US Economy Pushes Small Businesses To Look Abroad
With the domestic economy still sluggish, many businesses who never sold a single product overseas are now looking farther afield in order to chase new consumers.
Many of them crowded into a conference room at Hilton in San Gabriel last month to learn about resources that could help them expand overseas. It was a monthly export workshop organized by the Port of Angeles, which is attracting more and more small business owners.
In 2011, U.S. exports hit a record high of $1.48 trillion, a 13.8 percent increase from the year before. Although imports still grew more rapidly than exports, the nation’s trade deficits in the last three years have been lower than those in the four-year stretch between 2005 to 2008, according to WorldCity, a media company on global economy.
Local Businesses Look To Asia
Alyson Bisceglia works for Performance Packaging, an importer of food product packaging. The company has been in the importing business for 15 years but it’s looking to export food to Asian countries now.
“We’ve definitely seen a decline in the economy," Bisceglia said. "Over here, more of the gourmet or high-end products —people can’t afford that. That’s what they are cutting them out of their lives in order to get the basics to get by, so I think the weakening economy here has opened up our eyes or forced us to look elsewhere for market places or market shares and apparently the Asian countries are a place that offers that for us.”
She said the company had already done some marketing researches in Asia, and it shows a huge increase in high-end and specialty markets — their target markets.
According to Jim MacLellan, director of trade development for Port of Los Angeles, 85 percent of California companies do not export, but 93 percent of the world’s consumers and 66 percent of the world’s purchasing power is outside the U.S.
“They think they might be too small," said Maurice Kogon, director of the Center for International Trade Development. "They think it’s too complicated. They think it’s too risky. They don’t think they are going to afford it."
He said most of the reasons are merely excuses, and it’s time for business owners to think globally.
“I think we have arrived at a historical turning point,” MacLellan said.
He said the U.S. is now a mature economy, which doesn’t have a robust consumer market and sufficient savings. Therefore it’s necessary to look overseas because “it’s a new world now.”
It may have been OK to use all those “excuses” to stay comfortable at home five years ago, but now with a bad domestic market and weakening U.S. dollar, small businesses have to look out.
“I think what happened in the past is quality value balance has not necessarily been there, but with the drop of the U.S. dollar, the quality value balance is more in sync with a price point that the consumers internationally are willing to pay for it,” said Mark Hirzel, regional director with MIQ Logistics.
That may be the silver lining of the economic slow down in the U.S., because now other countries are able to afford the goods only the U.S. was able to afford and U.S. business owners become more hungry in the international market.
They do have competitive advantages in the global market - U.S. brands in general have a reputation of high quality.
Bisceglia is confident about their export expansion in Asia.
“People recognizes the United States as organic and the products have been safe, which is another concern over there [in Asia]," Bisceglia said. "Food tempering, food products problems they’ve seen. They are comfortable with the U.S.-branded products. So we feel we can really provide products for a market that is actually expanding over in those countries.”
Experts say for California, or larger Los Angeles area, the most promising industries to expand in exports would be fashion, agriculture and high-tech industries.
Hirzel went to China for a business trip last month. When he asked his friends in China what he could bring them, “vitamins” was the answer he got. Though there is a demand, it’s hard to get high-quality vitamins in China.
And not only vitamins. On taobao.com, a Chinese online shopping site like Amazon, there are thousands of shopping agents that buy products overseas and then sell them to consumers in China. American brands are popular, and goods they sell include all kinds of merchandise such as medicine, clothes, shoes and household items.
“When I was in Shanghai, I was shocked to see how fashionable everyone was dressed," Hirzel said. "I mean it was as fashionable, or more fashionable than Los Angeles, as far as brand recognition, and legitimate brand recognition."
Benefits And Drawbacks Of Small Business
With the growing middle class in China, which is estimated to be 200 million people, and their increasing disposable incomes, the chances of export expansion for U.S. business owners could be huge.
There are also challenges, especially for small business owners. They are generally uninformed of international trade. It’s hard for them to find distributors overseas, the documents required in exports can be difficult, and financing, packing and shipping could all present problems.
But being small is also an advantage.
“Small businesses are leaner, typically not restricted by a board of directors,” said Martin Selander, regional manager of Export Solutions Group at the U.S. Small Business Administration. "They can act much more quickly, don’t have to put things to a vote, are much more flexible, able to quickly take advantage of opportunities, whereas for large businesses, things might move a little more slowly.”
Small business accounted for about a quarter of all the goods and services exported last year, worth about $500 million, according to Selander.
He said there is a lot of potential for small businesses to take advantage of the continuous opportunities in the international market.
The U.S. government is also trying to help out. President Barack Obama announced the National Export Initiative in 2010, setting a goal of doubling U.S. exports by the end of 2014 in order to support millions of domestic jobs. Following that, Los Angeles also launched its Regional Export Council to assist local businesses in growing and creating jobs.
Hirzel said some “good secret” services provided by the government could be really helpful to small business owners. For example, the Gold Key program helps exporters look for qualified overseas distributors for about $1,500.
“They should be better publicized."
Listen to what experts and small businesses say about export increase below:
Reach staff reporter Kay Chinn here.