Blog/News

Ecommerce and Store Closures on the Rise

Sadie Keljikian, Express Trade Capital

Although fears of a “retailpocalypse” have mostly died down, the retail landscape is certainly shifting in favor of ecommerce, with more than 5,000 brick and mortar closures already announced in 2019. Many of the closures come from high-profile retailers like Gap, J.C. Penney, Abercrombie & Fitch, Tesla and Victoria’s Secret. Even Amazon has announced that it will close all 87 of its pop-up shops in Kohl’s, Whole Foods and malls nationwide.

A recent UBS study predicted that online sales will make up 26% of overall retail sales by 2026, from 16% today. Assuming current trends persist, roughly 75,000 more retail locations will close in that time. This amounts to approximately 8,000-8,500 closures per 1% increase in online sales. Amazon is expected to account for about half of the ecommerce market in the US at the end of the seven-year projection period. Of the 75,000 predicted closures, 21,000 clothing stores, 10,000 consumer electronics stores, 8,000 home goods stores, 7,000 grocery stores and 1,000 home improvement stores are expected to shutter.

Only time will tell whether these projections will come true, but on the bright side, Lasser and Sole say that the closures “should help the store productivity of surviving locations.”

Green Your Business

Sadie Keljikian, Express Trade Capital

The devastating effects of climate change have rapidly increased in the last few years. As a result, businesses of all sizes and across industries are taking it upon themselves to be more eco-friendly. Though most business owners recognize the urgency to reduce their wasteful or pollutive practices, many are concerned about the cost and complexity of implementing greener habits. Although some large-scale changes can be expensive, investment in environmentally sound systems absolutely pays off over time. Here are some of the ways your business can adjust its practices to take better care of the environment.

Change Your Lightbulbs

One of the simplest things your business can do to reduce energy use is to change your lightbulbs. Halogen incandescents, compact fluorescent lamps (CFLs) and light emitting diodes (LEDs) use 25-80% less energy than regular incandescents and last 3-25 times longer. Some cost slightly more initially, but more than cover their own price in longevity and reduction in your energy bills.

Recycle Everything

Recycling your paper, plastic and metal goods is a great start, but these days, it’s remarkably easy to find facilities that will recycle just about everything. Specialized recycling centers nationwide allow customers to deposit old electronics, appliances, batteries, and other items that were once difficult or impossible to recycle. Many of these centers even offer pick-up services for businesses that need to remove large amounts of heavy equipment at once.

Encourage Your Employees Not to Drive

One of the biggest problems employees face, regardless of location or industry, is their daily commute. Although they may be tempted to drive, encouraging them to carpool, bike, or use public transportation can drastically decrease your workforce’s negative impact on the environment. This can be as simple as posting a sign-up sheet in your workplace for carpools based on location and/or department.

If you’re located in one of the many cities that offer bike sharing, you can offer to pay for some, or all of the cost of your employees’ bike rentals should they choose to ride to work. You can also offer employer transportation benefits to those who use public transit. Regardless of which method(s) you choose, offering your employees a simple, inexpensive alternative to driving to work is a wise move.

Switch to PCW (Post-Consumer Waste) Paper

Although the world has largely transitioned to paperless documents, some businesses can’t avoid printing on a regular basis. If your business requires printing, make sure to use PCW paper products and packaging wherever possible. Although recycled paper is an improvement on new, or “virgin” paper products, it isn’t a regulated designation. Only PCW products are made entirely from recycled paper. They also use 45% less energy and create half as much waste in the manufacturing process as traditional paper products.

Eliminate Excessive Packaging and Single-Use Items Wherever Possible

This one can be a bit harder for employers to accept, but things like single-use coffee pods, plastic cutlery, water cooler jugs, and styrofoam cups make up a significant portion of the excessive waste North America produces. As an alternative, consider regular coffee, a water filter and reusable dishes and cutlery to keep your workplace from producing unnecessary trash that won’t biodegrade. You’ll also save the money you would’ve spent on refills for your water cooler, disposable dishes, and cutlery.

Clean Up Your Cleaning Products

Cleaning your office with harsh chemicals isn’t just bad for the environment, it’s bad for your employees. Harsh cleaning products can cause allergic reactions and other cumulatively negative effects on your workforce’s health. Switch out your cleaning products for their green alternatives and you’ll find your workplace a much happier, more energetic environment with fewer sick days.

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There are dozens of small changes you can make to create an office culture that takes better care of the environment. Business owners are too often bogged down by the idea of installing solar panels and other environmentally sound systems that are effective, but expensive and impractical. By implementing these small, inexpensive changes, you can dramatically decrease your business’s carbon footprint and inspire your employees to do the same in their private lives. A healthy planet is good for people and businesses alike!

