Fall 2021
Position Statement
Depop should establish physical retail locations in tandem with its digital platform to pursue growth in the US while preserving its core values and personality. Opening brick-and-mortar stores in major US cities will assist Depop in differentiating itself among competitors, creating a strong connection between the buyers, sellers, and the company, and increasing brand awareness.
Argument
While it seems counterintuitive to open a physical store as countless well-established brick-and-mortar stores are filing for bankruptcy, Depop will benefit from a retail space due to the upsurge in secondhand shopping trends. Time Magazine reported that during 2020, when most retailers were struggling to make profits, Depop sold $660 million worth of merchandise, doubling its sales from the previous year (Dockterman, 2021). Along with Depop, ThredUP, Tradesy, Vestiaire Collective, the RealReal, Vinted, and Poshmark are digital startups that have begun expanding in the US market. The fashion resale industry, or the “re-commerce” market, is increasing dramatically with an estimated annual value of $18 billion, indicating that these second-hand clothing startups are in a competitive market for similar consumers. As the fashion resale market segment continues to grow, Depop will need to expand at the same rate as competitors and differentiate itself from other companies by opening a brick-and-mortar store. For instance, The RealReal has already successfully opened physical locations in fifteen major US cities, reporting that consignors send more than 1.5 times in goods’ retail value compared to online, and similarly, shoppers who buy clothes both in-store and online spend three times more than an online-only buyer on average each year (Cheng, 2021). While The RealReal is not a direct competitor since it is positioned in the luxury resale market, Depop can translate these findings to its own retail spaces. The report demonstrates that a retail store will lead to an increase in buyer volume as well as seller product value.
Each competitor has the same fundamental service: an online marketplace for buyers and sellers of vintage and second-hand clothes. Depop delivers a unique digital user experience by fostering strong community connections and emphasizing a creative outlet for buyers and sellers, however, exploring more ways to get closer to its customer is important when creating wide-scale awareness in the United States. According to the case, Poshmark, one of Depop’s largest competitors, began developing strategies to make its consumer experience more immersive; for instance, “partnering with Amazon on ‘Poshmark Stylist Match’ to link the Alexa artificial intelligence tool to their app” (Beney, 2019, p.8). Offering specialized functions, such as the Poshmark Stylist Match, provides a company with a competitive edge; an experimental retail space would be an innovative feature that will increase Depop’s value proposition of socializing and selling. Opening physical retail spaces will aid Depop in connecting buyers and sellers and promoting a strong and creative community. Depop’s mobile app acts as a “social selling marketplace,” or a crossover between a social media platform and a second-hand clothing retailer. Depop encourages buyers and sellers to communicate with each other about products, creating “a buy-and-sell space that’s far more fun than sitting at home alone on your computer waiting to snap something up from eBay” (Beney, 2019, p.5). With this perspective on how a resale platform should operate, Depop could effectively translate its lively community into a physical retail store.
Establishing brick-and-mortar stores across major US cities will act as a marketing tool and drive Depop’s brand awareness in the US market. Depop does not utilize traditional marketing strategies, alternatively, it depends on word-of-mouth through harnessing its social community “by showcasing up-and-coming designers and referencing magazines and bloggers that feature the brand” (Beney, 2019, p.7). In cities with a strong fashion and artistic culture, such as Los Angeles, New York, Atlanta, etc., physical spaces will allow returning buyers and sellers to congregate and will draw in new customers. Since Depop is known for its creative and engaging community, the retail space will be seen as an opportunity to extend that online platform into the real world. The publicity created by opening a physical store will increase Depop’s brand presence and awareness across all channels.
Recommendation
For the initial step before opening brick-and-mortar stores Depop should construct a SWOT analysis to capitalize on what it does well and minimize the risks that it will face. To begin, Depop’s biggest strength is its large user volume, with 30 million active users (Dockterman, 2021). The case states that “Fashion re-sale is a challenging business, not least because it requires a high level of consumer participation” (Beney, 2019, p.9). Depop is successful in the resale market because it has loyal customers, buyers and sellers, who fabricate the culture and energy of the company. Entrepreneurial sellers devote a lot of time to their Depop shops and buyers are willing to spend money through the app, indicating that Depop’s consumers will continue to be loyal to the brand and engage in a retail space. A potential weakness for Depop’s physical store is that the purpose and function of the space is unclear. The founders express that their ambition for the space was to “create a natural extension of the app where the Depop community could get together and inspire each other, providing multifunctional spaces to help bridge the gap between online and offline.” To actually achieve growth with these beta spaces, Depop needs to utilize a SMART goal setting technique, since its current plan lacks a specific goal, has no means of tracking progress, and does not lay out a target deadline. As stated in the argument, Depop faces a lot of opportunity, with a growing resale market, high consumer demand for vintage and second-hand fashion, and the potential for positive press when opening a retail space. However, Depop will encounter financial and logistical threats after delineating from an online-only market. The company must take into account the added expenses of operating a retail store, including rent, employee salary, and inventory. This will affect where Depop positions the spaces and the products and services that they can afford to provide within them.
After evaluating its SWOT analysis and SMART goals, Depop should conduct market research to decide which geographic locations to have a store. Depop could segment its market based on an age demographic; according to the case study, 80 percent of Depop users are under the age of 25 (Beney, 2019, p.5), suggesting Depop should position its physical location in cities that have a large Millennial and Generation Z population. Further, the case cites that many Depop buyers are interested in streetwear and vintage fashion, and most sellers identify themselves as “creatives, stylists, or curators.” Therefore, Depop’s retail spaces need to be located in cities where its residents value fashion, art, and creativity. During the early stages of development, Depop should focus on New York City and Los Angeles since they represent the fashion capitals of the United States and are home to many local artists.
Once Depop completes and interprets market research to choose a location, the next step is to define the purpose of the retail spaces. Shoppers are looking for more than just a place to buy clothes, so the store must be an experimental and experiential space. Since Depop’s brand identity is based on fostering a community, the physical store should be a space where local creatives can come together. Especially after COVID, people want to get off their screens and engage with the community face-to-face.
After defining that the purpose of the space is to bring the creative community together, the company needs to determine the unique products and services it will offer to create a strong customer value proposition, with features that will inspire people to enter the store. The case study emphasizes that Depop values “curation in the app and creating fresh editorial content,” which must be echoed in the physical space. According to the case Depop “engages with users to encourage great styling and strong photography and contact those with good stock but bad photos to help them develop their profile” (Beney, 2019, p.3) With this in mind, the services in the space must provide for sellers that post on the app. Depop should offer resources that enhance the user's photography skills, such as studio space and photography classes. Also incorporating open model calls for seller’s clothing could generate a sense of community and add to the social dimension of the brand. As for products, Depop should curate an in-store product line that aligns with the trends that are popular on the app. The merchandise in-store must be more fluid than a traditional retailer so inventory does not sit on the rack for an extended period of time. Depop’s store should carry few items and constantly rotate inventory so the garments are perceived as more valuable, increasing customer spending in-store.
References:
Cheng, A. (2021, February 23). The RealReal’s results are another sign that brick-and-mortar stores won’t go out of fashion. Forbes. Retrieved October 28, 2021, from https://www.forbes.com/sites/andriacheng/2021/02/23/the-realreals-results-are-another-sign-brick-and-mortar-stores-wont-go-out-of-fashion/?sh=212eab9d7708
Dockterman, E. (2021, August 19). Inside Depop’s big plans for the future of fashion upcycling. Time. Retrieved October 28, 2021, from https://time.com/6089003/depop-upcycling-fashion/
Case study retrieved from Bloomsbury Fashion Business Class