GigaCloud

In late 2018, GigaCloud CEO Larry Wu (Yale MBA, 2002) sat reviewing his company’s operating metrics with senior managers at the company’s headquarters in Los Angeles. Wu and his team had begun selling furniture from Asia to the US in 2014. As a pioneer in cross-border e-commerce, Wu’s company, GigaCloud, procured directly from Asian manufacturers, taking advantage of the rich SKU assortment and competitive price to attract a wide array of U.S. customers.

All went well until mid-2018 when demand suddenly dipped amid higher interest rates and rising tariffs. Not only did demand decline, but the Asian manufacturers also started to sell directly to other U.S. retailers to stay profitable during the challenging time. Operating income slipped; the company went from earning hundreds of thousands of dollars per month to going into the red by August.

Reviewing the sales data and the company’s cash position, the senior management team agreed to sell inventory at a loss to pull GigaCloud through the crisis. Then, looking to the future, Wu proposed a rather radical pivot: build a B2B service business in addition to the company’s existing B2C business by attracting Asian manufacturers to offer their wares through the GigaCloud website to other U.S. retailers. Many of GigaCloud’s senior management team were opposed to the proposal, believing the service would cause GigaCloud’s retail business to collapse. These managers thought GigaCloud could weather the storm and return to the business as usual – nothing fundamental needed to change.

However, Wu believed the business would inevitably run into trouble down the road, and it was the right time to make some fundamental changes. Wu and his team debated the sharp change in the business model late into the night. Even if the company decided to shift its business model, how would GigaCloud implement the change?