But there are few things about selling in foreign countries that are going to be different.
For one, you’ll be receiving your Amazon payouts in foreign currencies.
Just like when you’re traveling to a foreign country and exchange currency, you’ll need to exchange money when you receive it from Amazon marketplaces in foreign countries.
That’s because Amazon always gives buyers on their marketplaces a native experience, they get to pay in their currency.
So, you’re going to need a way to get your money home. Ready to master new international Amazon marketplaces? Find out in this blogpost how it’s done!
Lesson #1: There’s No Way to Avoid Exchange Fees
The first thing every savvy global seller knows about exchanging currency is there’s always a fee.
Even if the bank or Amazon isn’t charging a separate fee.
According to Amazon’s Seller Central page on currency fees, “All fees and charges related to your use of Amazon Currency Converter for Sellers are included in the exchange rate.”
The important word here is “included.” The fee is included, not separate.
It’s just hard to understand how much you’re paying with this included fee. Let’s take a closer look at the most common foreign exchange fees to help sort it out.
What Types of Currency Exchange Fees Are There?
Currency exchange fees fall into two basic types:
1. Transaction Fees
Transaction fees tend to be explicit fees. They’re the upfront kind of fee charged in foreign exchange or FX, as it’s often called.
For example, if you’re exchanging money, you could be charged a flat 1.5% fee. In this case, you know the rate you’re paying and can calculate the real cost of the exchange.
2. Foreign Exchange Fees
Foreign exchange fees tend to get a little more complicated. Unfortunately, some foreign exchange services claim not to charge a fee.
This is the case of exchanging $100 and getting back $96, even though no “fee” was charged. They just gave you a really rotten exchange rate.
More Costly Currency Exchange Fees to Avoid
Once you figure out the real cost you’re paying to exchange your money, you’ve got to calculate the cost to use your money.
Watch out for services that charge a withdrawal fee.
You could end up paying double the “low fee” they fee quoted you to exchange your money, plus there can be debit card and account charges.
What About Amazon’s Currency Converter?
Using Amazon Currency Converter is sort of like exchanging money at an airport while you’re traveling. You know you’re not getting the best rate, but you just need some quick cash.
Even worse, some Amazon merchants don’t even know that they’re being charged an exchange rate.
So, let’s break down the fees involved in Amazon Currency Converter. That way, you’ll be prepared to understand the rates you’re paying and compare new options.
According to some estimates, the rate you’ll get using Amazon Currency Converter can be as high as 3.5%* of your profits.
There’s no way to get that number down to zero (see Lesson 1!), even banks have to pay to exchange money with other banks.
But you can negotiate a much better rate for your Amazon marketplace payouts.
With the right borderless multi-currency account, you can slash the fees you’re currently paying to Amazon to exchange your marketplace payouts.
Certain cross-border accounts offer competitive rates in the 1% to 1.5% range, depending on how much money you exchange on average.
Calculating the Real Cost of Currency Exchange on Amazon
Finding the right cross-border account could add an extra 2% to 2.5% to your profits, when you calculate the average 3.5% Amazon Currency Converter rate vs. a lower 1% cross-border account rate.
If you’re an Amazon merchant who exchanges the equivalent of $25,000 a month, those extra percentages will add up.
In one year, you’ll pay about $7,500 extra in fees. Over four years, that adds up to $30,000 – or more than half of a 2019 BMW 5 Series.
When you look at the cost of taking an extra $30,000 away from your business, the potential losses are even higher.
The cost of not having an extra $30,000 to invest in your business, whether it’s buying inventory at a lower rate or hiring new staff, could result in losing $60,000, $80,000 or more.
*Estimated rate based on actual Amazon Currency Converter transactions that took place between July 9, 2016 and July 23, 2016.
Cross-Border Accounts Designed for E-commerce
The most attractive option for many Amazon sellers is to open a borderless multi-currency account that offers competitive rates, unlike traditional banks.
With the right cross-border account, an Amazon seller can get transparent currency exchange rates in the 1.5% range or lower.
It’s possible to find cross-border accounts that don’t charge additional fees for using the account, so be sure to ask whether you’ll be able to make payments for free.
Make VAT & Supplier Payments for Free
The best global accounts even offer free VAT payments, which can be one of the costliest kinds of payments to make when you account for double exchange fees.
What are double exchange fees on VAT payments?
Here’s how it works… you have to exchange your profits into your local currency when you get paid, for example from Amazon UK.
Then when you have to pay UK VAT authorities, so you change dollars back into pounds to make the VAT payment (getting charged FX fees both ways). Ouch.
With the right cross-border account, you can keep pounds in your account without exchanging them into dollars.
Then pay the UK VAT authority directly without paying any additional fees.