12-9-2024
Lede
Numbered Spotlight Top Pick Global-e (GLBE) reported earnings on 11-20-2024, and we shared the earnings review that day here:
GLBE Q3 2024 – It’s More than a Big Deal
We spoke with the CEO afterward and share that transcription below.
As a reminder, all our CEO and CFO interviews for all companies are available on the Interviews Tab.
Please enjoy our one-on-one conversation with the CEO below.
One-on-One with the CEO of Global-e (GLBE)
Ophir Gottlieb:
Okay, Amir, I have an ambitious number of questions that I’m going to try to go through. My guess is I will not, but I’m letting you know I’m starting out the call ambitious.
So congratulations on a great quarter. It’s nice to see you again.
I’m going to start the conversation before I get too deep with a view of macro. You said, or Ofer said, someone said on the call, that there was actually more positive consumer sentiment as of September that continued into November. That was not incorporated into guidance. That’s fine.
I just saw the BFCM [Black Friday Cyber Monday] results. It seems like consumer sentiment didn’t worsen. So tell me, because you were pretty fair when consumer sentiment was not good in Europe. You’re just like, “Look, it’s just not good.” So I don’t know, without, I don’t know, too many details or as many as you like, tell me about that, consumer sentiment. What are you seeing? I’ll just leave it there. How’s that going?
Amir Schlachet (CEO, GLBE):
Yeah, I think it’s pretty much like you said it.
Back in August when we had to give guidance for the remainder of the year, typically, we take a look at how consumer sentiment manifested in our business, which is basically the same store sales numbers, or the sales of the same merchants, same lanes compared to the previous period. That’s how we define same store sales.
So basically when we looked at those trends back in August, they came on the back of some pretty low numbers. And there seemed to be somewhat of an improvement, but we always take it with a grain of salt because we don’t know if it’s a clear trend or if it’s just something temporary.
And yeah, it turned out that August, specifically the late part of August, picked up. September continued into October, and as you noted, the BFCM results showed that that endured into this peak trading period.
And yes, again, typically when we incorporate that into the guidance, unless we have a very clear reason not to, we typically take into account that consumer sentiment is going to stay roughly at the same level. We don’t factor in a huge improvement, nor do we factor in a huge downturn.
So that’s what was in our guidance. And it’s been a very volatile year, but sometimes volatility goes up, as anybody in the market will know.
It’s like the stock market. And I would say from a geographical perspective, I think the main territory to pull out is Europe, i.e. European consumers, which showed, I would say relative resilience; that came on the back of some very low comps and that contributed to it too.
From a kind of distribution perspective, it was all around. But I think Europe is the one to call out.
OG:
Okay. Yeah, I’ve heard the same thing by the way from tech CEOs that I talked to, which is totally different business.
But at first they were unwilling to say sentiment was getting better, even though it was. In their world it was called optimization, right? Optimizing just means lowering spend, but it’s fine. They can call it what they want.
But now it’s been two quarters in a row where they’re like, I mean, again, it’s almost like they almost don’t want to. But they’re just like, “It’s getting better.” So let’s hope that continues.
Okay. I want to talk about demand gen. Congratulations. We’ve talked about it for quite some time. You’ve been very patient with me.
I appreciate it. So I know assuming that all goes according to plan, you’re really going to start, it’s start being accretive to actual results in 2026.
We will see progress in 2025, but it’s going to take a little while. So I have four questions about this. So the first is how will you be charging for this? I’m guessing it’s like a percentage of GMV and a service fee. Am I not looking at it right? Or?
AS:
No, you are looking at it absolutely correctly.
So one of the unique features of our demand generation offering compared to other alternatives that merchants may have, like just advertising or putting up Facebook ads by themselves, et cetera. One of the benefits is that it’s actually charged on the sales that they make.
So it’s a percentage out of the GMV or the order value basically that is generated, rather than unrelated spend.
So they basically get a guaranteed ROAS [return on ad spend] of 10X, as we charge them 10% out of the sale.
So it’s guaranteed 10X, which is something any marketeer will buy every day.
And for the time being, that’s part of why you correctly noted that we plan 2025 to be a ramp-up year. And as part of the launch and the ramp-up for the time being, we are actually foregoing that fee.
So the merchants that signed up for the launch for the time being, they’re getting it for free.
But they know the price and they signed up knowing that that would be the price. It’s of course on us to prove that this can generate high-quality, meaningful additional traffic for them, which we believe it will once we finish scaling it up.
But it should be a very attractive model for them.
