As global inflation rates and interest rates continue to rise, currency conversion rates have also seen considerable fluctuations in recent months, reinforcing the importance for consumers hoping to reach and take advantage of international trade to stay up to date with foreign exchange rates and implementing strategies to better navigate future fluctuations.
“Many businesses setting up international e-commerce operations may be overlooking the impact that shifts in the currencies they do business in have on their overall profits,” Global Head of E-Commerce Lucy Allen for foreign exchange and payments company OFX tells Power Retail, “Not factoring in currency conversions, which can account for 2-8% of overseas revenue, and fees could cause unexpected impacts to your bottom line.”
For OFX, a mission to provide better and more reasonable ways for businesses to move money internationally means recognising the importance of providing businesses with a variety of options in order to better assist their productivity and strategies.
“We’ve combined a seamless digital platform with 24/7 access to currency experts (we call them OFXperts) to help our clients with transfers in 50+ currencies in 170+ countries,” Allen offers, “Whether we’re providing an e-commerce retailer with the insights into current market volatility and macroeconomic insights to plan costs or working closely on FX requirements for longer-term global expansion, we support e-commerce businesses with navigating cross-border trade, so they can focus on growing their business.”
For businesses both small and large hoping to operate in international markets, the importance of planning and strategising for the future has fast become more important than ever in the current economic climate. While geopolitical developments, fallout from environmental disasters and the ongoing recovery from the pandemic wreak havoc on the economy broadly, e-commerce must continue to simultaneously navigate ongoing growth and prepare accordingly.
“We’ve anticipated an increase in sales for September as Australian overseas travellers prepare to head to cooler locations on the other side of the globe. To prepare for this uptick, we know from over a decade’s worth of experience as a small, tight-knit team that planning FX costs well in advance can help to avoid financial pain when you need all hands on deck,” says Jennifer Hart, Founder of Everyday Cashmere, “As a small business owner, working closely with a FX specialist has been important when making regular payments in Australian dollars, US dollars and Great British Pounds to material suppliers in New Zealand, Scotland, Mongolia and India.”
“Having a specialist FX expert as an extension of the team has been helpful in not only balancing costs through external factors such as sporadic lockdowns in China, the impact of the geopolitical conflicts and local floods and inflation decreasing consumer confidence, but also managing the specific sales flows of your business.”
“It’s an interesting time for retailers and e-commerce businesses,” says Allen, “We’ve continued to hear from our Online Seller clients that there is ongoing pain due to supply chain delays and excess inventory. There is prolonged pressure to tightly manage inventory and expenses when faced with currency volatility, ballooning sea and air freight costs, and supply overstock due to cautious consumer spending influenced by rising inflation and interest rates.”
“This is causing many retailers and e-commerce businesses to reassess their foreign exchange capability and seek specialist advice for greater currency certainty and cash flow confidence.”
Ultimately, the challenges for e-commerce retailers mean that finding opportunities to save time while also enhancing preparedness for the future become crucial, particularly as foreign exchange markets continue to experience turbulent fluctuations hard for any but the most dedicated market watchers can hope to keep track of.
“Currency markets are hard to predict and most business leaders don’t have the time available to watch multiple currency movements in real-time,” says Greg Ollerhead, Founder of furniture wholesaler Oneworld Collection, “I’ve found hedging six months in advance can be a helpful way to effectively plan costs.”
“Using hedging tools like Target Rate Transfers, where businesses like mine can lock in a future target rate within a six-month timeframe, means a business can better map out cost scenarios and look to minimise the impact of shifting exchange rates.”
The key takeaway for businesses, particularly e-commerce retailers, to learn is a simple one. It’s that famous Scout’s Motto, you know the one – be prepared.
Observing strategies and taking advantage of opportunities to enhance preparedness are worth their weight in gold in times of uncertainty, and with the threat of a global recession looming, the value of being prepared now is arguably greater than even the most diligent Scout could have ever imagined.
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