Over the last decade, ecommerce has fueled a boom in the digital economy, giving small businesses around the world an opportunity to expand their reach and capture the attention of consumers. This trend has prompted massive growth within the direct-to-consumer (D2C) space, where business owners can circumvent the storefront and sell directly to target buyers through a marketplace or their own website.
Growing, Growing, Gone
While many have found enormous success in the D2C space, sometimes the challenges of growth are difficult to overcome, especially when it comes to global ecommerce expansion. A prime example of this is State Cashmere, a D2C brand that sells high-quality cashmere products. The company’s founder, Hao Rone, came from a region where cashmere is made. After graduating from Columbia University, Rone decided to apply his business knowledge and began selling cashmere directly from its origin.
The brand started selling on Amazon in the United States, where it saw rapid success as consumers loved to buy luxury cashmere at a reasonable price. State Cashmere’s sales grew so fast that Amazon invited the company to join its marketplaces in Europe, Canada and Japan. Eager to cater to all of these new markets, the company set up bank local accounts in each region to store local currencies as it scrambled to figure out how to pay taxes in each.
As summer came, cashmere sales took a seasonal dip. Despite a successful winter, Rone began running low on cash to purchase new inventory and pay for key marketing campaigns. The growing pains became overwhelming and State Cashmere needed to find a solution fast, before its success turned into a disaster.
When State Cashmere first approached Payoneer, it was growing too fast, expanding internationally and needed help that it thought required hiring more workers. Once on the Payoneer platform, State Cashmere immediately solved two of its major issues – currency exchange and paying taxes in multiple locations.
Stash the Cash in One Place
“When we onboarded with Payoneer, we were able to immediately connect all of our storefronts and marketplaces to one account where funds were going in and out,” Rone said. “This was a relief, because at the time, we were dealing with a handful of different international banks. Also, with this account, we were able to immediately exchange the various currencies into dollars without steep fees. It also enabled us to pay our external agencies in their home currency.”
Leaving the Tax Burden to Someone Else
State Cashmere now had partner that handled the heavy lift of paying international taxes. When selling in different countries through global ecommerce, merchants must pay Value-Added Tax (VAT) in each, sometimes on a monthly basis. With Payoneer, State Cashmere enters the amount of sales in each country, and Payoneer handles payments to the various government authorities in France, Germany, Japan, Canada and beyond.
Find a Good Source for Working Capital
With the issues of VAT, multiple bank accounts and currency exchange solved, State Cashmere only had one thing left to worry about – working capital. Hao wanted to set up an ecommerce site for State Cashmere customers, improve the quality of creative content, work with influencers and implement weekly photo and video campaigns. This of course all requires money, and cash flow was slower in the summer.
“When we heard that Payoneer was launching a product for working capital, we were quick to inquire,” Rone said. “Since it was the offseason and we needed to start building inventory for the holidays, the offer seemed like the obvious solution to our problem. With capital in hand, we were able to spend money on holiday inventory, product development, marketing and branding, website content and even influencers for our social media campaigns.”
With capital invested during the offseason, State Cashmere was able to bring in $4.5 million in global ecommerce sales in 2018, and is projected to hit $7.5 million in 2019.
When an entrepreneur starts a small business that becomes an immediate success, the growth can be overwhelming. State Cashmere was able to funnel the working capital freed up by Payoneer into managing its global ecommerce growth and fueling further gains. The digital economy has allowed entrepreneurs to create international businesses from scratch, and State Cashmere is a prime example of a success story resulting from this trend.
Iain McNicoll is VP and Regional Head of Americas, SMB for Payoneer