OG:
I would say so. Yeah, I think there are two moats with this. I think that’s number one. No one can offer that ROAS, because no one else is their platform for e-commerce. Right? So that’s number one.
And I’ll get to the other ones. But first my second question is I think I’m taking a statement from the earnings call; I think it was called “out-of-home media campaigns.” I’m just curious, what do you mean?
AS:
Oh, what we meant is that was our launch campaign, which was mostly digital, but we also took some offline media, outdoors media in central cities around the world and ran the campaign there as well. But it’s basically the launch campaign.
OG:
Okay. A Global-e campaign?
AS:
Yes, yes.
OG:
Okay.
AS:
Our campaign advertising – Borderfree.com is kind of a place to start your shopping if you want, we call it we’re the world.
If you want discover amazing brands from all around the world.
OG:
Okay, that makes more sense.
My third question, which I think is the second moat, but I’ll let you verify or not. It feels like on the one hand there’s this moat because of the way you charge, no one else can charge like it.
Like you said, there is no alternative to them for that. It’s either your e-commerce platform provides it or not. But Facebook’s not going to do it on results.
The second I think is a data moat.
So this is how I see it, and please correct me if I’m wrong. Global-e will do about five billion in GMV this year, likely six billion in 2025.
I’m not asking for guidance; I’m taking consensus estimates. Maybe eight billion in 2026. Again, I’m just taking consensus estimates.
That feels like a data moat because you will know how each particular type of trading is going.
Like, how is apparel doing in Germany? You will have data and you can help with this marketing. Is that the proper way to look at it? Or am I kind of making more than there is about this data?
AS:
No, you’re not. It’s definitely part of the data moat that comes from that. And by the way, we’re doing that even irrespective of the demand generation piece itself.
Even just in the way we work with, especially with large merchants, we can and we do crunch the vast amounts of data that we have.
And because they’re spread across thousands of merchants, across different verticals, different price points, et cetera, then it means that we have, without naming the benchmarks, we can still give them high confidence, data-based insights and predictions as to what products sell well in different geographies.
What would be the price elasticity of product prices, shipping prices. Ways to handle duties and taxes, et cetera. That’s definitely a big part of what we are doing and will continue to do with the data moat that we are generating.
What you mentioned there is an additional kind of data-related moat, which has to do with the shoppers themselves.
So part of the, I would say the advantage here or part of the uniqueness of our demand generation offering, is that when a merchant signs up to place their products and their brand on Borderfree.com, part of the deal is that we are then allowed to put a marketing consent for Borderfree.com on their checkout.
So there’s a self-reinforcing cycle here because they are enjoying the traffic that we are generating into Borderfree.com, both by means of us just advertising Borderfree as we discussed and we’ll continue to do that.
But also by us using our already pretty large, and growing database of shoppers that have given us consent and marketing them via email marketing, new offerings, new brands, et cetera, and essentially driving more and more high quality traffic into Borderfree.com that then later translates into a referral to their brands and vice versa.
We enjoy the traffic that these brands have because we can offer their shoppers even if they didn’t initiate, especially if they didn’t initiate the journey from Borderfree.com, they will still see the kind of Borderfree.com consent on the checkout, sign up to get Borderfree.com email updates, and we enlarge the database that way as well.
There are additional ways we’re offering other incentives like a cashback offering.
Part of the launch was a new cashback offering for anybody opening a Borderfree.com account, which I encourage you to do as well. You will not just get news about great brands and great promotions around the world.
You’ll also be able to gain 5% cashback when you purchase from participating merchants.
It’s not all the merchants on it. It’s the majority, but not all the merchants on Borderfree.
But that’s part of a set of interlinked moves and offerings that all relate to the demand gen that we are putting in place in order to drive more and more value to our merchants.
OG:
So in future earnings calls, will you guys be providing some sort of, it sounds like there’s two, other than the results, but I’m saying two baseline metrics. Is number of companies that are on Borderfree, that are essentially, that are signing up for the service. That are saying, “Yeah, we will take this 10X possible ROAS.”
And then there’s also the number of individual shoppers who are kind of opting in. Are you going to share stuff like that? Or is the market just going to get, here’s how it’s doing and just you can impute what you want to impute?
AS:
I think since this is a ramp up period, to be honest, I’m not sure we’re going to update on which KPIs and on which frequency.
Definitely the number of brands is something that is, it’s public information because once they set up and go live, they’ll appear on the website. So that should be easy.
In terms of the size of the shopper database and other metrics, that still remains to be seen.
