Founded in 2011 by ex-Google employees Danny Zhang and Peter Szulczewski, Wish has been a rocket ship of an eCommerce startup. And in certain circles, you’ll hear them referred to as an Amazon competitor – a moniker that often welcomes jeers from industry insiders. I mean, who can overcome the lead that Jeff Bezos has built? If not Alibaba or Walmart, the answer is probably no one.
This being the case, no other commerce company has scaled GMV (gross merchandise volume) faster that the San Francisco based giant. They are playing for keeps. And through an act of savvy partnership development and Magic Johnson’s wizardry, Wish is in position to take advantage of a sizable shift in brand fortune.
The company is now seven years into their journey. In 2016, Wish reportedly turned down a $10 billion all-cash offer from Amazon on “single-digit billions” in revenue after just three years. How? Wish sells very costly goods for rock bottom prices. But the majority of the products sold in the app are cheap goods sold for even cheaper prices. It’s a strategy that seems to be working for the company that’s now worth north of$8 billion.
The company is reportedly relatively light on infrastructure and since most vendors are sellers based in Asia, the app’s 400 million users don’t anticipate Amazon’s style of quick shipping. One of the leaders in mCommerce, the app is often the number one shopping app in 42 countries.
Wish is among just a handful of e-commerce upstarts that are positioned to offer serious competition to Amazon, which dominates online shopping in the US. Jet.com raised a boatload of funding and invited a ton of hype, but was soon sold to Walmart for $3.3 billion. Now it’s up to companies such as Wish, sports-focused Fanatics, wholesaler Boxed and a few others to offer new online alternatives.
Wish targets its wares toward lower-income shoppers, providing them an entry point to join the e-commerce trend, albeit without the speedy deliveries or top-shelf selection of Amazon. There’s growing competition for that market, though, with Walmart expanding its online presence and Amazon creating more services for people receiving government aid.
The company’s good fortune has not come for free. Thanks to hundreds of millions raised in venture capital, Zhang and Szulczewski have been able to market like titans. One of those early backers is GGV Capital, a firm that has its pulse on new retail. GGV also seems to be one of the few that operate with the understanding that Asia has a leg up on the American eCommerce industry. Online retail adoption is higher in Asia (20%+ vs. our 9%). In countries like China, their nation’s poor view eCommerce as their first commerce option rather than their last. This is a sharp contrast to America where Amazon’s Target and Amazon Prime users are more than likely upper middle class.
Wish is addressing this disparity in their own way. And the contrast in customer service, product quality, and logistics efficiency can be jarring to American consumers who’ve only experienced the luxuries of higher end eCommerce service. To combat these perceptions, Wish advertises quite a bit. And their history of advertising his been of legend in the eCommerce startup space.
The highest profile of these efforts have been the deal between Wish and the Los Angeles Lakers. Wish placed a lofty bet on the future of a then-below average organization.
First, the Wish shopping app made a splash by spending $100 million a year on Facebook ads. Then it sponsored the high-profile Mayweather-McGregor boxing match. Now, Wish is betting big on the return of the Showtime era to the Los Angeles Lakers. The startup, which has quickly built one of the most popular shopping apps in the world, has signed a deal to place its logo on Los Angeles Lakers jerseys.
Wish is spending between $12 million and $14 million a year on the deal, according to the Sports Business Journal, which also gives it some sponsorship rights inside the Staples Center and the Lakers’ new training facility.
Jason Del Rey, Recode (September 2017)
Fast forward, nearly a year later, and it seems that the eCommerce giant has had a wish granted. The cofounders bet that the Lakers organization could return to previous glory, generating multiples of return on their $12-14 million commitment per year in exchange for the logo placement. In year one of Wish’s agreement, the company paid an estimated $7-9 million over the value that the company received from its sponsorship media value. I anticipate that in year two, Wish will receive a 2-3x ROA. Just how much of an impact does James have on sponsorship jersey rights? We’ve broken down the economics below.
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With Lebron’s recent signing, the new face of the organization will move the Los Angeles Lakers from number five to number one overall in jersey sponsorship value. The anticipated $25 million in advertising value that Wish is set to generate in 2018-2019, on top of other advertising efforts, may finally push Wish into a mainstream media conversation dominated by few.
Wish could finally become ubiquitous in an America that sees Target, Walmart, and Amazon as the only cost effective online retail options. “Like any young global brand, we are looking to build legitimacy and trust,” says Sam Jones (Managing Director of Partnerships). “We felt using leading sport stars and placing products from our platform into the narrative…was a good way to start telling that story globally.”
The timing couldn’t be better for Wish. The San Francisco company is working towards an improved company culture and a highly anticipated IPO.
Read more of the issue here.
By Web Smith |About 2PM
