Preface

Please enjoy our one-on-one conversation with the CEO of Global-e (GLBE).

 

One-on-One with the CEO of Global-e (GLBE)

Ophir Gottlieb
I have a couple of quick questions, and then I really want to dive into demand generation, but let me start high level first.

On the call, Global-e noted that there were no delays in merchant decisions to buy; the pipeline looks robust, basically, so this is what I’m going to take away from macro for Global-e, that in a recession consumers spend less, that’s basic recessionary behavior, but it’s not really anything else that’s impacting Global-e, is that a fair way to say it so far?

 

Amir Schlachet (CEO of GLBE):
Yes, I would say it’s simplified, but yes, generally speaking that’s what we feel.

I think the additional layer on top of it is that because our business is so diverse, both in terms of where the merchants sell from and where the shoppers buy from, and also in terms of different price points of products, different verticals, et cetera, it’s so well-diversified that that also dampens any kind of recessionary effects, because even recessionary talks right now, we’re not talking every country in the world is entering a recession at the same time at the same magnitude.

If we were just working, for example, I don’t know, just with European brands, and for all of them the predominant export market would be the US, and the US would enter a steep recession, that would have a real impact.

That’s the only layer of that on top of that, but yes, indeed, the things that matter for the long term, which is really the cadence in which our merchants are going to sign up and are interested, theoretically you could also say that it might even help, like some mild recession may even help merchants to get to that decision to take us.

Because even if they have any kind of thoughts or dreams about doing some of this stuff by themselves, they can’t afford to put down the CapEx and it just doesn’t make sense.

We are one of the only plays you can think of that will generate additional revenues without any serious CapEx, sometimes without any CapEx at all, and based on traffic that they already have, marketing expenses they’ve already made, brands that they’ve already built, for many of them will also allow them to save money per order on the shipping side.

Maybe not for the largest brands, but for small and mid-sized brands, we will actually be able to generate savings for them on a per package basis because of the scale that we work with the different shipping carriers, enhances the prices that we can secure for our brands.

Directionally, that’s exactly how we view it and how we see it in real life.

 

OG:
Okay, so then last follow up on that.

I believe on the call, Global-e said that the company expects to add another record number of new merchants this year as it did in 2022, and that’s what I heard, is that right?

 

AS:
Yeah, our pipeline continues to be very strong, and merchant signings are year to date at a record level.

 

OG:
Now I really want to talk about demand generation, I’m going to ask three different questions, and maybe I will bore you.

Broadly speaking, this is me saying it, not you, I could see Global-e essentially, the enterprise Global-e bolting on
an advertising arm that acts like a DSP, a demand side platform that is in and of itself a business larger than Global-e is today, like that’s how much opportunity I see in this realm.

I have some questions after speaking with some funds. I spoke with [hidden] and Christopher Edge, so here’s what I want to know.

Right now it’s very, very early days, and it sounds to me like the operation is essentially a team inside Global-e doing very, very smart Google Ads, kind of that’s it, so here’s my question.

I know it’s early, that’s not what it’s going to look like at the end, can you share what this service might look like once it’s coupled with that team you kept from Borderfree?

What is the product per se, and how do you leverage the data that you have so you’re not just a standard ad agency?

 

AS:
I think your notion is very correct, not only do we not aim to have an internal agency.

It’s not an interesting business for us, an agency, first of all, it’s almost a commodity these days and it’s a bloody ocean out there, and it’s very hard to be differentiated as an agency per se.

It’s also not very scalable, definitely on a global level, so it was never the end goal, by the way.

You’re right, we have a team internally, we have capabilities around running paid search campaigns, we have a team that specializes in influencer marketing, et cetera, but to be honest, the intent of building that was more to build the expertise, to get the relevant people and the relevant knowhow into the organization as kind of infrastructure for the next phase.

Again, you were absolutely right that the next phase or the real phase is based upon the Borderfree acquisition.

