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We are building an online store to sell a software we developed.

We are Europe-based, so our we do our bookkeeping in EUR. Our only payment method, at launch, will be PayPal, linked to an account in EUR.

Based on experience with other apps (sold through the Mac App Store, where currencies are not a problem) we expect our customers to be from all over the world, but mostly from Europe (Eurozone and UK) and North America (USA and Canada).

So, we have different options:

  1. Use only euros at all time. So, we will display prices in € and have checkout in euros (we will pass the amount in EUR to PayPal and let them charge customers' credit cards in local currencies if they want). Price will be the same for all customers, but we'll have to charge VAT to european ones. Before checkout we may also give our users a "converter" suggesting the approximate amount in their local currency, if you think that's useful.
  2. The same as 1., but with USD instead of EUR (prices in USD, checkout in USD). We will still charge VAT to european customers.
  3. Localize currencies (supporting only EUR, USD and GBP, probably), so that the price in EUR is always updated to the equivalent in customer's local currency. Users will be asked to pick their currency from a list.
  4. Localize currencies, but with "fixed" conversion rates. So, for example, the app will cost 11.99 EUR (including VAT - or is it better to add it before checkout?) for european customers, 9.99 GBP (including VAT) for UK, 12.99 USD for rest of the world (VAT is not due).

Every solution has pros and cons:

  1. Easiest for us, and the less expensive (commissions for currency conversion are paid by customers). The price is unique, but may be confusing for customers outside Europe (I noticed that Americans, for example, often have no idea of how much an euro translates in dollars).
  2. We still have one single price, but being in dollars should be more "understandable" by anyone in the world (Europeans have generally a better idea of the exchange rate with dollar). However, this is much more expensive as we will have to pay all commissions (and customers outside the US will have to pay them too, since their credit cards will be billed in USD!).
  3. This is not as expensive as the one above. However, prices in currencies other than euros will be really floating, causing confusion in our customers' heads.
  4. This will solve the issue with floating prices on a daily basis, but in case of big changes in exchange rates our customers may think some are paying less than others.

With options #3 and #4 we also have the benefit of including VAT inside the price for Europeans. Since we are selling only to end-users and not companies, Europeans are used to see final prices, including all taxes. Since only Europeans will be allowed to pay in Euros or Pounds, everyone will see a final price (without more taxes).

So how should we display our prices so that they look more fair?

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In my experience many Americans will see a Euro or GBP and assume it's 2x that in USD...which is really inaccurate and offputting, but I'd be interested to know how it affects conversion rates –  Ben Brocka Apr 2 '12 at 16:58
    
@Rarity: Yup. I keep on reminding myself that 1 GBP is 1.5 USD not 2. –  dnbrv Apr 2 '12 at 18:03
    
I have a feeling this question was discussed somewhere recently but I can't find it. –  dnbrv Apr 2 '12 at 18:09
    
@dnbrv we've had several posts about e-commerce and choices but I don't believe this is a duplicate. –  Ben Brocka Apr 2 '12 at 18:35
    
@dnbrv I looked at all questions tagged with e-commerce (they're just 39 :) ) before posting and at all suggested discussions while posting, and before that I also googled. But I haven't found any satisfying answer to this question. –  Qualcuno Apr 2 '12 at 18:38

3 Answers 3

up vote 2 down vote accepted

I think option 4 is the right one, with VAT already added (aka gross prices).

Here is why and how I would implement it:

  • Users do not always visit the shop, make a decision and buy. Sometimes the decision takes a while. That said, floating prices may feel strange.
  • Most shops show prices in the local currency, also with local prices (e.g. New iPad on apple.it for 479 EUR incl. VAT, same device on apple.com for USD 499 + sales tax)
  • It's also convenient for users to see prices in 'their' currency without having to select currency or think about exchange rates
  • Detect the users' IP country and show the price in the currency of this country/region
  • Do not offer to select the currency as it adds more complexity and is not necessary if you detected the correct IP country[1]

Learning that VAT was not included during the checkout can be a bad experience for users. In some countries sellers are even obliged to show only prices including VAT (e.g. Germany) and breaking this rule would make you stand out in a negative way. And showing prices excl. VAT but having a note that VAT will be added would force users to calculate which you want to avoid.

