Localized Pricing is Key to Succeeding in Cross-Border E-Commerce

The internet has made it easier for merchants to sell worldwide. Foreign countries can become great opportunities for online businesses. Brazil, for instance, is by far the largest e-commerce market in Latin America, with a huge and ever-increasing consumer base. In addition, every year more and more Brazilians carry out purchases from international websites. However, merchants who opt to tackle the Brazilian market must consider some key factors to ensure their success, such as local payment methods and localized pricing.

 

 

The Importance of Localized Pricing

 

As we have already discussed the importance of providing local Brazilian payment methods in this article, as well as here, here and here, let’s now focus on localized pricing. It might seem a minor detail, but an online store displaying localized pricing is more likely to succeed when entering the market. In fact, localized pricing is one of the biggest opportunities to increase businesses’ revenue, nearly as important as making local payment options available at the checkout.

 

There are some elements to be taken into account when defining the prices in local currency:

 

  • Do your research: prior to setting your store’s localized pricing, research the regional pricing. Have you ever heard of the Big Mac Index? Also known as Big Mac PPP, it refers to a survey carried out by The Economistmagazine which is used to measure the purchasing power parity (PPP) between nations. As the name indicates, it uses the price of a McDonald’s Big Mac as the benchmark. Big Mac prices vary widely worldwide, adapting to the reality of each country where it is sold. Online businesses expanding to a new market must, therefore, research the regional pricing in order to set prices that fit to that market’s reality.
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  • Attune to cultural pricing: each country has a way of displaying prices. For instance, in China, it is not wise to have the number eight in the pricing as it is considered bad luck. In Brazil, prices are often presented with 90 cents in the end. Let’s say we decided to sell a product for BRL 100. In this case, the best option would be to show the price as R$ 99,90 (this is the exact form it should be displayed in Brazil, with the R$ and a comma instead of a dot). Furthermore, if you’re offering installment payments, it is common to see prices displayed differently. Taking into account the same price above, let’s imagine a scenario where we are offering up to six installments. This is how it could be shown: 6x R$ 16,65. That means six monthly charges of BRL 16.65.
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  • Consider all costs: when buying from a foreign website that does not provide local payment processing, Brazilian consumers are faced with the costs of spread for currency exchange as well as local taxes such as the IOF. By offering local payment methods, your buyers can save up to 13% as opposed to paying with their international credit cards (6.38% in concept of IOF and up to 7% for exchange rate fees). Therefore, you have a bit of margin here to set your prices slightly higher to cover your costs as well.

 

If you wish to learn more about the Brazilian market and its opportunities for international merchants, contact us.

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  • Gregory 26 de May de 2018

    Thanks for the article post.Really thank you! Great.

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