Are you ready for a whole new world? Expanding your selling operations overseas can make you feel like Jasmine flying on a Magic Carpet with Aladdin. A whole new set of possibilities, a new market, and more customers for your business make global expansion a good idea for many large businesses.
With the growth of the internet and the overall globalization of our planet, selling internationally gets easier every day. Products can be shipped in a matter of days to customers across the globe. When a foreign shopper orders from your store, they can get the same or similar experience as someone within your country.
Of course, as with most aspects of eCommerce, the process of selling internationally comes with a few bumps, twists, and turns before it’s completely optimized. One of the hardest aspects of running your business overseas is the management of your pricing. Prices differ overseas due to a couple of reasons, namely the shipping cost associated with the distance between countries and continents.
The standalone shipping price is enough to discourage customers from shopping on your site and result in an abandoned cart. To prevent this kind of a situation, international sellers absorb the shipping cost into the product’s price.
Therefore, your products’ prices are going to be higher overseas. This overall lack of price parity can make international selling a bit harder than anticipated. Luckily, there are plenty of ways you can manage your prices across several markets.
Understand Exchange Rates
It’s common knowledge but it’s also worth emphasizing. One currency is almost always stronger than the other, and most people don’t know how to read foreign currencies without a calculator. This is because currency exchange rates change all the time. The dollar’s value can exceed that of the pound’s in a manner of minutes.
There are a ton of moving pieces that cause exchange rates to fluctuate. You have to make sure your prices are continuously optimized to ensure your product’s value hasn’t been altered by the change in a currency’s going rate. What might appear to be a good deal in the dollar amount might be completely ridiculous in another, so be prepared. In many currencies, round numbers are far more appealing than others, so make sure to round up or down after converting to the new price.
Dynamic pricing can help your prices stay optimized. Not only will it change your products’ prices in accordance with changes in competitor prices, but it will also change prices along with fluctuations in the market. Don’t be taken by surprise. Make sure your prices fit right in with your company’s vertical.
Be Prepared for Additional Costs
Foreign taxes are slightly different than domestic ones, so be prepared for their effects on your prices. For example, the EU holds a Value Added Tax, which is a tax on the perceived value of a product. It’s displayed as a component of the final price, instead of being added to the market price like in the United States. Different markets will carry different costs, so make sure you prepare your margins accordingly.
You can be more competitive in your own country than your foreign markets because of high shipping costs. Plus, it’s easy to corner the market with higher prices for your unique items. If you have an item that no one else has in a foreign market, you can be incredibly flexible with your prices. Raising the price for a foreign market makes your domestic price that much better.
Don’t Give In to Competitive Pressure
Consumers might carry different price perceptions based on your company’s vertical. If your foreign competitors have prices that are lower than you’re used to, it’s not completely necessary to alter your price in a foreign market. Price’s effect on brand value can really come into play in a new market. If your prices are much higher than your foreign competitors’, it can paint you as a far more luxurious brand.
However, don’t be lazy. You still need to make sure that your prices are optimized for their respective markets. If your entire competitor base is selling products at a price well below yours, it’s going to be hard to justify a premium. Play by the other market’s rules to make sure your prices are continuously optimized. And if you can’t afford to be competitive, it might be better to pass on that market until you find a way to make it work in a profitable way.
Selling to an entirely different country can appear to be a daunting task. However, it doesn’t have to be too hard. Aside from shipping woes, selling internationally can be incredibly beneficial for your business. And if you can manage your pricing in an appropriate fashion, it can open plenty of doors to success overseas.