Etsy acquires Depop as the growth of secondhand clothing market explodes

Etsy, the e-commerce marketplace for gifts and handmade goods, is acquiring Depop, the UK-based second-hand fashion app, for $1.6b.

What’s the big deal? Gen Z’s love secondhand shopping and vintage apparel. In 2020, the resale market grew 25x faster than new retail and Etsy wants a piece.

• BCG estimated the used-apparel industry to be worth $40b (2% of total apparel market) with a growth of 15-20% a year for the next 5 years.
• Apparel resale apps like ThredUp (NASDAQ:TDUP) and Poshmark (NASDAQ:POSH) used the momentum to go public this year.

What’s the impact on Etsy? Depop’s $70m in 2020 sales is a drop in the bucket compared to Etsy’s $1.7b. But, as a trade-off, Etsy gets access to a fast-growth market and expertise in reaching Gen Z’s.

• While the median age of Etsy users are 39, 90% of Depop’s users are under 26.

The big question: How will Etsy do post-COVID? After growing tremendously in 2020, Etsy had a big warning for investors: growth will slow significantly.

• Sales growth is expected to slow from 141% in the 1st quarter to 15-25% in the 2nd quarter — the announcement sent its stock down 15%.

Don’t expect the Depop acquisition to give Etsy an immediate pick-me-up. But strategically, Depop is a step in the right direction for Etsy to stay relevant.