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Here’s why investors will love ContextLogic Inc.

by Concerns of the Future about a month ago in investing

Contextlogic is the parent company of Wish, a popular e-commerce brand known for its insane deals.

Here’s why investors will love ContextLogic Inc.
Photo by Anete Lūsiņa on Unsplash

Wish is a discount e-commerce platform that is seen as an online dollar store. With more than 100 million monthly active users in over 100 countries, Wish has an impressive customer base. As the coronavirus pandemic subsidies, the world economy reopens, and economic activity surges, investors fear that Wish’s relevance will diminish.

With a unique business model, this stock is great for long=term investors. However, with numerous complaints about the low quality and low durability of their products, it’s understandable why some wouldn’t think about adding Wish to their portfolios. At the same time, with consumers paying really low prices on items on the Wish platform, it’s not surprising to find that the products aren’t high quality.

And there are concerns about the people managing Wish. Most of the people that are either on the Board of Directors at Wish or are running the business from the top don’t seem to have backgrounds in retail. If anything, their backgrounds are completely different from retail. Some are from finance and others are from entertainment. When a company recruits someone that has made a name for themselves and is a veteran at an industry different from the business, it’s usually a sign that the company wants to venture into that particular industry. However, in Wish’s case, they have no interest in other industries, they just want to stay in retail. That’s why investors are skeptical on whether Wish can sustain its success, or not.

With having over 100 million monthly active users despite the numerous complaints and the mixed backgrounds of the company’s management and board, Wish has shown that it can overcome the odds. The unique business model and the unique position that Wish holds in the world of e-commerce shouldn’t go unnoticed.

Wish’s targeted customer base is people who make less than $75,000 and people that are value-conscious shoppers. According to Statista, 53% of Americans make less than $75,000. That percentage is estimated to be higher in Europe. Because of this, Wish is widely relevant to consumers in the West. As for the East, with incomes being a lot lower there, Wish has been widely popular there.

One thing that keeps Wish’s platform attractive to users is how Wish gamifies the shopping experience. There are sweepstakes, rewards for logging into the app daily, and many other ways that users can get discounts. Even if Wish might look very similar to the other e-commerce platforms, the gamification of Wish’s shopping experience continues to draw users into the platform.

And remember, like social media companies, Wish will make more money as users are more glued to its platform. In other words, Wish is a mixture of both e-commerce and social media wherein it makes money from selling products and selling advertising space and sees its profits correlate with users spending more time onto the platform. Furthermore, the more that users are glued onto the Wish platform, the more ad space that Wish can sell to merchants.

With the expansion of Wish Local, users can order items from small and local businesses and pick them up in the store. In the process, Wish can get higher-quality merchants and small businesses will have access to more customers within their area.

Investors should note is that Wish spends a lot on customer acquisitions and is playing in cross-border e-commerce, an industry that has been slower in gaining traction compared to local e-commerce. There are many hassles with cross-border e-commerce and there are many competitors in that space. Also, Wish’s customers are willing to sacrifice quality for affordability, but that in itself could be what reduces the upside for the company’s userbase.

Overall, while Wish continues to burn capital to finance growth, the company is operating in a unique niche and continues to display great user metrics. As it continues to gamify the shopping experience, it’ll continue to attract more users to the platform and earn more in sales. Being the dollar store of internet retail, Wish is a company that I can see dominating its niche.

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Concerns of the Future
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Concerns of the Future

The future is concerning. But at the same time, there are many things to be optimistic about.

*All views expressed in my articles are my own. Please do your own research and talk to a financial advisor before making any decisions.

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