Fueling Your Growth: Smart Financing for Peak Season

Direct-to-consumer (DTC) and ecommerce brands experience a dynamic and exciting life cycle, often seeing accelerated sales during major sales events like new product releases and Peak Season. However, as ecommerce businesses prepare for seasonal demand surges, they face significant financial risks associated with poor inventory planning and stockouts. These financial risks can prevent ecommerce businesses from meeting increased consumer demand. Financing solutions exist to help.

As Peak Season approaches, we’re discussing common financial hurdles brands may face during Peak, and effective strategies that will help online businesses plan ahead of the busiest shopping season of the year.

5 Challenges Faced by DTC Brands in Financing Peak Season Inventory:

1. Cash Flow Constraints

It’s common for ecommerce sellers to find themselves in a cash flow bind as they prepare for Peak Season. Most suppliers require a deposit payment prior to production, with the remaining balance of the invoice due when the inventory is ready to ship. Purchasing and holding incremental inventory can require substantial upfront capital, leaving businesses with limited funds for other seasonal operating expenses, like increasing seasonal headcount or executing targeted marketing efforts.

2. Risk of Over- or Understocking

Striking the right balance between having enough inventory to meet demand and avoiding excess stock is a real challenge for many ecommerce brands. When inventory purchases tie up your cash and your store frontloads too much inventory, there will be a cash gap—not to mention the additional fees (like higher storage fees) that come with overstock inventory. Instead, ecommerce brands can leverage flexible reserve storage and warehousing solutions that only charge you for the pallet positions you use, and offer scalable options to adapt to your business needs.

3. Uncertain Demand Forecasting

Inventory planning for Peak Season is a crucial exercise that ecommerce merchants must perform to balance inventory quantities with unpredictable customer preferences and market trends. Under-forecasting demand may lead to last-minute air shipments—and on average, air shipments are five times more expensive than ocean freight, resulting in a potentially major operating expense that could significantly hurt profitability.

Understanding demand planning and forecasting down to a SKU level, and how to get started, helps your business evaluate seasonal fluctuations in demand, identify top-performing products, and stock up on those items ahead of Peak Season shopping.

4. Supplier Capacity Restraints

The surge in customer demand during Peak Season can place immense pressure on supply chains, with suppliers struggling to meet increased order volumes. This scenario can manifest itself in production delays and lengthier lead times, or potential shortages of raw materials or finished products. If an ecommerce merchant is forced to make large last-minute purchase orders to accommodate an increase in sales, they risk potentially paying for inventory that fails to meet Peak Season shipping deadlines.

5. Limited Access to Financing

Importers face challenges funding inventory purchases and supplier deposits. For fast-growing small-to-medium sized businesses (SMBs) in particular, there are few appealing options available to address these shortfalls. Banks might hesitate to provide financing to these brands due to their relatively short operational history and lack of accounts receivable—while merchant cash advance providers charge high interest rates and equity investors dilute existing shareholder and business owner stakes.

How to Overcome Financial Challenges with Flexport Capital

1. Explore Inventory Financing Options

One differentiator that sets Flexport Capital apart from other Peak Season financial solutions is our understanding of the pain points merchants experience throughout the supply chain, along with our seasonal business cycle and freight industry expertise.

For example, one of the biggest pain points for ecommerce merchants is the timing gap between placing purchase orders and when Peak Season sales pick up. Flexport Capital is tied into this critical piece of the supply chain, so we can analyze the necessary data to understand your business’s cash needs, and create a customized inventory financing solution to ensure Peak goes smoothly.

2. Leverage Data Analytics for Demand Forecasting

Accurate demand forecasts are key to optimizing inventory levels and minimizing the risk of overstocking or understocking. Flexport Capital has first-hand visibility and access to the data required to learn your demand trends, and the inventory levels required to meet them. We understand, at a glance, how your trends move and can provide the capital you need to bridge any funding gaps—providing you with the peace of mind in knowing exactly when you’ll have cash flow again.

3. Collaborate Closely with Suppliers

Flexport will pay suppliers on your behalf so you don’t have to pay for inventory until it’s on your shelves. By extending this payment window, you can reinvest cash into other growth initiatives—like targeted marketing campaigns and additional staffing—that will continue driving growth through the busy season.

4. Implement Just-in-Case (JIC) Inventory Management

By adopting a just-in-case inventory strategy, merchants can prioritize having safety stock on hand to reduce the potential impact of supply chain disruptions or spikes in either the price of raw materials or customer demand for your most popular products.

Given the current trade and tariff environment, this strategy is particularly crucial when accounting for additional duties on international goods. To better understand your tariff exposure ahead of Peak Season and the financial impact on your business, visit Flexport’s Tariff Simulator.

See How Flexport Capital Can Unlock Growth for Your Business

Peak Season is a critical time of year for DTC ecommerce retailers, and maintaining the runway needed to expand sales channels that depend on available inventory—without breaking the bank—is crucial. Every cash flow cycle has natural gaps; however, it’s incumbent on businesses to be able to cover invoices, POs, and ongoing operating costs while waiting for the demand spike of Peak Season to bring fresh infusions of capital.

For many businesses right now, margins are just too thin to make that work, so they find themselves looking for a financial partner to bridge the gap. If that sounds like you, reach out to Flexport Capital to see how we may be able to help.

The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.