Business Success in the US – Blog #4 The End of the Great US Recession is Nigh ….. Finally!

Having just returned from one of my regular trips to the US, I was struck by the abundance of something that had been virtually non-existent for the past 3 years ….. optimism! While the American economy is far from being out of the woods, it is clear that consumer confidence is slowly turning around and with it there is increased optimism from reps, distributors and retailers.

The latest US retail sales climbed 1.1% in February, the fastest in five months, to reach US$407.8 billion. In the wake of the data leading economists have lifted their estimates of first-quarter GDP to 2% which is far from world beating but shows that the worst might finally be over for the world’s largest consumer market.

True there are parts of the economy that are still vulnerable and with unemployment still well above 8%, the Federal Reserve is likely to leave rates on hold (at all time lows) at least for the short term. But in the land of consumerism it is retail sales that are the bellwether of any recovery and with groups like the National Federation of Independent Business reporting the sixth straight monthly improvement in small business optimism the future looks ‘LED’ bright.

They say that out of adversity comes opportunity and there will certainly be good prospects for international companies in the US moving forward but how has the market changed and what are the trends that are re-defining the US retail market?

1.     The Majority Becomes the Minority

The demographic landscape is changing rapidly in the United States with groups once termed as ‘minority’ now representing large consumer groups that cannot be ignored by companies. A few statistics of interest:

• By 2042 the minority (African American, Hispanic, Muslim etc) will become the majority in the US;
• This will be the case by 2019 for those under the age of 18;
• 16% of US adults aged 25-49 are Hispanic (45% in Los Angeles); and
• The number of Latinos in the US is larger than the population of Canada.

2.     E-Commerce is King

While other retail sectors hemorrhaged during the recession E-commerce has achieved double-digit growth for the last 5 years. For the 2011 calendar year, U.S. retail E-commerce spending reached a record $161.5 billion, marking a 13 percent increase from 2010. As well as being a lucrative channel if approached strategically, the Internet also plays an extremely important role in building your brand in the United States. Consider these facts:

• For every $1 purchased online, $6 are researched online and purchased offline.  
• Online will influence more than half of total US retail sales by 2013.  
• 83% of consumers say they are more confident in making a purchase when they have conducted research online as opposed to speaking to a salesperson in a store.  (TIME Magazine, July 2010)

3.     Mobile Commerce – The New Frontier

According to Neilson around 66 per cent of Americans aged between 24-35 own a smartphone and 52% of them use their devices while in a store to get help with purchasing decisions (Pew American & Internet Life Project, 2012). Over 74 million consumers in the US already shop from their mobile devices and it is predicted that mobile shopping sales volume will reach $9 billion in 2011 (InMobi study, 2011).

Not only do these figures point to a monumental change in the way people shop but also a huge opportunity for retailers (and vendors) that can enhance the shopping experience to cater for an information hungry consumer.  And this is starting to happen with 67% of US retailers seeing the value of having customers use their smartphones within the store (RSR Research, 2011).

US entrepreneur, Bo Bennett, was quoted as saying “As sure as the spring will follow the winter, prosperity and economic growth will follow recession”. It has been one of the mildest Winters in the US on record, lets hope this is a sign of things to come in the coming season!

Author:

Ian Smith

Chief Executive Officer

Access USA Pty Ltd

ian@accessusa.com.au

www.accessusa.com.au

Business Success in the US – Blog #5 Third Party Logistics 101

As any international company that has looked to export to the United States will tell you, the logistics of getting your product from point A to point B on time and undamaged can be complex and is key to success in the market. Any product that is imported into the US requires extensive logistics planning and management which can be overwhelming for a new entrant. That is why an increasing number of international companies are choosing to use the services of a Third Party Logistics (3PL) provider.

According to the Council of Supply Chain Management Professionals, 3PL is defined as "a firm that provides multiple logistics services for use by customers which are preferably integrated, or bundled together, by the provider. Among the services 3PLs provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding."

To a great extent a good 3PL partner can act as a ‘virtual’ presence for international companies first starting out in the States. Some 3PL providers will be ‘system driven’ meaning they have set procedures and systems that the company will have to adhere to. Others called ‘Customer Developers’ are more proactive in fine-tuning their business, procedures and systems to meet individual customer needs.

A Customer Developer 3PL will undertake the following on behalf of the client company:

·         Arrange transportation / freight forwarding from a customers manufacturing location or a specified shipping location to the warehouse;

·         Be responsible for all the appropriate customhouse brokerage;

·         Warehouse the product;

·         Advise on inventory control, offer full material management / customer service, order fulfillment; and

·         Pick & pack different orders and arrange domestic freight forwarding and transportation.

Some will also provide full management reporting for the activity of their customers business in each specific market. A select few can even raise invoices and answer the phone for you!

All of these services can, of course, be provided by many different entities but only a true 3PL Customer Developer will package everything under one umbrella and assume responsibility across the supply chain from international port to customer delivery.

Author:

Max Lewis

Import Logistics Inc.

