Depop, the popular peer-to-peer resale site, has recently announced a significant loss in its latest financial report. The company, which is owned by Etsy, recorded an operating loss of £84.5 million in 2021, a stark contrast to its £0.4 million profit the previous year. This news comes as a surprise considering the rapid growth Depop experienced during the COVID-19 lockdowns in the UK and US.

While Depop’s sales more than doubled in 2020, they only saw a modest 2.5% increase in 2021. The initial surge in growth during the first quarter was largely driven by prolonged lockdowns, but it stabilized in line with industry trends afterwards. The decision to expand its employee base, going from 296 to 407 within just 12 months, resulted in a significant increase in salary expenses. Additionally, Depop spent £16.7 million on advisory fees related to its acquisition by Etsy.

Despite these challenges, Etsy remains optimistic about Depop’s future prospects. In fact, it has injected an additional £15.1 million in financing and continues to see value in the business. Depop’s expansion efforts in the US market are expected to play a crucial role in boosting its profitability. The company already boasts a strong presence among the younger demographic, with approximately one-third of the 16-24 age group having a Depop account.

However, the key question that lingers is whether Depop can generate substantial profits in the future to justify the considerable price Etsy paid for the acquisition. While the post-pandemic return to normalcy has posed challenges for the brand, the current cost-of-living crisis could actually work in its favor. Generation Z, who are actively seeking affordable fashion options and ways to monetize their past purchases, may turn to Depop as a solution.

In summary, Depop’s financial results shed light on the complexities and uncertainties of the fashion resale market, especially in the wake of the pandemic. Though the losses are concerning, the company’s unique social commerce model and large user base provide it with the potential to bounce back and thrive in the future. Only time will tell if Depop can turn a profit and become a lucrative venture for Etsy.

Useful links:
1. Depop
2. Etsy