International Exchange Rates, How Do You React ?

Nottingham United Kingdom
Kudos: 3,693
Joined: Feb 21, 2014
International Exchange Rates, How Do You React ?
20 Jul 2015
As more and more sellers are now selling internationally, factoring in the currency exchange rate becomes more important especially for sellers working on tight margins.

With the Australian Dollar in particular having changed by nearly 9% against the Pound in the last few weeks, how do you stay on top of your international pricing ?

Obviously those that use services such as WebInterpret have their prices adjusted on a daily basis, but for others how quickly can you react to a sudden(ish) change in exchange rates ?

We currently work in a competitive market on a very small percentage so a change in exchange rates, no matter how small, has to be reacted to quickly to enable us to remain competitive, and more importantly, keep our profit margin. That is why we can now reprice our entire eBay catalogue within around an hour of a change in exchange rates.

This has enabled us to increase sales as well as profitability in our international marketplaces.

The question is, how do you do it ?

[Last edited: 20 Jul 2015]
E-commerce , love it or hate it, that's why we are here
United Kingdom United Kingdom
Kudos: 15
Joined: Jul 24, 2015
Re: International Exchange Rates, How Do You React ?
24 Jul 2015
When you say you can update all prices in half and hour how many items are you talking about?
UK United Kingdom
deepak Goyal
Kudos: 23
Joined: Feb 19, 2014
Re: International Exchange Rates, How Do You React ?
24 Jul 2015
Currencies Direct has published an e-book (download it here) which provides a lot more detail on these issues and specifically talks about how to overcome them.

Exchange rate movements affect online sales and profits significantly. The 9% move you have mentioned could just as easily occur in other major currencies such as USD, GBP and EUR - in fact we've seen the Euro lose over 7% against GBP since February this year and over 5% against US Dollar.

There are two issues at work here. Firstly, the exchange rate itself and more specifically the exchange rate that you are able to achieve for the transaction you are making. The better the exchange rate, the lower the cost of the transaction. The second issue is that of time. If you agree a deal to import products at time (a) but the physical transaction occurs at point (b), the time difference between (a) and (b) creates Foreign Exchange risk.

You will not be able to completely remove risk from the equation, but you can mitigate most of it. I would advise that you firstly identify exactly where exchange rates are having the impact in your business. Once you have done this you can start looking at the best solution

Sourcing stock in foreign currency (importing)
What does it affect:
Instantly affects your product input price
How to deal with it:
1) Secure a wholesale exchange rate when buying the currency
2) Use a forward contract to lock in exchange rates today for use in the future

Frequency of price changes based on exchange rates
What does it affect:
Regular/daily changes = potential confusion for customers.
Infrequent price changes = great for customers but your profit goes up and down with the market
How to deal with it:
1) Your listing software may have the ability to build in a currency buffer to pricing
2) You can use forward contracts to hedge the risk on your sales to avoid having to change prices too regularly

Converting foreign sales revenue into your home currency
What does it affect:
Assuming a 50% profit margin on your products. Marketplace exchange rates = a hidden 8% reduction in your net profit
How to deal with it:
1) Use an e-tailer Collection Account to collect funds from marketplaces to avoid the conversion charges
2) Use forward contracts to protect your profit from currency risk

Currencies Direct is a wholesale foreign exchange company which works with over 2,500 online retailers to help them manage currency issues. Please visit our website (here) or contact one of our e-tailer specialists on 0044 207 847 9269 to discuss e-tailer Collection Accounts and forward contracts.

[Last edited by moderator: Fixed formatting — 24 Jul 2015]