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Q&A: Building an International Business Legacy

For more than 40 years, Harold Bauer's small business, Royce Leather, has been distinguished by its Austrian craftsmanship and American design.

Bauer started his company in 1974, selling men's leather wallets, travel accessories and luggage. Two years later Royce Leather began selling internationally. Over the next four decades, Bauer's business grew from a company of three - Bauer, his wife, Kathy, and a shipping partner - to a company of 13, which includes his son Billy. This year, his business is poised to do more than $5 million in sales.

Since those early years, Secaucus, N.J.-based Royce Leather has expanded its product line and now imports from nearly 10 manufacturing partners in foreign markets, including Colombia, Italy, Turkey and Hong Kong.

If our suppliers haven’t shown us any courtesy discounts, we ask them to give us a break since we’ve been giving them a break with the exchange rate.

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Here, Bauer shares some of his own experiences related to growing an international business.

Why did you start doing international sales?

Bauer: Initially, I had a manufacturer over in Austria who was making manicure sets and travel sets from a factory over there, but ultimately with the rise of cheap labor and favorable currency conditions, we moved production to East Asia. They've since closed, but at the time it just made sense to sell there if we were manufacturing there. For the money you spend, you get your money's worth.

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How did you find manufacturers in China?

Bauer: Through Alibaba, we complete our preliminary sourcing and then proceed to purchase samples, extensively analyze the quality of the merchandise and verify the validity of the supplier via peer-reviewed ratings. Finally, we always meet at least once in person to reaffirm the sincerity of the relationship.

Do you do anything to hedge currency fluctuation in the market?

Bauer: Fluctuations in the currency markets have a substantial impact on our outgoing import payments, and this foreign exchange risk is something we manage seriously via forward and future contracts. We engage in currency hedging to prevent losses that would otherwise accrue to Royce due to unfavorable exchange rate movements. Twice a year, we check our prices to make sure we are getting the best exchange rate we possibly can. If the dollar is getting strong, we try to take advantage. If our suppliers haven't shown us any courtesy discounts, we ask them to give us a break since we've been giving them a break with the exchange rate. It's a matter of when you catch it. I try to stay on top of it by reading Bloomberg News,TheWall Street Journal and talking to brokers. We maximize profit by culminating all of our shipping by July, before shipping rates go up, as well as shipping everything by container.

What advice do you have for other business owners looking to grow their international sales?

Bauer: Be honest with whoever you are doing business with. If you're not, it's hard to stay in the game. Take away the facts and figures, and your reputation is all you have. Your supply chain partners on both ends of the spectrum have to know that they are getting a good deal because there is no second chance beyond that initial impression. We have succeeded despite several recessions in an industry of high demand elasticity because we take pride in what we deliver and we have kept our prices flexible.

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USD 69.3440 1.3139 0.7857 53.2670 1.0000 0.8780
CAD 52.7470 1.0000 0.5978 40.5230 0.7604 0.6680
AUD 50.4280 0.9555 0.5715 38.7410 0.7268 0.6386
EUR 78.9250 1.4956 0.8945 60.6340 1.1377 1.0000
GBP 88.1960 1.6713 1.0000 67.7560 1.2713 1.1169

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