3-5-2025
At the Top
Numbered Spotlight Top Pick Global-e (GLBE) reported earnings on 2-19-2025, and we shared the earnings review that day here:
GLBE – Very Strong; Tariffs are Real; New Market Opens
We spoke with the CEO afterward and share that transcription below.
You will see from the transcription that while tariffs impacted revenue guidance for 2025 (but neither GMV nor EBITDA margin), in the medium- to long-term this trade war world adds complexity to the cross-border ecosystem and that in fact adds to GLBE’s total addressable market.
GLBE saw a very similar reality with Brexit and, as you will read, while it caused a short-term headache, it created a medium-term pull forward of pipeline and that has continued even years later.
Here is a snippet from the conversation from the CEO on this topic:
When Brexit started to become a reality, that level of interest rose quite significantly.
And then when merchants finally realized that (A) Brexit is happening but (B) irrespective of what the final decisions would be on how exactly trade is going to work between the UK and the European Union.
The only thing they knew for certain is that these decisions are going to be, and these bilateral agreements are going to happen just before the actual drop-dead date, and there’s just no chance that we’ll have the ability to adapt in time.
And we literally saw a big rush of merchants, including merchants that we’ve been in discussions with for a long time, that were sitting on the fence that were discussing with us some nuances in the contract all of a sudden like, “Okay, contract is fine, the price is fine, everything is fine.
The only thing is how quickly can we go live? Because we realize that if we don’t, we’re just not going to be able to trade.”
It’s as simple as that.
So we think that in the long term, as this whole tariffs thing raises the complexity of international trade, it should drive more business towards us.
After all, the bearish thesis for GLBE is that somehow cross-border e-commerce becomes less complex. I think an objective observer can say that we are moving toward more complexity, not less.
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 think you know where I’m going to go with my first questions, but first of all, congratulations on a fantastic finish to the year.
I was really pleased with those numbers, I’m sure, or I hope you were too. Also full year GMV in line.
I know that there’s a lot going on, but that’s great.
And also you actually maintained EBITDA margin guidance even with that take-rate, which we will get to.
I don’t know. I was super pleased.
Having said that, we live in a world that has changed slightly, so I’m going to ask you mostly about tariffs, mostly about multi-local. I will get to Shopify Managed Markets.
I’m just trying to lay the groundwork, so you don’t feel like you have to answer everything all at once. Okay.
Amir Schlachet (CEO, GLBE):
No problem at all.
OG:
So, the big takeaway for me, and I’m guessing most other people you’ve spoken with, was the impact of tariffs and the speed at which enterprises are changing their models just in anticipation, and ultimately what could mean a lower long-term terminal operating margin.
I’m not going to ask about that. You have an investor day.
That’s just what I’m hearing. The full year GMV guidance was in line with sell-side estimates, 32% growth, which is I think remarkable revenue of course was considerably lower due to a move in multi-local.
Okay.
How does multi-local work for Global-e with respect to the take-rate?
I know it’s lower, but I heard some stuff on the call that maybe it’s essentially nothing. So let’s just start there. What does multi-local look like for Global-e?
AS:
Actually, we need to separate the discussion into two.
One is the services take-rate, on which there’s no real difference between multi-local and a regular model.
Apart for the, I would say inherent fact that merchants that for whom multi-local is an option, are typically larger merchants.
These would be the ones for whom the service take-rate is probably in the lower bracket to begin with.
But that’s irrespective of multi-local or not multi-local, just because they’re large merchants.
The difference is on the fulfillment take-rate because by and large, when a brand goes multi-local, it means that they will hold the inventory in the market and the fulfillment will be done in the destination market domestically.
And that means typically, I would say either no fulfillment take-rate for us because they’re going to do it all by themselves, they already, in many cases, have a setup with a local carrier, or it’s going to be a lower fulfillment take-rate because inherently domestic fulfillment is cheaper than the cross-border one. So we will have a reduced to no fulfillment take-rate.
That is the effect of going multi-local.
OG:
Okay. Yeah, and obviously it’s like you said, it’s sort of incidentally it’s larger customers because larger customers can do multi-local, have a need to do multi-local.
AS:
Exactly. They can, because in order for a multi-local strategy to be effective, it means that they really need to hold a substantial inventory in the market.
