Wish IPO prospectus reveals heavy risks tied to reliance on China


E-commerce marketplace Wish filed its IPO prospectus on Friday, and gave it to investors, who may be worried due to excessive skepticism over China.

Kash, founded in 2010, is an online marketplace with a range of discounted goods ranging from cheap homewares and apparel to electronics and toys. The app offers a bunch of products for just a few dollars as a way to target low-to-moderate consumers with more affordable options that can be found on other sites, including Amazon.

Priced at $ 11.2 billion by private investors, the company is able to keep prices low by sourcing most of its products from vendors in China. Desire does not break from which regions more than 500,000 of its vendors come from, but Marketplace Pulse previously estimated that 94% are based in China, with the remaining 6% coming from the US, UK, Canada and India.

“We initially focused on the world’s largest exporter of goods over the past decade, focusing on merchants in China, because of the strength of these traders in selling quality products at a competitive price,” says the prospectus.

Amazon and Walmart also have a growing share of China-based sellers, but they are not as dependent on Chinese merchants as Wish. Wish’s prospectus overcame many of the risks associated with his concentration in China.

Market earnings fell 8% in the first quarter from the previous year due to an initial outbreak of Kovid-19, which “severely disrupted manufacturing and supply”. The business has grown by 67% in the second quarter, before increasing to 33% in the third quarter as “disruption to the global logistics network” continues.

Changes in postal subsidies could harm the company in other ways of moving forward. Desire has long benefited from an agreement between the US Postal Service and China Post, China’s official postal service, which allows packages weighing 4.4 pounds or less to be shipped between the US states at a cost. Will be shipped to the US more cheaply.

In July, Universal Postal Union, a United Nations agency, abolished the subsidy and set higher rates on inbound mail from China. To make up for the increase, Wish’s Chinese merchants could be forced to raise the price of their products, the filing says, by reducing one of the company’s major benefits.

Kash’s dependence on Chinese traders exposes this, especially with US-China trade relations, which became very hostile during President Donald Trump’s term. If the US imposes new tariffs on Chinese imports, Wish Sellers may have to raise prices on their products.

The company recently threatened to impose tariffs on $ 500 billion imports from China by the US.

The prospectus adds, “Further increases in trade tensions between the United States and its trading partners, particularly China, may be the result of long-term changes in global trade, including countervailing trade restrictions.” “Any change in our business strategy or operations undertaken to adapt or comply with any change will be time-consuming and costly, and some of our competitors may be better equipped to withstand or respond to these changes.”

Vish said it is taking steps to diversify its merchant base geographically. In the past year, the company has added more merchants from North America, Europe and Latin America. American traders have increased by 268% since 2019.

The company is also investing in its own logistics offerings and is partnering with third-party carriers for cross-border shipments. Additionally, it is expanding its array of private label products, which are items that are manufactured and purchased wholesale by Wish and sold on its platform.

Watch: Airbnb, DoorDash, Wish and more have all announced IPOs this week



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