Rates | The Shapsogh Sisters

Understand how currency trading benefits marketers and perhaps you

Foreign markets have long understood the value in catering their services and products to another country which pays better. Labor has been outsourced to countries which have lower rates for manufacturing goods (Such as China or Indian manufacturers), and then selling them to countries which have the highest yield on the dollar. Understand that the money is all a game of trading. It is shifting one asset to another assets, one location to another location, in order to make the most out of it. The most common way of gaining quick capital is to do it with foreign commerce.

What does it mean when someone says the Exchange Rate?

Exchange rates are the rates which are established between countries as to the worth of currency. For example: 1 USD is 3.67 AED. 1 Euro is equal to 4.07 AED. However, 1 AED is equal to 33.85 Yen or 17.82 rupees. Keep in mind that these markets do fluctuate and that as stocks either increase or decrease in a particular country, that the exchange rate will either go up or down dependent upon that.

What does this mean for my finances?

There are many ways in which foreign investments, trade, commerce, exchange rates, and such play into your finances. This blog cannot explain it all in one post. However, there are two areas which should be of interest to you. The first is in production costs and the second is in the buyer’s costs. Here is how each benefits works:

Production Costs as it relates to Foreign exchange rates – Marketers and pretty much everyone that manufactures a product on a large scale does so in countries where the exchange rate is low. For example: If it cost 45 AED a day in labor to produce a product that can be produced for 200 YEN, then the company will use the YEN based country as it will only cost them about 7 AED to do so. Of course, each country has its own labor laws and minimum wages, but this is the basic principal of outsourcing or production cost management.

Buyer Exchange Rates as it relates to my finances – When selling a product or service, marketers look for the highest yield on their investment. This means that they will not only use the lower production costs but then they will take that product and sell it to the country with the highest rate of exchange. For example: If a product costs 20 AED and a market wants to get more profit, they offer it to those that pay in Euros for the “same price” of 20 Euros. In reality, the product has seen a 400% markup as 1 AED = 4 EURO. The marketer makes 60 AED on their item.

How can this system work for you?

As stated, there are several ways in which the exchange rate of currency can be used. However, you should keep in mind that you cannot launder money through foreign countries to get a higher yield. Neither can you hide your assets in another country to keep from paying taxes on them. But you can offer your services/products in a country or in a country’s currency and reap the financial benefits. The most common ways in which to do this are:

Have a freelance site which targets markets (clients) in high yield countries such as America and the UK.

Have an ecommerce site that does NOT convert the asked price to the exchange rate price but offers only fixed rate prices for products.

What you should know

Many countries have stipulations as to the amount of money you can legally earn in that country before having to pay taxes to both that country and your country.

Products which are made in certain countries should be examined for quality. Check the labels of your products to see if the product is made in that country or just distributed and sold in that country. You may be surprised on what is being outsourced and marked up.

To save on your financial spending and savings, shop from people locally. You will get a better product, support the local economy, and ensure that you do not pay a tremendous markup on the product. For example: Most produce is marked up at minimum 70% when it is transported. This is to accommodate for the bruised and unsellable product. However, if you buy locally you get it from a farmer and the markup is generally less than 40%.

Exchange rates are a part of the financial marketing system. It is unavoidable. Understanding how the market works and areas in which you can utilize the exchange rates to your advantage will build your finances and make money work for you not you for money.

~ Sondos Shapsogh

In today’s economy everyone is looking for the best deals and the best ways to save a dollar or two. Marketers have honed in on this demand and supplied an ample amount of “solutions” to help you save a dollar, at least in your own mind. However, if you observe and calculate the costs of these marketing ploys (for that is what they are) you will realize that your dollars are being taken from you. Understanding how these marketing schemes work is the first step in making money work for you and not you for working for money.

The Savings scheme

Consumers are looking for a deal. If something can be offered at a discount, rarely do they take the time to read the fine print or even analyze the practicality of the offer. For example: Wal-Mart recently posted an ad that said .10 off of every gallon when you purchase 3 cokes for $4.50*. Now when you looked at the * you find that there is a limitation that you only can use the discount up to 15 gallons. So this is not a deal. Here is why:

.10 times 15 = $1.50

If you have to buy 3 cokes for a total of $4.50 then you actually pay $3.50 for your “savings”. Even if you drink usually buy a coke the price difference does not add up. Most vending machines offer coke for about $1.00 to $1.25, so you still end up paying.

The bottom line is that you are always going to pay.

The pay for shipping scheme

Another common financial scheme is to lower prices and have you just pay for shipping or offer free shipping for a product. This is where things get a little tricky. You need to take note of where the product is being shipped from. In most cases, you are paying more than what it would cost to buy directly from the manufacturer. How is this so?

The rate of exchange (which we will cover in another blog) is a big cash cow for many online commerce sites. For example: If the U.S. Dollar is worth about 3.67 AED and it costs 1000 AED to manufacture and another 100 AED to ship, then the equivalent would be $275 US dollars. However, you will not pay that amount. You will pay $500 US dollars with free shipping. See how this works?

1000 +100= 1100

$500 converted = 1835 AED. They make a profit of 735 AED.

The Warehouse Price Scheme

I find it somewhat comical that there is a great draw to the “buy at warehouse prices” scheme. For one, anyone consciences of their finances should ask “whose warehouse is it?” A warehouse price just means that you are paying the same price that someone else paid to buy in bulk and sell it to you (before their mark up to you). Warehouse does not mean manufacturing price. What it does mean is that you will probably spend your money on a bulk item that is either defective or that will not sell easily in the market. Consider, if I have a highly profitable item that is in high demand, would I reduce the price and offer it to competitors or would I increase the sales price to yield a higher profit? Common sense would say that you would raise the price.

So what marketing is catered to consumer?

None, and that is the point. Do not be drawn in by the gimmicks of marketing with the premise of saving your money. Your best bet in investments is to seek local businesses when possible. Smaller businesses are ideal as they have to compete against the major corporations and therefore will offer a more competitive rate in order to stay in business. If you have to buy a product in bulk (for example if you are an Ecommerce store which offers products from other vendors) do a bit of research to see where the product is shipping from. You may come out cheaper buying directly from the manufacturer, especially if you can point out the excessive exchange markup.

Money makes the world go round. We have to use it to live, but at the same time we do not have to become a slave to it. It was once written “All things may be available to me but not everything is profitable for me”. This is very true when it comes to finances and in investments. You may have many options, but not everything which is offered is going to help you make or save money. Understanding how to invest your money from the ground level up to the higher ended investments and portfolios will make money work for you, not you for money.

~ Sondos Shapsogh

The Shapsogh Sisters

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