Aurora, Illinois, U.S.A.

max@importlogistics.com

About Import Logistics:

Since 1971 Import Logistics Inc. has grown into one of the leading specialist providers of third party logistic services for off shore manufacturing companies exporting to the United States. Vast experience coupled with contemporary technology allows Import Logistics to be an effective link between our clients and their customers. The object of our integrated resource is to enable our clients to deliver a local customer service level that is fully equivalent to their competition.

Unearthing your Hidden Cash Reserves

The Australian Institute of Export, is a proud supporter of: Unearthing your Hidden Cash Reserves, a new report examining the international payment challenges faced by Australian mining and resources companies. 

Deloitte and Western Union Business Solutions have collaborated to examine the unique international payment challenges faced by the mining and resources sector and offer insightful strategies for managing these issues.

AIEX is pleased to be a supporter of this astute report and invites all of its subscribers to download a copy here http://business.westernunion.com.au/p/mining/

As the number of local resource companies establishing projects in emerging markets gathers pace, many of these businesses aren’t prepared for the challenge of moving funds between operations in different parts of the world. 

With no solid currency risk management process in place these companies are losing profits and draining operational resources. 

Download http://business.westernunion.com.au/p/mining/  the report now to find out how you can unleash your own hidden cash reserves.

Click here to download media release

China outpaces US, boom for Australia

HSBC have predicted that China will take over the US as the world’s leading trading nation by 2016
Article by- Rhiannon Sawyer, Dynamic Export

This news will be welcomed by Australian exporters who will be able to drive an increase in international business over the next five years. HSBC Global Connections expects Australia’s trade growth to be up to 25 percent higher than average world trade growth.

An increase of nearly seven percent in Australia’s trade each year for the next five years will be driven by China’s growth as the world’s top trading nation, with Australia’s infrastructure and agriculture contributing significantly to this large gain.

While world trade is expected to grow by nearly four percent over the next five years, Asia’s is expected to grow by nearly double that at six and a half percent.

“These findings provide a good reason for optimism about Asia’s and Australia’s prospects in an otherwise challenging global environment. Businesses need to identify their opportunities now to ensure they are financially and strategically prepared for the expected acceleration in trade in coming years,” said James Hogan, head of commercial banking for HSBC Bank Australia.

Demand for infrastructure expertise will be a boon for Australian businesses architectural and structural engineering sectors, with exports in architecture plans expected to grow by 25 percent annually for the next five years.

While this predicted growth is based on China’s rising trade, Australia will also have  growing trade with other trade partners in Asia, with the fastest growing including Indonesia, Thailand, Korea and India and coal, agriculture, oil and gold as the main export sectors.

HSBC’s Global Connections is a quarterly report spanning 37 countries and covering the top 10 sectors for exports and imports in each country.

Got something to say? Join the export forum here at DynamicExport.com.au

Going international a boost for sales

Expanding overseas is proving to be the best boost of revenue for Australian companies.

Article by- Rhiannon Sawyer, Dynamic Export

A new Regus report suggests that 62 percent of companies are reporting high revenues than those that concentrate only on the Australian market. After polling more than 12,000 companies around the world, the Regus Global Survey also showed that 78 percent of Australian firms that already operate internationally intend to expand further in the next few years, with companies in the ICT and manufacturing and production industries indicating that they are the more likely to grow offshore.

While 40 percent of global companies on average are looking to expand into international markets, only 34 percent of Australian companies operating domestically plan to expand, below the global average. Regus regional vice president South East Asia, Australia and New Zealand said: “Our results indicate that in the current economic climate, Australian firms concentrating on the domestic front risk being left behind in fiercely competitive global markets.
“The findings should act as a wakeup call for these businesses and encourage them to find more effective and cost-efficient ways of moving cross-border in order to enhance their earnings and spread their risk.”

Property lease times and the decision over whether to have an Australian or local presence looking after the company internationally are among the bigger concerns for companies who are yet to expand. Willems said that these concerns aren’t necessarily viable.  “While property and people are perceived as potentially major challenges, the wide availability of flexible workspace options around the globe make the ‘property’ element more perception than reality. Technology in particular, has been a key enabler in helping firms overcome the difficulties of setting up a fixed office space. The phenomenon of the virtual office for example, has provided a platform for firms of all sizes to access global markets of scale but at a fraction of the cost.
“The ‘people’ issues however, do require careful judgement.  Decisions about whether to install a local manager or one from the company’s home country are critical and largely rest on whether sales are handled mainly through a few major distributors, or with direct contact amongst a wide range of customers. Such decisions will depend on the type and size of the business and the industry of operation.”

Got something to say? Join the export forum here at DynamicExport.com.au.

Bega Cheese exports to Middle East

Bega Cheese and the Victorian state government have announced the expansion of the company’s Tatura facility in response to a new export deal to the Middle East.
Article by- Rhiannon Sawyer, Dynamic Export

The $7.8 million expansion will generate added investment and jobs in the dairy industry, and will mean the company’s production capacity of cream cheese at the Tatura facility will increase from 15,000 tonnes to 22,000 tonnes.

