The marketplace for hand-crafted goods will acquire music gear marketplace Reverb for $275 million.

Leading marketplace for hand-crafted goods Etsy Inc. will acquire Reverb Holdings Inc., a marketplace that sells musical instruments and other music-related products, the companies announced Monday.

Etsy, No. 16 in the 2019 Internet Retailer Online Marketplaces ranking, will purchase the used and vintage music gear shopping portal for $275 million in cash. After the purchase, which is expected to close in the third or fourth quarter of this year, Reverb (No. 35) will continue to operate as a standalone business.

Etsy’s sales grew 20.2% in 2018 to $3.91 billion.

Reverb sold an estimated $600.0 million worth of goods last year, up 56% from $385.0 million in 2017. It crossed $1 billion in gross merchandise volume on its site since launching in 2014, Reverb CEO David Kalt says.

“This transaction is a great strategic fit that firmly aligns with our mission of keeping commerce human,” says Etsy CEO Josh Silverman. “Reverb is the ‘Etsy’ of musical instruments, with significant competitive advantages, and we see tremendous value and untapped potential in the business.”

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Internet Retailer categorizes both Etsy and Reverb as niche marketplaces: specialized multi-merchant shopping sites offering consumers a unique set of goods in a specific retail vertical. For Etsy, its products are all handmade and, therefore, different than other marketplaces such as Amazon.com Inc. (No. 3) or eBay Inc. (No. 5). Plus, Reverb sells products in a specific retail category: music.

Niche marketplaces can be particularly beneficial for small sellers that may be drowned out on large marketplaces, like Amazon, that have millions of sellers. Reverb, for instance, gets 60-70% of its GMV from small sellers, Kalt says.

“Thousands of sellers are relying on us to do all of their marketing,” Kalt says. “We’ve seen more traditional [bricks-and-mortar stores] retailers rely on Reverb for their ecommerce.”

Reverb gives these sellers a targeted audience that’s specifically looking for products they sell. For some sellers, selling on Reverb is more cost-effective than spending marketing dollars to attract customers to the seller’s ecommerce site or to listing pages on Amazon.

For musical instruments retailer Monster Music, the highly targeted audiences of some of the smaller marketplaces have made these attractive outlets for bringing in new sales, owner Brian Reardon told Internet Retailer in 2018. In addition to its retail store in Long Island, New York, the company sells on its own website, eBay and Reverb.

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On Monster Music’s storefront on Reverb’s marketplace, the company is able to link back to Monster Music’s own ecommerce site, which has led to some additional traffic, Reardon says. Promotion of sellers’ own sites is rare and often against the rules on larger marketplaces.

Since it started selling on Reverb in 2014, Monster Music generated more than double the sales on Reverb than on eBay as of early 2018, Reardon says. Plus, Reverb’s customer base that is only looking for instruments helps, he says.

In January 2018, Reverb launched Reverb LP, a marketplace for buying and selling records. The company created a separate website instead of adding a section to its existing Reverb.com because the community of buyers and sellers for records is different than musical instruments.

“We wanted to create a catered experience for the disc buyer,” Kalt says. “If we added it to Reverb.com, it would have felt like a secondary category and would have the same structure as eBay.” This would have taken away from the “niche” aspect of the marketplace.

Reverb LP sold more than $1 million last year, Kalt says. Reverb LP is a part of Reverb Holdings, and therefore it is a part of the Etsy acquisition.

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