ETC’s Mark Bienstock Talks Factoring with TSL

ETC Managing Director Mark Bienstock is featured in the latest issue of The Secured Lender as part of a discussion on modern developments and competition in receivables financing. Click here to learn about the latest developments and what the future holds for the factoring industry!

Tech Shakes Up Retail

Sadie Keljikian, Express Trade Capital

As technology becomes increasingly present in our daily lives, it changes the way we do nearly everything, most notably how we buy and sell products. Keeping up with the intricacies of digital sales can be overwhelming, particularly given the ever-evolving nature of technological functionality. Here are a few of the latest and most prominent ways in which technology has revolutionized sales techniques.

  • Multi-channel approach.

Contrary to popular belief, physical store locations are not going away entirely. With more ways than ever to reach prospects and customers, a multi-channel approach is essential to successful sales. Whether you’re selling consumer goods, commercial equipment, or anything else, it is important to integrate your online presence with any brick and mortar locations as seamlessly as possible.

The recent trend in previously online-only businesses opening store locations (Wayfair, Warby Parker, Casper, and Untuckit among them) is a great example of this. While modern consumers appreciate the convenience of ecommerce, they miss certain aspects of the in-store experience and frequently choose to blend their shopping methods.

This has proven particularly popular in industries like apparel, where consumers are hesitant to buy items they can’t try on, or large appliances and furniture, where consumers often prefer to see the item firsthand and ask questions before they make a final decision. Some apparel retailers have even opened mini-locations with limited samples of each item for customers to try on before they order them online.

  • Personalization

Some big-box stores use augmented reality to provide an in-store experience from home. Target, for example, launched an AR feature in 2017 that allows customers to take a photo of a space in their home and see an approximation of furniture pieces and home goods as they would appear in the space. This personalizes and simplifies the selection process significantly in terms of dimensions and style and prevents unpleasant surprises when items arrive.

Additionally, methods like individually tailored sales emails and social media marketing based on curated data are becoming the most popular strategies businesses use to market and sell their products and services. Brands are also expected to not only cater to each customer’s lifestyle and esthetic preferences, but to their philosophical beliefs as well. As a result, companies that make a point of using charged imagery or pointed messages in the way they sell their products are often among the most successful.

  • In-store tech.

Many retailers that depend primarily on in-store sales have begun incorporating technology into the customer’s experience at their locations. In some cases, they use virtual reality to add an element of fun in select store locations. Walmart’s tech incubator, Store No. 8 offers an immersive VR experience followed by a gift shop.

Others offer a visual search station for customers to locate the items they wish to buy, saving them the difficulty of finding the product they need on foot. Other retailers have begun using interactive apps that allow customers to learn more about a product by simply pointing their phone camera at its label. Luxury resorts have started offering AI services to allow guests to plan their visits and personalize their experience by communicating with chatbots. Grocery stores and department stores have even started using mobile robots to monitor obstructions in the aisles and customer reactions to free up human employees to assist customers.

Systems like these not only give the customer a better sense of engagement and control of their experience, they also offer retailers similar insight into their customers’ habits and preferences. Consequently, on-site technology can be as useful to market research as web traffic and sales numbers, allowing brands and stores to further optimize the way their customers’ experience and buying habits.

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Consumers have never had higher expectations of their retail experience. For big brands, this emphasizes the importance of diversifying their offerings and allowing their customers as many customizable options as possible. For smaller brands, it means homing in on the specific preferences and values that most accurately align with their target demographics. Ultimately, there are more ways than ever to use technology to guide product development and research markets, allowing brands and retailers to come up with solid solutions that allow their businesses to thrive.

Business Credit 101

Sadie Keljikian, Express Trade Capital

One of the most crucial components to effectively fund a business is its credit history. Credit reports help lenders determine how likely a business or individual is to repay their debt. While most individuals are aware of their credit scores, too many don’t know where those numbers come from or what details go into determining them, let alone how business credit is measured. Here are some of the basics of building and maintaining good credit as a business.

  • Simple steps to establishing a business’s credit.

As a fledgling business owner, the thought of establishing your business’s credit from square one may seem a bit daunting, but don’t be discouraged. Most of the processes involved in establishing good credit will serve you and your business in more ways than one.

First, you’ll need to either incorporate your business or form an LLC to establish your business as a legal entity. Then, you’ll need to get an employer identification number (EIN) from the federal government and open a bank account on behalf of your business. This is essential to legitimizing your business and ensuring that your personal and professional finances are appropriately differentiated. There are corporate service providers that can help with these steps if you feel ill-equipped or nervous.

