You’ve gone through the grueling process of finding the right Amazon products to sell. All your research has paid off and your Amazon business is booming. Now your eyes are on the next prize: selling globally on Amazon’s international marketplaces.
Entering new markets can widen your customer base but can also present big challenges. Logistical issues like supplier coordination, managing customer support, and fulfillment are just a few of the obvious challenges. But there are less obvious considerations that can have a major impact on your bottom line. In this post, we’ll cover what currency risk is and how you can manage the foreign exchange part of your business to save on your global payments with our partner OFX.
What Is Currency Risk?
Because exchange rates are constantly changing and can be volatile, they represent one of the major risks for businesses making international payments. Currency risk, or foreign exchange risk, refers to the losses incurred by a global business due to fluctuating exchange rates. What proportion of your business results in the need for foreign exchange payments? The higher this amount, the greater your likely exposure.
Choose a Currency Specialist
An OFX survey of 600 small business owners in the United States found that 60 percent of those that expanded internationally in 2020 said that their lack of knowledge about foreign currency exposure was their main barrier.
Selling internationally means you will likely be making payments and receiving funds in multiple currencies on a regular basis. You’ll need a provider for your international money transfers that won’t eat into your profit margins.
Big banks usually add a percentage to the daily “mid-market” or “interbank” rate for exchanging currency. Foreign exchange experts like OFX can often offer bank-beating exchange rates. A lower rate may not seem like it would make a big dent on a single transaction, but if you add in a bank’s standard fee for every transfer, this can quickly add up.
Finding a specialist that focuses on foreign exchange payments could help you keep more of your profits, which you could use to re-invest into your business.
Some considerations to take into account when choosing a currency exchange provider:
Does it offer 24/7 live support?
Does it have special rates for online sellers?
Can you seamlessly transfer between currencies on its platform?
Familiarize yourself with Amazon’s different payment service providers. Some add as much as 5 percent on top of the market rate, so weigh your options and choose one that’s right for your business.
Find an Easy Way To Pay Global Suppliers
If you’re selling more than one product, you’re probably dealing with multiple suppliers and recurring payments on different schedules. You’re also receiving funds in different currencies from one, two or three Amazon marketplaces. If you’re not outsourcing your accounting, you may want to manage all of this in one place so you can save time and focus on other parts of your business to drive growth, such as listing optimization or choosing more in-demand products.
Try a multi-currency account which allows you to send, receive and hold funds in multiple currencies in one place. You can also pay overseas suppliers or pay taxes in that market’s local currency from the same account, avoiding extra transaction fees.
The OFX Global Currency Account, for example, can receive Amazon funds in seven different currencies:
Hong Kong dollar
If you’re a U.S.-based seller operating on Amazon UK, you can deposit your Amazon proceeds into your Global Currency Account in GBP. You can either keep the funds in the account, convert into your preferred currency right away, or wait for a better exchange rate.
You can also look into specific tools offered by foreign exchange specialists. A Forward Contract, for instance, allows you to lock in a rate for up to a year. This is ideal if you are making the same payments every month to an overseas supplier. Your payments will be protected from fluctuating exchange rates for the period that you’ve locked in that specific rate.
Figure Out Local Regulations and Tax Rules
You’re probably already familiar with the domestic regulations and tax rules of your home market. But doing business abroad in multiple countries is a different story. You don’t want to get hit with unexpected import fees and taxes. Any payment delays could mean you don’t get inventory in time to fulfill orders, which when compounded could hurt your profits. Consider setting up bank-to-bank transfers and always supply the right contact information.
Make Currency Markets Work for You
Changes to exchange rates could mean you’re paying more for inventory than you planned to sell them on your Amazon shop. So it’s important to stay on top of currency swings that could affect your business. While it’s helpful to know the general factors that affect exchange rates, it’s also important to seek expert advice so you can ensure your business remains profitable.
OFX has several tools, such as Forward Contracts or the Global Currency Account which can help protect your bottom line from market movements. OFX experts are also available to speak 24/7 if you have questions about how to manage your currency conversions.
Brought to you by OFX. Moving money globally? OFX doesn't just offer great rates. Access 24/7 phone support from currency experts when you need it, and a seamless digital platform when you don’t. Questions? Contact Will Moffet at email@example.com or (925) 209-1648.