Guest post by Currencies Direct
International marketplaces like Amazon offer online retailers the chance to bypass the set up time and cost usually associated with growing an international business and tap into a well-established brand and logistical infrastructure.
Retailers who aren’t taking advantage of this opportunity to trial their products in front of thousands of potential new customers around the world, are missing one of the easiest ways of increasing sales and profitability.
The opportunity is larger than ever during the peak holiday sales season, which will kick off this year with Black Friday on November 24th.
The foreign exchange effect
When you begin making sales to international customers, foreign exchange markets start to play a crucial role in your overall profitability. Changing exchange rates and conversion costs will affect your margins and competitiveness against local sellers.
Managing multiple currencies requires some simple planning, but with the right consideration, you can boost your international sales and lower your costs.
Here are our top currency management tools for online sellers this Black Friday:
1. Forward contracts: Keep your costs predictable
Forward contracts are the most popular tool for managing the cost of supplier payments. They allow you to secure today’s exchange rate for use up to two years in the future. Essentially, ‘buy now, and pay later’.
Knowing exactly how much your own stock will cost you, allows you to keep your own pricing consistent and forecast cash flow more accurately. A big win for businesses dealing with an influx of sales enquiries during the busiest time of the year.
2. Market orders: Keep your pricing profitable
The nature of marketplace selling means that you will often be competing against a group of sellers also offering the same or similar products. The most sure-fire way of attracting more customers and getting your product under the Christmas tree of thousands of customers is to offer a better price for your product than the rest.
Market orders allow you to give a target rate to your FX provider who will monitor the market and automatically execute a trade on your behalf if your target rate is reached. Being able to secure the best exchange rates even outside of normal office hours will help you sustain a better margin, adjust your prices with changing exchange rates and stay competitive.
3. Multi-currency accounts: Maximise your repatriated revenue
Online marketplaces will convert your foreign currency sales to your domestic bank account for you, but conversion fees and high margins will eat into your eventual profit. With an international bank account, you can avoid this problem.
Receive payments from marketplaces in the currency your customers pay you in, and use the services of a specialist broker to repatriate your revenue at a better exchange rate.
Take control of your international payments and unlock global selling potential
Foreign exchange is often far from being the top priority of any ecommerce business. But when you consider the opportunity of international markets, it can actually be a quick win for sellers looking to improve profitability. Online businesses that learn to implement a simple payments policy will quickly have an advantage over those who leave expose their transactions to the mercy of volatile exchange rates.
Using some of the simple tools discussed it’s easy to make cash flow more predictable and maximise the returns of international trade before the mania of Black Friday begins!
Every day we learn more about the challenges you face. We help online retailers like you to receive money from international marketplaces without having to worry about local bank accounts. Compared to online marketplaces, our clients can save up to 3% of the total sales value on exchange rates.
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