Emergence of the larger online shops
Initially, manufacturers and traders sold their products online in their own online shops. They did this by offering them directly on the internet. Without the intervention of middlemen, this meant they reached the end user directly. This form of selling, created high costs, largely caused by the return issue, but also a higher margin. Over time, the first larger online shops made their appearance. Their scale allowed them to reduce the cost per shipment. Think of well-known players like Wehkamp, Coolblue, Bol.com and Amazon. These players purchased large quantities of products, handled online sales and the entire logistics surrounding the products. This often from their huge distribution centres.
The potential of online marketplaces
In recent years, we have seen a further development of this business model. The online department store does not buy the products itself, but allows its suppliers, the 'partners', to sell on the platform themselves. The big difference is that the customer for the supplier is no longer the online shop, but the end user. This is often the consumer. The supplier has the choice of handling all the logistics itself or having the platform do it. In the latter case, the goods go to the distribution centre of the platform in question. After an item is sold and paid for, they take care of shipping. This, of course, for a fee. In both options, the supplier takes care of invoicing the end customer and the online shop does not run any stock risk.
Mediating role of web shop
Since we also want to talk about financing in this section, we come to the next special aspect of these platform sales. The supplier sells directly to the end customer, often a consumer, and the online shop has only an intermediary role. The customer usually pays the supplier's invoice in advance, but does so to the platform. The platform, the online shop, receives these funds for and on behalf of the supplier. Periodically, in most cases once a month, the online shop remits the total amount, less its margin and costs, to the supplier.
Stock risk and waiting for your money
For more and more companies using these online marketplaces, as they are also called, financing plays an important role. Often, the supplier has already paid for the goods long before it gets its money from Bol.com, Coolblue or Amazon. Especially in the case described above, the financing requirement can increase considerably because the supplier runs the inventory risk and has to wait more than a month for the payment of the money from its end customers.
Often no funding from traditional funders
Because the customer has already paid for the product and the online platform only plays an intermediary role, traditional financiers often cannot fill this financing need. This is also because there are still issues like right of return and they do not have a good understanding of the exact amount the platform owes the supplier at any given time.
Financing using smart technologies
Fortunately, Xolv Finance has collaborations with financiers who are able to use smart technologies to finance companies' receivables on the various marketplaces. Want to know if this type of financing is something for you? Then contact one of our financial specialists.
