop’s active users are under the age of 26. This generation is believed to be adopting secondhand fashion faster than any other.
Depop’s influencer-led approach to e-commerce drives its success with the Gen Z market. With encouragement and guidance from Depop, sellers leverage social media marketing on platforms that skew younger in their demographics, such as Instagram and Snapchat.
The rise of re-commerce
The acquisition deal consists primarily of cash and is subject to certain adjustments for Depop’s working capital, transaction expenses, cash and indebtedness, as well as certain deferred and unvested equity for Depop management and employees. It is expected to close in the third quarter of 2021.
Depop will continue to be headquartered in London and operate as a standalone online marketplace, though it will benefit from shared expertise in product, marketing, technology and customer support. Its existing leadership team will also remain in place.
“We’ll now take an exciting leap forward as part of the Etsy family, benefiting from Josh’s and his team’s expertise, and the resources of a much larger company whose values are so aligned with ours here at Depop,” said CEO Maria Raga.
Etsy, meanwhile, will add Depop to its “house of brands”, to quote Silverman, which also includes Reverb, an online marketplace for new, used and vintage musical instruments. Reverb was acquired by Etsy in 2019.
Business of Fashion heralded the acquisition as “a big bet on the future of secondhand fashion” as well as the opening for “bigger, badder competition” in this sector.
This competition includes other big-name players such as Zalando, the online fashion marketplace headquartered in Berlin. Zalando launched a pre-owned category on its site in 2020 and expanded it to countries including Ireland earlier this year.
Meanwhile, well-known fast fashion brand H&M is a majority owner of secondhand marketplace Sellpy. First launched in Sweden, Sellpy has now launched in 24 countries across Europe.
And new players are also blowing up the scene. Last month, Lithuanian secondhand fashion marketplace Vinted raised €250m in a funding round that valued the company at €3.5bn. In March, San Francisco’s ThredUp raised $168m at a $1.3bn valuation from its IPO.
Internet Retailing described this shift towards secondhand as a new “business imperative” for fashion retailers.
“For H&M it is a matter of working out how to sell more without selling ‘more’ and being seeing as an environmental pariah,” wrote Paul Skeldon in an editorial. “For Etsy … it needs to reach down to a much younger audience to expand its brand reach and, one presumes, groom the next generation of Etsy shoppers.”
Depop seems to understand this as more of a cultural shift than a consumer trend.
“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,” Raga said. “Our community is made up of people who are creating a new fashion system by establishing new trends and making new from old. They come to Depop for the clothes, but stay for the culture.”
