Just as the daily operations of online retail are more complex, the difficulties involved in funding an online business can also quickly add up. However, it also has benefits, as online merchants have increasingly valuable and easily obtained adaptive financing sources.
These methods resolve the most common pain points associated with securing financing and streamlining it into an increasingly sophisticated tech stack. Online business owners have long taken these complexities in stride, as the veritable cost of reduced overhead expense and location independence. Today, they don't have to — and as one survey found, SMB owners spend 17 full days a year fretting over their business outside of work (primarily about finances).
As with any business, it's essential to work around unexpected challenges — but it's as, or more, important to stay on the watch for novel solutions that prevent those challenges in the first place.
What eCommerce SMB Owners Are Looking For
Raising capital for eCommerce SMBs is quite different from brick-and-mortar businesses. Even physical storefront owners with an online side-channel have it more accessible because the lending institutions of old have heavy eligibility requirements that include putting up precious physical assets.
Most eCom entrepreneurs need to have the hard assets necessary, putting them low on the list when applying for loans or credit lines. This is to be expected for more advantageous financing arrangements, but what if those arrangements are increasingly one-sided? The benefits of even having the just-barely obtainable loan diminish.
With less to offer by the day, legacy financial institutions are particularly ill-suited for the needs of online SMB owners. Not ironically, the revenue solution business owners have been looking for also happens to reduce the overall complexity of cash flow management, simplifying their daily operations. As a result, they can focus on the fast-changing market to position themselves for a more significant market share.
What more could they want? The limitations of yesterday set the modern online retailer on a mission to secure financing that conforms to their current needs:
- Flexible timing that reflects the payment processing cycles of major eCom platforms
- A financing partner who understands the eCommerce cash cycle
- Lower risk terms, in exchange for lower fees
- Approvals based on current performance
- Low or no collateral requirements
- Ability to pay with future earnings
In each of these ways, banks and credit card companies are far behind, and only time will tell how they'll respond to approval rates for alternate financing that now outpace them all.
No matter what funding source you currently have, there are certain fundamentals to be aware of when raising capital. Watching them will reduce your off-the-clock headaches to a minimum and tighten your operations — but you'll need to know where to look.
Related: 3 eCommerce Financing Options to Grow Your Business
Ecommerce Market Horizons
Social Dynamics
One of the most important things to keep your eye on now, and always, are major demographic shifts. 2023 is currently undergoing one, with around two billion new eCommerce shoppers seeking to establish greater brand relationships. The so-termed "Generation Z" is particularly willing to connect with brands that share their necessarily unique vision of the future, especially with social media.
Take a few statistics about these young shoppers to heart as you plan your capital-raising efforts. The following should help guide your choices for product selection, payment portals, and communication strategies in the times to come:
- An astounding 97% use social media for product discovery — though almost 50% are wary of the medium's effect on mental health
- They are more selective, preferring unique and engaging shopping experiences to Amazon
- Their buying power is estimated at $323 billion, with an equally impressive influence on household buying habits
- Over half say they've made purchasing decisions based on company ethics
- Expectations for hyperlocal delivery are rising, with 58% of Gen Z willing to pay more than $5 extra for deliveries within the hour
Shipping Trends
This latter expectation sounds impossible, but some vendors still need to try. Fulfillment centers are opening at a higher rate, which will impact the shipping industry. A McKinsey report estimates that 30% of customers expect same-day shipping options. A race for ever-tighter fulfillment speeds is on!
Consumer behavior is also changing en masse. A 2022 report on sustainable packaging states that over three-fourths of survey respondents shop for more environmentally responsible package materials.
Fintech Solutions
There are also several converging technical factors that eCommerce businesses must look at. Some are certain to create lasting impact in their own right, while others need to be watched closely. Altogether, the very structure of the eCommerce landscape is changing yet again, and this time, it's thanks to more flexible financing options.
One of the most significant factors is how different payment processing methods are facilitated. Social media payment integration seems set to take off, speeding up the buyer's journey. Consumers can purchase a product immediately after feeling inspired to do so — the ultimate impulse buy.
More fundamentally, digital payments are increasing the world over. Fears of radical upheavals and hegemony from central bank-backed digital currencies have somewhat soothed since the 2020 blitz. Instead, decentralized payment strategies are taking the shape of their own accord, experiencing a healthy growth rate.
McKenzie reports detailed new digital payment trends that paint a picture of potential upheaval in how eCommerce payments are facilitated. Foundational infrastructure for eWallets, e-billing, real-time account transfers, and other digital payments have increased worldwide — sometimes independently of legacy institutions. This has increased the eCom market base, capitalizing on the already rising acceptance rate of alternative payment options, such as mobile carrier billing, cryptocurrencies, prepaid vouchers, and postpay arrangements involving affiliate stores.
These trends are fast increasing payment options while rendering the eCommerce market more agile to consumer demands. McKenzie credits digital commerce as the most significant reason for the increased reliance on these new payment methods. Digital payments and eCommerce go hand in hand, and the world's supply of eCom entrepreneurs is making their impact known on a global scale.
Emerging fintech systems are the most significant market trends eCom owners must keep their eyes on. Much more than a technical matter, it's greatly expanding the size of the eCommerce market itself. With increased market value comes higher trade rates (and vice versa), so it will likely be more accessible for SMBs to build or at least maintain wealth if the oft-reported "looming economic depression" actually plays out.
Only time can tell if the proliferation of less centralized digital payment methods will empower enough individuals and contribute to a righting of the world economic ship. These technological shifts are not only putting the world's first sharing economy into the hands of more people — they're facilitating new trends that will significantly impact customer relationships.
If these relationships flourish and become more direct, the strength of merchants' customer-brand relationships will become more crucial than ever.
Related: Ecommerce Success Stories and What You Can Learn From Them
Keeping One Eye on the Market
Tracking these changes can become a full-time job, so studying the essential eCommerce metrics for your business is important. It can save you time while honing your company's vision for the next-best move.
That's also true of studying the market itself, which is always on the move. To keep up, be on the watch for these essential factors and measurements when planning your capital-raising strategies:
- Social media use rates (will "Gen Z" use the medium more or less?)
- The market share of social media payments, delineated by channel
- Preferences for products, sales channels, and communication methods
- The impact trending social issues have on purchasing decisions — with a cautious eye towards those that may backfire
- Market surveys, albeit with a similar skepticism in the absence of robust quantitative data
- Shipping speeds and fulfillment center trends in your market (especially competitors)
- General fintech trends, with an emphasis on those that affect your geographical market
Taking all of this in can be overwhelming. Yet when your focus is exclusively on your bottom line, it can counterintuitively cause more significant stress when your market is in flux. It creates a competing demand for your guide; one drives closer inspection of your immediate cash flow needs, while the other calls your attention to noticeable, significant changes in the marketplace.
Those new market forces could be promising if harnessed correctly — but it also seems irresponsible to do anything but keep your eye on the prize most available at the moment.
How To Manage Daily Ops and Study Your Market?
The solution is to do both. Now, fintech solutions for eCommerce businesses allow you to do just that. When a more accessible funding source double-serves as a solution to numerous revenue-management headaches, you can attend to the market changes that will position your company for the longest-term growth.
In the short-term, revenue-based financing assures your cash flow needs are automatically correlated to daily performance. Time, your most precious commodity, is on your side again, and the financing options of yesterday become decreasingly attractive by comparison.Operating multiple sales channels, communications platforms, payment portals, payment mediums, and other technological innovations are more necessary than ever to stay competitive in your share of the eCommerce market. To learn how easy it is to manage cash flow and daily operations, sign up, and get an offer today.
