With Amazon and eBay continuing to grow and dominate the B2C ecommerce market, many retailers are electing to eschew physical presence on the high street in favour of selling their goods exclusively through these third-party websites.
This form of ecommerce retailing offers sellers a whole host of benefits, allowing them to cut costs and leverage a known brand. After all, establishing a brand can take a considerable amount of time and money, particularly in an increasingly overcrowded digital world.
Ecommerce retailing also allows you to reach out to a much broader audience, overcoming geographical limitations to access markets worldwide.
One of the key benefits of online retail is that costs can be kept significantly lower, due to the fact that these etailers have no brick and mortar stores and, as such, don’t face many of the overheads that come with a physical, high street presence.
However, it’s important to keep in mind that, although ecommerce retailers face lower costs, they still need to ensure that they have a healthy flow of working capital if they want to survive and succeed.
Why do etailers need working capital?
Working capital is key for any small business, including ecommerce businesses. In fact, the most common cause of small businesses failing isn’t low sales, but a lack of working capital.
Although, when it comes to ecommerce, payment is usually received before the goods are supplied, that doesn’t necessarily mean that etailers have a short working capital cycle. After all, you’ll need stock and, in most cases, this stock will have to be paid for upfront, prior to you making the sale.
One of the most prominent growth limitations for ecommerce retailers is lacking the working capital to purchase additional stock. The additional
Additional Working capital will allow you to ensure that you have a consistent flow of and allow you to purchase additional stock in order to grow and expand your business. This is also important to ensure that you are prepared with enough stock for typically busy periods.
Just because you run your ecommerce business through a third party site, doesn’t mean that you don’t need to invest in marketing. A comprehensive and effective marketing strategy will help you to expand your business, allowing you to reach out to new customers and ensure your brand is at the forefront of your existing customers’ minds.
But, of course, marketing activity requires a budget, and so to cover it, you’ll need to ensure you have access to working capital.
Working capital is essential if you want to avoid experiencing any cashflow issues when it comes to meeting your financial obligations such as taxes and wages, which must be paid in a timely manner.
It’s also important to have strong cashflow if you want to be able to react quickly to changing market conditions.
At Boost Capital, we offer business loans and merchant cash advances for small businesses that can help you to optimise your working capital. For further information about our flexible, alternative business funding solutions, or to discuss your specific requirements, please get in touch – our skilled and experienced team is always on hand to help.