While disruptions and delays in the global supply chain continued into early 2023, e-commerce marketplace GigaCloud Technology Inc. reported one of its most successful years.

GigaCloud moved its headquarters from Walnut to El Monte in mid-November, and posted record revenue in its third quarter as well as two substantial acquisitions. The company said it has no plans to slow this high-growth phase and is poised to be the leading business-to-business e-commerce marketplace for large parcel items such as furniture, exercise equipment and other bulky home goods.

GigaCloud was founded in 2006 and after 13 years of operating as a wholesaler and distributor of large parcel – or “big and bulky” – items, launched its e-commerce marketplace in 2019. A manufacturer or supplier can list an item, such as a sofa, on GigaCloud’s online marketplace and resellers such as Wayfair Inc., Target Corp. or Amazon.com Inc. can purchase units of the item directly to list on their own websites. GigaCloud then facilitates the shipping of orders directly from a warehouse to either a store location or an individual customer, meaning that the reseller doesn’t need to transfer items to their own warehouse before distribution.

Buyers can purchase and list inventory on their own website before either storing it briefly in a GigaCloud warehouse or have GigaCloud directly ship it to a customer. GigaCloud then takes a commission from the transaction between the manufacturer and the reseller, usually between 1% to 5%.

Risk pooling

Resellers can order inventory and experiment with new items with less risk if the inventory doesn’t sell, since the items are going straight from the manufacturer to the store or customer and don’t need to be stored in the reseller’s warehouse beforehand. This centralization of inventory, also called risk pooling, is not a new concept. However, its benefits vary depending on the circumstances of a business, according to Greys Sošić, the senior vice dean of faculty and academic affairs at the USC Marshall School of Business.

“If there is a lot of variability in demand, then pooling can be very helpful,” Sošić said. “You also want to take into account what portion of product cost is shipping cost, as you if you are shipping from the manufacturer, you are shipping over longer distances. So, there are always these kinds of tradeoffs and there is no one recipe that works for every product.”

Transporting made easy

GigaCloud operates a large transportation network through partnerships with shipping, trucking and freight providers and operates 24 warehouses globally. Resellers are able to rent warehouse space in order to store inventory before it is sent to a customer if necessary and can do so at a flat rate per cubic foot per day.

“It’s illogical to have a big and bulky product, like an eight-piece dining set, travel through all these unnecessary destinations, when the only logical path that product needs to take is from the manufacturer directly to the consumer,” GigaCloud president Iman Schrock said.

The company said that by setting up local infrastructure close to ports and working at every step of the supply chain, it’s able to deliver U.S. products to final customers within a week of their order at a cost that is cheaper than standard rates from FedEx Corp. and the United Parcel Service.

In addition to this, Sošić said that GigaCloud’s business model is attractive because it aggregates manufacturers’ offering for resellers – a reseller can go through multiple manufacturers’ inventory to find items and have them shipped from a single portal, rather than visiting each manufacturer’s individual website.

For reselling to clients such as Lowe’s Cos. Inc. and Walmart Inc., GigaCloud said the marketplace offers increased visibility into inventory and lower transaction costs. The marketplace is supplemented by artificial intelligence technology which helps GigaCloud organize orders and optimize inventory management, as well as sales analytics on pricing history to allow resellers to estimate the value of their inventory.

Big profits

GigaCloud posted large gains in the third quarter, including $24.2 million of net income, up from $700,000 in the same period of the previous year. Adjusted earnings before interest, taxes, depreciation and amortization for the quarter were $29.8 million, up 150% year over year. The company’s stock, which trades under the symbol “GCT” on the Nasdaq, hit an all-time high on Jan. 2 since its initial public offering in August of 2022, closing at $20.06 per share. GigaCloud’s board announced a stock repurchase program in June for up to $25 million and, as of Sept. 30, has bought back approximately $1.6 million of Class A shares.

“(At the time of our) IPO, the stock wasn’t doing as well,” Schrock said. “We figured there is no better way to invest this money in the company that we know so well, and it’s so undervalued, at least by our analysis.”

The third quarter report also posted $178 million in revenue and $214 million in cash on hand, after which GigaCloud closed two large acquisitions and announced a change in its headquarters. The company closed the deals with cash from its balance sheet, including a $10 million purchase in mid-November of digital signage and e-catalog management software Apexis Inc., which is based in Tampa, Florida, and does business as Wondersign at more than 2,500 retail locations.

GigaCloud also acquired Chatsworth-based Noble House Home Furnishings LLC for $85 million at the end of October. Noble House is a furniture supplier that works with some of the biggest retailers in the country, including Costco Wholesale Corp. Noble House was founded in 1992 and filed for Chapter 11 bankruptcy protection in September.

“Noble House went bankrupt because of mismanagement of inventory, because they brought in inventory that didn’t move,” Schrock said. “We allow multiple people to pull from the same inventory so …the risk is almost eliminated on the buyer side, but it’s also reduced on the supplier side.”

Sošić said one key element for the company’s long-term success is to ensure there are enough manufacturers and resellers actively using the marketplace. According to GigaCloud, the marketplace had 741 selling manufacturers and 4,602 active buyers during the 12-month period ending on Sept. 30. The number of active sellers went up 43% over this period, with buyers spending an average of $149,000.

In addition to purchasing Noble House’s inventory, websites, customer contracts and tradenames, GigaCloud also acquired its 800,000-square-foot office and warehouse property in El Monte. The company moved its headquarters to El Monte from Walnut, though it continues to run offices in locations such as Hong Kong and England. Schrock said that being a tech company close to downtown, versus in the suburbs, puts the company at an advantage by increasing its proximity to investors.

“Being in the fortunate position of having a lot of cash on the balance sheet, if we wanted to, we could acquire another company, but our main and sole focus in the next couple quarters … is to produce results and to make sure that this operation is profitable before we take on new endeavors,” Schrock said.

GigaCloud allows sellers to set their own prices based on factors such as quantity or delivery date, and buyers can purchase inventory units either individually or in bulk. The company pulls its revenue through its commission rate on transactions in addition to delivery fees and rental fees connected to holding products in its own warehouses for clients.

While the company’s marketplace was originally focused on resellers that are prominently based in e-commerce, such as Amazon, Schrock said the company wants to target more brick-and-mortar stores going forward.

“Having variety and choices is a powerful thing, and we offer that risk free to the stores,” Schrock said. “I think it’s very beneficial for our company (to help) stores get into this idea of trying new styles and new (inventory) without really committing dollars and space.”