Are you going to this year’s Prosper show? Chances are you have your Amazon business already up and running. If you’re an established international seller looking to drive down costs and increase your profits, you may want to look at the foreign exchange portion of your e-commerce business. Below are three practical tips on how to handle different currencies to ensure you’re protecting your bottom line.
Find an alternative to your bank
This isn’t a suggestion to ditch your bank altogether. You’ll want to stick to your current one for your personal needs and domestic business transactions. But as soon as you’re converting currencies on a regular basis for your global online business, you will want to find an option that gives you the most bang for your buck.
Traditional banks typically add a higher margin or percentage to the daily “mid-market” or “interbank” rate, also known as the wholesale rate for exchanging currency. Sometimes this is on top of standard transfer fees per transaction. Currency specialists like OFX can often offer bank-beating exchange rates. While a marginally lower rate may not appear to have a big impact on one transfer, this can quickly add up. Switching to a provider that specializes in currency could make the difference in your take-home profits in the long run.
As an Amazon seller, you’re probably already familiar with the payment providers that offer a currency exchange service. It’s important to compare your options, because some may charge as much as 5% on top of the wholesale rate. Try asking them directly about their margins on each transfer, or if they have any special rates for online sellers.
Get a multi-currency account
Once you’ve looked beyond your bank, it’s now time to look for the right multi-currency or cross-border account for your business. A multi-currency account simply allows you to send, receive and hold funds in multiple currencies within one place. By using a multi-currency account like the OFX Global Currency Account, you can avoid unnecessary foreign exchange fees and save on every international payment or invoice.
For example if you’re a US-based Amazon seller operating in the UK market, you can have Amazon directly deposit funds into your Global Currency Account in GBP. You can either keep the funds in the account, convert into USD right away, or wait for a better exchange rate and convert at a later time. You can also pay overseas suppliers in their local currencies from the same account, avoiding extra transaction fees.
Limit your currency risk exposure
You didn’t start an online selling business to suddenly become a currency market expert. But dealing with fluctuating exchange rates comes with the territory of managing a global business. A sharp rise or fall in a currency that you usually use to pay or receive funds can have a big impact on your costs and profits. Changes to exchange rates could mean you’re paying more for inventory than you planned to sell them on your Amazon shop.
There are various economic and geopolitical factors that could affect exchange rates, and it’s helpful to know the basics of the global currency market. An extreme example would be when the pound dropped 10% in one day after the 2016 Brexit vote.
When you find a currency specialist provider, ask them if they have tools or expert advice to help you navigate currency swings. OFX has several tools, like Forward Contracts or the Global Currency Account which can help protect your bottom line from market movements. OFXperts are also available to speak 24/7 if you have questions about how to manage your currency conversions.
Growing a profitable e-commerce business means you’re always looking for ways to reduce costs and find new customers. At this year’s Prosper Show, OFX wants to help one lucky Amazon seller save by giving you a chance to win up to one year of free FX. Find us at Booth 3104 to find out how to enter.
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. UKForex Limited (trading as “OFX”) and its affiliates make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.