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 overseas labor.
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 ( LITB ) 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 gadgets.
LITB, which incorporated in 2008 and had its initial public offering June 6, sources most of its products directly from China-based manufacturers.
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 Capital.
"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 said.
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 garden.
"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 month.
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, Sweet noted.
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 ( UPS ) andFedEx ( FDX ).
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 million.
Although LITB lost money every year from 2008 to 2012, it generated net income of $2.6 million for the quarter ended March 31.
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 sales.
"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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.