From: blaze Spinnaker
Still, to be honest, a dropping L$ doesn't really hurt me. What hurts me are fewer gross sales when converted into USD .. which I have not seen..
What happens is the L$ drops and my prices drop.. but then more people buy because things are cheaper.
So, really, it's not really bugging me
But surely, Blaze, thats a question for you, and your individual product line. Some products, you drop the price, the sales increase and more than compensate - some other products, sales don't increase enough, and it doesn't compensate.
Price drop is not a universal good for all traders. Indeed, you could argue that any price change not chosen by the trader can benefit only a mistaken trader who has got his price on a non-optimal part of the curve anyway. If you have your price exactly right, then increasing it or decreasing it should cause you to make less money. Surely that is the skill of pricing.
This curve, and the optimum price, all relate to what economists call "Price elasticity of demand", which is well described here:
http://en.wikipedia.org/wiki/Price_elasticity_of_demandSo you see, the smartest traders will have got their prices just right, and any involuntary price change forced upon them by, for instance, exchange rate movement, should cause them loss, forcing them to change their prices to compensate.
The only traders who should benefit will be those who are on the wrong part of the curve, and should have changed their prices anyway, so that the exchange rate change accidentally corrects their error.
It's more complicated than this, because changing everyone's prices together, wholesale, also chnges the shape of everyones curve. But the point remains, all the people who had their prices right will be skewed off and be almost certain to lose (unless their curve accidentally reshapes to peak at the new position by accident). They will be forced to adjust their prices (by mostly trial and error again) if they want the best return. Half the people who had non-optimal pricing may benefit by accident, but only because they were losing out before.
The concept of "Price elasticity of demand" may seem daunting, but it is just exactly what we are discussing. It puts a number on whether you gain or lose overall by increasing your prices.
Edit: The point of this posting is not to suggest that we can all in practice experiment with our prices until we get them optimum and in line with theory. But rather that understanding the fundamental principles shows us that we can never be confident that an overall pricedrop will be of value to the business community, because everybody will in truth be on different bits of the curve. Some will accidentally gain, more will lose, and most will never understand why.