Back when the world was a much smaller place, product
distributors needed to be near their manufacturing sources to
keep costs low and margins high.
That seems like a quaint notion today with so many companies
sourcing products half a world away to take advantage of cheap
But the basic theory still holds true. Everything else being
equal, it really is cheaper to source goods close to home than to
source them several time zones away.
That's one of the advantagesLightInTheBox Holding (
) has over other companies in its sphere.
The China-based online retailer sells a variety of goods on
websites such as lightinthebox.com and miniinthebox.com.
The company's sites are available in 17 languages and cover
more than 80% of Internet users globally.
Its product lineup includes everything from apparel and
wedding goods to electronics, home and garden gear, toys and
LITB, which incorporated in 2008 and had its initial public
offering June 6, sources most of its products directly from
According to its prospectus, the company "works closely" with
manufacturers to re-engineer their production processes and
improve the time it takes to get to market.
This streamlined production model is one of LITB's main
strengths, says Stephanie Chang, research analyst at Renaissance
"Since they have access to direct sourcing from Chinese
manufacturers, they can save on manufacturing costs but still
offer premium prices in Europe and North America," Chang
Because LITB tends to shy away from huge orders, it also has
the flexibility to customize products for customers at much
cheaper prices than most competitors.
"This is another positive for the company," Chang said. "As an
example, they can customize a wedding dress and sell it for $200
instead of thousands of dollars, which is what other companies in
the U.S. might charge."
LITB also benefits from its focus on three core product
categories: apparel, small accessories and gadgets, and home and
"These products generally require design specificity, thus
giving them more pricing flexibility and allowing them to capture
higher margin potentials," Scott Sweet, senior managing partner
at IPO Boutique, noted in a recent report.
"At any time, a customer shopping for a special occasion dress
on their site can have her dress made-to-measure, choosing from
more than 4,300 distinctive designs," Sweet added.
As of March 31, LITB had more than 220,000 product listings on
its sites. In the three months ended March 31, the company added
an average of more than 14,000 new product listings each
Most of LITB's revenue comes from Europe and North America.
Last year Europe accounted for 51% of sales, while North America
accounted for 24%.
The company has the wherewithal to serve consumers globally
"without incurring the costs and complexities" associated with
establishing a traditional multinational retail infrastructure,
In addition to its own websites, LITB uses global online
marketing platforms such asGoogle (
) and Facebook (
) to reach consumers.
The company accepts payments through all major credit cards
and electronic payment platforms such as PayPal. It delivers its
goods through major international couriers likeUPS (
) andFedEx (
Financially, LITB has produced head-spinning growth over the
past several years. Its annual sales hit $200 million in 2012, up
from only $26 million as recently as 2009. From 2008 to 2012 its
number of customers ballooned from around 36,000 to 2.5
Although LITB lost money every year from 2008 to 2012, it
generated net income of $2.6 million for the quarter ended March
Analyst Chang says the company has plenty of room to grow its
business as it expands its operation in key markets.
"The main positive is that they have a huge market to draw
from, and the United States and China both represent growth
market opportunities," she said.
The U.S. accounted for less than 17% of LITB's sales during
the quarter ended March 31. China wasn't even listed among the
top markets. Instead, it was grouped under "other countries,"
which accounted for 8.5% of quarterly sales.
On the product side, Chang says accessories and gadgets --
which include things like cellphone cases and video games -- have
shown the most growth in terms of the overall percentage of
"But it's a pretty commoditized category that might cut into
(LITB's) margins," Chang said. "Apparel is the biggest product
category, but it has been pretty flat in terms of the overall
percentage of sales. Apparel is the best margin category, so we'd
like to see that grow more."
No U.S. analysts follow LITB, so no such earnings estimate is
available. Its stock debuted at $9.50. Shares pushed above 18 on
June 17 and currently trade near 13.