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In other words, it costs almost 12% more for an American to buy goods from the UK. I assume, therefore that UK businesses are having trouble selling goods to the US and that US wholesalers that import from the UK are having some difficulties.
Though I have first hand experience dealing with the US Dollar and British Pound, I'm willing to bet that other currencies such as the Euro are also more expensive to buy than they were 6 months ago.
We are considering adding a "Temporary Currency Adjustment" to compensate for our reduced gross profit on imported UK goods. I'm curious if others have devised similar plans. I'm also curious what UK businesses are doing to deal with this problem.
We are seeing an almost complete drop off of US orders. Not that we got that many in the first place.
Weak dollar = lower cost of goods for American exports, higher cost to Americans for import products, lower trade deficit
strong dollar = lower cost to Americans for foreign imports, higher cost overseas for American products, increased trade deficit
Although there is some national pride in having a "strong" dollar, the economic reality is that a weaker doller is generally better for the US economy.
Are there any steps you are taking to try to get back the US customers?
Mardi_Gras,
You are assuming that the US government has control of the dollar. A continued slide in the dollar would mean American buying power would continue to drop. A continued slide would also make investment in America much less appealing. Hence, the growth rate of the US economy will decrease if foreign investment drops off. In support of your argument, Mardi_Gras, I think it's true there could be some short term benefits, but without investment, there will be a lack of growth.
I'm still curious if any of you business owners out there, both in the US or abroad, have changed your strategy to meet the changes in currency. In the past, I've seen quite a few memers from the UK mention they sold goods to the US. Specifically, in the interest of SEW:
1) What have you offered on your website in the past to lure US buyers?
2) What are you doing now to help combat the loss of US buyers?
You are assuming that the US government has control of the dollar.
I'm not assuming any such thing :)
I'm just pointing out the effects of a strong dollar vs a weak dollar on US consumers, on the US economy, and on the US trade deficit.
Nevertheless, a weaker dollar makes investment in American products, companies and stocks less attractive. When foreign investors stop buying USA, this worsens the trade deficit. This is bad for US consumers, the US economy and the US trade deficit.
When foreign investors stop buying USA, this worsens the trade deficit
The effect of millions of American consumers buying overseas imports because they are cheaper than US products has a far more devastating effect on the US economy and the trade deficit than any lack of investment from overseas investors.
<<added>> despite my different views on the effects of a strong dollar vs. weak one, I think the questions you raise are interesting ones...<</added>>
Unfortunately, I don't seem to be generating responses from people caught in the middle of these changes. Clearly, neither you or I can do much to change the strength of the US Dollar. So I'll ask one last time, what can web businesses do to gain from this new environment?
Painful (very), because as pointed out, we are getting much less for each sale. But the reality is that we can't put the products up by 12% and expect to compete as effectively. Every day I hope for the pound to collapse... it's just not happening for me!
We have done a similar move. While we increased our prices by about 4-5% for UK products that we sell, that doesn't account for the 12% difference. For this reason we are trying to create a plan of action for handling a deflated dollar for an extended period of time.
BTW, this problem may present itself again when and if states start imposing tax on internet sales, causing customers to have another reason to shop bricks and morter.
So, what is your contingency plan?
Regarding the US customers the problem is not of real consequence. As they are less than 5% of our turnover, the fact that we can import from the US cheaper makes up for the drop off in customers.
Our real concern is with UK customers who are buying from the US sites in US$, pay the shipping and still be cheaper than us.
Some of addressing this is cutting our shipping charges, and emphasising the fact that we are UK based and that we can be called easily and cheaply if there are any problems with delivery or the hardware.
We are also reducing prices where we can.
As a brit, doing business out of the UK, my two concerns are the US $ and the EURO.
Currently the Dollar at 1.64, means we can buy cheaper from the US, and sell products more expensively, though our sale's like Ian's, are not of an amount to seriously be concerned about. Our major marketplace outside of the UK, is Europe, in which it accounts for about 15% of our yearly business, and see it as a major growth potential, however the currency has been as low as 1.5, currently at 1.53, as a standard we sell products at 1.6, though we are conscious of this. So the US dollar softening is good for us, and it is the EURO that is more of concern.
Panic!
I think it is just something else we will have to take on the chin. To sell in a market you have to accept the prices in that market.
The only other route we have adopted is to set up a dollar account (eg: PayPal) and only extract the monies when the exchange rate is better.
True, a bit difficult if you have to live on that money, but I can't believe will will be looking at 1.64 for too long.
I know... it's a gamble... because we started doing it at 1.58!
Now if only the dollar can drop another 15%………….. Than I could sell a ton in the USA, imports would be too expensive, and maybe I would be able to nudge exports to 2%.
US-overspending will keep the dollar low for a while IMO.