Finally, you should register for a DUNS number with credit reporting agency Dun & Bradstreet. A DUNS is a nine-digit number that allows the agency to identify your business’s location and financial activity. Although it isn’t absolutely necessary, a DUNS number will simplify financial reporting on behalf of your business and allow creditors and suppliers to easily run a credit check on your company. These steps will help you establish a transparent, trustworthy business and taking them early will serve you well as your business grows.

  • Business and personal credit reports are different.

If you seek funding for your business, your personal credit may not have much bearing unless you are the sole owner and your business is very new. It’s also important to note that while personal credit scores range from 300 to 850, business credit scores usually range from 0 to 100. Lots of uninformed entrepreneurs are shocked and confused to find a much lower number than expected when they check their business’s credit score, so don’t fret.

It’s important to stay on top of your business’s credit and ledger even if you don’t currently need funding, as you never know when you might need a financial boost to seize a growth opportunity. The best way to ensure that your business has optimal credit and financial records is to pay all your bills (including utilities and rent on your workspace) consistently and on time. The better your business’s credit, the more options you will have if you decide to seek out funding. It is also important to note that credit reporting is less consistent for businesses than for individuals. This means that creditors will often ask to see a more thorough history of your business’s finances than you might expect, so even small delinquencies are likely to show up.

  • If your business’s credit is compromised, don’t panic!

Although your business’s credit score is important, a temporarily low score isn’t necessarily a death sentence. Low credit scores are usually a symptom of overzealous borrowing and/or underwhelming revenues, but they can be remedied over time. Provided you find a way to pay off your business’s debt, its credit score will gradually recover. If you find that your operational costs make it difficult for you to pay off your debt without accruing more, there are alternate ways to bridge those financial gaps.

If production costs are straining your working capital, consider seeking financing against your open purchase orders or invoices. The primary benefit of these kinds of financing is that they generally rely on your retail customers’ creditworthiness rather than your own. This means that rather than depleting your funds to produce large orders and/or struggling to stay afloat while your customers take their time to pay, you can receive the bulk of those funds upfront. The other benefit is that in many cases, you don’t need to repay your financier. Private lenders that offer financing against receivables will often collect from your customers on your behalf, so you’ll save time as well as money.

In short, carefully managing your business’s credit and general financial activity affords you a lot of options to mitigate the challenges that come with growth. The more consistent your financial records, the better you will be able to handle changes and recover from any difficulty your business may face in the future.

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Financing for Amazon Vendors

Joseph Stern, Express Trade Capital

Amazon is one of the world’s largest internet retailers by revenue and market capitalization, providing sellers and buyers with a central marketplace to conduct trade. The platform has grown so large that many financiers, including Amazon itself, have begun to market funding solutions directly to Amazon sellers.

Amazon built two web interfaces to accommodate its sellers: Seller Central and Vendor Central.

Vender Central is utilized by manufacturers and distributors to sell to Amazon in bulk. Amazon will send weekly purchase orders for shipment to various warehouses. Vendor Central customers are partnered with Amazon, who will market and sell their vendors’ products to the best of their ability.  Access to the program is invite only so not all vendors can join Amazon’s Vendor Central program.

However, Amazon vendors have several alternative routes for financing.  Since vendors receive purchase orders from Amazon, they are financeable through traditional factoring and purchase order (“P.O.”) funding operators. Factoring companies allow vendors to draw funds against invoices to Amazon due in the future while PO funders give them access to cash to pay for production against purchase orders issued by Amazon.

Amazon’s other program, Seller Central allows merchants to market and sell their goods directly to customers. Sellers can fulfill orders on their own or outsource fulfillment. Amazon allows sellers to enroll in a program through which orders are fulfilled by Amazon (“FBA”).  In FBA arrangements, Amazon takes on their vendors’ shipping, customer service, and returns for every order.

Since sellers do not receive large purchase orders, but rather, small orders, customer by customer that must be fulfilled at once, they are not eligible for traditional PO funding operators.  Depending on the vendor’s payment terms with Amazon, factoring may still be a viable option.  In such cases, vendors who need further financing should seek cash lines against inventory or merchant cash advances.

Inventory financing is a type of asset-based lending where sellers use their inventory as collateral for a revolving line of credit. An amazon seller with his own inventory may assign his inventory to a financier while waiting for sales.  A financier may cut a deal with Amazon to target sellers using the its FBA or other programs.  

A merchant cash advance (or MCA) is a form of receivables financing where a seller takes on a cash loan by offering up a portion of future revenue until the loan and its fees are paid off. Advances are typically capped at one to two times monthly sales with a factor rate ranging from 1.14 to 1.48. In other words, a lender will take a small percentage of the merchant’s credit card revenue until 1.14-1.48 times the loan amount is paid off, depending on the MCA’s factor rate.

