How to Leverage Foreign Currency Volatility in Your E-commerce Business

How to Leverage Foreign Currency Volatility in Your E-commerce Business

For any e-commerce business, it makes sense that the more international markets you have, the more customers you’ll have and the more products you’ll sell. As a result, your business can reap the benefits of its increased bottom line.

Or perhaps you’re looking to source your products from overseas, thinking it’ll save some money or that you’ll find unique items that you can’t find locally.

However, it’s important to remember that selling to international customers or buying from manufacturers abroad exposes your business to volatile currency markets.

These fluctuations in the currency markets can significantly impact the cost and pricing of your goods and, ultimately, your company’s profits.

Foreign exchange rates can move by as much as 10% over just a few weeks or even days. Several factors can cause these fluctuations, such as political events and elections, economic data and forecasts, central bank meetings, commodity prices, and even the weather.

Some of these events leave only a temporary impact, while others can continue to create volatility for months.

For instance, in the weeks following the UK’s Brexit referendum, the pound fell by 10.4% against the euro, from €1.3017 on June 23, 2016, to €1.1663 on July 6, 2016.

While volatility can undoubtedly affect your e-commerce business, it can be a currency trader’s friend. As major currencies often display high price swings, if trades are placed wisely, the high volatility can help with tremendous profit-making opportunities.

Volatile currency markets don’t just impact traders and businesses. Anyone can be affected, positively or negatively.

That’s why when paying overseas invoices or repatriating profits from abroad, you want to ensure you are getting the best exchange rate and not paying enormous transaction fees.

You can avoid this hassle by having a bank account for each currency you are dealing with.

Otherwise, banks and international marketplaces, such as Amazon, will charge fees and uncompetitive exchange rates for each currency conversion when depositing funds into your domestic account.

With your currency-specific bank accounts, you can choose when to transfer your money back home based on the timing of when exchange rates are favorable.

Solutions To Currency Rate Fluctuations

When selling on multiple international marketplaces, your accounting can become a nightmare, especially regarding currency conversion for pricing, maintaining profit margins, and calculating your profits and losses (P&L). Sellercloud offers the ideal solution for this.

Sellercloud allows online retailers to consolidate their P&L across orders from all marketplaces. It records the currency in which each order was placed, and as Sellercloud automatically checks exchange rates once a day, it saves the current rate at the time of the order.

You can also search for orders across multiple currencies based on the home currency (USD for American companies).

For example, if you want a list of orders valued at over $200, it will also include orders with the corresponding value in EUR.

To take your accounting one step further, Sellercloud allows you to export orders into QuickBooks using its multi-currency feature.

By default, your foreign currency orders will post to QuickBooks in USD using the conversion rate that Sellercloud had automatically saved at purchase, or you can export orders in their native currency.

When you purchase goods from an overseas manufacturer, you may need to pay for them in their home currency. This can lead to more confusion when determining your profitability and cost of goods sold (COGS).

Luckily, Sellercloud supports international currency purchase orders (POs) and allows you to control the conversion rate on the PO based on the rate when you paid for the goods.

No matter which marketplace you sell in, you must manage your pricing to remain competitive and maintain your profit margins.

Fluctuating currency rates can complicate your pricing strategies even more. The good news is that Sellercloud allows you to easily adjust your item prices across all marketplaces.

You just add the base currency to your company profile, and your prices on the international marketplaces will auto-adjust based on the current exchange rates using a rating API.

You can even convert currencies in bulk on multiple selected SKUs at once.

Another bonus of using the Sellercloud system is taking advantage of our partnership with XE, which is the leading foreign exchange provider.

Through this partnership, you can accept and deposit payments locally and exchange them whenever the rates are most favorable.

You can even lock in your rate for up to three years, so you can rest assured that currency fluctuations will not manipulate your funds.

Whether you are an entrepreneur or a consumer, I’m willing to bet that you have a PayPal account. Did you know that PayPal, unlike most other payment processors, can hold multiple currencies in one account?

You can open a balance in any of their supported currencies, make or accept payments in these currencies, convert your balance from one currency to another, and even close out your balance in any currency you choose.

Pretty cool, right?

Even better is that Sellercloud’s integration with PayPal allows you to charge credit cards for orders, refund payments, capture payment details, and send PayPal invoices—all in multiple currencies!

Why Should I Expand Internationally?

Expanding your e-commerce business globally undoubtedly brings challenges and opportunities. As the domestic market tightens and becomes more competitive, more sellers expand abroad.

Shopify‘s data from The Enterprise Guide to Global Ecommerce anticipates a 246.15% increase in worldwide e-commerce sales, from $1.3 trillion in 2014 to $4.5 trillion in 2021.

That’s more than a threefold growth in online revenue.

Why Should I Expand Internationally?

It’s not just B2C e-commerce that’s seeing a global explosion, but B2B e-commerce sales are seeing even more growth.

According to Statista‘s B2B Ecommerce 2017 Report, B2C e-commerce sales were $2.3 trillion, while B2B e-commerce sales were $7.7 trillion.

Sellercloud has expanded its integrations to include several foreign marketplaces, including Amazon Canada, Amazon UK, and Walmart Canada.

International marketplaces are like the new frontier for e-commerce entrepreneurs.

It is uncharted territory and raises many questions, such as where should you invest first? Which countries present the best market for your products? Who should you partner with for global warehousing and third-party logistics?

I should note that many Sellercloud clients use Shipwire for worldwide logistics and fulfillment services.

Sellercloud’s integration with Shipwire allows you to process and fulfill multichannel orders. Then, updated inventory and order shipping confirmations will sync to your Sellercloud system.

If you aren’t selling internationally yet, you, like many other e-commerce businesses, may be experiencing a severe case of FOMO (fear of missing out).

If you are ready to enter the global e-commerce market and explore new revenue streams, ensure you protect your profits from the volatile sharks known as foreign currency fluctuations.

Contact Sellercloud to see how our tools can leverage these volatilities to your advantage.

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Jeremy Greenberg is the Founder and Chief Executive Officer at Sellercloud. His strong background in software development and e-commerce have propelled Sellercloud to the forefront of the e-commerce solutions space. Dedication to client success and a persistent desire to innovate have set him apart as a unique authority on e-commerce and a provider of complex, meaningful solutions to online merchants.