Lede

Global-e (GLBE) reported earnings on 2-21-2024, and we shared the earnings review that day here:

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.

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

Ophir Gottlieb:
Okay, so congratulations on surpassing a billion in GMV in the quarter. Let’s start with that.

Amir Schlachet (CEO, Global-e):
Not so bad, right? Thank you. So very exciting place.

 

OG:
There are milestones all over the place. I know there’s a million in revenue. No one cared about Global-e back then, other than you, but still, and when we’re talking about a billion and a quarter of GMV, that’s a real number.

AS:
Absolutely, and by the way, thank you for that. You, you’re actually one of the only ones that picked up on that and kind referenced that.

But then again, I’m not surprised because you run your own business.

 

OG:
So, I asked this similar question last quarter and as I look back at my questions, I think I’m going to repeat it every time we speak.

So, excluding Shopify, how was the pipeline of merchants and how are the channel partners helping? Was there a slowdown in onboarding of new merchants, a slowdown in new merchants going live, just not Shopify, just the Global-e core?

AS:
No, actually there’s been an acceleration also on the non Shopify side to an extent in which I think if you look pipeline wise, if you look at what’s planned to go live in 2024 overall, even with the introduction of [Shopify] Markets Pro, I believe that roughly the mix of Shopify versus non Shopify is going to stay roughly the same because we have quite a few, especially big merchants that are in integration and plan to go live later in the year, especially in the second half of the year.

The bigger merchants we are on-boarding now, they’re all non-Shopify, they’re all either on Salesforce or, there’s a bunch of them, but we think, I think the overall the mix is going to stay roughly the same this year.

 

OG:
Okay, nice.

I saw or heard actually about this new chat GPT integration that was in beta testing, kind of like a support chat bot.

I think you might know my view.

I am all the way in on LLMs and it has totally turned my business around completely.

So, can you share any sort of trends or feedback from this integration as well as maybe how widely it has been adopted or how will this impact GMV?

I know what chat GPT can do and what it is, but let’s talk about Global-e is doing with it since you brought it up [on the earnings call].

AS:
So, first of all, it’s actually, it’s beyond beta. If we’re talking about the customer services chat bot specifically, we ran it in beta mode the beginning of the year for quite a few months and trained it and kind of shaved off the rough edges, but it actually went into production before the peak period, peak trading period.

And so it’s already out there in the field and it actually, it performed phenomenally well. I can tell you that throughout the peak period there’s always obviously a spike in customer service inquiry.

So basically every year prior to 2023, we used to hire a considerable number of additional customer service reps to handle the influx. And this year we didn’t need to, the chat GPT bot actually took all the excess capacity.

I’m not talking 5% more inquiries, we’re talking dozens of percent spike typically in a given year and the bot just ate up all that additional necessary capacity.

And actually it’s not just about efficiencies and saving costs, I mean you’re an AI developer yourself, you know that it’s also about the speed of response and the consistent quality of the response.

So it actually bettered the consumer experience because instead of waiting 24 hours for a human being to answer, especially if it’s a relatively technical question, such as “where is my order?,” “when would it arrive?,” “why was I asked to pay duty and taxes?” Stuff like that.

They get an answer in real time and a very detailed answer and if they want some clarifications, they can ping pong a bit with the bot.

So we had literally dozens of percents of the inquirers that were just closed to the complete satisfaction of the consumer by the bot itself without ever needing to escalate to a human being.

So it’s a real game changer when it comes to customer services. We think that we’re just going to continue to evolve that and make it able to handle more and more of that capacity.

And in addition, on the R&D side, we’re already quite advancing, experimenting with copilot and the likes, so I’m also hearing very good initial responses from the teams around both speeding up coding, unit-test creation, and test scenario creation in general.

So, I think that’s going to be another, I would say relatively early implementation across the company.

And basically the way we took it, we actually have a team of, I would say very experienced veteran developers and tech guys that on the one hand know the company and the systems very well, but are also experts and are developing their expertise in AI, in generative AI in general and kind of staying on top of the market of what are the models that are coming out, use cases, et cetera.

And basically we’ve mapped and we continue to map various parts of the organization, various parts of our activity and identifying areas where we think that we can implement these models to again either make things much more efficient or much more effective.

