Selling on overseas marketplaces is a great way to expand your business and get your products in front of more customers. Whether you’re already selling abroad or just considering it right now, you’ll need to know the ins and outs of selling in a foreign currency and how fluctuating exchange rates can affect your profit margin. You could be saving time and money with the right solutions in place.
Do marketplaces have any requirements for international sellers?
While lots of marketplaces provide a great platform for international merchants to list and market their products, the services offered for converting and transferring your sales proceeds back to your home bank account can vary. For example, some may only be able to make in-country payments, meaning you’ll need access to a foreign bank account to receive the payments before moving your funds home.
Exchange rates can affect your profit margin
Since you’ll be generating sales in a foreign currency, the amount you end up with will depend on the exchange rate at the time your funds are paid out by the marketplace. Exchange rates are constantly fluctuating so if the rate doesn’t happen to be in your favour at the time of the payment, you’ll end up with less. As an example of the effect this could have on your business, see how the GBPUSD rate moved over the key Christmas period. In early November ’15 the rate was as high as 1.54, however, by January ’16 the rate had dropped as low as 1.42 (source: World First). If you were repatriating $10,000 worth of revenue, that could mean a difference of over £500 on your profit margin.
The cost of transferring your funds
Even if the exchange rate is in your favour at the time of your funds being transferred, what isn’t always obvious is that some marketplaces/banks can convert your funds at a poor exchange rate, which means you’ll still end up with less.
Using a specialist foreign exchange company to maximise your profits
Specialist foreign exchange companies like World First offer solutions specifically for online marketplace sellers. They can provide you with access to receiving bank accounts around the world – free of charge – so you can collect funds from international marketplaces without them being converted. This gives you the freedom to arrange transfers back to your home bank account at any time of your choosing; for example, when exchange rates are in your favour. And since World First offer great rates, you won’t have to worry about hidden foreign exchange costs either, saving up to 3% on exchange rates compared to banks*.
You can even arrange to fix an exchange rate in advance of the transfer with what is known as a forward contract. If the rate should go against you in the time between agreeing a rate and the transfer going through, you’ll be unaffected. Should the rate go in your favour, however, you won’t be able to benefit from the better rate. But what a forward contract is all about is certainty. You’ll know exactly what the rate will be, so you’ll be able to budget for it.
Any other benefits?
You can also benefit from World First’s great exchange rates if you make international supplier payments, helping to keep your costs down. And with the fastest available international transfers, you’ll be sure to keep your suppliers happy.
For more information on how World First can help cross-border merchants visit worldfirst.com or contact their dedicated e-commerce team directly on 020 7801 1051.
*Calculated from exchange rates and fees obtained using mystery shop data on 08.10.15, based on the cost of making a transfer of £5,000 in euros excluding the transfer fee.