The Currency Challenge
When you sell on Amazon's international marketplaces, transactions occur in the local currency — euros on European marketplaces, US dollars on Amazon.com. Converting these earnings back to pounds sterling involves exchange rates and conversion fees that directly affect your profitability. Managing this effectively can save or cost you hundreds of pounds per month.
Amazon's Currency Converter
Amazon offers to deposit your international earnings directly in GBP through their currency converter service. This is convenient but typically includes an exchange rate margin of 1.5 to 3 percent compared to the mid-market rate. On significant international sales, this premium adds up to a meaningful annual cost.
Alternative Services
Services like Payoneer, World First (now Xe), and OFX provide international receiving accounts where Amazon can deposit your earnings in the local currency. You then convert to GBP at rates much closer to the mid-market rate, saving the premium Amazon's converter charges. The setup requires providing a local currency bank account to Amazon for each marketplace.
Managing Exchange Rate Risk
Currency fluctuations affect your margins. If the pound strengthens against the euro, your European sales are worth less in GBP — even if the euro selling price stays the same. Some sellers hedge this risk by converting earnings at regular intervals regardless of rate movements, rather than trying to time currency markets. Others keep a portion of earnings in the foreign currency to pay for international expenses directly.
Accounting Implications
For tax purposes, you need to convert foreign currency transactions to GBP using a consistent method — either the actual conversion rate used or HMRC's published average rates. Your accounting software should handle this if configured correctly. Discuss the best approach with your accountant, particularly if international sales represent a significant portion of your revenue.