Amazon offers its own loan program modeled after inventory loans and merchant cash advances. With an APR of 6%-16%, an Amazon loan will be far less expensive than a merchant cash advance of similar size, which can have effective APRs above 100%. Instead of taking a percentage of sales revenue, Amazon takes fixed amounts from their sellers’ accounts over the course of twelve months or less, thus qualifying its instruments as short-term loans. By targeting only its own qualified merchants, Amazon can utilize its control of the seller’s proceeds and even inventory to ensure repayment. Amazon can also cherry pick preferred vendors based on whatever criteria Amazon believes best serves its risk appetite. In 2017 amazon issued $1 Billion in loans to its merchants.

So far, information on Amazon’s lending programs is scant. Little information is published on default rates, average funding amounts, and the programs are still young enough that available data is still in its infancy.  For now, the verdict is still out on how effective the financing programs are for Amazon and its vendors.

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Financing for a New Market

Sadie Keljikian, Express Trade Capital

Innovation, in every sense of the word, has taken over. The combination of consistent technological advances and a global market in flux has changed the culture and functionality of business operations on a global scale. One of the most remarkable results of this has been a rise in creative financing methods designed to serve new business models or those that were previously difficult to fund.

Although some funding options are universally available to those with strong credit (i.e. SBA loans for new small businesses), managing a business’s debt and retaining maximum equity can be a tricky balance, particularly if you have lackluster credit or no credit at all. Fortunately, financiers are creating new services and creatively applying existing ones to accommodate businesses that previously didn’t exist or had limited access to sustainable funding. Here are a few of the most accessible and adaptable forms of financing available.

Inventory Financing

If you sell seasonally specific or highly specialized products, inventory financing is a great way to maintain your working capital without giving up equity or accruing excessive debt. For example, let’s say you sell specialty liqueurs year-round, but approximately 70% of your sales occur in the month leading up to Valentine’s Day. Even with healthy annual sales volumes, this inconsistency can complicate year-round operations and strain your resources.

With inventory financing services, your financier will simply store your unsold inventory in a secure third-party warehouse, then provide you with a loan or line of credit, using the stored inventory as collateral. Since you won’t need those bottles until next January, you’ll have plenty of time to supplement your operational funds, pay off the funding you receive, and distribute the goods in time for Valentine’s Day. Businesses that benefit most from inventory financing are wholesalers who sell non-perishable consumer goods, as they needn’t worry about a lack of quality control if their inventory spends weeks or months in storage before distribution.

Business Line of Credit

Although a line of credit isn’t exactly a new method of financing, its versatility makes it worth mentioning in this context. Since a massive proportion of new businesses don’t sell tangible goods, the lack of readily available collateral can make it difficult for them to secure funding. Unsecured lines of credit are specifically useful for this because, much like credit cards, they don’t necessarily require traditional forms of collateral. Lines of credit are also like credit cards in that if you consistently pay off your balance, cash advances up to the full amount in your assigned credit line are available to you at any time.

Equipment Financing

For businesses that sell perishable goods or don’t sell goods at all, equipment financing is an attractive option. If your business uses expensive appliances or computers, you may be eligible to receive a loan or line of credit against your equipment, much the same way an individual would against a car or real property. Provided that the value of your equipment is equal to or greater than your business’s financial need, this is one of the simplest options. Most businesses in the service industry can take advantage of this, including some that are particularly difficult to finance like restaurants, medical practices, laundromats, and factories.

Short or Medium-Term Loans

Short or medium-term loans from private lenders are a somewhat expensive option, but they can be extremely useful if your business needs cash immediately and can pay it back very quickly. These loans are generally approved within a day and as a result, have higher interest rates than a standard bank loan would. If you receive a large wholesale order for which you expect to receive payment immediately, a short/medium-term loan can provide you with the cash you need to produce and ship the goods and bridge the financial gap that can occur when you have to pay to fulfill an order before you receive any payment from your customer. There are a few ways to address this problem, but if timeliness takes priority over cost, this kind of loan is the best choice.

Purchase Order Financing

If you’re dealing with the cost prohibitive nature of production, but don’t have particularly good credit, purchase order financing might be your best option. Purchase order financing (sometimes called “PO funding”) relies on the creditworthiness of your customers rather than that of your own business. You receive a cash advance against confirmed, open purchase orders to help pay for production of the orders in question. This kind of financing also allows significant flexibility and can combine with other financial arrangements like receivables financing. This means you can easily establish a seamless system that allows you to fulfill orders quickly and consistently without potentially draining your operational funds or accruing more debt than you can manage.

In short, funding options have never been more plentiful. If your business needs a financial boost, there is likely a perfect solution to your needs and limitations. Be sure to research your options and choose a reputable lender who will walk you through its process and fees to ensure that you get the best solution for your business and budget.

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