It doesn’t work if you only hold a few items because then it means that yes, you’ll theoretically do it multi-local, but in practicality, almost every order is going to default back to your source country and you’ll anyhow fulfill it cross border.
Only if you hold a wide and deep inventory in market can you actually fulfill the majority of B2C transactions from the domestic inventory.
So it does create complications.
So holding and managing multi-inventories in different markets and even keeping track of exactly what you have in inventory in multiple locations is not that easy.
OG:
Okay. So there aren’t that many that are doing hybrid, and by hybrid I would mean multi-local, but a local inventory that isn’t as robust as, let’s say, what it would be if it was just a cross border.
There’s not a lot of hybrid?
AS:
No, not a lot of these cases.
We actually, to give you some color on that, we do have brands that have local inventory in some markets because they use it to, let’s say, replenish local stores or local franchisees.
Not even their stores, but kind of to support offline sales and B2B. Yet for the B2C part, they actually fulfill it from their central distribution center cross border.
Again, because holding enough inventory and managing inventory tightly enough to support B2C is vastly different than what you need in order to support B2B.
Because at the end of the day, if a store orders certain items in order to put them on the shelf and they come in the wrong size or the wrong model, then it’s fine.
They’ll give a call to the central dispatch and they say, “Hey, we got the wrong items,” and the truck that comes tomorrow is going to bring the right stuff and take the wrong stuff back.
But in B2C, if you make a mistake in fulfillment, it’s much, much more complicated.
Implications are much, much bigger. You have a dissatisfied customer, you have to handle it from a customer services point, you have to make sure that you don’t get any reputational damage.
So it’s a much different operational challenge.
So that’s why there’s a difference. Now, of course with the tariffs, there is a new motivation I would say for, because historically brands were looking at multi-local, mostly in order to provide better service to their end consumers in the market.
That was kind of the prime goal for going to this much more complicated technical and operational setup.
Now, it is also becoming an important tool in order to combat the effects and lower the effects of tariffs.
Because you essentially switch from paying duties on the retail value to a wholesale value. When you sell cross border to the end consumer in the market, it means that whatever duties are levied, they’re levied on the full retail price.
Now, when there’s a de minimis exemption in place, then that’s fine because the duties are there in the books, but in the vast majority of cases, the consumers are not going to pay them because it’s going to be a personal import below the de minimis amount.
Now, if de minimis are taken out and items become dutiable from the first dollar, then it means that there are duties no matter what you’re going to do, the only thing you can try is lower the base price on which the duties are calculated.
OG:
Okay. So Nir was saying that on the one hand, everything you just said, multi-local means less revenue from the GMV portion, but on the other hand, it’s an offering Global-e has actually had for some time, but there was just little interest. Again for everything you just said.
It’s really complex.
And Nir seemed to imply that now it’s kind of suddenly in focus. So it’s this idea that the merchants are embracing the reality of more complexity and volatility in the cross-border landscape.
So is the true that they’re now relying more on Global-e to quickly and efficiently sort of adapt to whatever happens.
So I think what Nir was trying to imply is in the short term there could be a revenue shortfall, but in the long term, this actually opens up a new addressable market. Is that how you see it?
AS:
Yeah, that’s exactly our view currently, because yes, in the short term there could be a revenue shortfall.
There could also be, depending on where the tariff ping pong ends, but with rising tariffs and retaliatory tariffs, etc, it can get to a point where it also affects consumer demand.
Stuff is getting more expensive at the end of the day.
There’s no way around it. So as long as the tariffs are at a, I would say reasonable level, if it’s…
We spoke last time, if it’s 10, 20%, yes. These are things that we have seen happen in the past in other markets, like in Australia when it introduced tax on low value goods.
Other markets in the world over the past few years have introduced low value goods tax. When it’s in those brackets, yes, there may be some effect on consumer demand, at the margin, but also on the other hand, there’s maybe be lower volume, but higher prices… it shouldn’t have that much of a dramatic effect.
If the tariffs go berserk, then yes, it will also affect demand, but there could be a short-term effect.
Long-term, we think that it’s going to drive more business to us, more merchants to us, because it’s, as you alluded to, there’s more complexity, there are more barriers to trade, and the velocity in which they are changing is growing.
