The Scottish referendum and your Cross Border Trade profits

Deepak GoyalDeepak Goyal is Head of E-commerce at Currencies Direct. He’s carefully avoided getting into the Scottish debate on whether there should be a YES or NO vote, but what is interesting is how the debate is already affecting currency exchanges and how sellers can profit, regardless of which way Scotland votes. Here’s what Deepak has to say:

International marketplaces profits are not the first thing that springs to mind when you start considering the Yes and the No sides of the Scottish independence debate….and why should they?

Evenly-balanced polls make it impossible to predict the outcome, and should the Union break-up there is no clarity on what the political, economic or business environment of an independent Scotland would look like, or its impact on a reduced UK. This double layer of uncertainty is spooking the markets and importantly causing volatility in the currency markets – particularly the position of the pound against other major currencies.

A poll showing a shock lead for the Yes campaign saw a four cent drop in GBP against the US dollar. A second poll suggesting the lead had swung back in favour of No saw sterling rebound by a cent. The recent volatility of the currency markets are now being picked up by more and more online sellers, many of whom have significant international sales through Amazon and eBay in Germany, France and the US.

One of Currencies Direct’s clients, a UK based third party amazon seller dealing in electronics, has experienced their best month so far on the European marketplaces. The seller generates regular weekly sales of €10,000 week on Amazon’s German marketplace. Once converted into GBP, the client was creating weekly revenues of £7,892. In recent weeks, the weaker sterling has meant that fewer euros are required to create each UK pound in revenue. The pound is over 2 cents lower against the euro compared to a couple of weeks ago, which pushed up revenue to £8,032 a week – a nice little earner of £7,280 per annum.

Quite straightforward and simple, until you start to appreciate what the seller did next.

Instead of pocketing the extra profit, the seller dropped prices and as a result shot straight to the top of price filtered searches. Quite an achievement in the cost conscious branded electronics product categories on Amazon and eBay. By passing on the increased profit created by the weaker pound to customers, the same the seller increased GMV on the marketplace by 50%.

Taking advantage of such fluctuations in markets required three things:

  • Visibility and control on exchange rates to identify ideal times to take action
  • Availability of stock at short notice – handy for clearing overstocked items
  • Time to watch the currency markets or access to a service that could keep you informed on exchange rate movements

Importantly, the seller also took action and worked with a specialised e-tailer currency service to enable the capture an advantage from the seemingly disconnected debate on Scottish independence.