As Gen Z continues to turn its back on ‘fast fashion’, Etsy expects the acquisition of DePop to provide a new generation of online shoppers.
On Wednesday (June 2), online marketplace Etsy announced that it will acquire fashion resale platform Depop for $1.625bn.
According to the move, Etsy’s stock price dropped from less than $12 to over $175 Washington Post.
Etsy projected the acquisition as a move to capitalize on the growing resale market and, in particular, Gen Z’s appetite for vintage clothing and accessories.
Etsy CEO Josh Silverman said, “We are thrilled to add Depop – which we believe to be a resale home for Gen Z consumers – to the Etsy family.”
“Depop is a vibrant, two-way marketplace with an enthusiastic community, a highly differentiated offering of unique items, and we believe in significant potential to grow.”
Why did Etsy buy second hand?
Etsy’s own online marketplace is an internet giant. Established in 2005, the platform provides a place for buyers to purchase crafted and curated items from independent sellers. These sellers flock to Etsy for the tools and services the platform provides for them to reach customers and generate sales.
Brooklyn headquartered company went public in 2015, its valuation nearly doubled to $3.5bn. However, within two years, the company’s stock was struggling and losses mounted. important downsizing Silverman’s appointment at the company and in 2017 was intended to turn his fortunes around.
Depop presents both enough similarities and differences for Etsy to present a golden opportunity for the company. Both are marketplaces serving buyers and sellers in a community-led fashion. However, Depop specializes in apparel, which is a segment of Etsy’s broader market, and the younger company also tends to attract a younger audience.
Founded in 2011 by Simon Beckerman, Depop has seen a decade-long changing approach to what it describes as ‘fast fashion’. Increasing environmental and ethical concerns around the impact of apparel production and the waste associated with high volume production of fashion brands have increased interest in the secondhand market.
Citing Wall Street research, Etsy claimed that the used clothing market in the US is set to reach $64bn by 2024.
Depot is a major player in this market. With headquarters in London and bases in the US and Australia, the company achieved approximately $70m in revenue in 2020, marking a year-on-year increase of 100pc.
About 30 million users have registered with Depot in about 150 countries. In 2020, the company reached 4m active buyers and 2m active sellers on the platform.
Crucial to Etsy’s Gen Z Play, DePop’s 90 PC active users are under the age of 26. Admittedly, this generation is adopting secondhand fashion faster than any other.
Depop’s influential-led approach to e-commerce has fueled its success with the Gen Z market. With Depop’s encouragement and guidance, sellers take advantage of social media marketing on platforms that are younger in their demographics, such as Instagram and Snapchat.
Rise of Re-commerce
The acquisition deal primarily involves cash and is subject to certain adjustments for the depot’s working capital, transaction expenses, cash and indebtedness, as well as some deferred and uninvested equity for depot management and employees. It is expected to close in the third quarter of 2021.
Depot will remain headquartered in London and operate as a standalone online marketplace, although it will benefit from shared expertise in product, marketing, technology and customer support. Its current leadership team will remain the same.
CEO Maria Raga said, “We will now make an exciting leap forward as part of the Etsy family, benefiting from the expertise of Josh and his team and the resources of a much larger company whose values here align with ours.”
Meanwhile, Etsy adds Depop to its “house of brands” to quote Silverman, including Reverb, an online marketplace for new, used, and vintage musical instruments. Reverb was acquired by Etsy in 2019.
business of fashion Declared the acquisition as “a bigger bet on the future of old fashion” as well as the opening for a “bigger, badder competition” in the region.
The competition includes other big-name players such as Zalando, an online fashion marketplace headquartered in Berlin. Zalando launched a pre-owned category on its site in 2020 and expanded to countries including Ireland earlier this year. Meanwhile, well-known fast fashion brand H&M is the majority owner of secondhand marketplace Sellpy. First launched in Sweden, Sellpi is now launched in 24 countries across Europe.
And new players are blowing up the scene, too. Last month, Lithuanian secondhand fashion marketplace Vinted raised €250m in a funding round The value of the company is €3.5bn . is. In March, San Francisco ThredUp raises $168m at a valuation of $1.3bn from your IPO.
Internet retailing has given this shift towards secondhand a new “business essentials“For fashion retailers.” It’s a matter of working out for H&M how to sell more without selling ‘more’ and without being viewed as an environmental pariah. For Etsy… it needs to reach a much younger audience to expand its brand reach and, one guesses, prepare the next generation of Etsy shoppers,” said an editorial by Paul Skeldon .
Depot seems to interpret this as more of a cultural shift than a consumer trend. “We are on an incredible journey, taking Depot to a place where the next generation comes to explore unique fashion and be part of a community that is changing the way we shop. Our community is made up of people who are creating a new fashion system by setting new trends and creating new from old ones. They come to the depot for clothes, but stay for culture,” said Raag.
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