(Source: https://pltfrm.com.cn)
Yes, there is a need for currency conversion in pricing when a foreign business enters the Chinese market, or any market where a different currency is used. Here are several key reasons and considerations for this:
- Local Consumer Familiarity: Pricing in the local currency (Chinese Yuan Renminbi, CNY or RMB, in China) makes it easier for consumers to understand the cost, compare prices, and make purchasing decisions.
- Compliance with Local Regulations: In many countries, including China, local regulations may require that prices be displayed in the local currency to avoid confusion and ensure transparency.
- Currency Fluctuations: Exchange rates between currencies fluctuate constantly. Pricing in the local currency can protect consumers from these fluctuations and provide a more stable pricing structure.
- Competitive Pricing: To remain competitive in the local market, it’s important to understand and match the local pricing strategies and levels. This is only possible when prices are converted and adjusted according to the local currency.
- Payment Processing: Local payment systems and gateways typically process transactions in the local currency. Pricing in the local currency simplifies this process for both the business and the consumer.
- Psychological Pricing: Local currency allows for the use of psychological pricing strategies, like pricing products just below a round number (e.g., 99.99 RMB instead of 100 RMB) which is a common practice in many markets.
- Ease of Transaction: It’s more convenient for consumers if they don’t have to mentally convert prices or incur additional fees for currency conversion during payment.
- Customs and Taxation: When dealing with customs duties and taxes, transactions are typically evaluated in the local currency, making it necessary to have a clear understanding of how your product is priced in that context.
- Market Adaptation: Demonstrating awareness and sensitivity to local economic conditions, including currency valuation, can enhance a brand’s image in the eyes of local consumers.
- E-Commerce Considerations: For online sales, most e-commerce platforms facilitate currency conversion and display prices in the customer’s local currency, enhancing user experience.
When setting prices in a foreign market, it’s important to consider not just the direct currency conversion rate, but also other factors like local market conditions, purchasing power parity, competitive pricing, and costs related to importation and distribution. Using a dynamic pricing strategy that adjusts for currency fluctuations can also be beneficial. Additionally, partnering with local financial experts or consultants can provide valuable insights into the best practices for currency conversion and pricing in the specific market.
PLTFRM is an international brand consulting agency that works with companies such as Red, Tiktok, Tmall, Baidu, and other well-known Chinese internet e-commerce platforms. We have been working with Chile Cherries for many years, reaching Chinese consumers in depth through different platforms and realizing that Chile Cherries exports in China account for 97% of the total exports in Asia. Contact us and we will help you find the best China e-commerce platform for you. Search pltfrm for a free consultation!