Of course we’ll keep everybody posted on how this is going, but it’s really very, very, early innings. So we’re yet to decide on exactly how and in which frequency we’re going to report it. But definitely we’ll share details because it’s one of our main initiatives for the next two or three years for sure.
OG:
Okay. Yeah, it’s just super clever how you’re going to get enterprises to do it with just the way you’re charging. It’s just like, I love that. It’s just really, really smart.
All right, switching gears here. You guys talked about BOPIS, buy online, pick up in-store. So this is a small question just because my brain is just too small. I understand how it works, how you buy online and pick up in-store, but these are cross border.
So I’ll ask this. And you gave an example of a US merchant that saw around 50% of its e-commerce sales to Canada managed through its country branded series during the first month of the offering.
So does Global-e help international brands find local partners to handle in-store pickup? Or do they naturally have that? How does that work?
AS:
No, so typically we don’t. We’ll typically walk into a situation where a brand, and obviously these are typically the larger brands, will already have a network of stores in a specific market.
It can be their own stores or it can be franchisee stores or branded partner stores, but they will have a physical footprint.
We’ve had a ship-to-store offering for many, many years now.
We have had merchants using it for probably more than, more years than I can remember, and they could offer their stores as pickup locations for orders. And of course merchants that had stores in other markets love that because it’s great for everyone.
The uniqueness about this new feature is that the actual pick and pack is done in the store. So the products don’t need to travel cross-border. And actually the entire transaction is done locally.
OG:
So how was that cross-border then? Because so let’s say it’s a German brand, but they also have some retail locations in Canada. And I’m in Canada, I’m not, but let’s just say I’m in Canada.
And I go to the website. The website would have normally been centered on a German checkout, and then Global-e makes it a Canadian checkout. Is that how it works?
AS:
Yes and no.
So we will handle kind of the front end experience.
We’ll localize the shopping experience, the checkout experience for that Canadian shopper.
So it can feel Canadian, because everything will be in English or French depending on where you are in Canada. It will be priced in Canadian dollars.
You’ll be able to pay with whatever card or alternative payment method you want to use. And the taxes are going to be calculated correctly, et cetera.
The difference is, and in a way it’s similar to what we call our multi-local model, which we’ve discussed in the past.
In case the merchant has the relevant setup in this case, the buy online pickup in-store set up, then actually the transaction itself is not cross-border, it’s actually a domestic transaction.
So everything will be done in Canada, in market; will be packed up in the store. And the shopper is going to be able to come and pick up the order from the store itself. And it’s going to be based on the inventory that already sits in the warehouse of the store.
That’s kind of the uniqueness for this model. And essentially it enables merchants to better utilize the stuff that they’ve already imported into the market.
And obviously it’s more sustainable as well because the stuff is already there so it doesn’t need to travel from a central location abroad.
And typically they can offer a very quick turnaround for the shoppers.
Right now, it basically works if all the items are available in the store.
If only some of the items are available in the store stock, then the order basically defaults into being sent from the central distribution center.
In future iterations of this offering, we also plan to support the ability to split the order and have it, whatever can be picked up in the store to have it picked up in the store, and the rest to be sent from abroad.
Honestly, the gating factor here is more on the merchant side because in order to do this effectively and actually make shoppers happy, you need to make sure that you manage your inventory, your in-store inventory very, very tightly.
Because it’s going to be a very disappointing experience for a shopper to say, “Hey, I want to pick you up in-store.” And the merchant says, “Hey, it’s going to be ready tomorrow.”
And then they get an email saying, “Oh, sorry, we actually didn’t have some of the items we thought we had in stock. And it’s going to take a few more days.”
So in order to avoid that, you need, as a merchant, to make sure that you have a very, very clear and up-to-date view.
That your systems have a very up-to-date view on what’s the real current stock is in each store so that they can take those decisions.
But if they can, then it’s a great value to the shoppers, to the brand, to us.
OG:
Global-e becomes a bigger and bigger part of that brand’s kind of ecosystem of sales really with that.
AS:
Exactly.
And it enables us for brands that have this footprint of stores and that are interested in this offering, this is clearly very advantageous for them and very important for them. But it’s a very complicated offering and we put a lot of effort into building it and launching it.
But at the same time, and I think this is what you alluded to, it enables us to basically serve these brands on these very large destination markets where they’re so, I would say central to the business that they open up doors in them. And yet they choose to route their business to us because of the advantages that it brings to them.
So it’s definitely, again, part of the broad set of capabilities that we have and that we keep on building in order to be able to work effectively and support the needs of these very large brands.
OG:
Yeah. And the brands are, they’re self-selecting what the important markets are because they’re there.
AS:
Correct.
