Analysis: Etsy’s Depop deal is a big bet that retail has changed forever

Resale sites and apps, such as Depop, Vinted and ThredUp, have been taking the world by storm over the past 12 months as consumers re-evaluate their wardrobes and consumption habits. 

Depop is the 10th most-visited shopping site for Gen-Z consumers in the US, with more than 90% of its buyers and sellers under the age of 26.

Etsy, meanwhile, has carved out a niche connecting independent creatives and small business owners with shoppers seeking unique and vintage items. The business also has a much broader age demographic than Depop, with an average seller age of 39.

When Etsy purchased Reverb, an online marketplace for used and vintage musical instruments in 2019, it set out its criteria for future acquisitions. These include what Etsy calls a “two-sided marketplace model”, aligning with Etsy’s values of “keeping commerce human”. Potential acquisitions must also be in a position to benefit from its expertise.

Etsy boss Josh Silverman said the Depop deal has been in the works for two years. 

“We’re patient and picky, and we have a very clear set of criteria for acquisitions,” he says.

“We proactively reached out to them, and have been tracking and following Depop because we’ve been so impressed with the organic growth and the authenticity of the brand and their culture and values,” he says. 

“We’ve spent time getting to know each other and the management team are confident we can help them grow their community, and that Etsy can enable even better growth, so the time is right, right now.”

“There are a lot of natural synergies between the two brands. The biggest thing for me is that the deal reaffirms Etsy’s commitment to becoming the antithesis of Amazon – a digital marketplace for conscious consumption”

Natalie Berg, retail analyst

While both Depop and Etsy operate as peer-to-peer marketplaces, each has a differentiated position within the second-hand economy, which Silverman views as their strengths. 

“There are a lot of natural synergies between the two brands,” says retail analyst Natalie Berg. “The biggest thing for me is that the deal reaffirms Etsy’s commitment to becoming the antithesis of Amazon – a digital marketplace for conscious consumption.

“I think that this is all about staying relevant in a rapidly changing world and, for Etsy, it’s about growth – tapping into a different consumer segment and reaching a second-hand market in a more meaningful way. It makes Etsy more relevant to one of the biggest and most lucrative consumer groups.”

While Etsy is hoping it can learn about a new consumer demographic from Depop, Silverman also believes both parties have knowledge to share with each other to help elevate their respective positions within the retail industry.

“Search and discovery is a great example of the common challenge that all two-sided marketplaces face,” he says.

“Like Etsy, Depop has millions of items that are unique and don’t match up to catalogues – that’s the kind of thing where we have a lot of expertise and we’re excited to partner with Depop on this. 

“A lot of the machine-learning models, a lot of the expertise we’ve gained in how to expose our search differently, are the things the Depop team is excited to lean into. There’s a lot of expertise we have at Etsy that could be poured over to Depop in a very relevant way.”

On the opposite side of the deal, Silverman says Etsy can learn from Depop how they “do discovery” as Depop’s visually led, Instagram-inspired app lends itself to a new way of merchandising products that Etsy could harness to appeal to a younger audience.

“What we don’t anticipate is trying to merge these two communities into one. But we do think there’s a lot of shared learning that can make each of these businesses stronger”

Josh Silverman, Etsy

“What we don’t anticipate is trying to merge these two communities into one,” Silverman says. Depop will be operated as a separate business under its current management team. 

“Etsy stands for something very distinct – it’s handmade and vintage. Reverb is musical instruments and Depop is fashion apparel for Gen-Z consumers, so when you come to each of these brands you know what you’re getting and they do that super well.

“That’s really important, but we do think there’s a lot of shared learning that can make each of these businesses stronger.”

The Etsy and Depop deal is just the start of the growth of the resale market in the mainstream fashion industry, according to Berg.

“I think the resale sector has just been thrust into the mainstream in the past 12 months – like many other things, Covid has accelerated the shift towards conscious consumption,” she says.

“These are all signs of genuine change in an industry that is notorious for waste.”

Despite operating in an increasingly competitive area of the retail sector, Etsy’s deep pockets, broader customer base and technological expertise will help Depop gain momentum as it looks to dominate the resale market.

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