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Why Etsy thinks fashion resale site Depop is worth $1.6 billion

A sign advertising the online seller Etsy Inc. is seen outside the Nasdaq market site in Times Square following Etsy's initial public offering
Reuters/Mike Segar
Etsy has bought itself a new fashion-resale marketplace, Depop.
By Marc Bain
Published Last updated

Etsy has announced it will buy Depop, a UK-based fashion resale marketplace, for $1.63 billion in a primarily cash deal. It’s Etsy’s second acquisition of a resale platform and much bigger than the last one—its $275 million purchase of Reverb, a marketplace for new and used music gear, in 2019.

The company sees Depop as a way to bolster its business in clothing resale and with Gen Z, the generation generally regarded as being born between 1997 and 2012. It also expects to use its expertise in peer-to-peer marketplaces to help Depop grow, Etsy’s management explained on a call with investors and analysts today, and believes it can learn from Depop in return.

The fashion resale market exploded over the past decade as numerous companies launched to sell used clothes online. Some work on a consignment model while others, including Depop, operate as peer-to-peer marketplaces. Globally, the resale market for clothes, footwear, and accessories is now worth between $30 billion and $40 billion, according to Boston Consulting Group, and growing fast.

Within this market, Depop, launched in 2011, has emerged as a popular place for young shoppers to buy styles from the 1990s and 2000s, as well as streetwear and assorted vintage finds. Its merchandise sales grew to $650 million last year, generating $70 million in revenue. Etsy, which emphasizes handmade and vintage items, has its own clothing business that reached roughly $1 billion in merchandise sales in 2020. But it’s not the kind of clothes sold on Depop.

Its core audience is different too. On the call, Etsy CEO Josh Silverman said the average Etsy seller is 39. At Depop, about 90% of its active users are younger than 26.

Etsy’s goal, however, isn’t to bring Depop’s audience onto its platform and vice versa, according to Silverman. It’s to grow it right where it is. “We believe that Depop has the most engaged community of any resale platform,” he said.

Etsy’s plan to help Depop scale

Depop sellers, in fact, can develop large followings of shoppers, giving the platform a social component. Depop’s average active buyer bought six times last year, Silverman noted, and 75% of merchandise sales come from existing buyers. In 2020, it had 4 million active buyers and 2 million active sellers, and has registered users in nearly 150 countries.

Silverman said it has “significant potential to further scale,” and Etsy’s aim is to help it do that while maintaining its focus on Gen Z shoppers. Depop has gotten where it is without any significant marketing, for example, and that’s one area where Etsy sees an opportunity. Etsy also thinks its expertise in search, as a marketplace for unique items that users rely on search to find, will allow Depop to improve its own search capabilities, potentially turning more browsers into buyers. Introducing new services for Depop’s sellers, including advertising, could help it grow too.

Etsy, for its part, might take lessons from Depop’s highly visual user experience, and the way it fosters engagement among its community of customers.

Marketplaces only get better as they get bigger, Rachel Glaser, Etsy’s CFO, said on the call. That’s what Etsy is counting on for Depop.

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