Whether it’s for trading or for strategic business use, the forex market extends fruitful opportunities for businesses within the retail sector.
With an astute knowledge of the most accessible trading platforms, retail chains may take advantage and potentially gain a competitive edge against their competitors. From local community-based store groups to nationwide business operations, we’ve outlined why retail companies should consider keeping a close eye on the forex market.
Currency fluctuations and import costs
One of the foremost reasons for retailers to monitor the market is its clear and direct impact on both import and export costs. The latest Food Security Index found that the UK relies on imports for 40% of its food, a figure that might only grow as EU trade relationships continue to improve after Brexit.
The power of GBP makes a huge difference in retail. A stronger pound can trigger cheaper imports and potentially increase profit margins too. But if the pound falls, retailers may pass the difference to consumers through pricing increases.
Adjusted pricing strategies
Pricing always comes with risk. This describes the chances that the value of a security, or investment, will decrease to an unrecoverable value. There are several factors that affect or increase price risk, which include poor business management and price changes.
The most common and impactful tool used to mitigate price risk is diversification. For retail bosses, that means investing more and achieving a greater understanding of the market. With such readily available online forex trading platforms, it’s easier than ever for small companies to get started.
Economic trends and profit margins
The forex market indicates broader economic trends, especially when historic data is compared with current trends. Predictable and unexpected movements reflect so many variables, including:
- Interest ratesÂ
- InflationÂ
- Overall economic healthÂ
- Political stabilityÂ
Retailers who keep an eye on currency trends may be able to make comparatively more informed decisions about hedging strategies and pricing adjustments too. By responding efficiently and keeping one step ahead of major trends, retailers can protect their bottom line.
Consumer behaviour
Forex movements could also be linked to consumer behaviours. Retail directors and business advisors should take this possibility seriously, especially in border regions or any other areas with high rates of tourism.
Where a weaker pound might attract more international visits, for example, a stronger pound could divert domestic consumers to foreign platforms or international retailers online. It’s possible to use currency astutely and predict shopping patterns too.
Risk management
Finally, all top retailers should remember that risk management is imperative for any business dealing with foreign countries. This is a concept that’s not only emphasised by the Financial Conduct Authority, but one that could change the shape of a retailer’s success.
By understanding the current and upcoming trends in foreign currencies, retailers can learn to recognise when to lock in favourable exchange rates. These could streamline future purchases or sales, not only making them more cost-effective but potentially saving considerable amounts on upcoming international transactions.
