This is a question that many new e-commerce entrepreneurs puzzle over, as e-commerce markets are global.
Here are a few pointers to consider
- Quoting prices in the local currency serves as protection against fluctuations in the exchange rate, which are presented between the local currency and a different commercial currency. However, your local currency may not be the best option from a promotional point of view.
- There may be a commercial advantage in quoting and accepting payments in the currency of the country in which you would like to sell or in a currency acceptable to your foreign business partners.
- The choice of the currency should be based on the risks that the seller is willing to assume in relation to fluctuations in the exchange rate.
- You should also take into account payments for suppliers of goods, service providers such as warehousing and packing, and e-commerce fulfilment You can find out more about these at www.cannonpacking.co.uk.
How to approach it
An acceptable way is to quote prices and accept payments in the local currency and at the same time quote the prices, exclusively for comparison purposes, in another widely known currency, such as United States dollar, and give notice of the approximate exchange rate that is used. This allows buyers to pay in their local currency and at the same time have a good idea of the relationship between their price and the price of similar goods in the local market of buyers.
It is your responsibility, as a seller, to make clear that the payment is only accepted in your local currency, and to use a fair approximation to the exchange rate, so as not to disorient the buyer. You should be aware that if you use approximations of exchange rates that differ greatly from the real exchange rate, you are subject to legal fraud procedures.
If you want to avoid the use of approximations in exchange rates, you can incorporate a real-time currency converter into your e-commerce site, for the convenience of customers.
You must take into account the following aspects when deciding how to quote prices:
Some countries, such as Switzerland, have legal restrictions that prevent companies from billing in currencies other than the local currency. In this case, using a local price and an equivalent comparison price in another currency, such as the United States dollar, the euro, or the yen, may be the best way to present prices online for export items.
Your Chamber of Commerce or local trade association should be able to provide you with information about the application of laws of this type in your country.
The United States dollar is the currency that is frequently used for international payments and is accepted by most, but not all, countries. If you do business in a currency other than your local currency, not only do you run the risk of fluctuations in the exchange rate, but you will also have to pay bank charges for currency conversions.
It is advisable to obtain confirmation from your bank about the most appropriate currency to do business in with a specific target market.
With regard to the single currency of the European Union, if you only do business within the euro area, it is better to use the euro for prices (and to accept payments). However, the euro is not accepted in all European countries, not to mention non-European countries.
Outside the euro area, exporters should consider their local currency in relation to the currencies used in their target market.
Payment by international credit card allows buyers in other countries to pay in the currency in which you promote your product. In this case, you as the recipient of the payment, assume the risk of fluctuations in the exchange rate. If you think this is your best option, it would be wise to consider opening a merchant credit card account.