Online Purchases - Leverage Dangers

13 Apr 2011

Buying online is great, and offers great value at times. It can also offer awful value at other times, when shopping abroad. Why is this, and why can something cost twice as much in the US one week, in comparison to the next? Let us explore and explain to save you several financial headaches.

 

 

Understanding International Markets

At times, this can be a difficult enough subject in itself, but a basic knowledge is important in finding and maintaining value in products and services you buy online.

Currency Values Vary - Depending on the economic conditions in a country, suipply and demand, political stability and other market forces, the value of currency can vary greatly from month to month in developed countries, or even day to day in emerging economies.

Geographic Pricing - Some websites, and online retailers will purposely increase prices in countries they know can afford, or have higher local rates for products or services.

Supply and Demand - Overall, supply and demand will affect prices - for better or worse, for instance, in the US where web hosting firms are abundant, prices are much lower than Ireland, however keep in mind the key thing is the constant variation of currency values.

 

 

Effects on Customers

When you are purchasing online, you will notice prices will vary, particularily for services which are natively priced in a different currency, e.g. US Dollar or  Pound Sterling being the two most common encountered. This can cause a number of issues, particularily when purchasing:

Service Price Variations - This can be a real problem for people. Perfectly fairly you can get sucked in to buying a service one year, and find out a year later the value of your payment has depleted. This can sometimes work for you, and sometimes against. For example one of our suppliers in the US used to charge us €31 a month based on a US Dollar rate of $29, while at the moment we are getting an exchange of $29 = €20.50 roughly! The real tip with this is: If you can get a good rate, and can prepay for a number of years - do it!

 

Tips For Online Shop Owners

It can be difficult to run an online shop, particularily when currencies are flutuating. The best option seems to be, not to try and take advantage of the situation, but to offer genuine exchange rates, keeping your margin the same to all international customers.

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