Web businesses suffering as dollar rises

The dollar has climbed back above US90 cents as investors brace for an interest rate rise following the higher than expected underlying inflation figure released yesterday. And web businesses are feeling the pinch more than most.

Phil Leahy, founder of Entertainment House, one of Australia’s biggest eBay retailers, says his business was exporting 55% of sales. The strong Aussie dollar has seen that percentage drop to 45% – with US sales accounting for 15% and 30% from Britain.

He says while the dollar was around US70 cents a lot of Australian sellers were getting US business because their prices were competitive and consumers were prepared to pay a higher freight charge and wait longer for delivery.

Now that the dollar has hit US90 cents, things have changed. “It has a fair impact. We do a lot more business in the UK, so our exposure is not so great. If you do 80% to 100% sales out of the US, you are in a bit trouble.”

Chris Thomas, founder of hibermate.com, an online retailer turning over about $90,000 a year, says the strong dollar is really hurting his business and he is now looking at dropping his prices to compete with his offshore rivals.

“Orders have dropped from eight to 10 per day to about three to four a day. The dollar hitting 90 cents is a critical tipping point. So I’m looking at adjusting my prices, which will squeeze margins.”

Businesses using GoogleAds are affected too – local businesses pay GoogleAds in Aussie dollars, so they have never been so attractive. But those hosting ads are paid in US dollars so they are earning less for each click.

Leahy says Entertainment House is currently optimising his site and will be investing in more GoogleAds after launching a new shop-front in the new year.