Wish is valued in the listing at about $17 billion. A look back at the origins of Wish shows how a global pandemic should theoretically be perfect timing for an ecommerce company to go public because homebound shoppers have fueled a record-breaking surge in online sales.

(Bloomberg)—Online retailer Wish has priced its initial public offering at the top end of a marketed range, raising $1.1 billion and further elevating the year’s already record tally for U.S. listings. Wish is No. 14 in the ranking of Digital Commerce 360 Top 100 Online Marketplaces.

Wish’s parent company, San Francisco-based ContextLogic Inc., sold 46 million shares Tuesday for $24 each, according to a statement.

Wish is valued in the listing at about $17 billion on a fully diluted basis, which includes options and restricted stock units as well as the outstanding shares listed in its filings.

The offering is the 31st on a U.S. exchange to exceed $1 billion this year, according to data compiled by Bloomberg. It follows last week’s blockbuster trading debuts by DoorDash Inc., which soared 86% after its $3.14 billion offering, and Airbnb Inc., which closed its first day up 113% after a $3.83 billion IPO including so-called greenshoe shares.

Record December

With Wish, more than $20 billion has now been raised in IPOs on U.S. exchanges in Decembera record for the month. The 2020 total is now more than $174 billion, also an all-time high, the data show.

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Two other consumer-oriented, web-based companies, online video-game company Roblox Corp. and installment loans provider Affirm Holdings Inc., are also pursuing IPOs. Roblox told its employees that it was delaying its IPO until next year while Affirm was considering doing the same, people familiar with their plans said. Affirm hasn’t made a final decision yet, the people said.

The origins of Wish

The origins of Wish, officially known as ContextLogic Inc., go back to 2010, when Szulczewski and co-founder Danny Zhang started an online advertising company. When that failed to take off, Szulczewski hit on another idea: inviting Chinese merchants to sell cheap products directly to U.S. buyers. The timing was propitious because the community of sellers supplying ecommerce giant Alibaba Group Holding Ltd. were now looking for opportunities abroad. Szulczewski renamed the company Wish.com and in late 2012 began hiring Chinese staff to recruit sellers and handle customer service.

Wish grew so quickly in the early years that it attracted the attention of Amazon.com Inc. CEO Jeff Bezos. Typically, when a potential rival emerges, the Seattle giant strikes up a relationship with the upstart, the better to get a look under the hood and maybe even see if it’s worth acquiring. Szulczewski and Zhang were invited to Seattle, where they spent the day describing their vision. The pair got the impression that Amazon executives didn’t think much of their business model. But when Wish continued to grow quickly, Szulczewski was invited to sit down with Bezos. A suspicious Szulczewski declined the meeting and continued to build his company, raising $1.8 billion from investors including GGV Capital, Joe Lonsdale’s 8VC and Founders Fund. (Zhang left Wish last year.)

Scrolling through Wish’s feed today, shoppers see a smattering of products, from $8 AirPod knockoffs to 50-cent baby dolls. The items have little in common, except that they’re dirt cheap.

Katie Plummer is an Amazon Prime subscriber but sometimes finds herself on Wish buying random items — mostly for her dogs.

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Earlier this year, Plummer, 34, bought flashing lights for 95 cents to clip onto her mutt Stanley’s collar, so she can see him during nighttime walks. Then she bought a dog whistle and a $2 seat belt to keep the 35-pound pooch from flying out of the car. Plummer didn’t mind that it took months for Wish to deliver the items to her home in Concord, North Carolina.

“Amazon is convenient,” she says. “Wish is more of a dollar store on your phone.”

Wish generates about 70% of its sales from impulse buyers, not from searches for specific items, according to a filing. That could be a problem, says Forrester retail analyst Sucharita Kodali, who notes that Wish isn’t entirely comparable to dollar stores, which sell such essentials as groceries that pull people in regularly. And unlike Amazon, she says, Wish doesn’t sell everything.

“It’s random tchotchkes,” she says. “It’s cell-phone accessories and skirts. It’s not everything for all people. It’s not even some things for some people.”

Despite the stampede online this year, Wish said third-quarter core marketplace revenuewhich includes commissions collected from merchantsincreased 17% compared with the same period last year. That trails the 37% growth in U.S. ecommerce sales during the same period, as logged by the Commerce Department.

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In its IPO filing, Wish attributed the “moderated” third-quarter revenue growth to pandemic-related issues that slowed deliveries and prompted fewer shoppers to click the buy button. That could be a sign that while Wish’s customers are willing to tolerate extended shipping windows, there is a limit to how long they are willing to wait. It took an average of 62 days for U.S. customers to receive their Wish orders in the second quarter, compared with just 27 days in the first three months of the year. Shipping times improved last quarter, falling to 22 days on average.

Meanwhile, sales and marketing expenses are a considerable burden, costing Wish $1.1 billion in the first nine months of this year, or 64% of its $1.7 billion in revenue. And while the company spent a greater percentage of revenue, 78%, on marketing for all of 2019, a company filing acknowledged that these expenses will continue to comprise a majority of operating costs for the foreseeable future.

“They are quite literally buying sales,” Kaziukenas says. “I don’t know where that goes in the future, as Facebook and other marketing channels become more expensive. That’s a channel that will continue to eat into any sort of profitability.”

For years, Wish benefited from low shipping rates through the Universal Postal Union Treaty, which subsidizes small packages from China. The company notes in the IPO filing that the hike in rates that took effect in July are likely to increase its shipping costs. Unless Wish begins bringing more products wholesale into the U.S. and Europe, it could be difficult to continue selling so many items for less than $5, says Kaziukenas, who researches online marketplaces.

Last year, the company launched Wish Local, which lets customers pick up orders from nearby brick-and-mortar retailers. (The stores can sell through Wish, too.) In an interview with Forbes in July, Szulczewski said, “If you think about it, Walmart has about a billion square feet of retail space. If we have a million stores sign up for our service with about 1,000 square feet per store on average, we have a virtual Walmart.” So far, about 50,000 stores have signed on, according to the IPO filing.

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Ordering from Wish is far from perfect, according to Plummer, the North Carolinian customer. She ordered two “dog mom” key chains in April for 95 cents. They never showed up, so she got a refund in September. She has tried the local pickup option and hit some snags. Her most recent Wish order was a pair of earrings priced at $1 on Oct. 19. She selected a nearby computer store as her pickup location.

But because Wish orders take so long to arrive, Plummer usually forgets about themwhich is a problem because Wish gives customers only 15 days to pick them up. Plummer missed the window and was charged a 39% restocking fee.

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