Sometimes you have to make moves that you don’t want to make
September 23, 2007 by Bob
You know, in business, sometimes you have to do things, even when they aren’t exactly what you would want to do. I just made such a move, and I may have to expand on what I did in the future.
As you know, I have a pretty good number of e-commerce stores. I guess I have 15 or 20, but who’s counting, right? Well, in the last couple of years, the profits that I earn have been dwindling, and all for one reason. Oh, I still make the same amount of money every week, but even making the same number of dollars, I end up with 20% to 25% less to spend every week. Why? Because the US Dollar has been falling in value against nearly every world currency that I know of. As a matter of fact, let’s remove the word “nearly” because I know of no currency that the dollar is gaining on. The fact is that just 18 months or so ago, the US Dollar was worth about 56 Pesos. Today, it’s just over 44. That is a huge loss. On top of that, prices are always rising here in the Philippines. So, it’s a double whammy - my money is worth way less than it was, and I am having to pay more than I used to pay for the goods I sell.
On one of my stores, I raised my prices about 10% or so a couple months ago, and it has not hurt sales in the least. As a matter of fact, my sales are actually up since raising prices. But, I’ve lost way more than 10% in real earnings over the past 2 years or so, so that 10% price increase is only getting back a little bit of what I have been losing. I don’t want to make too huge of a price increase at one time, though. I feel that making that move would really push customers away.
As I eluded at the start of this article, I made a change today as well. On one of my sites, I abandoned the Dollar. I switched all of my pricing to Euros on one of my sites, we’ll see how it goes. There can be no question that in recent years the Euro has been a much better performer than the Dollar. I got a bit of a surprise, within an hour after I made the change, I got a couple of orders on that site too! If I can go a couple of months and see that there has been little change in sales after switching to the Euro, I will make the change on other sites that I own too.
I will say, I have been thinking of doing this for a while now. I have been hesitant, though, because I worry about the impact that such a move will have on my customer base. Will it scare them away, particularly the American Customers? I do feel that a lot of Americans are not too aware of what a Euro even is. So it will be interesting to watch. Another reason why I was not too keen on making the move was that as an American, it’s hard to abandon your own Country’s currency.
The choice, though, was a no brainer, really, if you only look at it through your business eyes. The slide in the Dollar does not look like it will stop any time soon.
A good move indeed, Bob. Like any major change, time and testing will tell, but I have read at least 20 or 25 blog posts this weekend from folks with the same complaint as you … and I, for that matter … the tremendous fall in the value of the US dollar. Out of all those 20+ complaints you are the first one I have seen actually take any rational steps to attempt to rectify things. You’ll find there are going to be a bunch of people who will question your decision and perhaps even some that will have negative comments … but not one of them, Dave wagers, will take any action on their own.
You know when the US Stock Market stumbles and loses 5 or 10 points the news media treat it as a _big deal_ .. as , of course it is, many people have a lot of their investments locked up there.
Yet when the US dollar falls 25% long-term … not just a little weekend hiccup … they hardly seem to notice. It’s as if they are afraid to talk about it … or (more likely) don’t understand the implications.
Those reading this in the US will likely think, “So what, too bad for Bob and Dave but earn and spend in dollars, so it doesn’t affect me.”
Well sooner or later that US person is going to buy a car, a TV set, or even shop for something smaller at Wal*Mart. Try finding any item in Wal*Mart, as just one example, that isn’t made in China. Just a few months ago the exchange rate for RMB (also called the Chinese Yuan) was slightly over 8 RMB to the USD. I just checked .. today it’s down to 7.507 RMB to the Dollar. That means everything made in China has just gone up in value 8 or 10% in just a couple months … it’s going to make a really big difference in the next few months as the US cranks into the end of year retail rush.
My business advice to anyone who’ll listen is, get the heck out of dollars wherever possible … the “greenback” is no longer the currency of the world.
Hi Dave - Yeah, I have been reading plenty of blog posts about the value of the Dollar in recent days myself. But, even before seeing all these posts, it’s something that has been on my mind for more than a year now. I guess you can’t help but have it on your mind when you are progressively getting less and less in return for your hard work, and only because of things that are way out of your own control.
Personally, I hope that the Dollar has not lost it’s place as the currency of the world, and that this is only a temporary glitch. But, the looks of it don’t point to that - it would appear that this is a long term move.
[...] decline of the Dollar has been so serious in recent months that I have already started taking steps to insulate myself from further decline. I have a number of income streams, but until my changes that I started, all of my income streams [...]
Given the more favorable trend of the Dollar versus the Euro, in relationship to the Peso, since March, have you given any though to going back to the dollar? I’m just curious because it is difficult to maintain perspective from Arizona. Thanks! I really enjoy your posts.
Hi R L Graham - No, I have elected to leave my stores set up as is. Firstly, the Dollar has made only very slight gains (maybe 2%) against the Euro, and also, I like the diversification of using multiple currencies for my stores. Most of my stores are still taking Dollars, but I have just one that is Euro based.
[...] decline of the Dollar has been so serious in recent months that I have already started taking steps to insulate myself from further decline. I have a number of income streams, but until my changes that I started, all of my income streams [...]