Wish's revenue has dropped sharply, and it plans to lay off employees and terminate leases

Affected by the global epidemic, rising labor costs, and soaring shipping costs... In 2021, cross-border e-commerce has experienced ups and downs. It is difficult for sellers to make profits, and the situation of cross-border e-commerce platforms is not simple. Some platforms have made a small profit with their own strong strength, while some e-commerce platforms have seen a sharp drop in revenue and widening losses.

Wish's revenue plummets, losses widen

Mobile cross-border e-commerce platform Wish released its fourth quarter and annual financial reports ending December 31, 2021.

The financial report shows that in the fourth quarter of 2021, Wish's revenue was US$289 million, a 64% decrease from the US$794 million in the same period last year. Core market revenue was US$139 million, Product Boost revenue was US$28 million, and logistics revenue was US$122 million, down 74%, 55%, and 40% year-on-year respectively. The overall revenue has dropped significantly!

The decline in revenue also led to a further expansion of losses. In the fourth quarter of 2021, Wish's net loss reached US$58 million, an increase of 90% compared with the same period last year. The adjusted loss of EBITDA (earnings before interest, taxes, depreciation and amortization) was US$23 million, an increase of 81% year-on-year.

For the full year, Wish's revenue was $2.085 billion, down 18% year-on-year, and its core market revenue was $1.177 billion, down 36% year-on-year. Compared with the fourth quarter, the decline in Wish's full-year revenue was relatively "moderate." The full-year net loss was $361 million, and the adjusted EBITDA loss was $199 million.

At the same time, Wish's cash flow is not optimistic. In the fourth quarter of 2021, Wish's cash flow from operating activities was negative $49 million, compared with negative $24 million in the fourth quarter of fiscal 2020; free cash flow was negative $50 million, compared with negative $25 million in the fourth quarter of fiscal 2020.

The decline in various business data shows that Wish’s prospects are not optimistic.

“Our financial health and Wish’s future growth depend on improving the user experience, deepening merchant relationships, and increasing organizational efficiency,” said Vijay Talwar, CEO of Wish . “As we solidify these three foundational pillars, Wish will enter a new era of growth.”

Layoffs and cancellation of leases, is Wish cutting off its own limbs to survive?

In addition to the financial report, Wish also announced the company's restructuring plan, saying that the restructuring is to readjust the company's operational focus to support sustainable long-term growth, better align resources and improve operational efficiency. Wish expects that the entire restructuring plan will be completed by the end of fiscal 2022.

Its restructuring plan includes: reducing the company's headcount by approximately 15% (approximately 190 positions); exiting various facility leases; and reducing and adjusting supplier spending.

At the same time, due to layoffs, Wish will pay a one-time $3 million in employee severance and other personnel layoffs. Combined with the cost of exiting certain company facility leases and related non-cash impairment of leased assets, property and equipment, Wish will pay up to $21 million. The company expects the related severance costs to occur at the end of the second quarter of 2022. Wish estimates that the restructuring plan will save the company $32-37 million in operating costs each year.

In this regard, Vijay Talwar said, “As part of our strategic transformation, we have made the difficult decision to reduce our workforce. We are also making other cost cuts to adjust the scale of our business. These measures are critical to the long-term success and sustainability of Wish.”

As a former industry leader, Wish has seen a decline in performance and a decrease in attention. These current situations indicate that Wish does need a reform and adjustment. Judging from Wish's recent developments, it is indeed carrying out a series of internal reforms, including withdrawing from the markets of 79 countries and regions at one time, changing the seller registration system to an invitation system, and launching new features such as Wish Clips. However, it will take time to verify how much effect these changes can have and whether they can lead Wish out of the quagmire.

In addition to Wish, the net loss of Coupang, a well-known Korean e-commerce platform, also expanded further in the fourth quarter.

Coupang's fourth-quarter net loss widens

According to Coupang's financial report, its operating loss increased to $396.6 million in the fourth quarter ended December 31, compared with a loss of $130.9 million a year ago. The net loss for the quarter was $405 million, and the net loss for the fourth quarter of 2020 was $83 million.

Coupang posted an adjusted EBITDA loss of $285 million and $82 million in the fourth quarter of 2020. The fourth quarter net loss and adjusted EBITDA included approximately $130 million in incremental costs.

Coupang reported a loss in the fourth quarter mainly because the company faced increasing competition and made heavy investments in infrastructure and services. In order to cope with the surge in online shopping and compete with local e-commerce rivals, Coupang spent more than 1 trillion won on the construction of distribution centers last year as the number of consumers ordering food online increased due to the outbreak in South Korea.

In addition to its massive investments in infrastructure and services, the company said it also faced pressure from rising costs such as labor in the fourth quarter due to epidemic-related control and isolation measures.

Although Coupang is losing money, its performance in 2021 is also quite good. Coupang's financial report mentioned that its active customers increased by 21% year-on-year, exceeding the 20% year-on-year growth for the 16th consecutive quarter. As of the end of 2021, the number of paid WOW members has approached 9 million customers.

Meanwhile, spending per annual customer segment has grown by about 30% or more since 2010. Coupang also added 15 million square feet of infrastructure in 2021, more than it added in the previous two years combined.

Coupang's revenue is nearly three times what it was two years ago, and even at this scale, spending per annual cohort grew by about 30% or more in 2021, suggesting Coupang is still far from reaching its full potential, said Coupang founder and CEO Bom Kim.

Coupang Chief Financial Officer Gaurav Anand mentioned that Coupang's gross profit margin is expected to increase by more than 250 basis points in the first quarter of 2022 and is expected to reach its highest level since the epidemic. So far in the first quarter, Coupang's revenue growth has remained at 30%, and its revenue growth momentum remains strong.

According to Coupang, starting from the first quarter of 2022, it will implement a new financial reporting structure that will include two reporting sections:

Product Commerce: This includes Coupang’s core products (retail and marketplace), Rocket Fresh, Coupang’s fresh grocery product, and advertising products related to these products.

Growth Initiatives: This includes Coupang’s newer products and services, including Coupang Eats, Coupang Play, international and fintech initiatives.

At the same time, Coupang also announced its full-year 2022 financial guidance:

Total Adjusted EBITDA loss of less than $400 million;

The product business unit's adjusted EBITDA will be profitable by the fourth quarter of 2022, with an adjusted EBITDA margin of 2.6% in the fourth quarter of 2021.

As part of its efforts to boost revenue, Coupang is planning to raise the monthly subscription fee for Wow to 4,990 won for new members. The company said it had about 9 million paying Wow members as of the end of last year. If the membership fee hike is extended to 5 million members, it could contribute about 125 billion won to Coupang's sales and profits, said Coupang analyst Park Sang-joon. However, the move is not enough to help Coupang turn a profit.

Wish

Financial Report

Coupang