That level of uncertainty and rapid changes and the need to adapt to them is something that should drive more merchants to just outsource this problem to Global-e, make it Global-e’s problem, to make sure that they are compliant and to track these changes and adapt to them without the merchant needing to do, in most cases, needing to do anything.
And again, on that, we have experience too. We’ve seen that when there were a lot of talks about Brexit, when it was starting to be clear that it might actually happen, we already saw a slight rise in interest for our services.
When Brexit started to become a reality, that level of interest rose quite significantly.
And then when merchants finally realized that (A) Brexit is happening but (B) irrespective of what the final decisions would be on how exactly trade is going to work between the UK and the European Union. The only thing they knew for certain is that these decisions are going to be, and these bilateral agreements are going to happen just before the actual drop-dead date, and there’s just no chance that we’ll have the ability to adapt in time.
And we literally saw a big rush of merchants, including merchants that we’ve been in discussions with for a long time, that were sitting on the fence that were discussing with us some nuances in the contract all of a sudden like, “Okay, contract is fine, the price is fine, everything is fine.
The only thing is how quickly can we go live? Because we realize that if we don’t, we’re just not going to be able to trade.”
It’s as simple as that.
So we think that in the long term, as this whole tariffs thing raises the complexity of international trade, it should drive more business towards us.
OG:
That was super good, very interesting. Okay, I want to talk about Shopify.
So Nir said this, I’m just going to read a quote.
“We do expect Managed Markets to remain around the 5% of overall GMV as we and Shopify are currently focused on enhancing the merchant’s experience and simplicity in order to support reaching in the longer term, larger addressable market.
But going forward, I think in future years with the build we are doing now, we do have high hopes for significant contribution.”
I actually got some concern from investors on this.
Okay. In the past quarters you told me that once the product, the product meaning Managed Markets, was out the door and GA, there’s immediate features that everyone knew had to be built even before really getting feedback from customers.
It had to be. Which is very common.
Okay, so my question is this, if that’s the case that Shopify is pushing Managed Markets maybe more slowly because of certain features that need to be delivered or if there’s some sort of friction between the two partners, and the reason I asked that specifically investors asked that specifically, is that Managed Markets guidance was essentially for let’s say about 32% growth, the same as overall GMV growth, and I think we were all expecting an acceleration in Managed Markets.
So maybe you can tell me about that.
AS:
First, I fully understand the question and the answer is the former. Not only is there no friction between the parties, there’s actually a lot of joint work continuing to happen between the parties, and it has to because it really is a joint offering.
I don’t think there’s a single element of Managed Markets that sits solely on either side.
It really needs to be built and deployed together.
I would say the main point here is that it’s an ever learning process because we just came out with it just over a year ago.
Because of the nature of this offering that it’s kind of naturally an SMB product, so we had to accumulate experience and data in some masses of merchants before we could draw real conclusions.
And what we are seeing is that, yes, in terms of the critical component of onboarding the merchants easily, that’s an absolute prerequisite because none of these merchants would go into any integration effort.
So that part, we feel very good about. Again, there’s still work to be done on that to further improve that, but by and large, it’s working well.
But what we saw is that in order to really see that great acceleration that we’re all expecting, we need to enlarge the applicability of the product.
Because at the end of the day, yes, they’re always… In every product launch, there are the early adopters that will be excited and learn about it, and will dive in.
And even if it doesn’t work in exactly the way they envision, they will still use the product and enjoy it.
But in order to really make it applicable for the masses, we realized through our joint work with Shopify, both of us realized that we need to make it even more seamless when it comes to how it is for the merchants to operate day to day, not just to onboard, not just to click that button.
That’s an easy decision. But in order to really work with it and enjoy the benefits of it day to day, it needs to be much more tightly integrated into the way they are used to working on Shopify. I’ll give you an example.
Yes, they did the one click, they onboarded, that’s easy. Now, let’s also assume that it’s generating great results for them, it’s yielding more international sales.
That’s great.
But what’s happening now is that instead of a single simple money flow that they have from their sales until that point, now they have two different ones because again, we’re talking about small merchants.
The vast majority of them are used to be paid for their sales once a day or once every other day straight into their Shopify wallet account through Shopify payments. That’s how the majority of them work.
Now, for all the international orders, all of a sudden it happens in a completely different route.