It’s not just the team, to be honest, they had kind of a skeleton team there working on that, it’s more the assets that we bought as part of that transaction.

I would say one of the main if not the main rationale behind that acquisition was actually the assets and the capabilities that they built around demand generation, and if I look and combine that already with my answer, the way we envision it at least for now is having, I would say, two main arms.

There will be additional augmented services, but generally the idea is to have two main offerings for our merchants; both new merchants that are joining and our existing base. One is the direct marketing arm, but a very efficient and unique one.

I’ll tell you what I mean by that.

As part of the acquisition from Borderfree, we also got a very large database of international shoppers, that have already given Borderfree consent to send marketing materials to them, to actively market brands to them, and a majority of them are active.

This is a real live, well-performing database, and mind you, these are shoppers that have not just shown interest in buying cross border, they have actually purchased cross border through Borderfree, ’cause that’s the only way you could sign up to this database, is by on the checkout clicking, “I agree to accept offers from Borderfree.com.”

That database by itself first is valuable because it serves as a basis, as a springboard if you want, to be able to offer it now not just to the limited number of merchants that Borderfree had, but to the 1,000-plus merchants that Global-e has, the ability to run very effective and very cost effective direct marketing campaigns, especially these days where in the post IDFA and kind of Google no-cookie policy, et cetera days, acquiring high quality traffic, both domestic and let alone internationally, has become very, very difficult and very expensive.

It’s very difficult to attribute it to these campaigns, so having the ability to do a targeted outreach to a very relevant database of clients who are proven avid international shoppers, that we believe will be extremely valuable for our merchants.

I can tell you it’s not just a belief, we also have the numbers, I can tell you that some of Borderfree’s merchants have a very significant chunk of their international sales coming through these campaigns.

We know it’s an effective tool, and that’s right now where it’s a limited sized database and a limited number of diversity of merchants that these international shoppers get exposure to.

That’s one element, there’s some development work that needs to go in the background in order to enable that in our checkout, and obviously also consent from our merchants to add that to also Global-e checkout processes, but we believe that because of the diversity of our merchant base, and we’ve been public about the fact that even our largest merchant is just about 5% of our GMV, so even our largest merchants in a way have more to gain than to lose by participating in such a program.

Because on the one hand, they will be contributing their “clients”, but on the other hand they’ll be getting much more than they’ll be giving us, so that’s one major factor.

The other one, you can think of it as sort of an affiliation play, because again, what these merchants have right now, if they want to reach audiences around the world, besides direct marketing, they can also rely on affiliation networks.
Generic affiliation networks are on the one hand very costly, but on the other hand not very effective, because again, at least to our knowledge, there’s no affiliation network that specializes in cross border shoppers around the world.

What we plan to do in that space is reliant on another asset that we acquired from Borderfree, which is Borderfree.com, which is kind of a portal, it looks like a marketplace but it’s not really a marketplace, because it’s not transactional.

It’s essentially a showcase where you as a consumer can go onto Borderfree.com, even today it’s operational, it’s just it only has the Borderfree brands on it.

Again, we need to do a lot of development work in the background to enable the connection of also Global-e merchants into it, but once we have that in place, you can go into this portal from anywhere in the world, it recognizes where you’re coming from, and it will pre-filter the brands that it shows you and the products that it shows you only by things that can actually be sold and shipped to your country.

You can either go by brand, or you can actually go by product.

Once you click either on a brand or on a product, it will redirect you to that merchant site, but you will know as a consumer that any brand and any product you want out of this vast portal, you’ll have the same great shopping experience as you do on any kind of Global-e brand.

The other, and I’m talking kind of endgame, it’s going to be phased obviously, but in terms of the endgame, the idea is also to enable you to open a Borderfree.com account which we’ll incentivize you to open that account, and we’ll obviously also invest our own funds in driving traffic to this portal, which will service, think of it as like an international mall type of portal.

