This article discusses pricing considerations and determining the full cost of doing business online together with how a strong dollar affects exporting. This information is taken from "Preparing your Business for Global ecommerce", a guide provided by the U.S. Commercial Service for online retailers to manage operations, inventory, and payment issues.
Last Published: 5/22/2017

When starting to export overseas via eCommerce channels it is important to consider the full cost of doing business online:

  • What will your product's full landing costs be?
  • What do competitor products sell for overseas?
  • All these considerations are an important part of your market research.
In general, you’ll want to select products for cross-border e-commerce that deliver the margins you seek, after subtracting the costs of getting the product to the buyer.  At the same time, you need to be conscious of what competitors are charging for a similar product.  You can easily get this information the same way buyers do, by comparing products and prices online.

These days, on-and offline exporters must carefully monitor the price of their products and the strong dollar.  For example, some buyers may have to pay 25 percent more for your product this year than last.  Depending on the product and the market, little profit may be possible from the sale, but you can take some practical, common sense actions to help manage the strong dollar's affect on your pricing and profit.
 

Ways US Exporters can manage the Effect of a Stronger Dollar

Don’t abandon your overseas customers because the U.S. market is booming and overseas markets aren’t (Americans have a history of doing this, only to find themselves having to start over again when international orders bounce back).

While it’s true that some U.S. companies have lost orders because of the strong dollar, U.S. goods and services retain their competitive edge because of a widespread reputation for excellent quality, after-sales service, and business ethics. However, in some cases, those attributes will not be enough to prevent customer defections.
  • Work with your international customers (especially those in Japan and Europe) to ease the burden of a stronger dollar and their weaker currencies. Consider passing along to your international customers the savings you realize from lower product input and transportation costs.
  • Offer longer payment terms by leveraging the programs of the Export-Import Bank. In some instances, the Bank will loan your customers money to buy your products. The Bank also has insurance products that will, among other risk-management strategies, cover any foreign currency losses you might  experience.
  • Revisit your supply chain to see if you can find additional efficiencies. Ask your freight forwarder and shipping company to work with you to retain (and even grow) your international customer base. Everyone in your supply chain benefits from working together; you have no reason to face exporting challenges alone.

While working with existing international customers, develop additional customers in the 20 countries that have Free Trade Agreements with the United States and that have low or no duties on qualifying US goods.
  • Investigate countries whose currencies are tied, or “pegged,” to the dollar.
  • Help your customers in other ways, such as temporarily lowering your wholesale prices, paying for promotional activities that your distributor recommends, and offering larger volume discounts as a hedge against future increases in the dollar’s value.
  • Talk to your shipping company and third-party logistics provider to position some inventory in your largest overseas market. Shipping products in bulk is less expensive than sending small quantities via air freight.

Use the strong currency challenge as a means to reduce your costs and your buyer’s costs. Explore starting or increasing your use of eCommerce channels for cross- border promotion, sales, and fulfillment. These channels can help you sell to the end user directly, reducing your dependency on middlemen and lowering your costs significantly. These days, solutions providers can accept payment; handle duties, taxes, and documentation; and even translate your shopping cart into different languages.
  • Price your goods in your customer’s foreign currency, and use hedging to keep the exchange rate fluctuation costs to a  minimum.
  • Consider exporting products that are well suited for bulk shipment, such as those that allow in-country assembly or dilution.
  • Make sure your products are classified with the correct HS number to qualify for the lowest possible duty rate. For example, your product may be classified under a broad category (e.g., medical supplies) when it would qualify for a more favorable rate if categorized more specifically (e.g., syringes).
  • Be aware of the minimum value at which the buyer’s government does not assess duty. In China, the minimum value is USD 5. In Australia, it’s USD 900. You can let the buyer know what they will pay (estimated landed costs). For a list of countries and their minimum (de minimis) rates, see Appendices.
  • Keep communication channels with your buyers open. Communicate with them even more frequently to learn about changes in their marketplace, and what you can do to maintain their business. Customer service is a competitive advantage for smaller enterprises—a strength you can use to your advantage.
  • Currency fluctuations are a fact of life in international commerce. Conditions will change continually, so make sure you’re dedicated to the international part of your business for the long term. Contact the U.S. Commercial Service for help starting or growing your international sales.