OG:
All right. So my next question is sort of because 2024 was so good, now everybody wants more.
So 2024 was really a huge year. I know that there was basically a recession in Europe. But what Global-e was able to get out the door with products like this, like demand generation. Getting Victoria’s Secret, just big, big things. Okay, so the next question is…
AS:
We got Harrods.
OG:
Yeah, Harrods. Exactly. Thank you. Even the largest one. Right, exactly.
So this is how I see 2025. You tell me if I’m not right.
Okay, new enterprise sales, fine. Shopify – I forgot Shopify at 2024 – new services. But to me there isn’t necessarily any clear massive new customers in the pipeline, publicly, like Victoria’s Secret.
And also, I don’t know if there’s any, I don’t know if you’ve mentioned any large feature upgrades that are as big as demand generation or as BOPIS.
So is 2025 for Global-e where the year’s going to be based on the way the company has been built through 2024 and now it’s kind of the realization of these things? Or is there still breakneck speed features and things coming out that we’re just not, I’m just not privy to?
AS:
So there’s going to be both, from my view.
So there’s going to be more doubling down on things that we already are doing and that we already launched like demand generation, like just the runway for growth that we have in our quote/unquote regular business across the US, Europe, et cetera.
Of course we have, and I think we commented publicly on the call as well, that we have a very strong pipeline going into 2025.
Basically we have not just a sales pipeline, we have a pipeline of projects of merchants that are signed who are in integration, were not planned from the get-go to go live in 2024, were planned to go live in 2025.
And there are opportunities of all sizes there, big and small.
We never announce merchants before they go live, so that’s why you don’t know the names.
But there are definitely large and interesting opportunities also signed up and in integration for a 2025 launch.
And a strong sales pipeline for brands that are in advanced discussions, and will sign up hopefully across the next few months and will hopefully go live the later parts of 2025. So we have that.
We also have a few new territories that we just recently launched.
And again, we think we can grow quite well in them.
We’re going to invest efforts in them, especially markets around the APAC region.
And we’re seeing great interest in places like Japan, Australia.
Well, South Korea has been in the news over the last couple of days, but irrespective of that, we’re seeing some good traction there. Hopefully there’s not going to be a huge impact on the local economy from the latest political debacle.
And also in Europe we’re looking at some of the Nordic countries with interest.
There’s lots more to do also from I would say a business development point of view. And in addition to that, we have features and capabilities in the pipeline. There’s a full pipeline of product enhancements and growth.
And again, we’ll announce them as they come to market.
But I think hopefully 2025 is going to look similar to 2024. With exciting news both on the ongoing business and on new developments that we’ll bring to market. There’s no shortage of things to do.
OG:
Okay. And no recession in Europe, let’s hope for that.
AS:
Yeah, for sure.
OG:
That would be nice. So you have an analyst day coming up, this is a hedge fund specifically asked me to ask this, will you give long-term targets on analyst day?
AS:
Yes, and we’re finalizing the details, but we definitely plan to have an analyst day.
And yes, part of the reason for us to have this analyst day in the first half of next year is because we basically achieved or surpassed all of the long-term targets that we’ve set for ourselves during the IPO.
And we actually think it would make sense, especially at this point in time in the growth of the business, with what we spoke about just now. With a lot of the things that we’ve been doing the last few years kind of kicking into play and starting to materialize.
Plus looking into the future, into the next few years and the growth opportunities that we see all around.
We thought it would be a good point in time to take a pause and share our view of what we think both in this strategic point of view, but also from a financial point of view, what is achievable over the next two or three years.
OG:
Okay. Yeah, I still think, you know how I hold Global-e is essentially the best or one of the best potential investments in the US markets there are. Okay.
AS:
We’ll continue working hard to justify that.
OG:
Yeah. I know you will. Is there anything I didn’t ask that I should have asked? Or anything you wanted to say that I didn’t give you a chance to say because I didn’t ask the right questions?
AS:
No, I think as typical, you asked great questions and they’re all on point. And no, I think we covered the main topics, also the main topics that came up in all our callbacks with analysts and investors alike. So I think it was, we pretty much covered it all.
OG:
Okay. Well, congratulations on a fabulous year.
That was a tough thing you had to deal with with Europe and you guys did it very gracefully. I’m just going to say that. And I will see you in 2025, Amir. Happy New Year.
AS:
Absolutely. Thank you very much. You too.
Conclusion
Today we reiterate Global-e (GLBE) as a numbered Spotlight Top Pick and an “after this” winner. We see a bright future.
The author is long GLBE at the time of this writing.
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