So just an example, we’re experimenting now with another, I would say common tasks that we have that is a classic for a ChatGPT-like tool, which is the processing of massive merchant catalogs, merchant product catalogs that we get.

We need to process them, we need to map them for customs, for import restrictions, stuff like that.

We’ve been developing algorithms and perfecting them to do this for a long time now, but we think that generative AI models and LLM models in general can provide the next step change or step up in both efficiency and accuracy of these types of tasks and automate them even further. And there are multiple other initiatives across the board.

I think that over the next few years we’ll probably see more and more aspects of our work being transformed by these models.

 

OG:
I’m so happy to hear that, Amir.

I was talking to a CNBC reported and I just straight up, I said there’s two types of companies in the future.

There will be companies that internally go all in with LLMs in whatever ways appropriate for their business.

That’s the first. The second type of company don’t exist in five years. I said, you choose which one you want to invest in. That’s it.

AS:
Yeah, I think anyone who has experienced the potential in these technologies cannot think anything else.

But yes, this is truly transformative. And again, I think that with any new technology you need to put away some hype factor and you need to make sure, I think as you alluded to, that at the end of the day, it is technology.

It’s not magic, it’s not that it magically solves any problem perfectly the first time around. You need to marry the deep understanding of your own company, your own product problems that you need to solve and marry them with the right application of the technology.

But if you do that, you can achieve amazing things in a very short timeframe.

 

OG:
Yeah, that’s right.

You must combine domain expertise with it and the number of domain experts is going down relative to the number of, if you call it signal versus noise and you say noise is non domain experts that’s going up and it will be paramount for companies.

You must be domain experts and you must go all in.

Whatever part fits your company, every company’s different.

And if you do that, you’ll be the winner in whatever you’re doing. And if not, you just won’t be around. I feel that strongly.

AS:
I agree.

 

OG:
Alright, let’s talk a little bit about Shopify Markets Pro.

When we spoke last quarter, I thought you were exceptionally clear about the unknowns and how this was, to use your phrases, actually “new turf,” you were appropriately cautious. I got that from you.

Wall Street underappreciated what you said, I think.

Wall Street underappreciated also how many large Shopify clients are already using Global-e that aren’t a part of Markets Pro which is very specifically for these smaller businesses.

So, the impact will be the sort of long tail, not like a sudden burst. I thought it was incredibly clear. Okay. Wall Street didn’t, so, alright.

AS:
Yes and no – by the way, just to, this may be a due clarification on that by and large, you’re right. And I agree.

However, the idea behind Markets Pro is that it’s very easy to onboard, it’s effortless on the merchant side and that means, or it’s very important for us and for Shopify to have a free choice for the merchant.

So even if you’re a big merchant, if you believe that the right way to go for you is Markets Pro, by all means. We have a joint roadmap together with Shopify, to adding features and capabilities to Markets Pro to make it even easier for you as a relatively larger merchant to still choose Market Pro.

If you feel that’s the right solution for you. It’s not necessarily just for smaller merchants, but of course the other way around doesn’t work.

So if you’re a very small merchant, you’re not going to be eligible to go on the enterprise route.
It’s either Markets Pro or nothing else.

But if you’re a large merchant, the idea is that you’ll have a choice.

Of course, naturally it’s safe to assume that the larger you are, probably the more chances are you have some kind of a unique use case that may require the more white-gloves, I would say special treatment that an enterprise merchant can get.

But if your use case is standard and there’s nothing out of the ordinary that needs to be done that maybe cannot be currently supported with the very productized approach that Markets Pro has, by all means go on Markets Pro tick that box and off you go without a need for a lot of effort on integration.

So, there are pros and cons to that, but at the end of the day it’s a merchant choice.

 

OG:
So, I’ve heard in interviews from other people that as Markets Pro went live, both sides realized that maybe some things weren’t quite perfect, a part of the original unknown came to fruition.

It’s like you try your best to try your best, but you don’t know.

So what is your view broadly on what has to be done in the short to intermediate term for Markets Pro to be, it’s never going to be done that as a software company, but to be roughly speaking where you were hoping it was going to be upon launch and then there’s this influx of customers like, okay, there’s a few things we need to fix.

