Depop, the popular resale site known for its peer-to-peer social commerce model, has reported a significant operating loss as its business slows down in the wake of post-lockdowns. The company, which was acquired by Etsy for £1.1 billion last year, recently revealed its latest financial results for 2021, showing a loss of £84.5 million after a small profit of £0.4 million in 2020.
Depop experienced a surge in sales during the lockdowns, with a growth rate of over 100% in 2020. However, in 2021, the growth rate slowed significantly, with sales only rising by 2.5%. This decline can be attributed to the reopening of physical stores and the stabilization of the industry as a whole. Additionally, the company’s expenses increased due to a rise in staff numbers and the payment of advisory fees associated with the acquisition.
Recognizing the underperformance, Etsy injected an additional £15.1 million of financing into Depop this year. While Etsy’s finance chief acknowledges the challenges, the parent company remains optimistic about Depop’s potential, particularly in the US market, where it aims to expand and become its largest market.
Depop currently has a strong presence among the Gen Z demographic, with approximately one-third of the 16-24 age group having a Depop account. This customer base presents a significant opportunity for the company to capitalize on. The current cost-of-living crisis and the inclination of Gen Z to seek affordable fashion options may work in Depop’s favor. By providing a platform for buying and selling secondhand items, Depop offers a solution for cash-strapped individuals to save and earn money simultaneously.
In conclusion, despite setbacks in its financial performance, Depop still holds potential for growth and success, especially within the US market. As the cost-conscious younger generation seeks affordable and sustainable fashion alternatives, Depop’s unique platform may provide the answer they are searching for. With strategic investments and a focus on profit generation, Depop could turn its fortunes around in the future.
Useful links:
1. Depop – Official Website
2. Etsy – Parent Company’s Website
