Business

Depop Business Model | How Does Depop Make Money?

Depop is a familiar name for anyone who supports sustainable fashion, follows lifestyle trends, or just loves style a little. 

We’re about to guide you on how to buy, sell, and discover clothing in the modern era if you haven’t already. Depop is comparable to eBay for fashion but has an Instagram-like UI. 

Depop Business Model offers an online marketplace for sellers and customers can easily connect, making fashion more accessible, inclusive, diverse, and sustainable.

Depop is an online marketplace with a social networking component that users can use to purchase and sell clothing.

Depop earns its money by charging 10% of the sale fee for using the platform and 2.9% + $0.30 for transactions. Therefore, the seller needs to pay the platform and transaction fee if his/her product is successfully sold.

Depop was founded in 2011 and has since become one of the most well-known fashion marketplaces. Etsy acquired the Depop for $1.625 billion in June 2021.

What is Depop?

Depop is an online marketplace where you can browse, checkout, and buy clothes. Furthermore, Depop also allows you to sell your clothes. 

You can purchase clothes from Depop by visiting the Depop website or downloading one of the platform’s mobile apps, then tap available on Android and iOS devices.

Depop Business Model

Additionally, customers and sellers can interact with one another within the app. Depop has created an Instagram-style feed in which users may like and share content and follow other users.

Additionally, Depop maintains two physical stores in the United States. These stores are located in New York City and Los Angeles.

How Does Depop Work?

Customers may purchase new or pre-owned clothing on the Depop platform. However, the market does include a greater emphasis on preowned (or vintage) items to support sustainable practices.

You can choose from hundreds of brands, including renowned names like Adidas, Dr. Martens, and Urban Outfitters.

Depop sellers can create a simple store or build a full-featured one. Some people even make a living selling on the platform.

The stores can either handle incoming orders independently or work with the work fulfillment team at Depop. Furthermore, it addresses the payment process.

How to Sell Clothes on Depop?

Are there things around your house that you’d like to sell online? For example, perhaps you have a collection of handmade goods that you’d like to sell? If this is the case, you may have thought about selling on Depop.

It might seem complex and overwhelming to sell anything on a new platform, but do not be discouraged.

Depop Business Model

Whether you’re a complete newbie or not, we’ll show you exactly how to sell on Depop step by step with a brand new account.

We’ll not only teach you how to sell on Depop, but we’ll also give you some selling advice and information about Depop costs, the shipping process, and more.

Are you ready to get started? Let’s get started right away

How to Sell on Depop?

A few factors to consider before you start selling on Depop, including the Depop selling and listing costs, will help you build a solid foundation for future income.

Listing Fees

Depop allows you to list items for free. The flat 10% selling fee is, however, only charged when a piece is sold.

Depop Fees

Depop deducts 10% of the purchase price (including shipping costs) once an item sells. Depop will deduct the cost from your linked PayPal account or your linked credit card.

In addition, PayPal charges 2.9 percent + $0.30 in the United States and 2.9 percent + £0.30 in the United Kingdom.

Depop makes it easy to sell things. You simply need to create a free Depop account, list your products, deliver them, and collect payments.

Here’s how to start selling on Depop:

Create a Depop account

Signing up for a Depop account is the first step. In this case, we’ll set up an account directly on their website. Alternatively, you can register on the Depop app, as the procedure remains the same.

Creating an account is easy if you follow these steps:

  • Sign up for Depop at signup.depop.com by entering your phone number and clicking Send code.
  • You will receive a six-digit code by text from Depop.
  • Click Next after filling out the essential information.
  • Create an account by clicking the Create Account button.

That’s it! You’ve finished the first step!

Connect Your PayPal Account

You must connect your PayPal account to Depop after creating an account before you can begin collecting payments.

Due to Depop’s lack of payment system, all payments are handled through PayPal regardless of whether the buyer pays with a PayPal balance, a debit/credit card, or even a bank account. 

Consequently, to sell on Depop, you must connect your PayPal account.

Here are the steps to linking your PayPal account to Depop:

  • Tap the ‘Profile icon’ at the bottom right of your mobile screen to open the Depop app.
  • Choose the ‘Settings’ icon from the top right corner of the screen.
  • Tap on ‘PayPal account’ now.
  • Click on ‘Connect PayPal’.
  • Sign in to your PayPal account.