[1] IP country detection is accurate but might not reflect the 'right' country/region for each and every user but the rate should be very low and you might be able to answer this question based on your previous experience

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Excellent answer! 1. I just don't understand "Most shops show prices in the local currency, also with local prices": what do you mean? 2. About "Do not offer to select the currency as it adds more complexity": I was not thinking about forcing users to choose a country manually, but about pre-selecting a country and add a (small) link like "Change country". What do you think? 3. About "Learning that VAT was not included during the checkout can be a bad experience for users" I am 100% with you in this point. Also because it's a B2C store, not B2B, so VAT is relevant. –  Qualcuno Apr 2 '12 at 21:41
    
@Alessandro Regarding 1. I added a more explicit example. The other point 2. was about not making users think about country selection as I assume this is irrelevant to >95% of the users is IP country detection is used. Again, you may have a different experience with your user audience and then you can or even should address this. Also A/B testing might be an idea. –  greenforest Apr 3 '12 at 9:31
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About country detection by IP... I'm not scared by the errors, which are probably irrelevant. But the bigger problem is when someone travels abroad. For example, I'll be spending 6 months in Canada later this year, so the system needs to let me choose a billing address in Italy (and thus make me pay in EUR). A part this detail, however, I really appreciated your answer, and it deserves to be accepted. –  Qualcuno Apr 3 '12 at 11:18
    
but... what about bank charges for exchange rates? banks impose different rates than promoted ones, so if I am in USA, and I pay by USD 20.00 USD, by the time it reaches your bank it would be not exactly the amount I initially thought it would be, but minus bank fees –  Ayyash Mar 8 at 14:56
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@Ayyash foreign currency conversion fees are to be considered as part of "cost of goods sold". They're usually around 2%, so not very high (PayPal commissions are higher even without these fees). Eventually, if prices are "fixed" in each currency, you already know you're exposed to exchange rate risk. –  Qualcuno Mar 9 at 20:02

You should Localize the currencies (Number 3). And could be great if you can auto detect user's country and show localized details automatically.

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Isn't it really annoying to see a different price every day or so? Users may be willing to wait if they believe their currency is going to become stronger in the near future. Also, prices will look like "$11.34", which is really ugly in my opinion. See, for example, why Apple's App Stores and iTunes use "fixed" prices (that are adjust rarely). –  Qualcuno Apr 2 '12 at 20:38
    
Oh, and what do you think about VAT? Is it better to include it in the displayed price in EUR and GBP, or add it in the cart later? I think Europeans don't really like the "surprise" of having VAT added in the cart... –  Qualcuno Apr 2 '12 at 20:39
    
I think that user wants to buy now, tomorrow he can forgot to visit your site again. –  Shmidt Apr 2 '12 at 20:47
    
Yes, europeans should see VAT enabled. Easy way for all groups is to show both price and total price with VAT. –  Shmidt Apr 2 '12 at 20:49
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As @user12999 suggests above, though, users may need time to think, and floating prices are not really helping. But There's always the option suggested by Andy of A/B testing the two! –  Qualcuno Apr 2 '12 at 21:46

I suspect that by using Paypal (which will allows conversion to many currencies) you will encourage users to skirt the geolocation and purchase at the cheapest rate. Even so, I personally find this illusion of choice enticing.

If you have the inclination and budget, I'd recommend options 3 and 4 are A/B tested - consumers have the reassurance of their local/preferential currency, and you can test which option generates the greater sales.

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1. I don't understand the first part of your reply. PayPal will surely help, but only during the payment phase (the last one). While selecting products, prices in different currencies may be an issue. 2. +1 for the A/B testing: it's something we should really consider. –  Qualcuno Apr 2 '12 at 22:18

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