So, you’re an online Aussie business and you’re driving new sales and orders. Whether you’ve been faced with new challenges amidst local lockdowns or thinking about maximising your reach in international markets, opening your business to online global sales comes with new considerations.
Take it from me as a small business owner; if you aren’t already familiar with transferring money from one currency to another, it can definitely be a learning curve, but it doesn’t have to be a challenging one.
Financial diligence can be simple, yet is so often overlooked.
From my own experiences growing Cake Maternity’s online presence, we were able to navigate the shift from local to global by learning some foreign exchange (FX) hacks to sidestep any tricky hidden fees, which could also help you tap into the international market or maximise what you’re already doing.
We established Cake Maternity, an Australian premium online maternity lingerie and clothing store, in 2007. So we’re no stranger to the masses of people now shopping online. After seeing the restrictions imposed during the pandemic, we knew this number would only increase in Australia, and globally.
With customers browsing and buying more online, tailoring our offer to the different markets to stay competitive paid off! We generated an increase in our online sales volume by seven-fold in 2020. We also estimated saving approximately $20,000 last year by using an OFX Global Currency Account.
So, what are the FX hacks and lessons I’ve learnt when it comes to selling globally online?
Lesson 1: Go local to go global with your online global sales
While global demand for your product may exist, selling abroad is not a simple “plug & play” operation. It became pretty evident early on for us that we weren’t going to successfully compete in the overseas market, should we not localise our offering. Adapting the customer experience (CX) to the specific market you are looking to sell in is key.
By creating a fully localised approach, from trading in local currencies and offering comparable pricing, to having an on-site support team and investing in competitive delivery times, our business was able to overcome competitive barriers.
Lesson 2: Make FX part of your strategy from the outset
We expanded in Europe, Canada and our now biggest market, the US, which contributes to over 50% of our sales annually. However, what I quickly learnt was that one of the most challenging pieces behind a global sales and distribution strategy is the handling and flow of funds, without losing significant margin due to currency transfers.
Transforming from a local Aussie business to a global e-tailer means we now accept payment in seven different currencies across various payment gateways. Seeking FX specialist support early on in the piece allowed us to establish the right FX strategies for our business and helped minimise impacts on our profits from hidden exchange rates or currency fluctuations.
Lesson 3: Think beyond your bank for FX
With so many payment flow considerations, the complexity of it all can be daunting – not to mention, it can also impact your business’s bottom line. Implementing a global sales and distribution strategy also includes knowing the best ways to tackle these barriers.
We found working closely with FX specialists helped grow our understanding of how to set up the right processes to secure competitive rates on our international transfers. In my experience, traditional banks are not necessarily proactive with currency handling or foreign exchange advice for SMEs, and there is lots of red-tape and challenges which can hinder Australian businesses from creating a bank account overseas. I’ve found turning to specialists like OFX, who work to provide tailored solutions while demonstrating an interest in my business, always make me feel like I am in safer hands.
Using a multi-currency account also helped us avoid multiple conversion and merchant fees that you can incur if making transfers directly through marketplaces and payment gateways.
For example, PayPal charges 4% above the base exchange rate when converting payments received in another currency. The base exchange rate is determined by the wholesale currency markets on the conversion day or prior business day. You’ll be charged for paying for goods or services in a different currency to what the goods or services are listed in, or for services where your recipients receive a different currency from the currency you pay.
A practical checklist to not drown in a sea of currency risks
Managing international payments, alongside the number of competing priorities that come with running an online global sales business can be overwhelming. But information such as how to save on transfers or navigate currency volatility can often be provided quickly when working with an FX expert.
For me, setting up the right foundations when it comes to handling global payments and multiple currencies has been key to success in global eCommerce. Having picked up a few tricks over the last decade on how to navigate foreign bank systems and make international payments, let me share a handy list to check how you’re using FX/CX for your business:
- Understand market peculiarities and offer local, compatible prices
- Pay local suppliers in local currencies where possible
- Lock in favourable exchange rates through Forward Contracts (these can help you lock in favourable rates for up to 12 months)
- Pay foreign suppliers from localised bank accounts
- Don’t be afraid to ask for better exchange rates, especially for larger transfer amounts
- Be mindful of hidden fees and higher exchange rates when using payment gateways such as Paypal, as it automatically converts payments received in another currency.
Author Bio:
Keith Hyams is the Managing Director of Cake Maternity, an online retailer which offers premium maternity clothing and is the go-to platform for time-poor mums looking for essential nursing wear. Cake Maternity is available in Australia, the US, Canada and Europe.
Keith Hyams has been a client of OFX since 2011 and worked with OFX on the development of this piece.