How a Payability Customer Walked Away with $1 Million in the Bank Instead of Owing $1 Million to the Bank

Everyone has come across case studies that share what happens when everything goes right. Someone comes across a problem, they find a solution and it’s all sunshine and rainbows, right? But, what happens when something goes wrong? This isn’t the typical case study. This is the real story of a real Instant Access customer and what exactly happened when a once thriving Amazon business with $20 Million a year in sales disappeared overnight.
*Names changed for privacy reasons*

The Seller 

Trendy Headphones, a Private Label electronics company, sold quality in-ear headphones with comparable sound experience to more expensive brands – at an affordable price. While Trendy Headphones sold on their website, and Groupon.com, the majority of their sales were on the Amazon.com marketplace.

Why did they need next-day payments? 

Trendy Headphones’ sales were growing rapidly, but they were struggling to keep inventory in stock to keep up with demand. They needed funds to pay their supplier to purchase more inventory. In short, Trendy Headphones had a big opportunity in front of them, but lacked the cash on hand to take advantage of it. Without more inventory coming in, Trendy Headphones was faced with pausing listings (and losing sales) so they didn’t lose sales rank due to a stockout. 

What did they get? 

Trendy Headphones’ first payout from Payability was over $75,000 – money that was going to sit with Amazon for another 2 weeks. Then, ongoing, they received next-day payments for their Amazon sales. As their sales grew, their next-day payout grew as well; Trendy Headphones had cash flow to sustain operations and the capital to reinvest in the next batch of inventory. 

What happened? 

Their sales grew!

Results

Sales Surge

With more capital in hand, Trendy Headphones was able to purchase inventory more frequently to keep up with demand. Constant replenishment of product meant their stock levels remained healthy, they kept the Buy Box, and sales kept growing. In less than 18 months, Trendy Headphones grew their business to more than $20 million in sales on Amazon. 

…Sales Collapse

However, it didn’t take long before their manufacturer caught on, and started selling the same headphones directly on Amazon, stealing their idea and undercutting them on price. Trendy Headphones’ business dwindled overnight and they were forced out of business in October of 2017.

Silver Lining

Even though the manufacturer stole their idea and their Amazon business dwindled, Trendy Headphones had control of their capital. They were also able to optimize the time in which they were the only one selling this in-demand product by keeping stock levels high and making every sale they could possibly make during this short, but profitable, period of time. 

Assuming Trendy Headphones could get a large enough bank loan, they would have been deeply in debt – potentially owing millions to the bank – when their sales came to a complete halt. A loan also would have limited them to how much they were qualified to borrow, not how much they could sell. With the help of a financing solution that grew with them, the amount of financing Trendy received was directly connected to how much they could sell on the Amazon marketplace. 

Instead, by using Payability and receiving their own sales to finance inventory faster, Trendy Headphones stayed out of debt and capitalized on the sales opportunity. 

Conclusion

Selling online can be risky business. The marketplace can literally do anything and your manufacturers can literally do anything. These changes often happen overnight and even the savviest ecommerce entrepreneurs can’t foresee or avoid them. It’s simply the nature of the business. Therefore, it’s best to make the most of the periods of time that sales are rolling in and consider every option/scenario when choosing a financing product. 

In this case, accelerated access to their own Amazon payouts gave Trendy Headphones the buying power it needed to keep inventory in stock without having to take on the risk of a loan. When the worst case scenario happened and the business ultimately folded, the owner parted ways with cash in hand ready to take on the next challenge or a much-needed vacation. In the high risk universe we know as entrepreneurship, sometimes coming out on top means walking away with more money in the bank than you started with, and being open to new experiences and adventures. 

Victoria Sullivan
Victoria Sullivan is a Marketing Manager at Payability. She has over eight years of social media, copywriting and marketing experience. Prior to joining the Payability team, Victoria developed social media content and strategies for top technology brands such as Skype and Samsung. She holds a degree in Advertising from Syracuse University’s S.I. Newhouse School of Public Communications. She can often be found in a yoga class or working on her fashion blog.