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Entrepreneur Insight

Leveraging Your Niche and Managing Cash Flow in the E-Commerce Space

August 12, 2019
Business owner looking at her e-commerce Amazon seller account on the laptop
Having the right tools to manage cash flow and grow the e-commerce business is crucial for business success. (Photo credit): Images

How an Amazon top marketplace seller utilizes sales strategy and line of credit to grow the business.

Felix Yeh started his e-commerce business NG Inc. in 2008, right in the middle of the global financial crisis. Although most people would consider the timing inopportune, Yeh insists that it contributed to his business’s current success.

“For us, it was good because we didn’t have a relative gauge of ‘wow, it was so much harder than it was before,’” he explains. “We started from the bottom of one of the most difficult times to start a business, but I think it kind of worked out in our favor, from a mental standpoint.”

Those initial challenges forced Yeh and his team to think outside the box, eventually becoming one of Amazon’s top 200 third-party (3P) marketplace sellers. NG Inc., which sells a large variety of products ranging from pet supplies, to outdoor gear, worked to develop its relationships with its vendors and Amazon so that they provide a higher level of support and communications channels that many smaller brands would not have. Now, NG Inc. is projected to reach $30 million in revenue by the end of the year and has expanded their business to include some brick-and-mortar relationships and their own branded products.

Finding niche opportunities

When they were first starting out in 2008, Yeh and his cofounders knew they had to set themselves apart, especially in such an economically inhospitable time. They decided to leverage their connections to companies they had individually worked with in the past and target ones with products “that weren’t really online yet” to help them build up their e-commerce presence.

Once they became more established, NG Inc. expanded their business by discovering niche sales channels for their merchants’ products. Thanks to the customer data they had accumulated over the years, Yeh and his team developed predictive algorithms to determine what products customers are buying, when, and for what purposes those customers were using those products. From that data, they found that customers are not always purchasing products for their intended use, and they realized that this could open up new sales channels for them and their vendors.

Cardboard boxes on conveyor belt at an Amazon distribution warehouse
(Photo credit):
NG Inc. expanded their business by discovering niche sales channels for their merchants’ products.

“A lot of what we’re able to get is customer data—getting a lot of customer reviews, accumulating data from customer phone calls that come in or customer reviews on product, to be able to hear why they’re happy with a product, why they’re unhappy,” says Yeh. “After talking to the customer, a lot of them are more niche industry-type experts who are able to use these products for something completely different.”

He uses lye as an example. Lye is typically used in the manufacturing process or in commercial drain cleaners; after talking with their customers, Yeh and his team realized that a lot of them were purchasing lye to hand-make soaps, which opened up a new marketing and sales opportunity for NG Inc.

“A bunch of people were talking to us, hey, we actually use this to make soap (and) sell it on Etsy,” shares Yeh. “This works really well for that—it would be great if you sold soap molds for this, or put more specific instructions on handling to make soap for it.”

Their ability to launch and sell products in unconventional ways helped NG Inc. expand beyond smaller, lesser-known companies and merchants to include internationally recognized names.

“Some of the brands that we sell now are like Starbucks and Godiva, where we sent it to a lot of companies as gifts around the holidays—but it’s also something that’s a nice perk to have in the office,” says Yeh. “It’s like, hey, I think this product will do really well B2B, and we have a lot of vendor relationships. Being able to sell products where you wouldn’t really think of and being able to scale that way has been really successful for us, being able to have a vision for the products themselves.”

Tools for business growth

“When I met Felix, his business was a little newer,” says Kevin Lu, vice president and relationship manager at East West Bank. “It’s really unique to find a business that is local in the Bay Area and is finding a new niche.”

As NG Inc. continues to grow their business, they need access to capital that would allow them to fulfill their current order volumes while also giving them the leeway to scale up further. The company received an increased line of credit from East West Bank to help ease cash flow and to purchase more inventory to prepare for the busy holiday seasons, which doubled NG Inc.’s projected revenue, shares Lu.

“Logistics have become more challenging, and during the holidays when it’s peak season for retail, everyone’s logistics are impacted,” explains Yeh. “So, being able to have more product on hand and getting it in earlier to our warehouse and our fulfillment centers is definitely one of the biggest growth opportunities for us.”

NG Inc. also received a commercial credit card, which has boosted the company’s relationships with their smaller merchants by speeding up the purchasing process.

“Having a seamless solution to purchase product is a big thing for us,” says Yeh. He explains that, during the 2008 recession, a lot of smaller companies were left in the lurch when their clients went under and were unable to pay for products they had already received. “To be able to have that safety net, where if they aren’t comfortable with us sending them a check—that’s completely fine, we can put it on our credit card. Being able to have a very large credit limit on that card allows us to put some of those massive inventory purchases on it,” he adds.

Lu adds that the commercial credit card is also a good tool to help ease a company’s cash flow, especially when combined with a line of credit. “Their current model, with how the warehouse works with Amazon, it gives them a delay potentially about six months. But with the commercial card and line of credit, this helps them float the time frame from buying inventory to final sale,” he says.

Developing relationships through education

NG Inc. wouldn’t be on its current growth trajectory if it weren’t for its focus on developing relationships through education. Yeh started his business by helping smaller companies navigate the online space and that remains the heart of his company’s business model.

“That’s been at the crux of everything we do from the get-go, being able to educate the companies and brands that we partner with about how the online space works and how it’s constantly evolving, how the marketing is changing, a lot of the challenges that companies will face when they try to sell online or sell in marketplace,” Yeh says. “Amazon Marketplace, Walmart Marketplace, are becoming a larger percentage of the e-commerce space as a whole. There is just a ton of challenges that come with that, and we’ve experienced a lot of those challenges.”

Although marketplaces like Amazon have become better at monitoring counterfeit goods and review manipulation, Yeh says that these issues are still a problem that many businesses have. Larger brands and companies may be able to communicate directly with Amazon, but smaller merchants might not have the means or access to do so. Luckily, Yeh and his team at NG Inc. have spent years developing those communication channels so that they can support their partners.

“That’s where we’re able to gain that advantage because we’ve dealt with way more instances of this happening over the years,” he says. “Having someone you can call or email is always a much more comforting channel than shooting an online form.”

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