Keep your overseas pricing competitive over the peak holiday season
Currencies Direct October 27th 2015 - 3 minute read
Pricing is up there as one of the most important considerations you’ll make for your ecommerce site this festive season. All the effort you put into the successful marketing and delivery of your products could be completely undone without a pricing strategy to match.
When you sell internationally, things begin to get more complicated. Competing with local sellers and keeping your prices down while accommodating international delivery charges and a fluctuating exchange rate can be a constant challenge.
The days from Black Friday through to Christmas pull in 50-100% more ecommerce revenue compared to shopping days throughout the rest of the year. During this period of increased sales, you need to ensure that your margins are well protected from foreign exchange risk – or the results could be catastrophic.
Here’s our guide to getting it right this Christmas
The markets are always moving
The crucial thing to remember is that exchange rates are moving from one minute to the next, so your pricing strategy should be as fluid as the exchange rates that influence it. A dynamic pricing strategy will keep your business above water as costs increase and decrease and profit margins grow or shrink.
Automatic vs Manual pricing on Amazon
When you’re listing on Amazon’s international sites, you have the choice of making individual listings and calculating your price in a foreign currency manually or replicating a listing from your domestic seller profile, linking it to its original price.
When you allow Amazon to automate your pricing decisions, you have the option of pricing your products at a percentage above your home price, or at the same amount as your home price. Amazon will then make daily calculations based on the current exchange rate and adjust your pricing accordingly. In theory, this should ensure your item stays competitively priced (and it is undoubtedly a great time saver!).
However, if you don’t closely monitor the situation you run the risk of making losses as the exchange rates move. It’s always important to factor in exchange rate movements and identify the upper and lower price limits that you are prepared to sell at.
Exchange rates in 2015 so far
Over the course of this year the US dollar to Sterling exchange rate climbed to highs of 0.68 in April – but only two months later they fell to 0.62. When you think about that sort of market movement in terms of online sales, you can see the real-life impact of currency conversion on your business.
For example, if an online seller in the UK made $50,000 worth of sales in the US in April they would have received around £34,000 when they converted their sales to Sterling. Two months later, the same sales volume would have been worth £3,000 less.
Being clear about how much foreign exchange movement you are prepared to absorb in your pricing model is the key to successful international sales all year round!
Keeping an eye on the markets
Subscribing to a service that gives you regular exchange rate updates allows you to manage pricing manually, but relieves the time-consuming aspect of monitoring currency movements.
Our Rate Watch service allows online sellers to identify a safety barrier rate of exchange that when reached or exceeded would start to have a negative impact on their profits. If the exchange rate comes close to this point, one of our dedicated ecommerce currency consultants would contact the online seller. The seller would then be able to adjust their pricing accordingly and avoid any nasty surprises, without the hassle of monitoring exchange rates daily.
Equally, it’s also wise to calculate a ceiling exchange rate that would make your product too expensive for consumers to consider and damage your sales figures. Marketplaces like Amazon are by nature a highly competitive arena – when there are likely to be several vendors able to offer products that are the same or very similar to yours, the only way to guarantee a sale is to offer the best price.
Keep an eye on exchange rates and you could be well on the way to making it into the all-important ‘Buy box’ this Christmas. For more information on setting up a Rate Watch, get in touch with the e-tailer team at Currencies Direct: email@example.com or call +44 (0) 20 7847 9269.