International marketplaces are becoming more and more important for small businesses and Amazon sellers. Though there are many other facto...
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International
marketplaces are becoming more and more important for small businesses and
Amazon sellers. Though there are many other factors, the main one is low risk.
There are numerous potential for additional revenue when you offer your items
in foreign markets. Selling to the other EU members is nearly mandatory for
vendors, particularly those from smaller nations like those in Central Europe.
What's
important is that there is very little danger and expense involved. It costs
very little up front to offer your goods to a vast delivery radius (like Amazon
sellers do); for some businesses, the only costs associated with this are
marketing costs if they want to expand into a new area. Gaining a few more
sales could be the reward, but it could also mean introducing a whole new
product to a market, thus gaining a first-mover advantage.
It brings
about diversity. Having a sizable amount of revenue from multiple markets is
one way to reduce systemic risk in the event of political unrest, job losses,
and/or a sharp decline in the purchasing power of the domestic economy. This is
because it is unlikely that all of the markets would experience the same level
of economic impact. This also holds true for modifications in laws, customs,
and culture.
All it takes
to expand internationally is a few button clicks on eBay or Amazon.com. It's
also possible that the provider the business now uses for delivery provides
affordable international shipping. For instance, DHL, FedEx, and UPS are
available in practically every nation.
However,
they pay in their local currency when selling to overseas clients. This puts
the onus of currency exchange on the vendor. Amazon makes the most of its
integrated currency exchange feature when it makes a sale. The rate is probably
about the awful 4% that a commercial bank offers its clients, give or take.
It's not
clear just how much markup is involved, which is never a good thing.
Additionally, a lot of sellers would do it without second thought. It
substantially reduces their earnings. Retailers who sell on Amazon (or eBay)
typically face intense competition in their industry. Because there are so many
vendors on these platforms, gross profit margins are probably going to be
extremely low unless the item is being sold in large quantities.
Every
percentage matters when using a low-cost strategy of high volume, low prices.
You are probably competing against domestic businesses who do not lose a
portion of their sale to exchange rate markups, thus spending an unnecessary 4%
on currency conversion could mean the difference between survival and failure.
For the avoidance of doubt, this markup is applied on the total sale price of
products sold on Amazon rather than the net profits. This represents a $4,000
annual waste when sales revenue is $100,000, to put things into perspective.
How to
get around the exorbitant exchange rates
However,
there are still some choices available to shops and Amazon sellers. It is
possible to reduce currency margins from the exorbitant 4% to approximately
0.5% to 1%. This is accomplished by opening foreign collection accounts, which
entail that when a foreign customer pays your business, the money stays in
their local currency in one of your foreign accounts
Why is
that good?
That way,
you have more control over the process of exchanging your money instead of
relying on Amazon. Alternatively, you can use other money transfer providers
and these collection accounts themselves. Numerous might be employed to cover
many areas. For instance, World First covers Singapore, Japan and China, USA
and Canada, and money corp may be used to cover the EU. OFX covers Hong Kong,
New Zealand, and Australia. All of them typically provide suppliers with
outgoing payments in more than 100 currencies (money corp is 40).
For most
businesses, a higher transaction volume results in a better exchange rate. But,
it will be superior to the Amazon currency exchange regardless of volume.
Businesses with large sales may benefit from this. When opening an overseas
collecting account, an additional $3,000 in profit should be anticipated if
annual revenues exceed $100,000.
However, it
is important to keep in mind that this can result in longer transaction times.
Generally speaking, having an overseas account will probably cause your cash
flow to slow down even if the transaction times are fair because you won't have
time to send money on a regular basis. To solve these problems and cover for
the times when sales revenue is not yet in the domestic business account, a
little cash buffer would be a wonderful idea.
PayPal will
be used by a lot of merchants, especially on eBay, to handle payment
collection. This is okay, but, like with banks and Amazon exchange, you should
avoid PayPal's transfer fees and exchange rate at all costs. It makes sense to
move funds from PayPal to a TransferWise account instead.
In addition
to charging horrible translation fees of between 3.75% and 4% (in 90% of
situations), PayPal also charges the same currency fees (e.g., 2% in Canada /
US) when sending money overseas. TransferWise borderless accounts (among many
others) offer free cross-border transactions to the same currency.
Additionally, TransferWise charges about 0.5% for currency conversions, which
is about 3.5% less than PayPal when sending, example, EUR to USD.
Since PayPal
is still a very safe corporation to use in business, connecting a TransferWise
borderless account to PayPal is great. Nevertheless, connecting an account for
transfers entails having the best of both worlds: a money transfer provider
that will give the best available rates that are on par with the interbank
rate, and PayPal's security and broad applicability to practically all other
third parties.
Read More:
15 Realistic Ways to Earn Money on Amazon
Amazon Marketing Tactics to increase Conversion Rates and Sales
12 Easy Ways to Make Money Online for Women
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