Congrats! PayPal is linked to your Depop account. So you can now start selling items and get paid when they sell.

List Your Items on Depop

Depop makes it easy to list items. Here are the steps you need to take to create a Depop listing.

You can list items on Depop in two ways:

Listing Items on the Depop App

  • Tap on the ‘Camera icon’ at the bottom center of the app. Tap ‘Set up your shop’ next.
  • Tap on ‘Next’ to add a photo or logo that represents your brand.
  • Click on ‘Next’ after writing a bio about your shop and what you’re selling.
  • Tap on ‘Next’ to link your social media account.
  • Please enter your first and last names, billing addresses, and tap ‘Next.’
  • Tap on ‘List your first item.’ 
  • Tap the ‘Camera icon’ again.
  • The final step is to upload four photographs and a video of your item (a video is optional, but we encourage you to upload one). Additionally, you’ll need to include a description,  five hashtags, your location, a relevant category, shipping details, and the item’s price. Click ‘Publish listing’ when finished.

The first item you listed on Depop has been successfully listed! You can now list as many products as you want.

Listing Items on the Depop Website

  •  You can access your Depop account by going to their website.
  • Upon logging in, click on ‘Sell’ in the top right corner.
  • Add your product’s photos, description, price, and all the other information we discussed above.

How Does Depop Make Money?

Depop earns money by charging sellers a flat fee whenever they sell an item using the Depop platform. 

A Depop fee of 10% is the first fee. Thus, if an item sells for $100, Depop retains $10.

According to the site, the fees are used to “keep the app operating smoothly, cover regular maintenance costs, and pay all of our team members, from engineers to designers.”

Poshmark charges 20% on purchases over $15 (and $2.95 flat fees on purchases under $15), while Vinted charges 5%.

Depop makes money by charging a small fee called a transaction fee to cover processing payments. For example, there is a charge of 2.9 percent plus $0.30. The customer may pay with Apple or Google Pay, PayPal, or a credit or debit card.

The fee compensates for the costs imposed by the payment companies with whom Depop partners, including MasterCard, Visa, and PayPal.

Depop Business Model

A major part of what distinguishes Depop from other established markets like Amazon or eBay is its social component. Growing an audience, sharing content, and interacting with fellow users are all possible.

Through their social influence, they may become influencers – and in some cases, full-time sellers – on the site.

The most well-known example is Bella McFadden (a.k.a. Internet Girl), who built a seven-figure business through her Depop celebrity status.

Furthermore, the social component makes merchants more likely to sell only high-quality, legal products.

Vendors previously copied Depop designs by dropshipping the products from China for a much lower price. 

Depop prohibited the practice to emphasize its commitment to sustainability and distinctiveness.

Success Story of Depop

Simon Beckerman founded Depop in 2011 with its headquarters in London, United Kingdom. 

After graduating from high school, Beckerman, who has English ancestry, pursued a career in industrial design.

After enrolling at Milan’s Polytechnic University to study industrial design in 1994, he left after one semester.

Beckerman worked many jobs for a living and even tried his hand at DJing.

In Groove (PIG), People In-Groove is a magazine covering news and culture founded by Beckerman and a brother in 1998. 

Around 3,000 copies were sold each month, allowing them to support themselves and later pursue other interests.

One of those efforts led to the co-founding of RETROSUPERFUTURE (RSF), an eyewear brand aimed at an affluent customer base.

Beckerman gave the glasses to stylists, photographers, and acquaintances of celebrities who later wore them in public.

That pre-social media incarnation of influencer marketing would catapult RSF to annual sales of more than $13 million.

Beckerman continued to work on PIG during this time. As a digitally savvy individual, he recognized that physical publications would no longer be the preferred way to consume media.

Even though PIG had a website, it did not have an online shop where buyers could purchase products mentioned in the magazine.

So he decided to develop an online store that interfaced with PIG. 

Johansson opted to pivot to a mobile app format following a brief web experiment in response to an increasing number of businesses adopting a mobile-first approach.

