With 53 countries and over 2.3 billion people, merchants of the Commonwealth have access to a very large market where they can sell their goods to consumers. Unfortunately, a predicament many merchants find themselves facing is a lack of sufficient financial resources to purchase competitive levels of inventory from suppliers.
InventoryClub is helping to solve this problem by connecting Commonwealth merchants to members willing to finance the purchase of inventory. The process is based on peer-to-peer financing, where the member financially backs the merchant’s e-commerce business by providing funds to purchase sufficient inventory levels to meet sales demand, at bulk discount pricing. In return, the member receives predictable and profitable financial returns.
But how exactly does the financing occur?
Members provide funds for inventory by purchasing a merchant’s inventory proposal.
The purpose of this article is to provide you a thorough understanding of what merchant proposals are and how they work, so you can make decisions to the best of your ability when purchasing them.
The Merchant Proposal
A merchant proposal (also known as an inventory proposal) is an offer that is prepared by a merchant outlining an opportunity to purchase inventory from a reputable supplier at a wholesale price. The proposal also outlines the purchase price, retail price, merchant profit, member profit and sales time frame.
How Merchant Proposals Work
Once a merchant prepares a proposal, it is submitted to InventoryClub for approval. We then perform a know your customer (KYC) on the supplier to ensure they are a reputable source selling authentic products. The supplier is then assigned a unique ID and the outcome of the check is recorded on the InventoryVault ledger.
Approved proposals are added to the marketplace for members to see. If you are satisfied with the proposal, you purchase it for the quoted price using VNT tokens. InventoryClub receives the funds from the proposal purchase, and proceed to purchase the proposed inventory on behalf of the member and merchant. The inventory remains your property until it’s sold, and is stored in a secure InventoryClub smart warehouse. The merchant then sells the inventory to consumers on the Commwea marketplace.
As products in the inventory are sold, the Inventory Finance Agreement (IFA) pays you and the merchant. Your initial stake and your profit come in as each item of inventory is sold. The merchant gets their share of the profits the same way.
The Process of Buying and Selling Merchant Proposals
Ok, now we’ve gotten clear on what merchant proposals are and how they work. But how do members and merchants trade proposals? Well, below is a detailed look at the process of buying and selling inventory proposals. Let’s start with a quick look at some of the tools that are used to facilitate the process.
When buying and selling merchant proposals, members and merchants use VNT Tokens. VNT is a cryptocurrency created by InventoryClub to control the flow of funds in and out of the InventoryClub marketplace.
Inventory Finance Agreement
The Inventory Finance Agreement (IFA) is a smart, self-governing contract that is based on Blockchain technology, which is used to regulate the trade between members and merchants. The IFA contains the terms and conditions of the trade.
The IFA also automates the entire transaction between a member and a merchant to guarantee transparency and ensure that there are no conflicts. Once the merchant has sold a proposal to a member, it ensures that the member has paid the full amount quoted for the proposal.
Once the inventory is purchased by InventoryClub, the IFA also creates records about the status of the inventory, which can be viewed by both the member and the merchant at any time.
As each item in the inventory is sold, the IFA updates the status of the remaining inventory. The IFA pays out the members’ initial stake and share of profits as well as the merchant’s share of profits.
Selling merchant proposals
The process of trading merchant proposals starts with a merchant creating a proposal. The proposal is reviewed by the Inventory Club, which starts by verifying the merchant has submitted it within the appropriate merchant level (i.e. a level 1 merchant can only submit a level 1 merchant proposal).
Next, we conduct a Know Your Customer (KYC) check on the proposed inventory supplier to ensure that they are reputable. If the supplier passes the check and the proposal is in order, it is accepted. The merchant can then post it to the marketplace, where members can view it.
Buying a proposal
Buying a proposal is a straightforward process. You browse the marketplace for merchant proposals that are equal or less than your member level. Once you have found a proposal in the marketplace that you like, the next step is putting in your buy request.
The proposal’s worth is calculated in VNT Tokens, which you’ve purchase using a fiat currency, Bitcoin, etc. through VNTPay. The VNT is then transferred to an enclosed client account, placing the funds in escrow. An IFA is generated during the process of the transaction.
The money in the client account is used by InventoryClub to purchase the proposed inventory, which is then stored in a smart warehouse. The inventory is stored in an InventoryClub warehouse until sold. As the inventory is sold, profits are appropriately transferred to you and the merchant based on the profit distribution terms specified within the IFA.
Side Note: when buying a proposal, a member can create a group or a cartel, with other members in the same or lower levels. The cartel can then buy inventory proposals from merchants as one entity, where the members share the cost of the proposal as well as the profits.
Carol, a commonwealth merchant, finds a supplier willing to sell inventory (clothes) at a wholesale price. If she can buy the inventory and sell it to consumers, she can make a 50% profit margin.
However, Carol does not have enough capital to buy the inventory, and she unable to get a loan from a traditional financial institution.
Carol joins InventoryClub and creates a proposal outlining how she can buy the clothes from a trusted supplier at a wholesale price and sell them to consumers for a 50% profit margin. Patrick, an InventoryClub member, sees the proposal, likes it and purchases it.
InventoryClub then takes the money and buys the inventory on behalf of Carol and store it in a secure smart warehouse. From here Carol can sell the clothes to consumers on the Commwea e-commerce platform.
With each sale, the IFA pays Patrick back for the financed inventory, plus his share of the profit. Carol also receives her share of the profit.
In the end, Patrick gets back all of his initial money plus his share of the profits while Carol receives her share of profits and the growth of her business.
Merchants of the Commonwealth have access to an enormous market for selling their goods. However, often times they find themselves lacking competitive levels of inventory, resulting in stunted business growth. We are helping to solve this problem by connecting Commonwealth merchants with members looking to finance competitive levels of inventory in exchange for lucrative financial returns.
This happens through the InventoryClub marketplace, where the buying and selling merchant inventory proposals takes place. Understanding the process of buying and selling merchant inventory proposals is paramount to seeing success within the marketplace. After reading this article, you can definitely consider yourself armed and ready to make better proposal purchase decisions, and hopefully reap lucrative financial returns as a result.
Interested in learning more about how InventoryClub can help you take advantage of the tremendous financial opportunity that is happening right now in the Commonwealth? Check out our whitepaper.