Actually, it’s not even there. It goes once a week by ACH directly into their bank account.
It’s a completely different process. The payout process is very different now than how they are used to operate on a day-to-day basis.
These are small merchants, they don’t have any big finance team they can now run a reconciliation process on a weekly basis, yada, yada. They just need it to work simply and effectively.
We need to mimic that process. We need to make sure that for them, it feels very natural to use Managed Markets. They’re just going to see the additional results.
They’re going to see the additional performance, but it’s not going to be an additional operational burden or change from how they’re used to working.
There are multiple other aspects of how the platform behaves that together with Shopify, we reached the conclusion that we need to invest in an additional build in order for them to play more nicely together.
OG:
Okay. Yeah, that’s really, really good color, Amir. Super clear, and also a really good answer at the beginning, relieving answer, but no, that makes sense.
I mean, I’m thinking from the perspective of a merchant, I mean, just make it work.
AS:
Yeah, exactly. Exactly.
OG:
Honestly, and that’s reasonable, by the way.
AS:
Yeah, no. If we thought that it is not a reasonable approach, then maybe we would taken a different route.
But if you put yourself in the shoes of a relevant merchant, it’s understandable, and that’s what I would expect.
We probably underestimated that in the original build, and this is what we want to concentrate on now in order, as you quoted correctly, in order to make it widely applicable across the vast portions of the Shopify merchant base.
OG:
Okay. Yeah, no, that’s great.
Also, I mean, more work on software creates more of a moat anyway, so you look a year down the line, merchants are going to become totally dependent.
They’re already dependent on Shopify, good for Shopify, but they’ll be totally dependent on the Global-e interaction now too.
This is one where patience is definitely worth it.
Also, it looks like Shopify will grow about 30% GMV, give or take.
So it’s not like it’s not moving forward. Okay.
Those were my big issues, so I’ll end the same way I always do.
Is there anything I didn’t ask that I should have asked or anything that you wanted to say, but I didn’t give you a chance to say because I didn’t ask the right questions?
AS:
No, I think also from the callbacks that we’ve had by now with investors, these are the main issues that come up.
Obviously the tariffs for sure, as well as the additional color on Managed Markets.
I think the tariff situation is evolving.
Maybe the only thing I would just put into perspective is that we’re not expecting, even if the tariff situation remains unclear, we’re not expecting, I would say, an avalanche of merchants going multi-local.
As I said to begin with, it’s only applicable for larger merchants. It takes time to set up. It’s not something that as a merchant you can make a decision on and move very quickly.
The movements that we’ve seen that we’ve anticipated for the beginning of the year are actually based on merchants taking the decision or at least contemplating it, and making the checks and the necessary preparations for a while now, anticipating a potential tariff issue in most cases.
But it’s not something that we expect many more merchants to be able to pull off on a tight timetable.
Also, it really depends on where it will end. Again, if the tariff escalation remains focused on China, for example, as it seems, at least for now, then probably many brands are just going to move production out of China, and that should “solve the problem” for them.
But if it becomes more widespread, then they’re going to need different types of solutions. We are also building and providing additional solutions, not just multi-local, which is the absolute one end of the spectrum.
We’re also now offering a service called 3B2C, which allows you to enjoy the benefit, if applicable, it allows you to enjoy most of the benefit of doing the importation into the destination market on a commercial level, but without the need to hold real inventory in the market.
There are additional flavors, and additional ways, to combat the rising costs imposed by tariffs. But anyhow, we do expect to have an effect, as we discussed earlier, but we’re not expecting a monumental shift anytime soon.
OG:
Okay. Yeah, your investor day is coming very soon, is going to be, that’s going to be hotly interesting. Yeah, the way you point that out.
AS:
I expect to.
OG:
Yeah. Yeah. Okay. Amir, thank you so much. I feel a lot better, a lot of clarity, and I will see you in about three months.
AS:
Yeah, absolutely.
OG:
All right. Thank you.
AS:
Thanks a lot, Ophir.
Conclusion
Today we reiterate Global-e (GLBE) as a Spotlight Top Pick. We see a bright future.
We see tariffs as adding complexity to the cross-border world and likely adding to the GLBE pipeline in the not too distant future.
We remind readers that the firm has its first investor day March 11, 2025.
The author is long GLBE at the time of this writing.
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