The recent tech sell-off has been brutal, especially for unprofitable growth companies. Global-E Online (GLBE +0.71%), the up-and-rising cross-border e-commerce solution provider, saw share prices fall more than 60% from their peak of $84 to $32.43.
Unlike last year, when investors were generally bullish on high-growth technology companies, investors are bearish on the same group of businesses this year.
Still, bullish or bearish, investors' sentiments do not affect the underlying business of companies like Global-E. On the contrary, this young company shows promising prospects, despite its recent share-price plunge.
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Global-E has a huge addressable market
Global-E started its business by helping clients in the U.K. sell globally. Since then, it has expanded its client base to cover regions across the U.S., Europe, and Asia. Its financial performance followed suit, with revenue rising more than sixfold from $39 million in 2018 to $245 million in 2021.
While impressive, these numbers have merely touched the tip of a massive iceberg. Based on Global-E's initial public offering (IPO) prospectus, the global and cross-border e-commerce markets could reach $5.8 trillion and $736 billion, respectively, by 2023. Operating mainly in the latter subsector, the tech company enabled $1.4 billion of gross merchandise value (GMV) in 2021 -- accounting for less than half a percentage point of this opportunity.
To gain market share, Global-E has been investing heavily to acquire new customers from the existing regions and verticals, contributing to its loss-making position in 2021. These investments have resulted in a few notable wins lately, like LVMH Group, Fenty Beauty and Fenty Skin, and Rihanna's cosmetics brands.
And Global-E is not stopping there. It is expanding aggressively into new regions and verticals. For example, it grew the team in Tokyo and recruited its first employee in Australia in the last quarter of 2021. While there is no guarantee that the tech company can succeed in these newer regions -- after all, the e-commerce industry can be brutally competitive -- there is a good chance that it will do well in a few of these territories. That will be enough to keep it busy for a long time.
Global-E is growing customer wallet share
Besides attracting new customers to join its platform, Global-E can rely on its existing client base to grow its business. There are a few ways to do this.
To start, Global-E can ride on customers' GMV growth to grow its topline since it charges its customers a percentage of the GMV as fees. In other words, the young tech company will benefit as long as the merchants continue to grow their cross-border sales.
Besides, certain customers may have multiple brands within their portfolios. As the relationship between Global-E and its customers deepens over time, it is natural for companies to enroll additional brands and products onto Global-E's platform. Cartier, Stussy, and Sennheiser are a few recent examples of merchants that have deepened their relationships with Global-E.
On top of that, Global-E can continue to develop new features and services to help customers better run their cross-border e-commerce businesses. Doing that improves customer satisfaction (and retention) and, ultimately, fuels Global-E's growth engine.
NASDAQ: GLBE
Key Data Points
Global-E is forming partnerships
To help facilitate its expansion plan, Global-E has developed a strong partnership with Shopify (SHOP 0.08%). The relationship gives Shopify a stake in the young company while Global-E gains access to Shopify's merchants. The alliance also means that merchants now have access to a global market without much added complexity. That partnership is a win-win-win proposition for all three parties.
While the relationship with Shopify is critical to Global-E's future expansion, the latter does not have to stop at Shopify -- it can further partner with other companies to help its expansion plan. For example, Global-E has also partnered with Meta Platforms to provide cross-border e-commerce solutions for Facebook's merchants.
Another potential area of growth is for Global-E to launch its marketplace. There, it can attract technology partners to provide additional tools and services to help merchants succeed on its platform. The company has yet to announce anything on this front, but I believe it is just a matter of time before it will do so.
