Global-E (NASDAQ:GLBE) simplifies cross-border e-commerce, providing an end-to-end solution that helps merchants boost conversion rates with international buyers. Despite going public earlier this year, the stock price has already skyrocketed 180%.
In this Backstage Pass video, which aired Sept. 14, 2021, Motley Fool contributor Trevor Jennewine shares his thoughts on Global-E.
Trevor Jennewine: We’re talking about Global-E, the ticker is G-L-B-E. Unlike all of the other e-commerce stuff we talked about today, Global-E doesn’t really have a marketplace and it doesn’t provide software to help you build your own website. Global-E solves, the mission of the company is to make commerce border-agnostic.
If you think about e-commerce, domestic e-commerce is relatively straightforward. But when you start thinking about cross-border or internationally e-commerce there are a lot of different things you need to consider. Can your website be read by people in other countries? How do you translate the currency into the appropriate currency for the countries you are selling in? What type of payment options are popular in those countries? What type of delivery options do people prefer? Who are the shipping carriers there? There are a lot of different variables. There is regulatory things to consider. How do you provide customer support and manage your returns? Global-E’s platform attempts to solve that problem.
Specifically, it simplifies cross-border e-commerce. What that means, its platform integrates with merchants’ websites or their online storefronts, and it localizes things like the language, translates the currency, it gives them local shipping options. The company also provides after-sales support customer service in 200 destination markets and it helps merchants manage returns in these markets. It also handles regulatory and compliance issues. Taxes and duties associated with importing things from international geographies. Let’s see, one of the other things I like about Global-E is while the company is providing these services, its collecting all of these data from across all these destination markets. So it works in 200 markets, currently has 522 merchants on its platform. Then it uses machine learning to surface insights for its merchants to help them tweak content to optimize it for buyers in each of those international markets. It does it on a market-by-market basis, helps merchants tweak their content so that it resonates with different buyers in different countries.
I think the company has been operating for about a little under eight years now, I want to say with 522 markets in the platform. They’re collecting data. They do say that they are the leading cross-border direct-to-consumer e-commerce platform. I think that’s where they have an advantage here — it is that data and the scale that they’ve already created.
Global-E also integrates with some of the big FinTech platforms and e-commerce platforms out there. For example, Salesforce Commerce Cloud or Adobe‘s Magento, BigCommerce, integrates with PayPal and then buy now, pay later like Klarna, and Facebook is on 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 expand their businesses internationally. I think that’s actually a growth driver. We actually talked about this on Clubhouse this morning. I think that’s a growth driver for both companies. I mentioned that Global-E has 522 merchants. Shopify powers 1.7 million businesses. That’s just a massive market that Global-E can tap into. But at the same time, Global-E has that breadth and scale across all of those different geographies and that it can help benefit Shopify merchants’ international sales, help them grow their businesses, build their brand in other countries. I think that is a mutually beneficial relationship there.
One of the questions is how effective is Global-E doing this? In their SEC filings, they mentioned that their merchants all can see a 60% boost in international conversion rates. One of the figures they give is that with any online storefront, typically, about 30% of the traffic comes from international buyers. But international buyers usually represent just 5% to 10% of sales. There is a disconnect there and Global-E believes its platform helps boost those conversion rates and international sales by, often, up to 60% or over 60%.
Something else I really like about this company is that the services provided is clearly resonating with its clients. The gross retention rate since 2018 has been typically over 98%. The company is churning less than two percent of its clients so that building strong relationships. The net retention rate has typically been over 140% which means that if its merchants are spending $1 in the first year, the next year they’re going to spend $1.40. They’re not only keeping their clients, they’re growing their relationship with them, they are expanding their business.
Then just to add a little bit of color on how they generate revenue. There are service fees which they take a percentage of the gross merchandise value that moves their platform. So the total value of what’s sold through their platform, they take a percentage of that as a service fee and they also take fulfillment fees for providing the shipping and handling and other delivery-related services. 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 resonate better with international buyers. You can lean on them for fulfillment as well if you would like to. Those are their two revenue streams right there.
Just to put the company’s growth in context, the growth has accelerated in the last couple of years. Between 2018 and 2019, the gross merchandise value moving to the platform jumped 81% and then it grew 103% in 2020 and is up 111% through the first half of 2021. From 81% [in 2019] up to 111% growth for the first half of 2021. Accelerating growth in gross merchandise value and that has translated into accelerating growth in revenue as well. During the most recent quarter, revenue was up 92% to $57 million. One of the other things is the company’s gross margin has ticked up along the way as well.
Gross margin hit 36% in the most recent quarter, and that’s up from a little over 32% last year. The company is currently not profitable on a GAAP basis, but they were profitable back in 2020. For the full-year 2020, they did generate a GAAP profit and they generated positive free cash flow as well. I think they are investing aggressively right now and I think — they could pull back and be profitable at any time — but I think this is, again, one of those markets where there’s such great potential that it makes sense to invest aggressively and operate at a loss for a while, while they’re out there grabbing market share.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.