(Bloomberg) –Online retailer Wish valued its initial public offering at the high end of the marketed range, raising $ 1.1 billion and raising the already record-breaking tally of the year for listings in the United States even further. The wish is No. 14 in the ranking of Digital Commerce 360 Top 100 Online Marketplace.
Wish’s parent company, San Francisco-based ContextLogic Inc., sold 46 million shares on Tuesday for $ 24 each, according to a statement.
Wish is listed at approximately $ 17 billion on a fully diluted basis, which includes options and restricted stock units as well as outstanding shares listed in its filings.
The offer is the 31st on a U.S. stock exchange to surpass $ 1 billion this year, according to data compiled by Bloomberg. It follows debuts last week by DoorDash Inc., which climbed 86% after its $ 3.14 billion bid, and Airbnb Inc., which closed its first day up 113% after an IPO. $ 3.83 billion stock market including so-called greenshoe shares.
With Wish, more than $ 20 billion has now been raised in IPOs on the U.S. stock exchanges in December–a record for the month. The 2020 total is now over $ 174 billion, also a record high, the data shows.
Two other consumer-focused web companies, online video game company Roblox Corp. and installment loan provider Affirm Holdings Inc., are also pursuing IPOs. Roblox has told its employees it is delaying its IPO until next year, while Affirm is considering doing the same, people familiar with their plans have said. Affirm has yet to make a final decision, the people said.
The origins of Wish
The origins of Wish, officially known as ContextLogic Inc., date back to 2010, when Szulczewski and co-founder Danny Zhang started an online advertising company. When it failed to take off, Szulczewski had another idea: to invite Chinese traders to sell cheap goods directly to American buyers. The timing was right as the community of sellers supplying e-commerce giant Alibaba Group Holding Ltd. was now looking for opportunities abroad. Szulczewski renamed the company Wish.com, and in late 2012 began hiring Chinese staff to recruit salespeople and handle customer service.
Wish grew so quickly in the early years that it caught the attention of Amazon.com Inc. CEO Jeff Bezos. Typically, when a potential rival emerges, the Seattle giant establishes a relationship with the upstart, the better to peek under the hood and maybe even see if it’s worth acquiring it. Szulczewski and Zhang were invited to Seattle, where they spent the day describing their vision. The couple felt that Amazon executives didn’t think much about their business model. But when Wish continued to grow rapidly, Szulczewski was invited to sit down with Bezos. A suspicious Szulczewski declined the meeting and continued to build his business, raising $ 1.8 billion from investors such as GGV Capital, Joe Lonsdale’s 8VC and Founders Fund. (Zhang left Wish last year.)
Browsing the Wish feed today, shoppers see a handful of products, from $ 8 AirPod knockoffs to 50-cent dolls. The items have little in common except that they are inexpensive.
Katie Plummer is an Amazon Prime subscriber but sometimes finds herself on Wish shopping for random items – mostly for her dogs.
Earlier this year, Plummer, 34, bought flashing lights for 95 cents to clip onto her dog Stanley’s collar, so she could see him on nighttime walks. Then she bought a dog whistle and a $ 2 seat belt to keep the 35-pound dog from flying out of the car. Plummer didn’t mind that it took Wish months to deliver the items to her home in Concord, NC.
“Amazon is convenient,” she says. “Wish is more of a dollar store on your phone.”
Wish generates about 70% of its sales from impulse buyers, not from specific item searches, according to one file. That could be a problem, says Forrester retail analyst Sucharita Kodali, who notes that Wish doesn’t quite compare to dollar stores, which sell essentials like groceries that attract people regularly. And unlike Amazon, she says, Wish doesn’t sell everything.
“These are random tchotchkes,” she said. “These are accessories and skirts for cell phones. This is not all for everyone. It’s not even certain things for some people.
Despite the online scramble this year, Wish said the third quarter main market revenue–which includes commissions collected from merchants–increased by 17% compared to the same period last year. This follows the 37% growth in e-commerce sales in the United States over the same period, as evidenced by the Commerce Department.
In its IPO, Wish attributed the “moderate” third-quarter revenue growth to pandemic-related issues that slowed shipments and caused fewer buyers to click the buy button. This could be a sign that while Wish customers are willing to tolerate extended shipping windows, there is a limit to how long they are willing to wait. It took an average of 62 days for U.S. customers to receive their Wish orders in the second quarter, compared to just 27 days in the first three months of the year. Delivery times improved in the last quarter, falling to 22 days on average.
Meanwhile, sales and marketing expenses are a huge burden, costing Wish $ 1.1 billion in the first nine months of this year, or 64% of its $ 1.7 billion in revenue. And while the company spent a higher percentage of its revenue, 78%, on marketing for all of 2019, a company file acknowledged that these expenses will continue to represent the majority of operating costs into the future. predictable.
“They are literally buying sales,” says Kaziukenas. “I don’t know where this will lead in the future, as Facebook and other marketing channels are getting more expensive. It is a channel that will continue to eat away at all kinds of profitability. “
For years, Wish has benefited from low shipping rates thanks to the Universal Postal Union Treaty, which subsidizes small parcels from China. The company notes in its IPO filing that the rate hike that took effect in July is likely to increase its shipping costs. Unless Wish begins to wholesale more products in the United States and Europe, it might be difficult to keep selling so many items for less than $ 5, says Kaziukenas, who studies online marketplaces.
Last year, the company launched Wish Local, which allows customers to pick up orders from physical retailers nearby. (Stores can also sell through Wish.) In an interview with Forbes in July, Szulczewski said, “If you think about it, Walmart has about a billion square feet of retail space. If we have a million stores that sign up for our service with about 1,000 square feet per store on average, we have a virtual Walmart. So far, about 50,000 stores have registered, according to the IPO filing.
The order at Wish is far from perfect, according to North Carolina customer Plummer. She ordered two “dog mom” key chains in April for 95 cents. They never showed up, so she got a refund in September. She tried the local pickup option and had issues. Her last Wish order was a pair of earrings priced at $ 1 on October 19. She chose a nearby computer store as her pickup location.
But since Wish orders take so long to arrive, Plummer usually forgets them.–which is problematic because Wish only gives customers 15 days to pick them up. Plummer missed the window and was charged a 39% restocking fee.