Driving your eCommerce growth strategy with business financing

Introduction

This year, the global eCommerce market is expected to be worth $6.3 trillion - up from $5.8 trillion in 2023. This means eCommerce businesses are now having to scale up rapidly to meet the demands of a global customer base. It's safe to say, this can be overwhelming when your business is developing an eCommerce growth strategy that takes you from startup to grown up at a comfortable speed. But with the proper financial support, you can navigate these challenges to build an effective eCommerce growth strategy.

The dynamics of rapid eCommerce growth

By 2027, experts predict global sales will reach over $7.9 trillion. Meaning new industries, products, and businesses will have more opportunities to grow. But like most things in life, with each opportunity, also comes new challenges. Supply chain disruptions, efficient inventory management, and a steady cashflow are now on an even grander scale. The fact that 90% of eCom businesses fail within the first 120 days is proof of how damning these challenges can be.

eCommerce stats at a glance:

Average Revenue Per User (ARPU)  - online consumer goods see an ARPU of approximately $3,000 in the US annually.
Social media sales - in 2023, global sales via social media platforms reached $1.298 billion.
Mobile commerce - 45% of eCommerce sales are made via mobile devices.
Cross-border trade - by 2028, cross-border eCommerce transactions are expected to reach $3.3 trillion.
Sustainability - 85% of consumers say they’ve shifted their purchase behavior towards being more sustainable.
Effective inventory management - the average accuracy of inventory management in the US stands at only 63%.

Love & Pebble’s growing pains

Love & Pebble, an eCommerce beauty brand, faced the same challenges mentioned. Starting as a small business, they quickly gained traction on their social channels with an effective social commerce strategy and by appearing on Shark Tank with their innovative, natural skincare products. But their rapid growth and newfound fame brought new challenges, specifically managing inventory and cashflow issues.

Challenges faced

These issues threatened to stifle their expansion efforts and disrupt operations. The sudden influx meant they were out of stock and needed capital to restock, quickly. This also took away their focus on developing the social commerce strategy that had already given them success - as they now had to face an influx of customer demands and queries.

Enter Stenn, the next-gen capital platform for eCommerce. We understood that with the right financial support, Love & Pebble could continue growing into megastars. Our revenue-based financing solution meant they could manage their inventory levels better by having a steady cashflow to buy materials as and when needed. They could also now allocate budget to their ongoing strategic aspirations and marketing ad spend.

RBF vs other financing options

Depending on the investment amount, repayment models, and whether they’d qualify for alternative loan agreements - choosing the right alternative financing option for your business can be difficult. The key lies in understanding the needs and restrictions of your business and discovering what finance option suits you best.

Revenue-based financing

Also known as royalty-based financing, it allows you to raise capital by pledging a percentage of your revenue back to us as regular repayments.

Repayments are calculated based on your business's revenue. There are no fixed payment figures, no equity dilution, and repayment installments fluctuate alongside business performance. So you can maintain 100% ownership of your business with being burdened by regular monthly repayments.

Find out more about RBF.

Debt financing 

Debt financing is structured similarly to a traditional loan in that you’re expected to repay the investment at a fixed sum each month - paid in full - and is not related to performance or revenue.

Another way debt financing differs is in collateral requirements - requiring a personal guarantee against the loan.

Equity financing

In an equity financing agreement, the borrowing business agrees to hand over a share of its ownership to the investor. This model is therefore more complex for the business, which agrees to more than just repayments - giving the investor a stake in decisions and more

Stenn’s role in supporting Love & Pebble’s growth

As a financial partner to Love & Pebble Stenn, were able to play a part in their eCommerce growth strategy by offering a tailored financing solution in RBF. This not only gave them peace of mind needed, as they now had steady cashflow to back up any strategic decisions they made. But Love & Pebble could look to the future and invest in new product developments, expand their marketing efforts, and fortify their supply chain operations.

Lessons learned

1. Put your cashflow into free flow: with the right financing option, you have the freedom to manage your operations how you see fit - especially during periods of rapid growth.
2. Effective inventory management: adapt to peak seasons by restocking at speed to meet demands and keep your customers happy.
3. Flexible financing: finance solutions such as RBF go outside the norm of traditional financing, in that you won’t have to give up equity and repayments adapt to your future revenues.
4. Invest in your future: when you’ve identified a gap in the market and opportunity knocks, make sure you have the capital to develop new products, apply new eCommerce growth strategies, and keep your supply chain steady.

Strategic financial planning is crucial for managing rapid growth in the eCommerce sector. As shown by Love & Pebble's success, leveraging the right financing solutions can provide the stability and flexibility needed to navigate the challenges of scaling a business.

Ready to drive your eCommerce growth strategy? Get in touch with us today: https://www.stenn.com/revenue-based-financing

Sources:
Forbes
Internet Retailing
WeAreSocial
JP Morgan Chase
MyosSimon Kucher
InternetRetailing.net