The undeniable truth is that eCommerce is thriving in South Africa and you should be taking advantage of this to ensure that your eCommerce business is thriving too.
Today we’ll take a closer look at the numbers when it comes to South Africa’s online shopping boom and then we’ll share some funding strategies that can have a huge impact on your eCommerce business’ bottom line.
While the COVID-19 Pandemic caused havoc and uncertainty for many industries, it was a huge driving force behind the growth seen in the eCommerce industry. In 2020, the eCommerce industry grew by 66% and kickstarted the industry’s explosion and the sector has also diversified drastically.
Where travel and accommodation used to account for a large portion of South Africa’s eCommerce business, other industries have begun to prosper meaning that there is space for all to benefit from South Africa’s rapidly expanding eCommerce sector. In particular, “the fastest-growing [industries] were consumables, home, lifestyle and media,” said Naspers - owners of eCommerce retailer Takealot.
Takealot is Africa’s second largest eCommerce retailer and showed revenue growth of 63% during the last half of last year.
With Takealot and other retailers growing so quickly, there is space for all business owners to enter and benefit from South Africa’s eCommerce sector – all without the need for your own store!
This is likely the best way to increase cash flow for eCommerce businesses. Inventory finance works for online businesses selling fast-moving products with a profit margin of above 40%.
Inventory finance involves a funder helping you identify the right stock, and then they buy it for you. You can use the freed-up stock to market your store to sell more products than you’ve ever sold – without ever running out of stock. And you only have to pay your funder for the stock after you’ve sold it.
The result is that you have enough stock to supply the demand, so you never miss a sale, maximise your revenue, and take your business to new heights.
Inventory finance can help you ensure you have enough stock in the lead-up to busy periods such as Black Friday. In fact, it’s one of our top 5 tips to prepare for Black Friday.
This is the most traditional way to get cash flow for your eCommerce business. A fast business loan can be as large as R10 million and take as little as 5 days to reflect in your bank account – depending on who you’re getting the loan from.
This funding solution works well for eCommerce businesses that ship their stock from overseas. It’s especially good if your products are tangible and complete for the end buyer and if you have a high-margin trade cycle of at least 15%.
There are various types of trade finance which will all help you increase cash flow for your eCommerce business. Here are the ones we offer at Geddes Capital:
With the inconsistency of the shipping industry, SMEs often get left behind in times of crisis – remember what happened in 2021 – so this kind of funding can be a lifeline for your business.
Invoice discounting unlocks working capital and saves you time and labour. Essentially, you ‘sell’ your invoices to a funder for a portion – usually 70% – of their value. So instead of waiting for clients to pay you, you get a portion of the money upfront.
When the payment is due, your funder will collect it and pay you the balance – the other 30% – of the invoice less the interest charged.
This option will work well if your debtors are frequent customers that you supply on an ongoing basis with payment terms of 30 to 60 days.
This service is sometimes called a bridge loan and is a short-term loan that allows your company to “bridge” the gap to longer-term funding solutions. These loans typically have a term of 3 months to three years and are secured by property.
This quick cash injection will work well if you have a big launch or sale coming soon. You can use it to boost your advertising efforts and ensure you have enough stock. Then, when the event is over and the stock has been sold, you can pay the bridge loan back with your business in a better place than when you started.
It's undeniable that eCommerce in South Africa – and Africa in general – is growing. These 5 funding options will help you take advantage of this growth so you can grow a business of your own. If you would like to learn more about SME financing options for your eCommerce business, get in touch with the team at Geddes Capital here.