PayPal has partnered with the Council of Fashion Designers of America, and the first partnership event will be in the fall for members of CFDA’s incubator program.
The October event will be a panel discussion about PayPal’s different payment options for merchants. Essentially the focus is to educate incubator participants about different options when selling on the PayPal network — whether as an online merchant accepting payments or as a merchant needing a small business loan.
According to Darrell Esch, vice president and general manager of small business lending at PayPal, fashion is a key segment for the firm. “In 2014, there were more than $20 billion payments connected with fashion sales” through the company’s network by “67 million shoppers” on a global basis, he said.
The fashion sector for PayPal includes apparel, accessories such as handbags and footwear, but not jewelry, which is classified as a separate category.
According to PayPal, of the $20 billion in fashion spend last year, $8 billion was spent in North America. Of the 67 million PayPal consumers worldwide who shopped in fashion, 28 million were from North America. The company said PayPal consumers are 9 percent more likely to buy the latest fashions every season than the average U.S. adult.
Of particular interest for direct sellers of fashion on the PayPal network is its working capital program.
Esch said the program began as a pilot concept in September 2013, and was ramped up in 2014 in the U.S. By the end of last year, the program was introduced to the U.K. and Australia. In the U.K., the funds are considered a merchant cash advance. More than $500 million in capital has been lent so far under the program since 2013, with more than 40,000 merchants benefiting. Of the $500 million lent out, more than 10 percent has been loaned specifically to fashion merchants, Esch said. PayPal said issuance is $2 million a day on average in the U.S. alone.
Most of the business owners who access the program use it to buy inventory, he said. Many are small merchants who have a hard time getting access to other lending vehicles.
Business owners log onto their PayPal account, and complete an application that takes between 3 to 5 minutes. Because the process is on PayPal’s network, it has access to the business’ sales history, which helps the payment firm determine how much the merchant can borrow. The maximum loan size is up to 15 percent of the annual PayPal processing volume, with a maximum dollar cap of $85,000 in the U.S. Once approved, the funds are loaded onto the merchant’s PayPal account and can be accessed immediately. There is a one-time fee based on the repayment option the merchant chooses, which can be 10 percent of daily sales, although some choose 15 percent or 20 percent.
Esch said the incubator partnership is likely to be broadened to include other CFDA members, although how to expand the program is still under discussion.