When online shopping, one of the first things people look for is the product price. It says $270 but is that in US dollars, Canadian dollars, Singapore dollars, Australian dollars or Mexican pesos? This is where customer confusion begins.
That leaves the customer to search around the website for information about what currency the website is in, or they might even have to go all the way to the checkout to see the currency code (USD, CAD, etc). Both of these scenarios result in the customer wasting time, and potentially losing confidence in shopping from the brand.
The solution is obviously making it clear what currency the store is in. But you can go even further to improve the shopping experience by displaying prices in customers’ local currencies and even allowing them to purchase in that currency so that there are no surprises with conversion rates on their credit card. Surprises like feeling that they overpaid because of credit card conversion rates can leave customers with negative feelings, even if it has nothing to do with your product, and they might not return to shop with you.
Benefits of Accepting Different Currencies
Shopify says that, "Stores that use local currencies have 7% higher international sales, on average". This isn't a surprise considering the confusion currencies can cause, resulting in customers simply leaving the store website. Here are some benefits to customers when stores allow them to shop in their local currency:
When customers can easily see what currency the price is in, and better yet — when they’re able to shop in their local currency, they can comprehend the price relative to other options on the market. By having this immediate comprehension, they feel comfortable shopping and haven’t become confused looking for answers on the site. By shopping in their local currency, they’re much more likely to have a good shopping experience, and make a purchase, increasing overall conversion rates.
Reduced abandoned carts:
If prices are not displayed in a customer’s local currency, it can lead to confusion about what currency the store is in. It gives customers a reason to pause and doubt finalizing the purchase. They might be leaving the store website to use a currency conversion tool to view the price in their local currency. You want the checkout process to be uninterrupted and as seamless as possible to reduce abandoned carts.
Causing price confusion leads to abandoned carts because customers are not sure of the total price in their local currency, and they know that they will pay foreign transaction fees, adding to the total price.
No foreign transaction fees:
Customers checking out in a foreign currency already have to manually make the conversion to their local currency, but on top of that, most credit card issuers also charge a 1-3% foreign transaction fee. This means that the customer doesn’t even know the final price they’re paying until their card is charged. No one wants the price to be a surprise.
This surprise can be very off-putting and result in customers feeling bitter about the purchase, or even cancelling their orders (the exact opposite feelings you want customers to have when shopping with you!). By accepting payments in different currencies, you’ve eliminated any friction that comes with foreign transaction fees, resulting in more satisfied customers.
How to Accept Payments in Different Currencies on Shopify
In the past, Shopify’s checkout only allowed customers to checkout in the store’s local currency. You could however, use a currency conversion app to automatically convert store prices to your customer’s local currency so that they would see the price equivalent. Upon arriving at checkout, the final price would switch back to the store’s local currency. This final step of paying at checkout would add some friction as the terms of the purchase change last second.
Shopify now allows stores to allow customers to shop and check out in their local currency. This is a very positive thing because buyers are much more likely to have a good experience shopping in their own currency and finalize their purchase knowing that they will not incur any additional fees from their bank.
Steps to accept payments in different currencies:
Install Shopify’s Geolocation app.
Set up your store’s Markets under Settings > Markets. This defines the regions that you sell to (you would have had to do this already to set up international shipping rates).
Activate local currencies. Go to Settings > Markets > International (or other Market) > Products and pricing > check “Show prices to customers in their local currency”. This will turn on the multi-currency shopping experience for the selected market. Ensure that your regions in payment settings match your shipping zones.
Show the currency selector. Open the theme editor and open the Footer section settings. Check the checkbox option for showing the currency/region selector.
The Geolocation app also has a "show selectors" option but your theme's selector design will look far better, so make sure to uncheck the selector box in the Geolocation app.
When using local currencies, prices are calculated by:
- Multiplying the store product price by the currency conversion rate (using the market rate)
- Adding the conversion fee (1.5% in the US, 2% in all other regions)
- Applying rounding rules (if applicable)
For example, Shopify gives the example of a $10.000 USD product that is converted to Euros:
(Product price x currency conversion rate) x (1 + currency conversion fee)
($10.00 USD x 0.867519) x (1 + .015) = €8.81
If rounding rules are enabled, the total is rounded up to €8.95
As you can see, the customer absorbs the currency conversion fee as this is included in the price they’re paying, but the benefit is that they know the final price they’re paying, rather than being surprised once their card is charged.
Modifying Prices for local currencies
By default, prices in your store change automatically with market exchange rates, but if you want to maintain price stability, you may also set exchange rates manually. Setting manual exchange rates will result in gaining or losing money depending on the current market exchange rate and your manually set rate.
You may also apply rounding rules so that product and shipping prices have consistent price endings after conversion. To do this, go to Settings > Markets > Preferences > Turn on Price rounding > Save. This will automatically round prices to the most common denominator.
Additionally, you may adjust prices for different currencies and markets by a percentage. For example, if for some reason it costs you more to offer your product to a certain region, you can increase the price in that currency to reflect that.
Create a localized shopping experience
The Geolocation app will direct customers to the right experience (currency and language availability) on your website based on their location, with a pop-up on arrival.
Note that the popup will appear for anyone who is outside of your site’s local country and default language for which you have set up a market. If you don’t have country and local currency options enabled in Markets, then the store will remain in your default country currency.
Although I find the popup to be an annoying "welcome" to the customer experience, Shopify has said that they do not automatically change the currency or language based on a visitors location because it goes against search engine guidelines and can be detrimental to SEO. It also would not be possible to do this in some regions due to privacy laws (Hint: Read How to make your Shopify store GDPR & CCPA compliant).
Local currencies is just one part of creating a localized shopping experience for shoppers. Our next post will be covering the language aspect of localized experiences. Make sure to check back next Wednesday for “How to translate your store into different languages on Shopify”.