Depop makes big loss as business slows post-lockdowns

By

Sandra Halliday

Published
Oct 10, 2022

Resale site Depop may be something of a headline-grabber with its of-the-moment peer-to-peer social commerce model, but that doesn’t mean its a licence to print money… not yet, at least.

The Etsy-owned company has filed its latest results (for calendar year 2021) at Companies House and they show it made an £84.5 million operating loss after a profit of £0.4 million in 2020. 

Etsy bought the 12-year-old business for £1.1 billion mid-way through the period following fast expansion of the Depop business during UK and US lockdowns. But like others in the online fashion space, it wasn’t been able to maintain the momentum once physical stores reopened.

Sales rose only 2.5% in 2021 despite having more than doubled in 2020. That 2.5% figure came after “strong growth” in Q1, “driven by continued lockdowns”, although growth ‘stabilised’ after that in line with industry trends.

As the firm took on large numbers of new staff (it had 407 employees at year-end compared to 296 just 12 months earlier), the salary bill soared, and it also spent £16.7 million on advisory fees linked to the takeover.

Etsy has this year injected £15.1 million of extra financing into the company and despite its finance chief admitting this summer that Depop’s performance has lagged expectations, the company still said it saw value in the business.

That value probably lies in the US where an expansion drive should make it the business’s largest market.

And the company clearly has plenty of potential with around a third of the 16-24 age group having a Depop account. But the big question is whether it can make substantial profits at some point in the future in order to justify the massive purchase price Etsy paid.

Of course, while the normalisation of life post-pandemic may have been bad news for the brand, the current cost-of-living crisis could help it. If Gen Z seek to get their fashion fix without spending too much money and also try to raise cash on their past purchases, Depop could be the place to do that.