by Stephen Garner

Etsy has signed a definitive agreement to acquire Depop, a privately-held, community-led, and purpose-driven fashion resale marketplace for $1.625 billion. The deal consists primarily of cash, subject to certain adjustments for Depop’s working capital, transaction expenses, cash and indebtedness, and certain deferred and unvested equity for Depop management and employees. Following the closing of the transaction, Depop will continue to be headquartered in London, England and operate as a standalone marketplace run by its existing leadership team.

Founded in 2011, Depop is a community-powered marketplace to buy and sell unique fashion, with a mission to build the world’s most diverse and progressive home of fashion. Depop’s 2020 gross merchandise sales (GMS) and revenue were approximately $650 million and $70 million, respectively, each increasing over 100 percent year-over-year. Depop’s GMS grew at a compounded annual growth rate of nearly 80 percent from 2017-2020.

Etsy believes Depop has a highly differentiated position in the fast-growing resale space with approximately 90 percent of Depop’s active users are under the age of 26; and young consumers are adopting second-hand fashion faster than any other audience. According to Depop’s monthly brand awareness surveys, it has high prompted awareness for the Gen Z demographic within the resale sector and is the tenth most visited shopping site among Gen Z consumers in the U.S.

“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 Josh Silverman, CEO of Etsy, Inc. “Depop is a vibrant, two-sided marketplace with a passionate community, a highly-differentiated offering of unique items, and we believe the significant potential to further scale. Depop’s world-class management team and employees have done a fantastic job nurturing this community and driving organic, authentic growth in a way that aligns well with Etsy’s DNA and mission of Keeping Commerce Human. 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.”

The second-hand market is projected to grow at a 39 percent CAGR from 2019-2024 in the United States, reaching $64 billion, and to grow to twice the size of fast fashion on a global basis. Starting first in the U.K. and moving into the U.S. and Australia, Depop now has a community of approximately 30 million registered users across nearly 150 countries. With 4 million active buyers and 2 million active sellers in 2020, Etsy believes Depop’s cohort behavior is particularly impressive: for example, in 2020, 75 percent of GMS was from existing cohorts; ~75 percent of sellers were also buyers; and, on average, sellers sold approximately 10 items and buyers bought approximately 6 items. Depop significantly grows Etsy’s GMS in the apparel sector, which was ~$1 billion in 2020.  Depop is primarily known for its vintage, streetwear, one-of-a-kind, and Y2K (late 1990s/early 2000s) fashion.

“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,” added Maria Raga, CEO of Depop. “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. 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.”

Following the close of this transaction, Etsy Inc. will operate three highly differentiated, non-commoditized, and loved e-commerce brands: Etsy, Reverb, and Depop. These businesses all share similar levers of growth to unlock value, including improving search and discovery, building human connections, and making selling and buying easier. The marketplaces will operate independently, while benefiting from shared expertise in areas such as product, marketing, technology, and customer support.

The transaction is currently expected to close during the third quarter of 2021, subject to satisfaction of customary closing conditions, including an antitrust review in the United States and the United Kingdom. Etsy has sufficient available liquidity to fund the acquisition. As of March 31, 2021, Etsy had approximately $2.0 billion in total liquidity consisting of $1.8 billion in cash, cash equivalents, and short- and long-term investments on its balance sheet, and an undrawn $200 million revolving credit facility.