Online, shopping ‘unease’ with foreign currencies
E-commerce was supposed to make global retail more accessible, but that value is often lost in monetary translation.
March 19, 2013
By Andrew Nusca
We’ve all done it.
We have all found a product online we really liked, looked down, saw the price in an unfamiliar currency, and hesitated.
How much is that? Will they even ship it to me? And how much would that cost? Where is this store in the world, exactly?
The rise of e-commerce was supposed to usher in an era of borderless shopping. While the Internet has made the world’s shops a mere click away, it hasn’t uniformly translated the language, currency and shipping concerns that make buying from them less than inspiring.
Language? Well, they’re working on it.
And shipping is always possible, though it could cost a pretty penny.
But currency? Are we really still having trouble translating retail prices on the Internet?
According to a recent survey commissioned by E4X (the American global payments provider owned by Cambridge Mercantile Group), the majority of online shoppers prefer local currency pricing and are adverse to USD-only pricing — yet retailers large and small continue to leave this unaddressed.
You can guess what comes next: “considerable” lost revenue, according to the survey. With more than $1 trillion in global e-commerce sales, the stakes couldn’t be higher. (So says a company that offers currency pricing services, anyway.)
Still, as a consumer myself, I had to better understand this e-tail disconnect. We’ve all experienced it firsthand, so what gives?
E4X’s Dana Nino indulged me.
ZDNet: Is this a user interface problem? I can’t get my head around this line of thought, this notion that it’s acceptable to sell to the world without doing the fundamental job of telling them how much it costs.
DN: A lot of the big e-commerce merchants we’d work with, there are still a lot of them in the mindset that, “We price in U.S. dollars. We don’t have the data to prove to the finance department the impact [of using local currencies]. Our books are easy; it’s all in U.S. dollars. We know it’s preferable [to price locally], but we don’t have any data.” We heard that over and over.
That’s how this came about. We decided to do a large-scale survey of foreign online shoppers — in the U.K., Germany, Australia and Canada, the main markets for global expansion [for U.S. retailers] — and asked all kinds of questions related to the following main topic: do you prefer the price in your own currency, and how does that affect your behavior?
It broke down into five main areas.
One is lost sales. Basically, people will shop on a merchant’s site — a U.S. brand, for example — they see that USD pricing, leave the site and go to another local site that has that brand and product in their own currency and buy it. Eighty-six percent [of people] in the U.K. do that. That’s huge.
Conversion rates is another big one. How is it impacting customers leaving the site? Anytime they leave your site, there’s the potential for them not to come back. If the products are priced in U.S. dollars, shoppers are leaving the site, checking conversion rates on XE.com or something, and there’s a drop-off and breakage in the flow. In the U.K., 65 percent of people are saying that, before they make a purchase, they’re leaving the site [to calculate or comparison shop]. That worries the marketing department.
And then there’s Web traffic. We asked how likely people were to revisit the site that’s only in U.S. dollars. Fifty-seven percent in Germany said they were unlikely to revisit a site only priced in U.S. dollars.
ZD: It all seems…obvious. How has the survey been received by merchants? They are your potential customers, after all.
DN: It definitely is what the merchants were asking for. We only published this two weeks ago, but now they have the data. Typically, it’s large merchants who are U.S.-dollar centric. A lot of customers will still pay [in foreign currencies], but they might not come back or spend as much.
ZD: Is it a shock to put this out now? It’s 2013 — we have real-time data, 3D printing and autonomous cars, but we can’t seem to do simple math at the point of sale.
DN: It is a shock! There was a feeling like, really? This is a no-brainer. But if you think of a merchant where every minor decision on a site needs to have five departments’ buy-in — especially if it’s a public company — you start to understand why we’re here.
And there really was no data. All these payment companies that do all sorts of surveys on mobile payments and all that, but there was nothing on pricing.
ZD: Can you share any anecdotes from the survey? The data is interesting, but I’m curious what shoppers had to actually say about this.
DN: They would say things like, “If a merchant doesn’t price locally, and they don’t get the importance of pricing locally, they don’t get us.” Or they think the shipping will get messed up.
Another person said they expected a higher chance of additional, hidden costs. We got that [feedback] multiple times.
There’s a general unease there; they don’t know for sure what they’ll see on their credit card. And then there are duty charges.
ZD: If you’re a retailer, do you risk some of your brand’s reputation by failing to cater to these shoppers?
DN: There’s also the question of general comfort level with the brand and site. In general, there’s that unease. Eighty-something percent of people across the board are not comfortable. That translates to the brand. Or, you turn it into a positive: translating into global currency, you are seen as more in tune with your local customers.
ZD: Something that I’ve always wondered about was actual pricing. I’ve often been shopping at overseas shops and a product felt shockingly expensive — in other words, much more expensive than even a currency exchange would allow for. Have you found a disconnect there? Personally, it certainly stops me from shopping at overseas stores.
DN: Some merchants just say, “I need $50 for this shirt, just translate it into yen.” But other merchants will look at how much is acceptable [for a shirt] locally.
A lot of merchants are thinking about the negative; they want to price it in an amount that’s acceptable. But on the flip side, it’s true — you could be paying more because they’re charging more in another market for a scarf. It can have effects on both sides. In general, merchants simply have a U.S. dollar price and have us convert based on the U.S. amount they want.
There is still a perception from global consumers that, if they’re buying a U.S. brand, there’s an awareness of the price in U.S. dollars. There is a theory that you can price your product differently in different places, because there’s less or more margin availability in some areas. Are you going to round up?
ZD: At what point do we stop writing off foreign purchases in this way? The Internet is supposed to be flat, but we still approach the price of foreign goods with more leniency than those we can purchase locally. I’m thinking of buying goods from Zurich, where the prices of goods reflect the high cost of living there. You can’t feel that basis from your basement in Omaha.
DN: It’s true. A lot of times the merchant is clueless about what the consumer is seeing as a final result. [In a given price] there’s the card-association margin, the [payment] processor margin…what exactly is the final charge? There may be some mystery. A lot of merchants have no idea what they’re paying for foreign exchange.
ZD: What’s the next step? How ubiquitous is local pricing on the Web today?
DN: The majority of major retailers totally get it and already are doing it. But 15 to 20 percent [of American retailers] are still pricing in U.S. dollars. And there is a lot of discussion around best practices, as well as dealing with day-to-day pricing fluctuations — for example, apparel companies don’t want changing prices. So there are a lot of questions around that.
And then once they start taking local currency, it can become a nightmare to reconcile it. Do you refund a customer if the rate has changed drastically? I don’t know.