If you’ll have a Borderfree.com account, it should enable you two things, one is to see all your international orders in one place and have an account that gives you a snapshot of all your orders from all the different brands that we work with, where are your orders, what is expected to be delivered when, et cetera.

The other thing is if you login and then you go onto any of our operated websites, you should be able to check out very easily all your details are going to be pre-populated, and it’s almost going to be like a one-click checkout.

That too should be very valuable for our merchants, because if they agree to put up their brand and their products on this portal, they will get, and our expense, basically we’re going to be the ones driving traffic to this portal, but then when somebody clicks and is redirected to the brand’s site, they will pay an affiliation fee.

Obviously again, end game, in the beginning we’ll probably incentivize them or either give it for free or reduce their costs, but down the line it should be cost effective for them to pay the affiliation fee and enjoy the traffic, because A, it’s going to be high quality traffic with a good chance of converting, and B, because we also earn money on the back of the transaction itself, we’ll-

 

OG:
Of course.

 

AS:
… Be able to price that very competitively for the brands, and almost guarantee an ROI for them, in a way.
These are, I would say, the two main avenues that we are pursuing and that we think are going to be very interesting and compelling for our brands, once we have them in place. Hopefully the first elements should be live towards the end of this year, but more next year as we roll out more and more features.

 

OG:
Is this going to be something you could imagine that your Shopify Pro Markets customers would also have access to, like as a bolt-on, or is that where one of the separations comes from?

 

AS:
Honestly, I don’t know yet. In parallel to building the capabilities, we’re also building the commercial team around it and doing a lot of thinking.

It’s an open question, because on the one hand you want these type of portals, they’re like a marketplace, they become more valuable the more brands you have there, but on the other hand, we’ll need to make sure that it’s consistent in terms of the experience, and you don’t want overload these things with an excess number of brands, so we’ll have to put in some guidance, but maybe not all, but definitely some of the Market’s Pro brands would also be relevant for these and would also be interested in consuming these services.

 

OG:
Super interesting, and very exciting, one more question on this, then I want to talk about maybe Amazon.

For this small, it’s almost alpha, I mean it’s beta but it’s a very small team that’s doing what it’s doing right now, and I know that even what you’re doing with the team is like it’s a small part of what’s going to happen, but it’s not functioning exactly, it’s more as you said, it’s like this intellectual infrastructure that you’re building; can you share the level of budgets you’re seeing from these customers in this beta?

They spend $100 on advertising for their products, do you know what share you’re getting of that, and is that accelerating?

 

AS:
It is accelerating, but again, we’re not talking huge numbers, but I don’t think we’ve ever disclosed the monetary aspect of it, but we have disclosed the fact that we have several dozens of brands that are already participating in this program.

Obviously, as you said, it’s almost an alpha program, but I can tell you that some of them are working better than others obviously, and we’re learning on the go.

Some of them actually have moved on from the alpha version to actually making it a permanent chunk of their marketing expense, because they saw a nice ROAS, nice return on ad spend, but it’s not [impactful] on our results.

As I said, it’s more of a part of the infrastructure that we build, rather than a standalone revenue generation.

 

OG:
I was speaking more like for the companies themselves, and I think you’ve answered the question, for some of them where it’s working, they’re basically saying, “Hey, they can call it alpha or beta, whatever they want, we’re in.”

 

AS:
We do see some of those, and again, it’s not like they’re taking all of their marketing budget and just funneling it through us, but for them these are meaningful sums because they see the effect and they see the results, but it’s not something that I can say, “Listen, this is all of them,” or not even the majority of them have gone through that phase, it’s with various degrees of maturity with the different brands that we work with.

 

OG:
All right, so I think it’s time with Global-e’s success that I have to ask the other question.

What role does Amazon play in the area of cross border eCommerce? Is there a potential partnership with Global-e?
Is it strictly competition? Is it neither?

 

AS:
I don’t think it’s real competition, for two reasons.

One, Amazon itself has a different model, Amazon has a multi-local approach, if you want, because of the nature of their business and their marketplace.

