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12/07/2020

Can Wish Use Online Discounts to Snag Big IPO?

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Can Wish Use Online Discounts to Snag Big IPO?
In 2019, the company narrowed its net loss of $129 million compared to a net loss of $208 million in 2018.

Online discount marketplace Wish hopes to ride pandemic and other consumer trends into an $1.1 billion initial public offering.

Wish — a mobile-commerce focused company founded in 2010 and which targets lower income consumers who might not be able to regularly afford deals on Amazon and other retail sites — filed new IPO paperwork with the U.S. Securities and Exchange Commission.

In that filing, Wish reported 2019 revenue of $1.9 billion, a compound annual growth rate of 31% since 2017. For the nine months ended Sept. 30, revenue reached $1.7 billion, up 32% year over year.  

In 2019, the company narrowed its net loss of $129 million compared to a net loss of $208 million in 2018. For the nine months ended Sept. 30, Wish generated a net loss of $176 million.

IPO Plan

Wish plans to sell 46 million shares at between $22 and $24 dollars, according to the SEC filing.

In 2019, Wish said, 93% of the company’s revenue came from marketplace services — 84% of which was from core marketplace revenue with the reset from Wish’s native advertising tool, ProductBoost, logistics services. ProductBoost is an advertising feature by which merchants can promote their listings within user feeds.

In the filing, Wish said it has become one of the largest and fastest growing global e-commerce platforms, connecting more than 100 million monthly active users in over 100 countries to over 500,000 merchants offering approximately 150 million items.

“Our platform combines technology and data science capabilities, an innovative and discovery-based mobile shopping experience, a comprehensive suite of indispensable merchant services, and a massive scale of users, merchants, and items,” according to the filing.

Affordability Opportunity

According to the SEC filing, Wish stands to benefit from the ongoing growth of the global mobile commerce market, which is expected to more than double to $4.5 trillion by 2024.

“While e-commerce grew from 3% of global commerce in 2010 to 14% in 2019, e-commerce companies have largely focused on serving affluent consumers by offering branded goods and prioritizing convenience over price,” Wish said. “However, 44% of U.S. consumers and 85% of European consumers have a household income of less than $75,000 and cannot afford many traditional e-commerce offerings. Additionally, in the emerging economies of Africa, the Middle East, Latin America, and Eastern Europe, where the average household income is approximately $18,000, affordability will be the key element for users shopping online. We believe that the next billion e-commerce customers will be these value-conscious consumers.”

According to a survey Wish conducted in 2020 across 2,850 consumers in select countries, approximately 75% of those responding put a priority on the price of an item over brand and delivery time. “We built Wish to serve these consumers who favor affordability over brand and convenience, and are being underserved by traditional e-commerce platforms,” the company said, adding that more 90% of its user activity and purchases occur via the Wish mobile app. “Over 70% of the sales on our platform do not involve a search query and instead come from personalized browsing,” Wish said, touting its technological appeal to investors.

China vs U.S.

China also plays a big role in the future of Wish.

“Today, most of our merchants are based in China. We initially grew our platform focusing on merchants in China, the world’s largest exporter of goods for the last decade, due to these merchants’ strength in selling quality products at competitive prices,” the company said. In the United States, meanwhile, the number of Wish merchants has grown some 268% since 2019. “Through our diversified and global merchant base, we are able to offer greater depth and breadth of categories and products” the filing said. “For example, in 2019, four out of the top 10 selling merchants on our platform were located in the United States selling refurbished electronics, beauty products, and hobby items, which illustrates the ongoing diversification of our merchant base and product categories.”

Local Commerce

Local commerce and omnichannel also promises to help Wish in the years to come — reflecting larger trends in commerce that are brining those merchants deeper into various e-commerce ecosystems.

“Local brick-and-mortar stores worldwide are struggling to attract consumers and compete in a retail world being transformed by e-commerce and industry consolidation,” according to the filing. “We launched Wish Local in 2019 to help these merchants increase their online reach and discovery, gain foot traffic, and drive additional sales. Today, we have almost 50,000 Wish Local partners in 50 countries who have signed up to our Sell on Wish feature to upload their in-store inventory on Wish for local pickup or delivery. Our Wish Local partners also serve as Wish Pickup locations for online Wish orders, which effectively gives us a local warehousing and fulfillment footprint around the world without owning any real estate.”

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