Retailer m)phosis Chooses Alternative Finance to Fuel Regional Growth
You’d almost think that traditional lending has gone out of fashion. Renowned fashion label m)phosis is the latest company to sign up for a supply chain finance facility from ApexPeak to help grow its business regionally.
The facility, worth S$200,000, is one of a number of measures put into place by the retailer to sustain its growth during 2015 and to cope with the Chinese New Year shopping rush. A consolidation of their outlets and franchises in China has improved the company’s days working capital; however, to increase their market share, more cash is required to purchase additional stock for new ranges of women’s clothing.
“Supply chain finance is a smart solution for us as it frees up working capital. Instead of a retailer like us paying suppliers, the alternative finance company pays the suppliers and we use the extra cash to fuel growth,” says Hensley Teh, Managing Director of m)phosis.
The deal is the first of its kind for the retailer and represents an entrée into alternative finance. The old method to improve working capital was to pay suppliers late. However, in retail, contractors fitting out retail stores want payment upfront, while leasers want three months’ rental deposit and one month rent, also upfront.
“Retailers can expect SCF to free up working capital. 50% of suppliers in Southeast Asia are asking for payment upfront. This has an effect on days working capital,” says Michael Hyltoft, Head of Supply Chain Finance, ApexPeak.
Supply chain finance (SCF) helps companies bridge the time they pay suppliers, to the time they receive cash from their customers. Typically for the retail and textile industry, days working capital is 76 days.
Days working capital is calculated by adding the days inventory to the days receivable, and then subtracting the days payable. In addition, the retailer is poised to reposition the brand to become more relevant to today’s e-commerce-savvy shoppers. They are shifting from a bricks-and-mortar company to becoming a clicks-and-mortar business.
“Opening more retail stores does not necessarily equal more customers. To attract young female adults as our core customers, we have to consider how to integrate in-store with digital. We plan to use the cash unlocked from payables to fund research and development in this area,” says Hensley Teh, Managing Director of m)phosis.
As commercial rents and shop fit-out costs rise in Singapore, efficiently managing working capital can offer a competitive advantage. m)phosis chose alternative finance to reduce its dependency on traditional lenders. The SCF facility was made available within just one month – perfect timing to catch the Chinese New Year shopping rush. m)phosis are so pleased with the product they are considering extending the facility to cover more opportunities abroad.
ApexPeak begin first by understanding the customer’s business. It is important to understand their operations, as some programs work better than others, and this helps us match the company needs to the right product.
ApexPeak then perform credit checks and provide a term sheet that outlines the rates, the approved amount and the tenure. Once all parties have agreed to the terms and signed the contract, the facility is available in one week. Furthermore, ApexPeak’s contracts are written in a friendly manner, so they are easy to follow.
ApexPeak pay the suppliers on behalf of the client each month, and the client then uses the cash to invest in more inventory. Payables then become an off-‐balance sheet item. A SCF facility that is structured sensibly will not only reduce days working capital, but will work with the client’s current operations and be easy to maintain.
‘Over time we will see deals of upwards of 20 million as local businesses become more familiar with alternative finance,’ says Michael Hyltoft, Head of Supply Chain Finance, ApexPeak.
m)phosis has been a pioneer Singapore brand since 1994. The firm is highly regarded for creating affordable high-end womenswear. Drawing from sleek and clean aesthetics, the brand strives to deliver comfort in style. The brand is regionally recognized. They have 45 outlets across Singapore, China, Indonesia, Philippines, Vietnam and Malaysia, and an online retail presence.
ApexPeak improves the cash flow for companies, both large and small, by providing alternative finance. Working capital is provided via a suite of digital platforms, making cash advances fast and easy. ApexPeak was founded in 2012. Its headquarters are in Singapore and it has offices in Dubai and Africa. It is majority locally owned. Visit www.apexpeak.com to find out more about invoice discounting (commonly called factoring) and supply-chain finance.