Etsy plans to pay $1.63 billion for the 10-year-old London-based shopping app. The deal is expected to close during Q3.

Etsy Inc. plans to acquire Depop, a marketplace for secondhand apparel and accessories, for $1.63 billion as it seeks to attract more younger consumers. The acquisition is expected to complete in the third quarter, Etsy says.

Launched in 2011, Depop is a shopping app to buy and sell used apparel. Approximately 90% of Depop’s active users are younger than 26 and Depop is the 10th-most visited shopping site among “Gen Z” consumers (those born between the mid-1990s and mid-2010s), according to Etsy. Traffic to Depop and Etsy’s websites shows the former does attract a younger shopper than Etsy. Nearly 36% of Depop.com visitors in 2020 were between ages 18-24, compared with Etsy.com, where only 21% of visitors fell in that age range last year, according to data from web measurement firm SimilarWeb.

In terms of gross sales, Depop is less than a tenth of the size of Etsy. Depop’s gross merchandise value was approximately $670 million in 2020 and grew 100% year over year, according to a statement announcing the deal. Etsy’s gross sales crossed $9 billion last year, up 101% from 2019.

This is Etsy’s second marketplace purchase in less than two years. The online crafts marketplace acquired Reverb, a shopping portal for musical instruments and gear, in July 2019 for $275 million in cash. Reverb is similar to Depop in that it sells products in a niche category as opposed to general merchandise, and it sells vintage and used goods in addition to new items.

The secondhand market in the U.S. is projected to hit $64 billion by 2024 and to grow twice the size of fast fashion on a global basis, according to Bloomberg News. This acquisition will extend Etsy’s presence in the resale market and allow it to help Depop, an early-stage business, expand and drive further growth and profitability, Etsy CEO Josh Silverman said in the statement.

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Depop, which has about 30 million registered users across nearly 150 countries, will continue to be based in London and will operate as a standalone marketplace run by its existing team. Following the deal, Etsy will have three distinct brands: Etsy, Reverb and Depop.

Maria Raga, CEO of Depop, said consumers “come to Depop for the clothes, but stay for the culture,” and the business will benefit from the “resources of a much larger company whose values are so aligned with ours here at Depop.”

Etsy is No. 18 in the Digital Commerce 360 Top 100 Online Marketplaces Database. Reverb is No. 42.

Niche marketplace growth

Digital Commerce 360 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.

In the Digital Commerce 360 Online Marketplaces Top 100 ranking, for example, 44 sell products from a particular merchandise category, such as apparel or home goods. The 44 niche sites collectively grew GMV 40.9% to $59.55 billion in 2020, faster than the 29.0% growth of the full Top 100 marketplaces.

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What’s more, consumers are shopping on niche marketplaces: 42% of online shoppers purchased from a specialty marketplace that focused on a unique category in the past year, according to a Digital Commerce 360 and Bizrate Insights survey of 1,000 U.S. consumers in April 2021. And the popularity of these marketplaces isn’t slowing down. The same survey in 2020 showed 29% of shoppers purchased from a niche marketplace.

Bloomberg News contributed.

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