California Apparel News

Built into the apparel industry is a certain conundrum: A wholesaler has to pay the manufacturer but doesn’t have revenue from the garments yet, and a retailer has to pay the wholesaler but hasn’t yet sold the goods to the consumer.

Pioneering online marketplace FashionGo continues to fire the spirit of innovation with the release of Dynamic Net Terms, a groundbreaking payment solution in the B2B space that makes it easier for retailers to make larger orders by giving them terms ranging from one to two months, with FashionGo stepping in to pay the vendor.

The solution is aimed at precisely those small- to medium-sized businesses who struggle with access to funds in what is known as the conventional binary approval means of assessment, in which the retailer either gets yes or no for an answer. Dynamic Net Terms means there are now three levels of yes.

The California Apparel News sat down with Paul Lee, CEO of NHN Global, owner of FashionGo, to learn the details of this disruptive new payment solution.

CAN: You became CEO right before the pandemic. Normally that would be a tough time to start a leadership role but not in the case of an online marketplace like FashionGo.

PL: We were certainly a beneficiary of the pandemic in the sense that all of the physical channels were closed. There were no trade shows for a year and a half. So the new buyers and brands that would have pursued that channel came to us, and we got a tremendous amount of traffic. While personally difficult, it was fantastic for the business.

CAN: Tell us about what you’re calling a revolutionary new payment solution, Dynamic Net Terms.

PL: To toot our own horn a little bit, we’re pioneering a first-of-its-kind B2B payment solution, providing buyers with 60-, 45- and 30-day terms. The buyers are approved based on their individual business profiles and credit levels, so we’re definitely disrupting the terms of traditional net solutions with greater flexibility and accessibility. It’s powered by our financial technology partner, Balance, which is well versed in the marketplace landscape.

CAN: How exactly does it work?

PL: If a retailer applies for this program and is approved for 30–60 days—depending on its history with FashionGo, credit level and needs—then when there’s a purchase the vendor is paid immediately and the buyer has the term to make the payment, giving the time to actually sell the product. But the reason why we consider this a true innovation is that traditional net terms are fairly binary: Yes, you qualify, or no, you don’t. With Dynamic Net Terms, if you don’t qualify for 60 days, you may qualify for 45, and if not that then you still may qualify for 30. It’s a very flexible way of looking at risk assessment. There isn’t a product out there like this.

CAN: Besides the length of terms, are there any other differences between the three levels?

PL: No, this is completely free for the buyers. FashionGo is bearing the cost. We recognize that for small- and medium-sized businesses—even though they’re the backbone of the U.S. economy—access to funds is sometimes challenging, especially in this kind of retail climate. We’re making the investment on the buyer’s behalf so it has the opportunity to increase its purchasing power on our platform and grow its business, and that’s what drove us to embark on this endeavor in the first place.

CAN: Why wasn’t this pioneering program done before, by yourself or elsewhere in the industry?

PL: I think the industry has just gone with the traditional binary of yes and no for credit assessment, and the industry norm for approval rates ranges from 5 to 15 percent. With dynamic, real-time assessment, we’re looking to do five to six times that for approval.

CAN: And FashionGo makes its revenue by taking a commission from the vendors?

PL: Correct. There’s no fee for the retailers to make purchases or use Dynamic Net Terms.

CAN: But a retailer doesn’t have to sign up for the program, right?

PL: No, it’s merely a way of increasing its purchasing power on the platform. So if you qualify, you can use those terms, plus whatever availability you may have on your credit card, thereby expanding your credit for the purchase. So you can make a larger order across our eleven different product categories. Second, Balance and AI algorithms, based on your platform history, will automatically suggest increases in term limits over time.

CAN: For a retailer who’s not using FashionGo, could you sketch a scenario and how it might play out?

PL: Once a buyer is approved it can place, for example, a $5,000 order. The buyer can receive those goods immediately and defer the payment for 30–60 days. If a buyer only has $4,500 in its Dynamic Net Terms limit, it can simply pay the remaining $500 on its card on file. Over time, as on-time payments are made, our algorithm will automatically increase the limit so the buyer can place more-substantial orders.