Online Seller Finance
For sellers, an online marketplace is a highly competitive space as each merchant is competing with thousands of others like them. If the seller is present on the all the big ecommerce platforms, like Amazon, Flipkart, Snapdeal, eBay, Shopclues and Paytm, then multiply the intensity of the competition that many times.
Why Working Capital is important for sellers
The biggest pressure point for an online seller is – Capital (lack of it). Big brands that sell online have financial backing. But small sellers can face financial crunch. On top it the inability to predict online sales and being prepared for the sheer volume, especially during online sales & festive seasons, can be very pressurizing. This is when the need for Working Capital (WC) is felt the most. Few reasons why/when WC is important are:
It allows the day-to-day operations of a business to run smooth
Enhanced financial liquidity
Meet sudden increase in demand by buying inventory
Create new product line for a specific period
Build brand value and goodwill
Determines the ability to pay off short-term expenses or debts
Assistance from Marketplaces
Before ecommerce entities started offering financial assistance, personal wealth and borrowing money from friends/family were the first two options to get funds. Next option was to approach banks/lenders for loans, which is not only a lengthy process but also doesn’t guarantee that your fund request will get approved. Why?
Ankit Nagori, Flipkart’s CFO had an answer to this, about which he spoke in one his interviews, “Most of the lending organizations consider them (online sellers) as ‘un-bankable’ which results in a lot of SMEs/units closing down or borrowing from other sources at higher rates.”
As all the big players want their platform to be the one with the biggest seller base, a need for monetary assistance for small sellers was identified by all. And therefore as one can see there is a surge of such capital initiatives and other seller wooing tactics in the last one year.