by Company founder, CEO and Chairman Larry Wu helps explain the company’s business model and why it’s creating demand for its services in the marketplace
EL MONTE, Calif. — Anyone who has followed GigaCloud Technology knows the company has seen success amid a challenging business environment relating to tariffs and a soft housing market.
For its second quarter ended June 30, the company reported $322.6 million in revenues, up 3.8% from $310.8 million a year earlier. Net income was $34.6 million compared with $27 million the same period last year.
“Despite a challenging environment, we continue to grow and have achieved our highest quarterly revenue to date — a milestone powered by accelerating performance from our Noble House portfolio, which is now becoming a meaningful margin contributor,” said Larry Wu, founder, chief executive officer and chairman, adding that the results “validate the strength of our Marketplace and the differentiated advantages of our Supplier Fulfilled Retailing (SFR) model. We are attracting new Marketplace participants, expanding our European footprint as we work to grow its scale to that of the U.S. market, and enhancing our ability to transform and reinvent the way big and bulky merchandise is bought and sold through one single technology-driven platform.”
For the full first half, the company reported $594.5 million in total revenues, up 5.8% from $561.9 million the same period a year earlier. Net income for the first half was $61.7 million, compared with $54.2 million last year.
This follows its successful financial performance for its fourth quarter and full year ended Dec. 31. For the fourth quarter, the company reported $295.8 million in revenues, up 20.9% from $244.7 million the same period a year earlier. Net income was $31 million, down 12.9% from $35.6 million a year earlier.
For its full year, it reported $1.2 billion in revenue, up 65% from $703.8 million a year earlier. Net income was $125.8 million, up from $94.1 million a year earlier, a 33.7% increase.
Billing itself as an online global B2B solutions provider “that is reinventing the supply chain for wholesale buyers and sellers of large-parcel merchandise,” its model has thrived on the ability of customers to source and buy from an extensive selection of furniture and other large products that are distributed through GigaCloud’s 36 fulfillment centers totaling 10.7 million square feet around the world.
Through its B2B Marketplace, the company provides what it describes as a one-stop shop for inventory management, transactions and logistics, offering manufacturers and distributors an opportunity to sell on the platform, “gaining exposure to thousands of active resellers nationwide.”
The platform also allows resellers to browse its products online that can be purchased for their showroom, e-commerce platform or store network.
And by having access to GigaCloud’s logistics network, the company said, customers do not need to keep inventory on hand, thus lowering overhead costs. Goods can be stored in one of its warehouses, or a member of the company’s logistics team can pick up items from the customer’s warehouse and deliver it anywhere in the continental U.S., including to the end consumer.
The business is largely divided into what it calls 3P and 1P segments. The 3P model is where the company does not own the inventory, but rather helps its customers sell their products through its online Marketplace.
“We are generating revenue by charging a fee for brokering the transaction and doing the fulfillment,” Wu said.
1P, by comparison, is best associated with its fall 2023 acquisition of Noble House. In this model, the company purchases and owns the inventory.
“Because it has a brand component in it, we also are allowing other customers in the ecosystem to use it if they want it and pay a fee for that brand,” Wu said.
Still, with furniture representing between 70% and 80% of its business overall with the large and bulky products it handles, the company has been susceptible to market challenges ranging from tariffs on goods sourced overseas to the soft housing market.
In an interview with Home News Now earlier this year, Wu discussed some of the factors driving the success of its business. Addressing the tariffs head on, he said he has not been too worried about their impact in the marketplace.
“We shouldn’t forget that we are selling low frequency purchase types of products, for most average people,” he told Home News Now. “Although the ticket value is high, because the purchase frequency is so low, it is not as significant as people think. Most people don’t really have a reference system to help them even understand that the price has gone up.”
And as most furniture is not standard in the same way say, an automobile, for example, or even a large appliance might be, it makes it even more difficult for consumers to compare and contrast particular items simply based on price. Thus while the tariff may be 20%, he noted, the retail price might go up by 10% or less, which would bring a sofa formerly at $799 to $879.
Of course, tariffs are not the only factor driving up costs of product. So is transportation, particularly the handling and shipping of product domestically.
The goal of its Supplier Fulfilled Retail Model, he noted, is to make things easier for the supplier, distributor and manufacturer by warehousing the product itself through GigaCloud’s own extensive distribution network versus shipping the product to the retailer’s warehouse facilities.
“We are saying that retailers should be running inventory-free, which is beneficial for both sides,” he said, noting that any movement or handling of large and bulky product is expensive for both the retailer and supplier alike. “If we can successfully do that, then we are removing the touch point at the warehouse of the retailer, which obviously costs money. So we are improving the efficiency of the whole supply chain by removing that.”
By holding inventory, it also is removing from the retailer the risk of warehousing products that may not sell.
The company’s name, which combines the two words, Giga, derived from the Greek word γίγας meaning giant (or big and bulky) and Cloud, which allows the customer — meaning the supplier and the seller or distributor — to perceive that the inventory is simply in the Cloud.
“They don’t have to worry where we physically store those products,” Wu said. “We use algorithms to do the load balancing to make the product be as close as possible to the consumer based on our own projections. Then when the sale is done when the consumer has already bought it, the retailer can have the product shipped anywhere in the United States without having to worry, ‘where do I store it and how do I ship it?’ We handle that for them so they can do business virtually or digitally in the marketplace … without having to worry about the physical handling of everything. We are generating revenues from those transactions and we are generating revenues from those fulfillments.”
Thus, with the goal of helping create efficiencies through its network of warehouse and distribution facilities, Wu said the company has seen an increase in interest for its services.
And based on the company’s success this past year, through the first half of this year, he remains bullish about its prospects moving forward.
“I think the market in the U.S. is still going to be soft, but the good news for us as a company is that we have gotten way more inquiries than we used to have,” he said, noting that this also provides an opportunity for the company to improve the level of services it provides the industry. “We have to sit down and pay attention to every single component of our operations to make sure the efficiency is there in order to deal with the headwinds of the industry. This is really helping our business because we have positioned ourselves as the experts of efficiency for the supply chain.”