Beckerman later shifted away from PIG selling the products to anyone selling them. Instead, H-Farm Ventures agreed to provide him with €1 million in seed capital to develop the actual product.

The peer-to-peer ‘flea markets’ were already generating noise (in 2011), making it easier for H-Farm to understand Beckerman’s use case.

Depop launched its iOS app in August 2012 in Italy. After eight months, Depop was officially released to the public in April 2013.

Beckerman had already migrated to London at that point, citing the British capital’s promise of increased access to talent and financing. 

It didn’t take him long to accumulate more funds. Depop raised a further €1 million in  October.

As a result of the increased resources, the team developed and launched an Android app in February 2014, enabling it to expand its reach further. 

The iOS app alone had sold over 200,000 items by this point, totaling around five million Euros.

Beckerman turned over the reins to Runar Reistrup, who joined the company as COO a few months earlier. 

Depop grew from 50,000 to 5 million subscribers and €100 million in gross retail volume (GMV) under Reistrup’s leadership.

The company raised $12 million and $8 million from him in two separate rounds of investment. 

Depop was also able to expand into the United States through its money when it opened its second office in New York City (January 2015).

Maria Raga, the firm’s newest CEO, was responsible for the expansion’s coordination and execution. 

Raga joined Depop in 2014 after working at Groupon for four years.

Depop continued to grow tremendously over the next three years, primarily due to word-of-mouth and social sharing. As a result, Depop now has over 13 million fashion fans by mid-2019.

The company raised its largest round of capital so far as a result. Depop raised $62 million in  September 2019, led by General Atlantic, a global venture capital company.

Ralph Lauren and Depop announced their first significant collaboration later in the year. 

Depop will present a collection of 150 pieces made exclusively by its vendors, dubbed Re/Sourced. Richard Quinn and Vans subsequently collaborated with him.

Sadly, Depop was also suffering from increasing aches. 

Depop Business Model

Concerns arose in November 2019 regarding insults and messages sent by anonymous users to sellers on the site. 

Depop users have even reported their accounts being hacked to sell bogus items to other users.

Depop responded by increasing the size of its Trust & Safety team and investing in technology that prevents these types of actions (mainly speech recognition). 

Despite this, as the platform expands, its difficulties are expected to become more complex.

Depop has continued to grow enormously despite a few setbacks. 

Especially in the year 2020, there has been a tremendous success. A pandemic of Coronavirus triggered substantial increases in sales as people shopped from home.

Depop’s meteoric rise eventually led Etsy to purchase 100% of Depop for $1.625 billion (mainly in cash). 

We expect the deal to close in the third quarter of 2021.

There are now over 30 million registered users on Depop. Furthermore, the company has approximately 1,000 workers in its London, New York, and Manchester offices.

Who is the Owner of Depop?

Etsy acquired Depop for $1.625 billion (mostly cash, some stock).

After the acquisition, Etsy gained access to a whole new audience of customers and product categories. Depop has almost 96 percent of its users under 26, making it immensely popular among Gen Z.

Etsy is also not very strong in the fashion segment, focusing instead on artisan and home products. Etsy will leverage Depop to enter the trillion-dollar apparel market.

According to Beauhurst, founder Beckerman and CEO Raga owned 4% of the company before the transaction. Thus, the deal will net them each approximately $68 million.

HV Capital (formerly Holtzbrinck Ventures) was Depop’s largest shareholder before the acquisition, with an 18.75 percent stake. The sale brought them around $300 million.

What is the Revenue of Depop?

According to Depop, its revenues reached $70 million for the fiscal year 2020. From 2017 to 2020, the company has grown by about 70 percent annually.

What is the Funding and Valuation of Depop?

Crunchbase reports that Depop has raised $105.6 million in venture capital funding over seven rounds.

Depop investors include HV Capital, Creandum, Octopus Ventures, General Atlantic, Balderton Capital, and Klarna founder Sebastian Siemiatkowski.

According to Etsy, which acquired Depop in June 2021 for $1.625 billion, Depop is worth $1.625 billion.

About the author

Madhav

Hey Folks, I am Madhav! I lead a team of Marketers at Tech Startup based in Australia. In my free time, I dissect the business models of various businesses. And if there's any free time, I cook some new Dish!