GLOBAL-E ONLINE LTD.

Scalar Gauge Fund, L.P.

COMPANY BACKGROUND

• Israeli-based cross-border eCommerce company, started in 2013
• Cross-border eCommerce optimization and localization of shopper experience
• Went public May 12 at $25 a share – 171% increase since then (Ticker = GLBE)

COMPANY SERVICES

• SaaS, white label product
• Services:
• Optimization of eCommerce: Global-e calculates currency conversions, duties, complies w/ import regulations, etc.
• Data Optimization: Business Intelligence Model
• Localization: 25+ languages, 100+ currencies, 150+ payment methods, 170+ destination markets, 20+ carrier partners
• After sales support and returns
• Global-e becomes merchants of record, transferring some liability to them

WHY 3P COMPANY FOR ECOMMERCE?

• D2C eCommerce becoming increasingly popular (20% growth in 2021)
• In-house D2C requires time/effort/investment
• Cross-border eCommerce growing at double the rate of domestic eCommerce (Accenture research)
• International shoppers are 30% of traffic but only 5-10% of monetization
• eCommerce tailwinds due to pandemic expected to continue
• As companies grow, handling logistics becomes more of a burden 🡪 turn to third parties

COMPANY REVENUE SEGMENTS

• 1) Service fees
• Generated as a percentage of GMV processed (6.5% take rate)
• Gross profit margin = 70%
• 37% of total revenue
• 2) Fulfillment services (shipping, handling, returns)
• Take rate = 11.2%
• Gross profit margin = 10%
• 63% of total revenue
• Optional but about 94% of merchants use fulfillment services – suggests cost effective business model

COMPANY SCALE + GROWTH

• Statistics for end of 2018, 2019, 2020 only
• Merchants: 161 🡪 283 (76% inc) 🡪 442 (56% inc)
• GMV: 211 🡪 382 🡪 774 million
• Forrester: TAM for cross-border eCommerce will be 736 billion by 2023
• Lots of potential to expand
• 4.6 mil transactions in 2020

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COMPANY MERCHANTS

• About 50% of merchants are UK based but looking towards other countries
• Luxury and mass market fashion = 76% of GMV, Jewelry = 7%, Sports and Fitness = 7%, Cosmetics = 6%
• Big name brands: Hugo Boss, Anastasia Beverly Hills, Marc Jacobs, Marks & Spencer, Versace, Cartier, Forever 21, Desigual, Uniqlo, Skims by Kim Kardashian

COMPANY MERCHANT PROFILE

• 46 known Global-e merchants
• Merchants tend to 1) be name brands or 2) offer specialized products because otherwise there would be no advantage for cross-border eCommerce vs local shopping
• Global-e merchants align with this, as most brands have a significant following

STRENGTHS

• Effective
• 58% average increase in conversion rate
• Lots of name-brand customer success stories with high figures cited on Global-e website
• 134% and 172% Net Dollar Retention Rate – existing customers see opportunity with Global-e
• Specialized solutions: Global-e Pro and Global-e Enterprise
• 98% Gross Dollar Retention Rate
• Partnerships (35% of new merchants through referrals)
• Shopify
• DHL
• BigCommerce, Facebook Retail, etc.

Global-e merchants expand into new markets and increase GMV because they see opportunity

EXCLUSIVE PARTNERSHIPS

• Shopify partnership as of April 2021
• Global-e pays Shopify 470 million over 4 years in warrants
• Global-e gets access to over 10k Shopify merchants (merchants can choose to work with Global-e)
• Global-e expects that top 1% of Shopify merchants will be relevant to them, equating 30-40% of total Shopify GMV
• Will drive future growth
• DHL Partnership
• Handles 59% of shipping
• Holds > 5% of outstanding shares

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WEAKNESSES

• Revenue Concentration
• Top 10 customers = 44% of revenue
• Biggest customer (Marks & Spencer) = 15% of revenue
• Possible overreliance on DHL
• Markup from duties/shipping is passed onto customers
• Partnership with Shopify could fail to meet expectations
• No significant differentiation in services compared to competitors

OPPORTUNITIES

• Cross-border eCommerce trends
• Secular growth industry
• Forrester: TAM = 736 billion by 2023
• D2C eCommerce growth rate of 20%
• Cross-border eCommerce growing 2x faster than domestic eCommerce
• Tailwinds expected to continue post-pandemic
• Partnerships with Shopify, Facebook Retail, BigCommerce, etc.