Victorian Minister for Innovation, Services, and Small Business Louise Asher joined Bega Cheese‘s CEO Aidan Coleman to make the announcement at the Gulfood trade fair in Dubai.
“This announcement is a clear sign of the strength of Victoria’s dairy industry, and in particular, the opportunities present for our clean, safe and reliable dairy exports to the Middle East region,” Asher said. ”I am pleased Bega Cheese has recognised the opportunities in the Middle Eastern market and has joined me on Victoria’s largest ever trade mission to the region.”

Coleman added, “We are proud to be working with the Victorian Coalition Government on these ongoing trade and investment projects, including the Dairy Nutriceuticals to Asia Program which aims to significantly increase our export of infant formula, and other nutritional powders to Asia and the Middle East.”

Minister for Agriculture and Food Security Peter Walsh welcomed the announcement in Melbourne, saying that Victorian exports of dairy to the Middle East and North Africa grew by almost 18 percent from 2009-10 to 2010-11 and were worth $272 million.
The Tatura dairy facility is already exporting to key markets in the Gulf region, including the United Arab Emirates, Kuwait and Saudi Arabia.

Got something to say? Join the export forum here at DynamicExport.com.au.

Australia in the Asia century

The Australian Government has embarked on the development of a White Paper on “Australia in the Asian Century”. The work on the paper is being led by DR Ken Henry AC and will be completed by mid 2012. Considerable public, including business, consultations have been undertaken resulting in a wide range of people being canvassed on social, political and business aspects of our position in Asia and where it’s likely to be in the future.

I think the introduction to the Terms of Reference is worth repeating, “The greatest influence on the future prosperity of Australia is the dramatic shift of economic power and as a result, strategic weight to Asia” “This shift has been underway for some time but has never been more rapid or more profound for Australia’s interests“.  “We are a decade into the Asian Century. Is Australia ready to take advantage of the great opportunities this transformative event will bring” Is Australia prepared for the changes – here at home and in our external relations – that will also come? What do we need to do to better prepare Australia”

This is very timely exercise and we commend the Government for the initiative. From a business perspective I can hear people saying so what’s different? sixty plus percent of our exports are already going to Asia and logic says that will simply continue as it’s done for the last ten or fifteen years. What I think we fail to grasp is four things, first, the rate of growth is nothing short of phenomenal, ten years ago China was by international standards deemed an emerging economy, today its already the world’s second biggest economy and rapidly heading for number one. Second we seem to be transfixed on China and India while countries like Indonesia and Vietnam to name just two have substantial potential as they too are driven by the massive increase in their very business savvy middle class. Third, we are not the only players on the block, the USA, Germany, UK and many other are out there driving their export capability, probably much harder than we are. Finally this middle class we refer to is not only getting bigger, its well educated, very brand conscience and rapidly adopting western behaviours in many of the things they do and wear and in particular many of the things they choose to eat.

Having had the pleasure of working in a number of Asian countries I have gained some insight into where I think Australia stands and what have been the drivers in us acquiring that position. Interestingly some quite small things have made an important contribution. The first is respect for the management of our economy. I recall when I was working with a few different countries before and after the “Asian meltdown” Before it, the broad perception of Australia was a steadily growing economy, three of four percent growth with not much happening, no real excitement a sort of steady as she goes mentality. After, when Australia clearly survived almost unscathed, the rhetoric was different. No more “we are the Tiger economies and you simply don’t fit”, replaced by “you must be doing something right, how can we learn from the Aussie experience?”  The same thing is occurring now, while we may not be seen as a truly dynamic, there remains a sound level of respect which I think will last us a very long time. Australia too should not underestimate the contribution Universities and other places of learning have contributed to our business strength in Asia. Many leading business men and women and government officials particularly in South East Asia and India were educated here in Australia. Many now occupy positions of influence, money and importantly they know the business behaviour of Australians which is vital to building a sound and workable relationship. 

Having this respect and knowledge of our business culture is an important building block for the future. But a building block it is. We too need a better understanding of the business culture in different Asian countries and we too need to make sure that we continue to play a significant role in educating the middle class of Asia.

On the subject of business culture, we urge the Government to work with the private providers in making sure there are funds to train our exporters in this fundamental aspect of doing business in different Asian countries. Let’s see no more money wasted on language courses for exporters that no one has the time or inclination to endure, instead focus on how our neighbours think in terms of business and I’m sure greater outcomes will result. And let’s see Government really get behind the continued development of inbound education, it paid enormous dividends in the past and will continue to in the future. And finally, don’t underestimate the value of the media, Radio Australia played a massive role in positioning Australia in Asia and given the rapidly expanding communication opportunities, we need to be leaders in the field as we were twenty five years ago.

And one word of caution, Asia is not one culture, its many very diversified, colourful and exciting cultures. Australian’s must never assume one size fits all, it doesn’t.

 We wish Dr. Henry and his team at DFAT well with this important initiative.    

Ian Murray, Executive Director- Australian Institute of Export