Why net-60 terms help in ecommerce advertising and marketing
Selling a product online can often be a long game for ecommerce companies. You have to convince a consumer to buy a product amid what might be a sea of competitors, whether it’s clothing or some kind of subscription box for coffee. That means you have to play the long game when it comes to advertising, too.
But unlike apps or other kinds of purchases that might happen on-the-spot, purchases like clothes or other products might happen well after the first ad goes out. So ecommerce companies may find themselves spending a lot of money on advertising well before they see any revenue.
Fortunately, there are ways to get access to capital ahead of time. Typical charge cards may require you to pay back what you owe at the end of each 30-day period, whereas traditional credit cards usually charge interest if you end up paying your balance over time. But a product like a card with net-60 day terms gives you a much longer runway to start investing in marketing before a sale.
For ecommerce companies, the first ad might just be the first step in a very long journey to convince a customer to purchase a product. For the sake of this example, let’s consider a completely hypothetical company that sells grilling equipment.
How do net-60 day terms work for advertising budgets?
Let’s say Labor Day is right around the corner, and you’re trying to convince someone to buy a set of grilling tools ahead of that big party. This is a particular purchase that’s often going to have the highest chance of success right around that big holiday. This kind of scenario can be common in ecommerce, with certain times of the year being the most important for sales.
You still have to convince customers that they first need a set of new grilling supplies, and then convince them that they should buy yours instead of a Weber grill. The final decision might not happen until just a few days before a big holiday like Labor Day. So you need to start getting in front of customers right away.
The “timer,” so to speak, starts once you buy your first ad. For an ad buy for a campaign that starts on July 1, payment would be due 61 days later, on August 31. If you spend more on advertising on July 2, payment for the additional ads would be due on September 1, and so forth.
Why do you need net-60 day terms to invest ahead of your sales?
There are around three stages you will probably have to hit your potential customers. You’ll want them to be aware of your products well ahead of the final purchase. So you might be purchasing ads on Facebook, Pinterest, or even out-of-home displays like billboards. After that, you’ll want to hit them at the stage where they’re exploring different grilling products. And then you want to get in front of them right when they’re ready to buy something.
When you’re trying to get them while they’re actively looking for grilling tools, you might pay for search ads like Google. And as they get closer to a purchase, you want to drive them to the place where they can hit the ‘buy’ button. Those ads may get more and more expensive over time, but net-60 terms help give you access to capital while giving you time to pay them back once you actually make money off your grilling tools.
Net-60 day terms can help you avoid paying interest on purchases made well ahead of your sales cycle. On a typical business credit card, you might have to repay the amount you spend for an ad nearly two months ahead of a sale. And if you decide to carry a balance, you’ll see a cut of your revenue going toward paying back the accrued interest.