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Etsy is acquiring Depop, the second-hand fashion app, for $ 1.6 billion, as the handmade products market expands its portfolio to younger consumers.
He trend for the vintage or recycled clothing trade online, which Depop helped pioneer a decade ago, has now spawned several billionaire e-commerce companies, such as traditional fashion retailers to catch with the growing consumer demand for more ethical and sustainable production practices.
More than 90% of Depop’s millions of active users are under the age of 26, an age group known as “Generation Z”, giving Etsy access to a younger population than its main consumer base. Etsy users are usually millennials or older, with an average age of sellers of about 39 years.
“The resale market in general is a massive market that we believe is well positioned for growth into the future,” said Josh Silverman, CEO of Etsy. “We believe Gen Z is the most exciting resale community.”
London-based Depop, which was founded in 2011, doubled its revenue last year to $ 70 million, mainly from sales commissions. Its active network of 4 million buyers and 2 million sellers traded goods worth about $ 650 million by 2020.
Depop has also established partnerships with brands such as Adidas, Benetton and Ralph Lauren, as fashion retailers seek to increase their sustainability credentials.
“We share the same mission and share the same values,” Silverman said. “We both want to maintain human trade. We both want to support creative entrepreneurs. “
The takeover comes at a time when that of Nvidia proposed The $ 40 billion acquisition of UK-based chip designer Arm has reopened the debate over competition from British and European tech companies for larger US rivals. The UK Competition and Markets Authority has also stepped up its review of technology transactions over the past year.
Silverman said New York-based Etsy was “really aligned with where all regulatory authorities want to go,” because its technology helps people and smaller businesses compete with Amazon.
“We offer a community and a brand to help the Davids compete on more equitable playing terms with the Goliaths,” he said.
Depop hopes to leverage the experience of Etsy to strengthen community security and scale internationally, while Etsy hopes to learn from the mobile experience of Depop and social media connoisseurs.
“A lot of the challenges we’re going through as a company are things that Etsy has gone through before,” said Maria Raga, chief executive of Depop. “Etsy has made huge improvements in terms of search and discovery, and that’s something we can definitely learn from.”
Etsy will pay about $ 1.6 billion for Depop, mostly in cash. Silverman said the price was “a multiple that is consistent with what you see in the market based on gross profit-based growth, which is how most investors see the resale e-commerce space right now.”
Depop grew sales faster than rivals Poshmark and ThredUp last year. Its price is lower than that of its nearest European competitor Vinted, which was valued at 3.5 million euros in private funding last month, while Poshmark is currently listed at a market capitalization of $ 3.5 billion.
Vestiaire Collective, focused on second-hand luxury clothing and accessories, was valued at more than $ 1 billion when fashion group Kering acquired a 5% stake earlier this year.
Depop, which will maintain its existing offices and management team, had raised about $ 100 million from venture capital sponsors, including General Atlantic, Balderton Capital, Creandum and Octopus Ventures. According to its latest annual report on Companies House in the UK registerDepop’s revenue grew 55% year-on-year to £ 21.4 million in 2019, but pre-tax losses tripled to £ 15.5 million.
Shares of Etsy fell more than 10 percent last month, after warning of “some headwind reopening,” prompting a “possible slowdown in e-commerce growth.” ‘this year.
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