Etsy Inc. plans to acquire Elo7, a handicrafts marketplace based in Brazil, for $ 217 million. Etsy will expand its presence outside of the United States with this purchase, its second acquisition of an international marketplace in a month.
Dubbed “Etsy of Brazil,” Elo7 was launched in 2008 as a marketplace for handmade and personalized 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 to Etsy’s 90.7 million buyers, 4.7 million active sellers, and 90 million items for sale.
“This transaction will allow us to expand into Latin America, an under-penetrated e-commerce region where Etsy currently does not have a significant customer base,” Etsy CEO Josh Silverman said in a press release announcing the ‘acquisition. “We look forward to welcoming the talented management team and employees of Elo7 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 the first quarter of 2021, that percentage rose to 42%, from 36% in the same quarter of 2020. Etsy is ranked # 18 in the Digital Commerce 360 Top 100 Online Marketplaces database.
The purchase follows Etsy’s acquisition of the UK clothing shopping app Depop in early June. This is Etsy’s third purchase on the market in less than two years. In addition to Depop, which Etsy bought for $ 1.63 billion, the marketplace acquired Reverb, a portal for buying musical instruments and equipment, in July 2019 for $ 275 million in cash.
Growing niche online market
Reverb, Depop, and Elo7 are similar in that each sells products in what Digital Commerce 360 calls niche categories as opposed to general merchandise. For Etsy and Elo7, their products are all handmade and therefore different from other marketplaces such as Amazon.com Inc. (# 3) or eBay Inc. (# 5). In addition, 50% of Elo7’s gross merchandise sales are in its “special events and moments of life” categories such as weddings, baby and children’s parties. Depop and Reverb sell products in specific retail sectors: clothing and music, respectively.
In the Top 100 ranking, 44 marketplaces sell products of a particular commodity category, such as clothing or household items. The 44 niche sites collectively increased their GMV by 40.9% to $ 59.55 billion in 2020, faster than the 29.0% growth of the Top 100 overall.
Additionally, consumers buy in niche markets: 42% of online shoppers have purchased in a specialty market that has focused on a single category in the past year, according to a Digital Commerce 360 survey and Bizrate Insights surveyed 1,000 US consumers in April 2021. And the popularity of these marketplaces continues to grow. The same survey in 2020 showed that 29% of buyers were buying in a niche market.
Strong sales growth for Etsy since COVID-19
In retail, Etsy has been one of the biggest beneficiaries of the coronavirus pandemic. The market attracted millions of consumers at the start of the pandemic by calling its vendors to sew and sell masks. Where it took more than a month for other mainstream retailers like Gap Inc. to source and list the masks for sale on their websites, Etsy was able to do so in the weeks following the initial shutdowns of mid-March in the United States. managed to attract new customers and old buyers who had not visited the site for some time.
“In March, when the offline world largely shut down, the demand for essential items on Etsy skyrocketed and our sellers increased almost instantly to meet those needs,” Silverman said on his earnings call. from the fourth quarter of 2020, according to a transcript from SeekingAlpha. Etsy added twice as many new buyers in 2020 as in 2019, according to the marketplace, and it reactivated 22 million buyers who hadn’t bought from Etsy in at least a year.
In 2020, Etsy’s sales, which it calls gross merchandise sales, rose 106.7% to $ 10.28 billion, from just under $ 5 billion in 2019. Before the year last, growth fluctuated between 14% and 26% for six years. Its momentum continued in 2021 with 132% year-on-year growth in the first quarter. Digital Commerce 360 estimates that Etsy will end the year with 45% growth.