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E-commerce and the arguments for accepting multiple currencies

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The third post in SmartBrief’s Spotlight on Customer Service series is brought to you by First Data, a global leader in electronic commerce and payment processing. Read how an online fashion retailer uses First Data’s Global ePricing product to provide its international customers with an “in-country” online shopping experience.

The recession opened the eyes of U.S. retail chains to the need of expanding their reach to new customer bases. Many of the plans made during the downturn are coming to fruition now, including international e-commerce ventures by merchants such as kitchen-goods seller Williams-Sonoma, men’s clothier Jos. A. Bank and apparel giant Gap.

Selling your wares in different parts of the world comes with a clear set of challenges, even when the products are the same ones you sell in the U.S. One of the major issues companies face when going global is how to deal with multiple currencies. Except in China, where the government sets them, there are no official exchange rates for foreign currencies, and rates can fluctuate wildly in the time it takes an online shopper to load the cart and check out.

Simply doing all transactions in U.S. dollars is the easiest solution for a U.S. merchant, but it’s also the one with the most potential to turn off new customers you’re trying to attract. Fluctuating exchange rates mean that even when that U.K. buyer can estimate what he’ll pay for your product, the final price tag can be wildly different when the credit card statement arrives.

The purchase can get even more costly for customers depending on which credit card or payment service they’re using, since the banks that service them ultimately determine what price the customer will pay — taking the pricing power out of the merchant’s hands.

E-commerce companies in it for the long haul are figuring out how to better serve their new customers by offering sales in their home currencies. It’s more complicated for e-commerce companies to set up but likely to pay off in the long-term, since buyers who are more comfortable dealing with a familiar currency are apt to return more often and spend more at the site.

Large online retailers often opt for turnkey packages that take care of all aspects of global e-commerce including dealing with foreign currencies and pricing issues, but smaller merchants will likely need to school themselves or find the expertise to deal with issues of fraud and international trade law.

When it comes to setting themselves up to sell in global markets, they basically need three things:

  • A multicurrency merchant account through a company that can process payments from providers in the countries where you’ll operate.
  • A payment processing gateway set up to handle credit cards from international providers.
  • An online shopping cart that supports multiple currencies.

There’s another benefit for merchants who invest in the resources they need to accept foreign currencies: Setting fixed prices in each country gives U.S. retailers a competitive edge in the U.K., Canada, Australia and many countries right now because the lower dollar makes your products a bargain for customers who can actually see the price when they’re buying.

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