Kevin Weeks is the Senior Director of Partnerships at Payability. Prior to joining Payability, Kevin was a partner at a digital marketing agency called Dozen Digital, and has held various roles in venture capital, private equity and investment banking. Kevin is also a supporter and frequent volunteer with Defy Ventures, an entrepreneurship training program for formerly incarcerated adults.
He recently spoke with us about Payability and how invoice financing benefits Amazon sellers, and shared some tips to boost margins and profitability.
Meghla Bhardwaj, Global Sources: What does Payability do and what value does it bring to Amazon sellers?
Kevin Weeks: Payability provides invoice financing to Amazon sellers. Instead of waiting weeks to receive their payouts from Amazon, Payability customers receive daily payouts. These daily payouts give sellers consistent cash flow so they can quickly reinvest in inventory, avoid costly stockouts and grow their sales volume.
MB: Why is using Payability better than other financing options, such as a credit card cash advance?
KW: There are multiple forms of financing available to Amazon sellers, each with different opportunities and drawbacks.
With credit cards and traditional loans, sellers borrow and spend today against the promise to pay back the lender or credit card company in the future. Cash advances work just like loans, but with the credit limit set against projected future earnings.
Payability differs from all of these financing options in an important way: we are simply paying sellers early on sales that they’ve already actually made, so sellers don’t have to worry about repayment. Payability is a very flexible solution that was designed specifically for Amazon sellers.
MB: Which geographies are your services currently available in, and for which marketplaces? Any plans to expand to other countries and marketplaces in the future?
KW: Right now we predominantly work with Amazon sellers located in the United States selling on Amazon.com. We have a few Canadian, British and Western European sellers who sell on Amazon.com as well. In the next few months, we will consider expanding that segment of our business, as well as opening up to other Amazon markets.
MB: Can you share any success stories of people who were able to expand their business using Payability?
KW: Two examples come to mind: One is a reseller and one is a private label seller.
C7 Device Recycle is in the electronic device refurbishing and reselling business. C7 purchases used devices and then tests, repairs and lists the refurbished devices very quickly – in some cases on the same day as the device arrives. About 80% of the inventory is sold on Amazon, and it sells to the Amazon customer very quickly. Because of this fast inventory turnover rate, C7 needs to buy just as fast (or faster) to keep inventory levels ahead of demand. Payability has allowed C7 Device Recycle to maintain flexibility in the supply chain and be more proactive with his inventory sourcing which, in turn, has minimized stock-outs and allowed him to avoid storage costs.
Totes McGoats is a private label seller with slightly different challenges than C7, but they ultimately mapped back to gaining control of her cash flows to finance her company’s growth. For private label sellers, there can be significant up-front costs just to get off the ground. Rebekah of Totes McGoats had initially funded her business with credit cards, but ran into spending limits pretty quickly. Small business loans weren’t a fit either, because the rigid payback schedules didn’t match the more fluid needs of her business. Gaining daily access to her actual sales revenue has enabled Totes McGoats to quickly re-stock existing items, and even launch new products. Since starting with Payability, Totes McGoats has grown from offering three products to five products (and counting!), and increased overall monthly sales by 400%.
MB: What are some of the biggest challenges you see Amazon FBA private labelers facing today?
KW: Amazon FBA private labelers face a unique set of challenges because Amazon is simultaneously a major marketing channel and an important supply chain partner. FBA clearly offers benefits to private label sellers (efficiency, variable costs, fulfillment speed), but FBA can also introduce challenges to rapidly growing Amazon businesses. For example, FBA can require longer lead times than other fulfillment options, which may be hard to project and manage for some sellers. Falling behind those lead times, coupled with increased sales volume (which FBA can help spur) may lead to unexpected stock-outs. Secondly, managing inventory shipment to multiple (and counting) FBA fulfillment centers can also introduce complexity to a Seller’s operations. Finally (and potentially most importantly for private label sellers), FBA introduces one more degree of separation from the end customer. When building a brand, any customer touch point is an opportunity. Customer touch points include packaging experience, box design, personalized notes, stickers, etc. None of this customization is possible for sellers using FBA.
MB: What are some of the things Amazon sellers can do to improve their margins and profitability?
KW: Take a holistic look at your entire business, not just your sales numbers. We talk to lots of sellers who focus almost exclusively on revenue. There are countless tools, tactics and services to help sellers squeeze either more revenue per sale or more sales per month, so it can be tempting for sellers to spend most of their efforts there. But sales only represents half of the profit equation! We recommend taking a semi-annual or quarterly deep-dive into your expense base, and thinking critically about where you can find some savings. This is especially important for rapidly growing sellers, as they may be able to negotiate volume discounts with their vendors more quickly than they realize.
Specifically, re-visiting your supplier relationships and terms can be a very effective way to expand profit margins after you’ve established credibility as a customer. Anecdotally, we’ve heard that many sellers view supplier agreements as “set it and forget it” or a necessary evil only to be discussed when the contract is up for renewal (if at all). However, sellers may want to contact their suppliers about updating their terms at some other specific trigger points:
- After a period of growth: If you can provide double the number of orders that you originally projected, your supplier may be thrilled to give you a bulk discount.
- When you have positive working capital: There’s nothing worse than chasing down invoices. If you can pay earlier than their other vendors, your suppliers may agree to significant early- or pre-payment discounts.
- When you launch new products: Again, new products = more order volume for your supplier. This could be an opportunity to discuss a bulk discount.
Check out this webinar we did with Kevin Rizer of Private Label Movement about smart sourcing and leveraging supplier relationships for some more ideas.
MB: What notable trends do you see emerging in the Amazon private label reseller space?
KW: For private label sellers, building trust with end customers will become increasingly important. For the last few years, “private label” meant simply that the seller sourced directly from the manufacturer and put their own logo on the item. We believe that the most successful private label sellers will start acting more and more like traditional brands and really try to connect with the consumer in ways other than low prices and optimized listings.
For re-sellers, flexibility will continue to be the key. The marketplace is becoming increasingly efficient, which means giant margins will be fleeting and arbitrage opportunities will move more and more quickly. Freedom to experiment rapidly across verticals and move fluidly among product categories will set the best re-sellers apart.