Adding New Foreign Markets
Situation
A US based online retailer has experienced strong demand in the few foreign markets where they have offered the option to pay in local currencies. However, risk and hassle have prevented further expansion into international markets:
- US dollar value of each international sale is unknown until settlement by the processor
- Cash flow is therefore unpredictable
- Reconciliation of transactions in multiple currencies is problematic
Objectives
If the online retailer could tap into the proven demand in foreign markets more effectively, international sales could lead to substantial growth. In order to do so, these key objectives need to be met:
- Eliminate foreign exchange risk to stabilize cash flow
- Simplify reconciliation to reduce work required
- Stimulate international sales by offering shopping in more currencies
- Minimize technological issues around sales in foreign currencies
Strategy
E4X technology is used to provide local currency pricing in a wide variety of foreign currencies, dramatically expanding the international markets where the online retailer can expect to grow sales rapidly.
Prices are set in US dollars and E4X exchange rates are used to automatically display these prices in the currency of the site visitor using IP geo-location. Thus, the online retailer experiences stable and predictable cash flow, while international customers know exactly what each transaction will cost them in their own currency.
E4X reporting and reconciliation tools are used to reduce strain on in-house resources. Implementation is fast and easy with full integration completed in just 30 days.
Results
Overall results from the implementation of a strategy of this nature vary, but are typically:
- Substantial increase in international sales with the addition of local currency pricing in more markets
- Elimination of foreign exchange risk and stabilization of cash flow
- Reduction of impact of international sales on operations
- Rapid implementation results in shorter time to new markets
