Posted on Friday, Sep 25th 2015
According to a recent US Census Bureau report, the country’s retail e-commerce sales, adjusted for seasonal variation, grew 4.2% over the year to $83.9 billion during the second quarter this year. Total retail sales during the same period grew 1.6% to $1,171.5 billion. Billion Dollar Unicorn player ContextLogic appears to be reaping the full benefits of this growing market.
San Francisco-based ContextLogic was founded in 2011 by Google veteran Peter Szulczewski and Yahoo alumnus Danny Zhang. The two had initially tried to set up an advertising-technology startup, but that failed. Despite the failure, they continued to work on a new project. ContextLogic’s Wish app actually grew out of a project that was looking to improve recommendations for shopping on mobile devices. Peter essentially wanted to create a mobile shopping mall where consumers would end up buying products that they did not know they wanted. Thus Wish was born that uses a smart algorithm for assessing a customer’s history of buying and rejecting products to recommend new goods for purchase.
Today, Wish has become a leading mobile shopping app across both the iOS and Android devices as it delivers both fun and relevance in the shopping experience. Customers wishing to purchase through Wish can set up free accounts on the site. They then have access to over 40 million items sold from around the world and make wish lists by saving, tagging, and recommending products to each other. Then Wish’s algorithm personalizes the customer’s shopping experience based on their posts and helps stores reach out to consumers who are more likely to buy from them. Wish thus allows merchants to get rid of middlemen and marketing costs by directly selling to consumers. More importantly Wish’s vendors are able to sell their wares internationally. Wish’s inventory includes cheap, unbranded clothes, jewelry, smartphone cases, shower heads, and other products, most of which are shipped directly from China.
Wish earns revenues by charging the merchant a fixed 15% share from each sale. Their revenue and profitability figures are not known. But Wish has seen rapid growth. As of May 2015, Wish had over 100 million free accounts and has a merchant base of more than 100,000 globally. While product listing and growth is impressive, Wish’s customers struggle with the vendors’ shipping times. Most products sold on Wish take weeks to reach their destination. Where other e-commerce players like Amazon are trying to shrink shipping times, Wish’s longer shipping duration is concerning. Wish is looking to address the issue by experimenting with warehouse space in the US, Europe, and China.
Wish has been venture funded so far with $578.7 million in investments from investors including DST Global, Founders Fund, AME Cloud Ventures, Cherubic Ventures, Formation 8, GGV Capital, Jared Leto, Legend Capital, AF Square, Andy Rankin, CRV, Digital Garage, Elad Gil, Felicis Ventures, Fritz Lanman, Hank Vigil, Joe Lonsdale, Keith Rabois, Michael Stoppelman, Naval Ravikant, Nils Johnson, Paige Craig, Pankaj Shah, Paul Bricault, Raymond Tonsing, Ron Conway, Sizhao Yang, Steve Chen, Transmedia Capital, and XG Ventures. Their last round of funding was held in June this year when they raised $500 million from DST Global. The round reportedly valued them at $3 billion compared with the $400 million valuation they were at a year ago. Wish claims to have an IPO on its mind, but details of the proposed listing have not been disclosed.
I am not convinced that this company can withstand the scrutiny of the public market and withhold its astronomical valuation.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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