Also from the brands’ perspective, any brand that has brand equity, their holy grail is to sell direct to consumers.

Irrespective of Amazon or any other marketplace, they want to sell direct to the consumers, forget even their retail margin, they want the data and they want the relationships with their end consumers to remain theirs.

They understand that by selling through a marketplace they give up these things, and as time goes by, these are the things that are most valuable to brands, not anything else.

In that sense, we don’t see real Amazon as a competitor, we do see Amazon as an opportunity, because having said what I said, many of the brands will still and should still view marketplaces, Amazon included, as an important additional channel.

They need to have a great direct-to-consumer experience to any client in the world, but in addition, especially in specific markets where the local marketplace is really dominant, it is important to have a presence there if you want to build your brand in the market.

A clear example is Japan, where Amazon Japan and Rakuten are really the go-to places for Japanese consumers to discover new products, to discover new brands.

Now as the brand that is building its presence in Japan, you want to be able to sell direct to the Japanese consumers, but you probably also want to have the best sellers maybe of your products to also appear in your Amazon store or Rakuten store.

On the other hand, this too is something that is very, very difficult for the brand to do by itself, because just like on the direct-to-consumer, here is a set of “localizations” that you have to do for that market because you have to open a store on Amazon Japan, half of the documents to do that are actually in Japanese, so it’s pretty difficult.

You have to make sure that the pricing is coherent with what you have on your side, and then when the orders come in, you have to fulfill them and you have to do it like Amazon asks you to do it, with the right paperwork and within the timeframe that they allot you, otherwise they’ll close your store, because they have a brand to protect from a customer experience perspective as well.

Brands find the same kind of difficulty that they have in direct-to-consumer to all these markets, they have the same problem.

Even if they know that they need to pursue that kind of marketplace strategy, it’s very difficult for them to devote the resources that are necessary to do it because at the end of the day, how many sales are they going to make through that channel compared to their overall business? Same problem they have with direct-to-consumer.

Actually, this is something that we are building, we already have a few pilot customers running. For example, Jabra, which is one of our consumer electronics brands, they have a store on Amazon Japan, but it’s operated by Global-e.

 

OG:
That’s what I was going to ask. Amazon can be a facilitator for you.

 

AS:
Right, correct, and basically everybody’s happy because Jabra may not have even done that by themselves, but we have the capacity and the incentive to build that link once to Amazon Japan.

Then assuming we build it right, we should be able to onboard additional merchants onto the same integration.
The plan here is to both add more merchants to the integrations that we already have and over time, build more integrations into additional marketplaces around the world.

Some of them are already operational and, again, it’s probably not going to be the primary sales channel for these brands, but it is an important additional channel, and they’re happy to pay us, if you want, to operate that for them because it’s another set of headaches that they don’t want to deal with when it comes to selling internationally.

 

OG:
Absolutely, and if Global-e has that ability, which it sounds like you will and do, then it’s another market.

 

AS:
Yep, exactly.

 

OG:
It’s the same question I always ask at the end, Amir, is there anything I didn’t ask that I should’ve asked or is there something you wanted to say but I didn’t give you a chance to say because I didn’t ask the right questions?

 

AS:
No, as usual, I think you asked the right questions, especially when it comes to the longer term items.

Obviously, we’re also happy to always speak about the last quarter results, but I think to me the truly interesting stuff is the long term prospect things, and I think we touched upon the important ones. I think these are the interesting things that are going on.

The only one probably that is taking a lot of attention on our side, but we’ve probably beaten it to death on the call itself is Shopify Market’s Pro; our cooperation with Shopify on multiple levels, but I think we’ve already answered all these questions publicly, so probably not worth spending more time now.
It’s always great to speak and to connect.

 

OG:
Thank you, Amir; speak with you next quarter.

 

Conclusion

Thanks for reading, friends.

The author is long GLBE at the time of this writing. 

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