Currency Risk When Buying Clothing Internationally
By The Velocity Wear Team
If your supplier quotes in a currency you do not hold, the price you agreed is not the price you will pay. Between quote, deposit and balance — often spanning months on a production order — the rate moves, and on apparel margins it moves by more than the discount most buyers spend weeks negotiating.
Where the exposure sits on a typical order
- 1**Quote to order.** You are deciding on a price that is already drifting. A quote valid for 30 days in a foreign currency is not a fixed price.
- 2**Deposit.** Converted at whatever the rate is that day.
- 3**Production period.** The largest window, and the one you cannot shorten.
- 4**Balance payment.** Frequently the largest amount, at a rate you could not know when you committed.
The costs that are easy to miss
The headline rate is not the cost. The spread your bank applies between the market rate and the rate you receive is a real charge and is often larger than the transfer fee people focus on. Two payments per order means paying it twice.
International transfer fees, receiving-bank charges and intermediary deductions also appear, and they land on small orders disproportionately — a fixed fee on a 20-piece order is a much larger share than on a 500-piece one.
The four ways to deal with it
- **Be invoiced in your own currency.** The simplest answer. The exposure moves to your supplier, and you compare quotes against your budget directly. We invoice in seven currencies for this reason.
- **Hold a balance in the supplier’s currency,** buying when the rate suits rather than when the invoice is due. Practical if you order regularly.
- **Use a forward contract** to fix a rate for a future date. Available to small businesses through most specialist providers, and it converts an unknown into a known.
- **Shorten the exposure window** by paying closer to delivery, if terms allow. Less exposure simply because there is less time.
What not to do
Do not take a view on the rate. Buyers who delay a payment because they think the rate will improve are speculating on currency markets with money earmarked for stock, and losing that bet costs more than the margin on the order.
Equally, do not treat a favourable move as a saving to spend. It is noise, and it moves back.
What to ask a supplier
Which currencies they can invoice in, how long a quote holds, and whether the price is fixed at order or at payment. Those three answers tell you exactly how much currency risk you are carrying — and for many buyers the right answer is simply to ask for an invoice in their own currency and stop thinking about it.
