When you start actively selling overseas it's important to consider the impact of expansion on your product prices. At a minimum, you should to be aware of the local markets and what your local competitors are pricing similar products at so that you can factor that into your pricing decisions. Whether your products are in the low, mid or high price ranges you need to consider the balance so that you are not too high, impacting sales, and not too low, impacting margins. On top of this there are some other factors to take into account in your price strategy:
When looking to purchase, buyers familiarity with their own currency can be a decision maker when purchasing from abroad. If your prices are not in the buyer's currency, but are instead in your local currency, it can cause a buyer to have some concerns and leave your site. USD may be the global trading currency, but when it comes to consumers purchasing products, they don't want to make a calculation that may not be right when it comes to the bill.
This has the biggest impact during checkout but can also make a difference when sellers are looking at your product pages. Ideally, localise all prices to the currency of your buyers. Localising your prices can be quite simple these days. Many ecommerce platforms have plug-ins available that enable you to do convert and display prices to your buyers and marketplaces will often do the conversion on your behalf.
Unfortunately though, it's not always the case and although it is simple, in practice there are still some areas to think about.
What to take into account when localising pricing:
1. Conversion Charges
Simply displaying the price for your buyer to see how much they will pay can still end up being misleading. If only display the price in the buyer’s currency but your payment provider only charges in your domestic currency then your buyer will be charged conversion fees and the price paid isn't going to end up being what was displayed to your buyer.
Make sure your payment platform and your pricing is aligned so that there aren't any surprises for your buyers.
2. Rounding
Displaying price conversions can also have another side effect that can be off-putting for users. A direct conversion will end up with some quite random prices; not 79.99 or 80 pounds, you’re prices will be more likely 76.43 or 88.46 euros.
In practice, this isn't as impactful as displaying a different currency but it does look unprofessional and you should consider rounding in your pricing strategy.
On top of this, be mindful that not all cultures are familiar with the .89 or .99 pricing approach. While a fairly common practice in Western cultures in others, like Japan and China, you're far more likely to see whole numbers or numbers rounded to the nearest 10.
3. Taxes & Duties
Each market has it's own set of taxes and duties that need to be taken into account when selling internationally. Ultimately, the best approach is to ensure when your buyer makes a purchase, all taxes are included in the price they have paid. For the display of this to your users you can either wrap it up in the final price or display the taxes separately. Personally, I would recommend the separate display approach as it is then very clear to buyers that all duties have been paid.
There are tools on the market that can help you appropriately price the taxes required and display these on your own website and add them to the buyers costs.
With marketplaces, there are some other points to take into account. When selling into the United Kingdom or the European Union, the marketplaces are responsible for paying taxes up to a certain threshold. We will go into this in more detail on a later post, but basically it is a basket of 135 GBP in the UK or 150 EUR in the EU. This means that when listing you need to make sure both that the marketplaces are taking this into account and you have a strategy in place for items over this amount. While the rules have been in place for a couple of years, there are still some marketplaces that are not providing this compliance.
4. Shipping Charges
The general fixation on offering free shipping has been waning of late, and this is a good thing for international sellers. Buyers know they are paying for shipping and if they're buying from overseas they expect shipping to be a factor.
However, over the years of managing international I have seen that the maximum amount of shipping a buyer is willing to accept is near 20% of the item price. If your shipping is higher than this, consider putting some of it into the item price to get the shipping down. It does of course increase your product price, but buyers look at the total price of the item, including shipping when making a purchase, and there seems to be a psychological factor in play when it comes to seeing expensive shipping in the checkout.
5. Updating Pricing
When pricing internationally currency fluctuations can potentially make it less profitable for you. Wild swings are unusual but small changes can have an impact on higher priced items. Ensure the tools you're using for conversion take swings into account in a reasonable frequency.
Monitor and Analyse Performance
Once you've set your prices, it's essential to monitor their performance and make adjustments as needed. Here are some key metrics to monitor:
Sales Performance: Monitor sales volumes and take into account the impact pricing might be having on these. A good way to do this is to check yourself against your competitors.
Competitive Analysis: Understand and monitor competitor pricing over time. Ensure you are in the range you would expect to be and adjust your strategy accordingly.
Customer Feedback: Gather feedback from international customers to understand their perception of your pricing.
Understanding these factors will give you a head start when considering the steps you need to take to be successful internationally. You don't necessarily have to do everything at once for every country, but it's important to cover the basics as you start to expand and when you have done so, take pricing into account when reviewing your performance.
Comments