The term C-Rate is a loose abbreviation for FixedConversion Rate and was coined by Climate World Trade in 2011. It was derived from the term "foreign currency exchange conversion rates" and is the nickname for a common solution to the problems that currency fluctuations cause.
When doing business internationally, fluctuating currency exchange rates can be a real toffee in the drinking water. FOREX can give many people a real pain if you don't have a degree in economics behind you.
Currency fluctuations is a difficult concept for many people to grasp and prevent many of them from doing business internationally, while the Internet is almost begging them to jump on board.
But the C-Rate makes this very simple to understand and to deal with.
If you have got a spare wheel in your garage that you want to get rid off and thus advertise it on eBay, it won't really be a problem to you when you get paid in dollars and then convert it to your own currency. But when you buy products in bulk from a supplier and pay in US Dollars, and then have to resell in Greek Drachma (sounds like they're heading back to their old currency...) these fluctuations can become a huge problem.
Should your reselling-currency falls steeply after you've paid for your products, you will make a ton of money extra (you get more Drachma for your dollars.) But it can also strengthen against the USD after you have paid for your merchandise, and you'll be either selling at a loss then or have to increase your prices.
The need for such a term as the C-Rate originated to describe a common solution to this problem, especially helpful with more and more people conducting business online and buying and selling from and to people in other countries.
What happens when an online customer wants to know from a website how much an item will cost in his or her own currency, while that item is marked in say US dollar? The salesperson - or the customer him/herself - can quickly look up the price, but just minutes later that amount will be different again. In just a day that can make a significant difference.
Not only does this cause inconvenience to the customer, it can also cause trouble and a lot of extra admin for all the members of that company's sales team. The customer can either pay too much with the company making more profit as result, or pay less with the company then suffering a loss. Surely there are software to assist with this dilemma, but to get that software out to sales staff and keep it up to date is just a lot of extra work and time lost.
Climate World Trade nicknamed a common solution - used mainly with large international transactions - the C-rate, whereby a certain fixed conversion rate for the month ahead is given every first working day of the month to its sales staff together with our new price lists for that month.
Although the abbreviation/term may be new, setting a fixed exchange rate between two currencies when conducting an international business deal is common practice in IMEX (another abbreviation commonly used by CWT, that stands for IMport & EXport.) Part of the negotiations when doing a large international deal worth millions, is deciding which currencies to use, and then at what fixed rate. For decades the US dollar was - and still is - the appointed worldwide default currency, but that is gradually changing with more and more cross-border transactions taking place in the currencies of the buyer and the seller.
Like many other companies doing business online, all prices on the CWT-website and its price lists are fixed for a one-month calendar period, in US dollars.
When a company pays for merchandise in one currency and sell in another currency it can easily means a loss to either the customer or the company itself, just because two different currencies are involved and one always lose while another one wins in the fluctuation race. While the C-Rate doesn't completely eliminate this problem, it does save a tremendous amount of time and make dealing internationally easier.
What Climate World Trade basically does by "introducing" the C-Rate, is to make this concept of fixing a conversion rate to conduct international business just that much easier to understand for newbies that want to make money online and thus register as agents for us.
When a customer orders a product on our website and pay via PayPal, PayPal themselves convert the amount to the customer's currency. This off course is the most accurate price, since that is what the customer will be paying at that exact point in time. In this instance our C-rate doesn't apply.
But what happens when one of our agents advertise one of our products at an online auction site, or at a free advertising site, or sell to a shop, where the buyer(s) are in a country not using the USD as their standard currency? This is where CWT's C-Rate for that country is used. The agent simply have to look at the USD price on his or her price list - whether it be our Recommended Retail Price or our Bulk Price for orders of 10 or more different items/units - and use our C-Rate for that country to calculate the correct price that will be valid for the whole month. Only in cases where one currency weakens really badly (think Zimbabwian Dollar a few years back) against the US Dollar will CWT change the C-rate more frequently.
Here it is in practice, with an example or two:
Since the US dollar is the default currency, an agent in Germany will speak of the Euro C-Rate. So when he wants to know from CWT what the Euro C-Rate is for the month ahead, we simply have to reply: 0.85. That means that the agent grabs his calculator and price list, takes a price x multiply it with 0.85, to get the correct price in Euro.
That price will be valid for the whole of the month, and is the amount that CWT have to receive for that order. Neither CWT nor the client - or anybody else for that matter - can predict with 100% accuracy how much these two currencies will fluctuate, but at least both parties have a fixed price to work on then.
South Africans on the other hand will use the term South African C-Rate, or SA C-rate for short, when wanting to convert our dollar prices to their currency ZAR. So when an agent wants to know what the SA C-Rate is, we reply: 8.20. Then the agent knows we fix the value of the ZAR at R 8,20 for 1 USD for that specific calendar month. To get a price, just multiply (always multiply the dollar price with the specific country's C-Rate to get it in that currency) with R 8,20 in this example.
To protect itself from huge losses CWT limits our general C-Rate to an amount of $ 2 000 per order. This means that the C-rate only applies for orders with a maximum value of two thousand dollars. When a client wants to place a bigger order it is time to sit down and negotiate a specific C-rate for that particular order, based on the current exchange rates on that specific day(s), except when the client is willing to pay in USD and therefore not needing the C-Rate.
A client is however welcome to request for a specific C-Rate to be calculated for his order - even if it is for much less than $ 2 000 - should s/he feels the exchange rate is too much in favor of CWT.