Dive Brief:

• Etsy will plunk down nearly $1.63 billion, mostly cash, to acquire mobile-oriented apparel resale site Depop, the artisanal marketplace said Wednesday. The deal is expected to close in the third quarter, per an Etsy press release.

• Ten-year-old Depop will remain headquartered in London, operating as a stand-alone marketplace run by its existing leadership, the companies said.

• The resale site boasts some 30 million registered users across about 150 countries, with 4 million active buyers and 2 million active sellers in 2020, per the release. Last year, its gross merchandise sales reached about $650 million and revenue hit about $70 million, each rising over 100% year over year. 

Dive Insight:

Like Etsy's purchase two years ago of music gear marketplace Reverb, this deal allows the company to grow without sacrificing its reputation as a marketplace that caters to consumers on the lookout for special, well-made or vintage items.

It also allows Etsy to jump into the exploding apparel resale phenomenon. Last year, rival apparel resale site ThredUp said it expects the secondhand market to reach $64 billion by 2024, with $28 billion coming from traditional thrift and donation, and $36 billion coming from resale. Etsy itself on Wednesday said the compounded annual growth rate of used apparel sales in the U.S. is expected to be 39% from 2019 to 2024, hitting $64 billion and reaching "twice the size of fast fashion on a global basis."

The site is a Gen Z favorite, as Etsy CEO Josh Silverman noted. The acquisition checks a few boxes for Etsy, which will "be a tremendous 'house of brands' portfolio of individually distinct, and very special, e-commerce brands," Silverman said in a statement. For Depop, it's an opportunity to scale, according to Depop CEO Maria Raga.

"We'll now take an exciting leap forward as part of the Etsy family, benefiting from Josh's and his team's expertise, and the resources of a much larger company whose values are so aligned with ours here at Depop," Raga said in a statement.

Both assessments ring true to GlobalData Managing Director Neil Saunders, according to an emailed client note. But the companies must navigate what has become a congested space in recent years, he also warned.

"A polarization is now emerging between companies focused on mainstream resale, luxury resale, and vintage and creative resale," he said. "Depop falls into the latter group and is nicely differentiated. Etsy will need to take care to ensure it retains its distinctiveness as this is, in large part, what makes it so appealing to Gen Z shoppers."

The acquisition may be a coup for Etsy, but it's a miss for several old-school apparel players, according to Lee Peterson, executive vice president of thought leadership and marketing at WD Partners.

"What surprises me the most is that you would've expected a traditional retailer like the Gap or Macy's to have made this purchase a long time ago," he said by email. "You think the children of their CEOs ever mentioned Depop to them? You betcha they did!! Every person I know under 30 has been using Depop for at least 4 years, including making a living off the platform for the entire pandemic. Shows you who's got their ears to the ground in a very clear way."