HOW TWO QUEENSLAND FASHION EXPORTERS OVERCAME CASH FLOW CONSTRAINTS

Written on the 8 August 2016 by Andrew Watson, Executive Director, Export Finance, Efic

HOW TWO QUEENSLAND FASHION EXPORTERS OVERCAME CASH FLOW CONSTRAINTS

WHILE the news might be full of stories about the troubled outlook for the global economy, the truth is, Australian conditions for export are as good as they have been for years.

A number of developments are making it easier than ever before for innovative Australian companies to take advantage of the opportunities that exist in international markets.

These include new free trade agreements with China, Japan, and South Korea, the depreciating Australian dollar and the growth in new technologies, which are better connecting the global marketplace.

Two such companies are Brisbane success stories Studio Agency and Cherry Blooms.

Global growth for Studio Agency 

Studio Agency is a Brisbane-based fashion designer and wholesaler that exports a range of women's fashion designs around the world.

Founded in 2007, the company started out distributing a selection of international and Australian fashion labels as a wholesaler. More recently, Studio Agency has also established two of its own private label brands that the company designs, manufactures and wholesales.

"I was 19 years old when I started Studio Agency and really didn't have a clue what I was doing, but I knew that I was passionate about working and doing something amazing in the fashion industry," says Founder Zoi Vafias (pictured. Copyright: Efic).

Studio Agency started exporting in 2014 after receiving strong interest for Australian brands from overseas markets, with its key export markets being the US and the UK. Its customers are typically large online retailers, with around 40 per cent of its total revenue coming from exports.

Overcoming a funding gap

Studio Agency is enjoying promising growth overseas, with increasing demand for its products from its buyers in the US and UK. However, Zoi explains, "there's a good 60 to 90 day period before we get paid from when placing the order."

This lag puts pressure on the company's cash flow, which in turn can have an impact on other aspects of the business. With two contracts with retailers in the US and UK continuing to grow, this situation recently started to become a pressing issue.

Zoi needed financial support to manage the cash flow pressure, "We really needed just a tiny bit of a hand with helping balancing this out and growing overseas. Unfortunately, the banks just weren't ready to take a risk on us."

Efic provided Studio Agency with a A$180,000 Export Contract Loan, which it used to fund the manufacturing costs associated with its US and UK export contracts.

This loan not only reduced pressure on Studio Agency's cash flow, but allowed it to reinvest in the business and grow its export revenue even further.

"It was really amazing that Efic came to our rescue. The way that the Export Contract Loan has helped our business is quite substantial," Zoi said.

International success for Cherry Blooms 

Cherry Blooms is a growing Queensland cosmetics company that began as a weekend market stall in Brisbane.

Now based on the Gold Coast, Cherry Blooms designs, markets and wholesales its unique brand of beauty and style products. Through its effective use of social media, Cherry Blooms has become known as a 'rebel' brand in the cosmetics industry, challenging the status quo while remaining at the forefront of current trends.

In just a few years, demand for Cherry Blooms' innovative beauty and style products has soared. Along with being available in many boutiques in Australia, Cherry Blooms also exports to the United States, Canada, South America and Europe.

A new opportunity

With increasing export opportunities in the United States, Cherry Blooms secured contracts with several leading North American retailers, including the well-known department store Nordstrom. Having been in business for over 100 years, Nordstrom has more than 300 stores in North America and is one of the United States' leading fashion specialty retailers.

In order to deliver on these contracts, Cherry Blooms needed additional working capital very quickly, due to the tight payment terms from its manufacturer.

While Cherry Blooms' bank was supportive of these new export contracts, its bank was unable to provide the required finance at such short notice and so suggested Cherry Blooms contact Australia's export credit agency. Efic was able to very quickly provide an Export Contract Loan, which allowed Cherry Blooms to meet the tight payment deadlines set by its manufacturer and fulfil these important contracts.

"Without the fast approval of Efic's loan, we wouldn't have been able to fulfil our export contracts on time," says Jellaine Ross, Founder and Director of Cherry Blooms.

On the back of Cherry Blooms' success, exports to North America alone are anticipated to reach around 70 per cent of the company's total sales in the coming year.

A lesson for Queensland exporters 

Both Studio Agency and Cherry Blooms are fantastic examples of Queensland businesses that have grown internationally by identifying and taking advantage of demand in different markets. They have been able to leverage the excellent conditions for export such as a depreciating dollar, new free trade agreements, and new technologies. Through innovative thinking they have unlocked new markets and put Queensland on the export map.


Author: Andrew Watson, Executive Director, Export Finance, Efic
About: Andrew Watson is the Executive Director, Export Finance, Efic - www.efic.gov.au.

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