Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Etsy Is Paying $1.6 Billion for Gen Z

The battleground for Gen Z is getting hotter by the day.

On Wednesday, Etsy inked a deal to purchase fashion resale startup Depop“the resale home for Gen Z consumers” buying and selling vintage, streetwear, and Y2K fashion, according to Josh Silverman, CEO of the “one-of-a-kind” digital community known for hawking handmade, vintage and crafty wares largely to millennial and Gen X women.

The $1.625 billion agreement would unite two peer-to-peer marketplaces with similarly capital-light models, Silverman told investors on a conference call Wednesday morning. Etsy has pursued the London-based startup since 2019, he added, and Depop is expected to augment its opportunity in the “high frequency” apparel category, which amounts to a $364 billion digital market that Euromonitor sees reaching $543 billion in 2025.

The news comes as Depop added Benetton to its stable of brand partnerships on Monday, with the startup’s sellers in the U.S. and the U.K. curating a selection of “rare” pieces from the Italian label, including Rugby shirts, “iconic” colorblock sweatshirts, patchwork denim jackets, Argyle jumpers and linen shorts.

“Benetton’s long-standing reputation for challenging conventions and championing inclusion in their creative campaigns directly connects to Depop’s point of view,” said Steve Dool, global head of brand partnerships for the resale site. “Through this partnership, we are not only engaging our [sellers] to help extend the lives of some of Benetton’s most covetable garments, but we’re also working in tandem with Benetton to amplify the representation and empowerment of creative self expression that we both strive to support.”

Benetton Group CEO Massimo Renon described the tie-up as core to the company’s “innovation process” focused on revamping the brand in a bid for younger generations.

“Thanks to Depop’s secondhand shopping model—a fundamental element for sustainable fashion—Benetton also enters the circuit in a contemporary and original way,” he said. “Our vintage garments that have made history will come back to life through Depop, which shares with us the same creative language and the same values ​​of diversity, inclusion and sustainability.”

Meanwhile, Depop tallied gross merchandise sales of $650 million last year, with revenue hitting $70 million, Etsy chief financial officer Rachel Glaser said, and Silverman believes the platform poses “significant potential to further scale.” For comparison, Etsy says its 2020 gross apparel merchandise sales totaled $1 billion.

The British platform targeting the American, U.K. and Australian markets is quickly becoming the “place where the next generation comes to explore unique fashion and be part of a community that’s changing the way we shop,” said Depop CEO Maria Raga, who will continue running the site as a stand-alone business out of the U.K.

With 30 million registered users across 150 countries, last year Depop reported 2 million active sellers and roughly 4 million active buyers—90 percent of whom are younger than 26. Three-quarters of buyers sold on the platform, too, with the average seller offloading 10 items and the typical buyer purchasing six. According to Etsy, Depop is Gen Z’s 10th-most-visited shopping site, which takes on added significance when considering that young consumers’ adoption of secondhand fashion—a $64 billion market by 2024 that’s handily lapping fast-fashion growth—outpaces that of any other demographic.

“Our community is made up of people who are creating a new fashion system by establishing new trends and making new from old,” Raga added. “They come to Depop for the clothes, but stay for the culture.”

Silverman told Wall Street analysts that as an early-stage business, Depop is well-positioned to benefit from Etsy’s expertise in accelerating growth and value creation, and both companies share a like-minded mission, strategy and values. “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,” he said, praising the startup’s “vibrant, two-sided marketplace with a passionate community, and a highly-differentiated offering of unique items.”

“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,” Silverman added.

After the deal closes, the company will operate three e-commerce brands, including Reverb, a music re-commerce site for millennials and Gen X men, operating primarily in the U.S., U.K., Canada, France, Germany and Australia.

Etsy said the businesses are similarly focused on improving search and discovery, building human connections and making selling and buying easier. While the Etsy, Depop and Reverb marketplaces will operate separately, they all benefit from shared expertise in product, marketing, technology and customer support, the company said.

Etsy cited $2 billion in total liquidity as of March 31, including $1.8 billion in cash, cash equivalents and short- and long-term investments, plus an undrawn $200 million revolving credit facility.

The purchase price is primarily cash, subject to adjustments for Depop’s working capital, transaction expenses, cash and indebtedness, as well as certain deferred and unvested equity for Depop management and employees. The deal, subject to customary closing conditions that include antitrust reviews in the U.S. and the U.K., is expected to close in Q3. Depop is expected to be accretive to Etsy’s top line-growth rate, and moderately dilutive to Etsy’s adjusted EBITDA margin this year.

More from our brands