AS:
So, first of all, in terms of what we wanted to achieve, the first and foremost thing we set out to achieve in the first iteration, if you want of Markets Pro, we actually managed to achieve, which is the seamless effortless one click onboarding experience for the merchants.

And that’s, that’s very big because if you think about it, this is the nothing here.

This is the thing that has never been done before and this is also once the merchants are live, yes, we will get to in a second, but of course there are always going to missing featured missing capabilities, but there’s nothing that, there’s no true unknowns here because these are things that we have experienced with on the enterprise side.

We know their impact, we know their relative importance, we can prioritize and we do prioritize it together with Shopify, but there’s little doubt that it will work.

It’s just a matter of getting it done.

The one-click fully automatic onboarding and integration of such an elaborate and complicated product that has never been done before, certainly never been done before by us.

And that was the crucial piece to prove here because otherwise there’s no point in doing all the rest because these are merchants that will never be able to justify a big effort in integrating them.

Neither side, neither us nor Shopify.

And so it would’ve taken away all the benefit of such an offering. So that I feel was the main priority.

Again, on both sides, that’s where Shopify have a very big team working on that as well.

These are joint teams and that is the piece we concentrated most of the effort on to begin with. Now on the, I would say product and offering side, there are things that we, in the interest of getting to general availability, getting out there, starting to work in the real life and proving that onboarding piece we knowingly set aside because there were, I would say too much of heavy lifting to be included in the first drop.

So, to give you some examples, things like additional integration to 3PL [third party logistics] apps and integrations into 3PLs in general, we know from the enterprise side how important that is.

It’s a very fragmented market, the 3PL market, the bigger you are as a merchant, the most chances are you are working with some kind of a 3PL.

They require you to work in a certain way to or with a certain app or integration to pass the order details into their own systems for fulfillment.

We need to continuously add support from all of these so that more larger merchants would find the product appealing because it’s not going to be disruptive to the way they fulfill their orders right now.

Things like a managed return offering, returns offering. Currently Markets Pro only supports the outbound route, but if the shopper wants to return something, they need to do it by themselves.

Whereas on the enterprise side, we have also a fully managed returns offering. Again, we know what to do. It’s not talking a rocket science here, but we just need to get it done.

And then this is something that again, the bigger the merchant is, the more important this piece of the consumer experience is for them.

When we started out Markets Pro only supported express shipping, that is something we actually already started to address and there are standard shipping options already available, but we need to work on that as well and make that more elaborate, more appealing.

So, it’s things around that of this sort.

We have, I would say a fully prioritized list of features and functionalities that we know we need to work together.

Shopify and us has to add over the next few quarters in order to broaden, I would say the appeal base of this offering, especially when it comes to larger individual merchants.

 

OG:
And so, every quarter, I guess on earnings calls, you’ll have portions kind of dedicated to some of that progress, something like that?

AS:
Most probably. Okay. I don’t know if every quarter, but every time I would say a big enough advancement to justify reporting.

 

OG:
Okay, so let’s talk about marketing services to enterprise clients.

Last time we talked, you gave a great answer, you bifurcated it, right? You said on the one side of was the traditional demand generation marketing services and that was expanded to additional clients, including some larger merchants.

Okay. Then the second part was this unique demand generation offering based on the BorderFree assets.

And we spoke about the progress in those building blocks.

So how does that look a quarter later? Was it delayed? Is it moving forward?

I’m curious if you’re getting this, but I’m sensing from investors a great deal of optimism around this piece of the Global-e service that will be provided to its clients.

AS:
Yeah, I think first of all, we’re sensing a great deal of optimism from our end as well.

I think that over time this can be a very, I would say, important addition to the set of services that we provide or the envelope services that we provide to merchants.

And it can be first and foremost another hook, if you want, into the merchants and another means to make sure that they both stay with us but also grow with us over time.

And once it scales up and proves itself, I think that it will also be, that’s further down the line, but in subsequent years, assuming that we prove that it works and all goes well, it can also be accretive to our revenues.

And it’s inherently at scale, it’s inherently a high margin business line.

So even financially, I think down the line it will be interesting.

