Etsy Inc. will purchase Elo7 for $217 million in cash as it seeks to expand its international presence. The deal is expected to close during Q3 2021.

Etsy Inc. plans to acquire Elo7, a Brazil-based handcrafted goods marketplace, for $217 million. Etsy will expand its presence outside of the U.S. with this purchase—its second acquisition of an international marketplace within a month.

Dubbed the “Etsy of Brazil,” Elo7 launched in 2008 as a marketplace for handmade and custom merchandise. The marketplace has 1.9 million active buyers, 56,000 active sellers and approximately 8 million items for sale—the majority of which are made to order. This compares with Etsy’s 90.7 million buyers, 4.7 million active sellers and 90 million items for sale. Elo7 will operate independently.

“This transaction will establish a foothold for us in Latin America, an underpenetrated ecommerce region where Etsy currently does not have a meaningful customer base,” Etsy CEO Josh Silverman said in a press release announcing the acquisition. “We look forward to welcoming Elo7’s talented leadership team and employees to the Etsy family.”

International sales accounted for 36% of Etsy’s gross merchandise sales in 2020 and 2019, according to its financial statements. In Q1 2021, that percentage increased to 42%, up from 36% in the same quarter of 2020. Etsy is ranked No. 18 in the Digital Commerce 360 Top 100 Online Marketplaces database.

This purchase comes on the heels of Etsy’s acquisition of U.K. apparel shopping app Depop in early June. This is Etsy’s third marketplace purchase in less than two years. In addition to Depop, which Etsy bought for $1.63 billion, the marketplace acquired Reverb, a shopping portal for musical instruments and gear, in July 2019 for $275 million in cash.

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Niche online marketplace growth

Reverb, Depop and Elo7 are similar in that each sells products in what Digital Commerce 360 terms niche categories as opposed to general merchandise. For Etsy and Elo7, their products are all handmade and, therefore, different than other marketplaces such as Amazon.com Inc. (No. 3) or eBay Inc. (No. 5). Additionally, 50% of Elo7’s gross merchandise sales are within its “special event and life moment” categories such as weddings, baby and children’s parties. Depop and Reverb sell products in specific retail verticals—apparel and music, respectively.

In the Top 100 ranking, 47 marketplaces sell products from a particular merchandise category, such as apparel or home goods. The 47 niche sites collectively grew GMV 46.9% to $69.64 billion in 2020, faster than the 29.0% growth of the full Top 100 marketplaces.

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 is growing. The same survey in 2020 showed 29% of shoppers purchased from a niche marketplace.

High sales growth for Etsy since COVID-19

In retail, Etsy has been one of the biggest beneficiaries of the coronavirus pandemic. The marketplace attracted millions of consumers at the outset of the pandemic by calling on its sellers to sew and sell masks. Where it took other traditional retailers like Gap Inc. more than a month to get supplies and list masks for sale on their websites, Etsy was able to do so in the weeks following the initial mid-March lockdowns in the U.S. As a result, it was able to attract new customers and old buyers that hadn’t visited the site in a while.

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“In March, when the offline world largely shut down, demand for essentials on Etsy exploded and our sellers almost instantaneously rose to meet those needs,” Silverman said during its Q4 2020 earnings call, according to a SeekingAlpha transcript. Etsy added twice as many new buyers in 2020 as it did in 2019, the marketplace says, and it reactivated 22 million buyers who hadn’t shopped on Etsy in at least a year.

In 2020, Etsy’s sales, which it terms gross merchandise sales, grew 106.7% to $10.28 billion from just under $5 billion in 2019. Prior to last year, growth hovered between 14% and 26% for six years. Its momentum continued in 2021 with 132% year-over-year growth in the first quarter. Digital Commerce 360 estimates Etsy will end the year with 45% growth.

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