Online sellers – protect your margins as euro falls further
11 Mar 2015
What a week it’s been for the euro. In fact, what a year it’s been so far in 2015. The value of the single currency just keeps falling and falling; yesterday once again saw new multi-year lows against most of the world’s biggest currencies.
Much of this euro weakness is down to the possibility of Greece leaving the euro, negative interest rates and the European Central Bank’s €1.1trillion bond buying program.
For online merchants selling products in the Eurozone, and transferring their proceeds home, this euro collapse – and we really do have to call it that – is a real concern, as it means that they’ll get fewer pounds for their euros.
At the start of the year, the EURGBP exchange rate was 0.7796, with €100,000 worth £77,960. At the time of writing, the same amount is now worth £71,420, around £6,500 less. Rewind to this time last year, and your €100,000 would have got you around £83,300, that’s about £12,000 less than it is worth now.
Today has seen GBPEUR hit 1.4250, and is homing in on 1.4285; this represents a EURGBP rate of 0.70, a 12% decrease in EURGBP since Christmas Day – at the heart of what is traditionally the busiest time for online sellers sending proceeds home.
And what’s more, many analysts and commentators are saying that the strength of the euro is only going to decrease before it increases again. For online sellers sending their money home, these massive declines in the value of the euro can make a huge difference to their bottom line.
Online sellers would be well advised to take control of their currency transfers, and give themselves some form of protection against ever-fluctuating rates. By fixing an exchange rate, online sellers know that even if euro did fall further, they’ll be unaffected, having already agreed a rate in advance. This is also very useful for effective budgeting.
Online merchants will be hoping that euro strength picks up in the coming weeks and months, but it looks like they may have to wait a little bit longer – fortunately, as we’ve pointed out, there are ways in which they can manage their risk.