Watch stocks you care about
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Roughly a year and a half after beginning its IPO process, global e-commerce company Borderfree (NASDAQ: BRDR ) finally went public on March 21. On its first trading day, the company's stock jumped 25% to $25, getting the attention of investors, and giving the company a market valuation of more than $600 million.
The company isn't your typical e-commerce retailer. Unlike Amazon.com or eBay, Borderfree does not use a business-to-consumer model. Instead, Borderfree manages proprietary technology that enables retailers in the U.S. to transact with customers in more than 100 countries and territories worldwide, with more than two billion potential customers.
Borderfree also provides logistics solutions -- from carrier management to customs compliance-- to several important retailers, such as Macy's and Aeropostale. Will Borderfree's IPO disrupt the landscape of logistics solutions providers?
The business model
The company mixes traditional logistics with online tools to provide a full set of solutions to e-commerce retailers. First, it provides an international checkout online solution, which enables retailers to greet customers in their own language, show local pricing, and local shipping options. It also takes care of all the international logistics processes, including international customs clearance, third party screening, and parcel fulfillment and returns -- providing constant package tracking. Moreover, the company sells data useful to retailers, such as merchandising tips, global shopping trends, and consumer insights.
According to Reuters, the company's revenue comes from fees paid directly by customers, based on a percentage of sales generated through Borderfree's platform. At the high end, it takes 12% for smaller retailers, according to Marketwatch.
Note that in 2013, the company reported a loss of $654,000, despite a 36% increase in revenue to $110.46 million. In the past five years, the company experienced massive growth in gross merchandise volume, which raised from $4.7 million in 2008 to $447.8 million in 2013.
From now on
There's a big long-term market opportunity for international cross-border e-commerce, which could help Borderfree to continue improving sales in the next few quarters, and possibly earn a profit in the not-so-distant future.
The size of Borderfree's total addressable market is expected to more than double in the next few years. According to Forrester Research, cross-border consumers are expected to spend as much as $24 billion on physical goods from U.S. online retailers in 2014. Likewise, the International Data Corporation expects the number of Internet users outside the U.S., purchasing online, to grow at a 17% compound annual growth rate between 2012 and 2017.
More importantly, there are still plenty of U.S. retailers ignoring international orders, perhaps due to the challenges associated with international logistics. Less than 60% of web merchants, ranked in Internet Retailer's 2013 Top 500 Guide, sell internationally.
Traditional logistics companies, such as FedEx (NYSE: FDX ) or United Parcel Service (NYSE: UPS ) are also interested in going beyond their core business of delivering packages, and have already started providing comprehensive e-commerce solutions.
Together with its usual shipping and delivery services, FedEx provides several electronic shipping tools to improve efficiency. For example, FedEx Web Services allows users to make shipping, rating, and tracking of orders from a single e-commerce system. Zara Wigs, which sells high-quality hair replacement products, uses FedEx Web Integration to ship its products for express and international shipping. To improve its top line, UPS is also offering back office services. The company helps online retailers to audit bills and pay invoices.
There's also a good amount of competitors specialized in specific market segments. BorderJump is said to focus on Latin America, while International Checkout targets small and medium businesses. Finally, Borderfree also faces competition from e-commerce retailers such as Amazon.com, which has invested more than $13 billion since 2010 to build over 50 warehouses.
Final Foolish takeaway
Borderfree has plenty of room for growth, as cross-border consumers are expected to spend $24 billion on physical goods from U.S. retailers in 2014. To gain sales momentum, the company is developing software to target small businesses, and has also been contacted by European retailers.
However, there are several players in the industry. The shipping giants provide e-commerce solutions, Amazon will always be a threat to anything e-commerce, and there are plenty of smaller specialized competitors. Still, Borderfree appears to be off to a good start.
The Motley Fool's top stock of 2014
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.