Australia is facing one of its toughest challenges in containing the spread of the Covid-19 Delta variant, with thousands of businesses seeing themselves back in lockdown. However, eCommerce business expansion shows no signs of slowing down, presenting an opportune time for SMEs to examine the learnings that helped Aussie SMEs navigate the road to recovery last year.
ABS data revealed online sales increased by 52.7% in February 2021 and 37.4% in March 2021 compared to the respective months last year*. However, a considerable portion of Aussie SMEs is yet to embrace eCommerce business expansion due to financial barriers**.
The accelerated update of eCommerce as a response to the pandemic offered many businesses the opportunity to tap into global markets and reach new customers. However, part and parcel of this are that many SMEs were required to learn about foreign exchange (FX) on the fly. The reality is that a false step and currency volatility can transform what seems like a great deal into a potential loss.
So whether you’re an eCommerce newbie or looking to expand your current business operations, you will want to limit your exchange rate risk and keep conversion fees to a minimum whenever you are exchanging one currency to another.
Understanding the role of FX can help you better protect your profit margins against currency risk exposure when dealing in multiple currencies. Currency fluctuations and the strength of local currencies can impact the amount you end up paying when supplier invoices are due. At times, you could be paying more than you originally planned for.
So, how can you ensure you have the appropriate FX safeguards in place when engaging in cross-border trade?
Integrated FX solutions for eCommerce business expansion
If you’re selling on international marketplaces, or collecting and receiving funds from payment gateways, one of the most important factors as an online business is ensuring you don’t get stumped by unnecessary conversion fees.
Let’s break this down further. Some countries like the US require businesses to have a local bank account to receive funds in the local currency. Without a US-based account, marketplaces and payment gateways can automatically convert your US dollar revenue back into Australian dollars using their own exchange rates. As a result, if you use your Australian bank account, you could pay more in conversion and merchant fees than necessary.
So, whether you’re selling on Amazon, eBay or using payment gateways like Stripe, opening an OFX Global Currency Account can be a great way to bypass merchants double-dipping in currency conversion and merchant fees.
Financial connectivity when selling globally
We all know as a business owner, you can wear many hats in your business. So it’s no wonder that turning to one institution, like a bank, to conduct all finance and FX related logistics can be very appealing. However, you could be missing out on the more FX specific expertise and tools that an FX specialist, like an OFXpert, can offer to help safeguard your business against exchange rate fluctuations.
For example, the OFX Currency Exposure calculator reveals that a US20,000 invoice could have cost as much as AU$26,745 and as little as AU$25,439 in the last 3 months – an annual difference of AU$5,224. Having the awareness and education to understand how currency volatility can impact your costs and profit and how to access favourable rates even if the market isn’t in your favour is key.
When planning and preparing for potential FX risk, it’s worth looking beyond traditional institutions to currency specialists who have the expertise to support you and your business on your global FX journey. Working with an OFXpert can help give you the tools to help take control of your transfers, so you can go back to focusing on what matters most – your business.
Edward Wiley, Director, Strategic Partnerships – eCommerce, OFX
Ed Wiley has been running the eCommerce partnership arm of OFX since 2016, responsible for driving growth and innovation. He regularly shares his wealth of knowledge in the areas of international payments and eCommerce with sellers and partners around the world. Ed is an annual speaker at conferences such as Retail Global and Online Retailer and a guest speaker on several eCommerce podcasts. By partnering with other leading eCommerce services, Ed is creating educational content and resources to help OFX online sellers take their business global.