So it’s exciting for us as well. There are no real delays.

It’s pretty much on the timeline that we assumed it would be.

It takes time to, we want to do it right, so it takes time to take the assets that we acquired as part of the BorderFree transaction, which are a great stepping stone to kickstart this.

But we want to finish building all the bridges and connections that are necessary into the Global-e systems and into the Global-e merchant base and also revamped the offerings themselves in terms of the BorderFree.com website.

In terms of the way it is integrated, these offerings are integrated with the Global-e checkout so that we can start to hopefully, sometime the second half of this year, start to deploy the first iterations of this offering and start to approach merchants and get them on board of these plans.

 

OG:
Okay. So your goal is second half of this year Global-e can start talking about this product being in production.

AS:
Yeah, I hope that sometime, I don’t know if it’s Q3 or Q4, we’re going to start to see the first merchants starting use this again, as I said earlier, probably you’re not going to see it appear on the financials too much because at least at the beginning, it’s one of these offerings where you need to get the snowball rolling. You need to start to show results and get merchants excited by the potential.

And for that you need the early adopters and obviously we’re going to incentivize them to join this program down the line into 2025. As I said, assuming everything works well, we should be able to start to monetize it separately more.

I don’t know if to the full extent, but to gradually start to monetize it.

 

OG:
Okay, yeah, it’s a great fit. It’s accretive to Global-e because of margins, it’s accretive to Global-e because it increases GMV, it increases the attractiveness of Global-e and it makes switching costs even higher.

AS:
Correct. Exactly. And at the same time, it’s very beneficial for the merchants because think of it as a guaranteed ROI way of generating very high quality traffic and I would say marketing to exactly the relevant client base.

It’s almost perfect segmentation with regards to what they’re looking to achieve in terms of selling direct to consumer internationally without the need to pre-spend a lot of money on media and hope that it will generate revenues.

And that’s especially become a big issue for merchants in the post IDFA era and the Google no cookie policy and all these things that are really making it very hard and very expensive for merchants to acquire high quality traffic.

And that’s why we believe, and we hear from merchants as well, that if we can provide them with a way to acquire high quality traffic and a guaranteed ROI, they’re very much willing to divert some of their marketing spend to that as they are looking to grow.

They’re interested in growing their business internationally and banking on their brand equity internationally, but they want to make sure that they’re spending the money wisely, especially because it’s not our only business line, it’s an add-on to our overall service.

It also means that even at scale, when we price it to its fullest, we can still provide it in a very attractive terms for the merchants because we are looking at these merchants from a wholesome perspective, including the services that we render to them on the back of the GMV.

And it’s not just this service that that will have to generate all our target margin.
So, it’s a true win-win I think for everyone

 

OG:
It is. Yeah.

Okay, Amir, so I’ll end with the same question I always end with.

Is there anything I didn’t ask that I should have asked or is there something that you wanted to say but I didn’t give you the chance to say because I didn’t ask the right questions?

AS:
I’ll probably answer the question with the same answer as always.

You’ve been very, very thorough and very good at, I think focusing on the main aspects of the business and the things that are in our focus.

And no, I think all in all we’re very happy with where 2023 landed.

We’re very, very excited with both, not just the pipeline, but also that we’re entering 2024, but also let’s say the advancements that we’ve made and the trajectory of all our strategic initiatives going into 2024.

So yeah, no, I think we’re very eager to see what 2024 has installed for us.

 

OG:
You have a lot of things moving in the right direction.

All of these initiatives all coming at the right time, so I’m excited too. Alright, Amir, I’ll see you in a quarter fly safe.

AS:
So thank you very much.

 

Conclusion

Thanks for reading, friends.

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

Please read the legal disclaimers below and as always, remember, we are not making a recommendation or soliciting a sale or purchase of any security ever. We are not licensed to do so, and we wouldn’t do it even if we were. We’re sharing my opinions, and provide you the power to be knowledgeable to make your own decisions.

Legal

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. Capital Market Laboratories (“The Company”) does not engage in rendering any legal or professional services by placing these general informational materials on this website.

The Company specifically disclaims any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

The Company makes no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that The Company endorses, sponsors, promotes or is affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.