Out of the Box Financing Solutions for Subscription Box Success
Published On: September 11, 2019
How do you get your product in the hands of millions of people? Many of our recent clients have had the good fortune to have their product featured in one of the popular subscription boxes. The subscription box model has taken the world by storm and retailers have taken notice, providing their own boxes as well.
How do I finance my subscription box order?
As more and more young brands approach their banks seeking financing of their orders, they are being introduced to our firm for financing. Prestige is able to provide a Factor’s Assurance Program to domestic suppliers or can make an introduction to a Purchase Order Finance partner to fund overseas suppliers. Some of the companies that we have helped include skincare, haircare, cosmetics, leisurewear, and accessories. Here are some testimonials from recent clients in the subscription space. We were able to help these brands at their crucial stage of rapid growth.
Working with Prestige has been a lifesaver. We were able to work together with their team and their PO finance partner to pay our suppliers for our lipstick in order to stay on time with our delivery schedule to FabFitFun.
Linda, CEO and Founder, a cosmetic company
When we got a 4 million dollar order for our skincare line from BoxyCharm, we didn’t have substantial credit with our domestic supplier. Prestige was able to offer a factor’s assurance letter to our supplier in order to increase the amount of credit they would extend to us.
Sarah, CEO and Founder, a skincare company
When we received a large order for our handbags from FabFitFun, we didn’t have enough credit with our overseas manufacturer. Prestige introduced us to their PO partner to open a Letter of Credit to ensure delivery within the timing needed. Prestige is a nimble partner, understanding the subscription box space.
David, CEO and Founder, a handbag company
By democratizing the field and allowing young brands to enter using the financing that we offer, we are pleased to grow businesses quite rapidly by providing liquidity when they need it the most. Additionally, replenishment orders are shipped at full retail value to the customer. That is where the brand can recoup their money.
With the significant rise in this sector and with no slow down expected we at Prestige Capital are firsthand witnesses to the success of this model.
Direct Sales Benefits
Selling in the traditional retail market finance companies often have difficulty gauging advance rates as many retailers have onerous programs that create dilution of the receivable. The unpredictability of the dilution has made it difficult over the years to know what the final collection amount will be.
However, in selling direct to consumers through subscription boxes there is no dilution, as consumers receive a box in the mail with samples of new products and therefore the receivable is a much simpler one to finance.
Subscription model services offer little margin to the manufacturer however, the tremendous exposure to the millions of subscribers of each box offers tremendous marketing potential especially for young brands.
Subscription Box Landscape
Richard Kestenbaum, Partner at Triangle Capital, LLC, expressed it this way, “Subscription is a new channel and there will certainly continue to be companies whose main business proposition is the subscription business. But there will be a broader array of companies that aren’t focused specifically on subscription that utilize it as one of several channels through which they reach consumers. We saw this happen in the catalog business when catalogs became popular. There were certainly companies that focused on selling only by catalog. But there was a greater number of companies that used the catalog business to supplement their other modes of reaching consumers.”
According to Forbes, nearly a decade after the first subscription box services hit the doorsteps of consumers; retailers are still working to get their heads around the significance of the industry’s rapid growth.
Christopher GeorgeSUBTA (Subscription Trade Association) Chairman adds, “Subscription Boxes are the modern-day magazine, it offers brands a low-cost marketing tool that not only brings brand awareness but allows the consumer to discover and try the product.” We are pleased to be a financing resource to brands as they get exposure to millions of customers and grow their market share.
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