THREATS

• Slow down of global eCommerce post-pandemic
• Changing regulations & data privacy laws
• 70% of increase in GMV from 2019 to 2020 came from existing customers
• Possible inability to onboard new merchants efficiently
• Competitors
• eShopWorld
• Borderfree
• Flow.io

COMPETITOR ANALYSIS – ESW

• Essentially the same services, including data optimization BIM
• Recently acquired by the Asendia Group in April
• Also has a partnership with Facebook
• Started in 2010, slightly bigger than Global-e ($1b vs 774m GMV)
• Slower growth than Global-e
• ESW: 34% growth 2018-2019, 85% growth 2019-2020
• Global-e: 81% growth 2018-2019, 103% growth 2019-2020
• ESW name brands: Nike, Victoria’s Secret, Calvin Klein, J.Crew, American Eagle

COMPETITOR ANALYSIS – BORDERFREE

• Global-e offers data optimization, Borderfree does not
• Borderfree: $100m GMV in 2015
• Declined significantly due to fluctuation in the dollar
• Acquired in 2015 by Pitney Bowes
• eCommerce services limited to US, UK, China
• 300+ merchants
• Borderfree name brands: Macy’s, Crate & Barrel, Bloomingdale’s, Saks Fifth Avenue, Nordstrom, Neiman Marcus, Under Armour, L.L. Bean, Rue La La, Kendra Scott, bebe, Champion, Ann Taylor, Bed, Bath & Beyond, Dillard’s, Target, Aeropostale, Sephora, Pottery Barn, Brooks Brothers, Vineyard Vines, Men’s Wearhouse
• Not much other info

COMPETITOR ANALYSIS – FLOW.IO

• Smaller than Global-e based on number of employees
• 200% YoY growth in 2019
• Alpha beta testing (unique to Flow Commerce)
• Not many name brands
• Not much other information

WHY GLOBAL-E?

• Global-e CEO: How Global-e competes: larger scale in terms of activity and/or geographic and/or product maturity scale. Best capabilities and most comprehensive data-driven insights.
• Rely on scalability and comprehensiveness

MARKET RESEARCH

• Researched Top 100 Fashion brands (by value) to find number of Facebook + Instagram followers, current eCommerce solution, and extent of cross-border eCommerce capabilities

• Most companies focus on Europe – possibly bc it’s easier due to Euro and similar public policies
• Some companies offer options for East Asian countries (Japan, SK, HK, China, Taiwan, Singapore), bigger Asian countries (India, Indonesia), and/or a few Middle Eastern countries
• Global-e would allow these companies to expand beyond Europe

MARKET RESEARCH (CONTINUED)

• Created database containing:
• Information on multiple eCommerce employees at each of the top 100 fashion brands (about 350 names total)
• Information on multiple eCommerce employees at Global-e merchants (about 150 names total)
• Talking to eCommerce professionals 🡪 insight into dynamics of Global-e and the eCommerce industry as a whole
• https://docs.google.com/spreadsheets/d/1FsMlt8RIb5AaotiiFnFk0fsCGjWd7QzVSO7cuiByA1E/edit?usp=sharing

INVESTMENT THESIS

• Uniquely positioned to grow because of exclusive partnerships with Shopify/DHL
• While Global-e doesn’t have significant competitive advantages or unique features, the company will remain profitable because 1) the sheer size of the TAM, 2) proven ROI, and 3) competitive capabilities

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INVESTMENT THESIS (CONTINUED)

• Drivers of growth:
• Top fashion brands have room to expand beyond Europe
• Goldman Sachs predicts Global-e 0.5% market penetration by 2023, indicating huge possibilities for future growth
• Demonstrated need – international shoppers are 30% of traffic but represent 5-10% of monetization
• Proven ROI – 58% average increase in conversion rates after Global-e
• Attracted attention after significant gains in stock price post-IPO
• Consistent growth – 81% in 2019, 103% in 2020

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FUTURE STEPS/MISCELLANEOUS

• August 16: Global-e will release Quarter 2 results