Global CommerceZone

1
Global CommerceZone

• Case Study
• Entrepreneurship Course 2001
• Shani Shalgi
• Pini Reisman
• Ziv Yirmeyahu
• Itai Raanan
• Nocham Ohana
• Zeev Getner

2
Teaser
Keep existing without a major customer...
3
Agenda

• The Problem
• Company History
• The Solution
• The Shift
• The Target Market
• Business Model
• Competition
• Our Input
• Thanks

4
The Problem

• Clearing international deliveries through customs
• Customs classification is complex.
• Regulations are updated frequently.
• The chain of pain.

5
Chain of Pain - Buyer

• Unknown import charges
• Two payment points

Buyer
6
Chain of Pain - Retailer

• Dissatisfied customers
• Customer service costs
• Lost revenues
• Cost of exceptions

Retailer
Buyer
7
Chain of Pain - Carrier

• Merchant complaints
• Customs collection

Retailer
Buyer
Carrier
8
Company History

• Foundation 1999
• Founders Haim Chasman, Richard Demb
• Investors BRM, Yazam.
• Original name vShip inc.
• Investment 10M.

9
The Solution

• Technical infrastructure to
• Provide automated, guaranteed landed cost quotes
  and documentation for international parcel
  shipments.
• Enable single payment point for all charges.
• Seamless transfer of customs funds from the
  merchant to the carrier clearing the shipment
  through customs.

10
How Does It Works?

• GCZ classifies each product on the clients
  catalog for every destination country.
• When a consumer makes an order, an XML query is
  sent to GCZs server.
• GCZ returns a quote of the full product price
  including customs duties and NTBs for the
  product, plus commission.
• GCZ guarantees the given quote.
• The consumer pre-pays whole landed cost.
• GCZ receives the custom costs plus commission
  from the retailer.
• GCZ transfers the customs to the carrier after he
  fronts the customs for the consumer.

11
Flow of Funds - Today
12
Flow of Funds - with GCZ
13
The Shift

• Bubble expectations there will be several
  Amazons, they were the target clients.
• The bubble popped, no new Amazons
• New focus
• B2B and B2C market, not necessarily e-commerce.
• Go to where the money is.
• Structural reorganization.
• The solution was not changed.

14
U.S. Outbound Market Revenue
Sources Maxwell Sroge, Forrester Research,
FedEx, UPS, DHL, excluding USPS and smaller
couriers. Average Courier Revnue 44 per parcel
15
Business Model

• Catalog classification outsourced and
  charged at costs.
• Commission on each transaction for the quote,
  insurance and money handling.
• Buying insurance for guaranteeing the landed
  cost.
• Making profits on the money during the time gap
  between collection from the retailer and payment
  of carrier.
• Marketing model (big clients only)
• Using the carriers as a channel to the market.
• Direct approach to other big clients.

16
Competition

• Direct Landed cost Calculations
• Vastera, Nextlinx, OpenHarbor, Xporta, ClearCross
• Indirect Portal and B2C
• Borderfree, Douwantit
• Inhouse Solutions
• Branching (Amazon)
• Financial Transaction Focus
• Global CommerceZone

17
?,?,? Risks

• Changes in custom taxes rates
• Changes in exchange rates

• (GCZ buys insurance and updates its
  classification database frequently)
• Carriers can become hard competitors by providing
  the solution themselves.
• Globalization free trade agreements, moving
  towards making the world a global village.

18
The Vision

• Like the American payroll market model.
• Clients will avoid distraction from core
  business.
• Developing and maintaining a system takes customs
  experts and a lot of energy.
• Advantages to scale
• The system learns and corrects mistakes
• One classification can serve several clients
• High loyalty expected with big clients.

Conclusion the market has place for only one or
two gorillas.
19
First Doubt The Question of Need

• Is the financial feature really
• necessary to the clients?

• GCZs clients are expected to pay for the
  classifications, the updates and the quoting
  system as they would any competitor.
• In addition, GCZs clients need to pay commission
  per transaction that covers the insurance.
• Our opinion prepayment and guarantee of
  landed cost is necessary and valuable.

20
Second Doubt The Question of Differentiation

• What does it take for competitors
• to develop the financial and insurance
  services?

• GCZ insures itself externally, by signing a
  contract with an insurance company.
• Our opinion
• This can be done by the competitors as well.
• Transaction handling is more complicated and will
  require a strategic change.

21
Third DoubtThe Question of Competition

• What about outside competition?

• GCZs technology is not an entry barrier
• GCZ outsource the classifications.
• Only 1 in-house customs expert
• !! No significant entry barriers.
• The competitive advantage is the connections with
  the carriers
• Our Opinion
• The market will be a gorilla market. Possible
  Gorillas are either existing competitors or the
  carriers themselves.

22
Doubts - Summery

• Is the unique service needed?

YES
2. Can the competitor develop the same service
quickly?
YES
3. Are there significant entry barriers?
NO
Gorillas market, but under carriers control

• Is BRMs support in the past (and future?)
  justified?

23
Survival Secrets

• A lot of faith
• A little help from personal connections
• One big client at advanced stage of negotiations

24
Once the Client Signs

• Radical cash flow improvement.
• Validating the vision business model
• Further funding rounds possible
• A reference to other big clients.

25
Thanks

• GCZ
• Herb Zlotogorski - CEO
• Zeev Frimer - CIT expert
• Arie Kadosh - CTO
• BRM
• Nir Barkat
• Johnny Klair