Dang, business is good! So good that the next logical business decision is to expand operations into international markets.
Foreign markets provide online merchants opportunities to reach a larger customer base, generate more revenue, and ultimately, scale.
But international e-commerce also comes with challenges, as does any new business endeavor.
This article will explore challenges and solutions regarding international expansion, including:
- Where merchants can expand internationally
- Payments: Customer payment methods in foreign markets, merchant currency receiving methods
- Foreign Exchange
- Local taxes in foreign countries
Righty, then. Let’s dig in.
You’re an online merchant. Your sales numbers are off the charts. Listings are optimized. Keywords are performing. Revenue is rolling in.
What are you going to do to reach more customers?
Where you can expand depends on the marketplace platform you’re utilizing and what countries that platform supports.
For example, the ever-popular Amazon marketplace currently operates Amazon stores in 16 countries.
PRO TIP: Test the waters. You didn’t open up shop in your current store country and five others simultaneously. Pick a country to test in (do a little research, weigh the pros and cons), and set up shop.
For example, if you are a US seller, it might make more sense for you to expand to Canada or Mexico first, based on the plethora of seller-support tools available and how well you use them to your advantage. The same could be said for Europe or Asia. This is going to depend on your product and business individually!
Now, there are different requirements you’ll need to provide to set up an Amazon seller account depending on location. You can find those guidelines here!
Now you’re set up. Customers are visiting your international listing. Orders are being placed.
How Will My Customers Pay?
In their local currency, duh! Up until now, you’ve been dominating in a single currency.
Not anymore. Business is about to get even better, but your best bet is to use a payment provider.
Payment solutions, like the types of complete money management solutions PingPong offers, opens a world of benefits to merchants. For example:
- Save time - no hassle of having to open a foreign bank account
- Receive money in customers’ local currency
- Pay logistics or suppliers in local currencies
- Lower than low conversion rates - we’re talking mid-market, never more than 1%
- Withdrawal in your local currency
- Choose when to withdraw money, based on the market. More profit? Yes, please!
Most countries are going to require some type of business or personal bank account to operate within their economy. A virtual account (make sure you get one that is registered and regulated by reputable financial institutions) eliminates the need for collecting business documents, flying to the country where you want to operate, and applying for a bank account in a different country, with different laws, that might even speak a different first language. Technically, you’re saving time, money, frustration, and potential obstacles that could arise. Win-win.
RECEIVE IN LOCAL CUSTOMERS’ CURRENCY
Most people don’t have bank accounts around the world with different currencies in them - on the off chance they one day want to buy something in Euros while living in Australia.
Customers universally expect to make online purchases in their native currency denomination. That’s all that they have. Being set up to accept payments in the foreign currencies where your product is selling provides a seamless user experience to your customer base.
We’ll get to withdrawing profit in a minute, but not so fast. Let’s say you’re selling in Dubai. You’ve racked up several thousand AED. You need to order more merch from your supplier, who also happens to be in Dubai. You are able to pay your supplier (or other logistics company) in their local currency directly from your account. No fees. No conversions. Easy peasy.
What is the protocol if you are selling in Dubai but your supplier is in China, you ask?
EASILY CONVERT CURRENCIES
Traditional marketplace models charge anywhere between 3-5% on top of the market rate to convert merchant earnings. This conversion is done behind the scenes. Money from the foreign markets where you sell - whether Europe, United Kingdom, Japan, etc., is paid to you in your local currency after those fees have been shaved off the top.
BUT. If you’re using an innovative payment partner, you can shop rates. For example, PingPong never charges its customers more than 1% for this service. That’s anywhere between a 2 - 4% savings. That might not seem like much, but imagine the savings difference on $5,000, $50,000, $100,000, $250,000!
PAY VAT/LOCAL TAX
Imagine you’re a seller in the United States. You’ve expanded business operations to Europe, let’s say Spain. Your customers purchase your products and pay in euro. Those profits are then converted into US dollars - either by the marketplace platform you’re utilizing or the payment solutions platform you’re using to optimize profits.
Not so fast. Some foreign countries have local tax laws, like VAT and GST. You’re responsible for paying those. But the marketplace platform you sell on, like Amazon, has already charged a conversion fee and paid you your profits in US dollars.
You’ll have to convert USD back to EUR (paying an FX fee) to pay up. However, if you’re working with a money management solutions platform like PingPong, you can pay VAT, GST, etc. right from your dashboard, without ever having to pay conversion fees, and definitely not paying double conversion fees!
With a payment solution platform, you control your profits. You can optimize logistics and save more money when it comes to paying suppliers and/or local taxes. When the time comes to withdrawal your money, you get to be confident knowing you are truly getting the most out of the profits you’ve worked so hard to earn, with the best rates in the business, if you so choose.
CHOOSE WHEN TO WITHDRAW MONEY
Most marketplaces aren’t working with your best interest in mind when it comes to foreign exchange rates. Conversions are generally done on a scheduled basis. Bi-weekly or monthly. However, some payment solution platforms allow you to choose when you withdraw your money. Why is this awesome? Because you can wait for the best conversion rate, and choose to withdraw when that rate hits and save even more money than you would when utilizing a traditional marketplace model.
Schedule a free demo with a dedicated account manager to walk through exactly how these solutions can benefit your business and get you up and running internationally in no time.