Global-E (NASDAQ: GLBE) simplifies cross-border e-commerce, providing an end-to-end solution that helps merchants increase conversion rates with international buyers. Despite its IPO earlier this year, the share price has already climbed 180%.
In this Backstage Pass video, which was broadcast September 14, 2021Motley Fool contributor Trevor Jennevine shares his thoughts on Global-E.
Trevor Jennevine: We are talking about Global-E, the ticker is GLBE. Unlike all of the other ecommerce products we’ve talked about today, Global-E doesn’t really have a market and doesn’t provide software to help you build your own website. Global-E solves, the company’s mission is to make trade independent of borders.
If you think of e-commerce, domestic e-commerce is relatively straightforward. But when you start to think about cross-border or international e-commerce, there are many things to consider. Can your website be read by people from other countries? How do you translate the currency into the correct currency for the countries you sell to? What types of payment options are popular in these countries? What kind of delivery options do people prefer? Who are the carriers there? There are a lot of different variables. There are regulatory elements to take into account. How do you provide customer support and handle your returns? The Global-E platform attempts to resolve this issue.
More specifically, it simplifies cross-border e-commerce. This means that its platform integrates with merchant websites or their online storefronts, and it locates things like language, translates currency, and gives them local shipping options. The company also provides after-sales support customer service in 200 destination markets and helps traders manage returns in those markets. It also deals with regulatory and compliance issues. Taxes and duties associated with importing things from international geographic areas. Let’s see, one of the other things I love about Global-E is that while the company provides these services, they collect all of this data from all of these destination markets. It therefore works on 200 markets, currently has 522 traders on its platform. Then it uses machine learning to emerge information for its merchants to help them refine the content to optimize it for buyers in each of these international markets. It does it market by market, helping marketers polish their content so that it resonates with different buyers in different countries.
I think the company has been in operation for about a little less than eight years now, I mean with 522 markets on the platform. They collect data. They say they are the main direct-to-consumer cross-border e-commerce platform. I think that’s where they have an advantage here – it’s that data and the scale that they’ve already created.
Global-E also integrates with some of the major FinTech platforms and e-commerce platforms. For example, Salesforce Commerce Cloud or Adobeit’s Magento, Wholesale trade, integrates with Pay Pal and then buy now, pay later like Klarna, and Facebook is there too. One of the big ones is Shopify. The company has an exclusive partnership with Shopify. Shopify merchants have access to Global-E to help them grow their businesses internationally. I think it’s actually a growth engine. In fact, we spoke about it at the Clubhouse this morning. I think it’s a growth engine for both companies. I mentioned that Global-E has 522 merchants. Shopify powers 1.7 million businesses. It’s just a huge market that Global-E can tap into. But at the same time, Global-E has this scale and scale in all these different geographies and it can help benefit Shopify merchants’ international sales, help them grow their business, grow their brand in other countries. I think it’s a mutually beneficial relationship there.
One of the questions is how effective is Global-E? In their documents with the SEC, they mentioned that their merchants can all see a 60% increase in international conversion rates. One of the numbers they give is that with an online storefront, around 30% of the traffic usually comes from international buyers. But international buyers typically only account for 5-10% of sales. There is a lag there and Global-E believes its platform helps increase those conversion rates and international sales by up to 60% or more than 60%, often.
Another thing that I really like about this company is that the services provided clearly resonate with its customers. The gross retention rate since 2018 is generally above 98%. The company has less than two percent of its customers, which helps build strong relationships. The net retention rate has typically been over 140%, meaning if its merchants spend $ 1 in the first year, the next year they’ll spend $ 1.40. They don’t just keep their customers, they develop their relationship with them, they develop their business.
Then just add some color on how they generate income. There is a service charge that they take as a percentage of the gross value of the merchandise that their rig moves. So the total value of what is sold through their platform, they take a percentage of that as a service charge and they also take an fulfillment charge to provide shipping and handling and other related services. the delivery. Some of the fees are optional, so you can use Global-E, you can use their platform to help localize your website and make it more attractive to international buyers. You can also rely on them to flourish if you want to. These are their two sources of income.
To put the growth of the company into context, growth has accelerated over the past two years. Between 2018 and 2019, the gross value of goods transferred to the platform jumped 81%, then it increased by 103% in 2020 and 111% until the first half of 2021. By 81% [in 2019] Up to 111% growth for the first half of 2021. Accelerated growth in gross value of goods and this also translated into accelerated growth in revenue. In the last quarter, revenue increased 92% to $ 57 million. One of the other things is that the gross margin of the business has also increased along the way.
Gross margin reached 36% in the last quarter, compared to just over 32% last year. The company is currently not profitable on a GAAP basis, but it was in 2020. For the year 2020, it generated GAAP profit and also generated positive free cash flow. I think they’re investing aggressively right now and I think – they could pull out and be profitable at any time – but I think this is, again, one of those markets where there is has such great potential that it makes sense to invest aggressively and operate at a loss for a while while they are there to grab market share.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.[ad_2]