Challenging Times for Importers

160115One-Peso

It is show season which usually means Product Marketers are putting the final touches on their programs for Fall 2016. From my sphere, the Consumer Electronics Show, International Builders Show and Air Heat Refrigeration Expo are behind us and we still have the International Housewares Show, Hearth and Patio Expo and Highpoint Market to come.
Let me take a moment to empathize with those fellow marketers currently setting prices for Fall 2016. I have lived through a couple of these cycles, but this one is a real challenge as a consumer, an investor and as a marketer. There is scant discussion of the winners and losers of the current low dollar policy of the Mr. Poloz. Photos of $8.00 cauliflower go viral for a day or two as a punchline. But importers and consumers who are savers are both getting hit hard while some benefit accrues to the manufacturing sector that has been hollowed out over the last 20 years. Thankfully, the Bank of Canada did not lower interest rates further last month, but with low oil prices forecast for  the foreseeable future and other geo-political risks present, a low Canadian dollar could be with us for quite some time. Certainly this will take some special marketing acumen to navigate these waters, maintaining market share and margins. In well managed companies, Sales, Marketing, Finance and Sourcing will be collaborating to find solutions. In dysfunctional ones, it’s probably another nail in the coffin.
And the Iowa caucus results aside, my American friends and colleagues possibly have their own challenges on importing from China the horizon.
“I would do a tax. And the tax, let me tell you what the tax should be … the tax should be 45%,” Donald Trump told the NY Times editorial board in comments on Chinese goods that were published Thursday January 7.’
None of the factories that I have dealt with have the means to emulate Haier’s solution of buying GE Appliances to comply with U.S. Trump style protectionism. Setting up a new factory to manufacture 50,000 vacuum cleaners or toaster ovens is often a monumental task. Imagine shifting production of millions of I Phones back to the developed world?
A 2017 North America market with a $.59 Canadian dollar and a 45% tariff on Chinese produced goods into the US. Think for a moment what that will do to the price of a coffeemaker?
Here are some thoughts on coping with  currency challenges:
• This may be a good time shake the tree a little and prune those complacent underperforming partners who are not offsetting the new realities of the global economy with innovation, brand building, supply flexibility and value improvement. For successful companies, these times are the opportunities to build share. Weak ones, step aside.
• In any environment price increases are difficult. Buyers at all levels in the supply chain are trained to fight them. The best face saving strategy is to slightly upgrade the product and disguise the increase. Consider taking a $79.99 price point to $89.99 or even $99.99 by adding a small improvement that costs little. New sku #, not a price increase.
• Remember we are in a North American market. If you subsidize a multinational retailer in Canada, his or her US counterpart can pull out a calculator and figure out the 10X larger market is overpaying. In the early 90s was when we had similar currency challenges, this level of integration was in the future. The prices of name brand goods in the two Home Depots in both Niagara Falls should be the same pre-tax, currency adjusted +/- 5%.
• At the end of the day all competitors face the same pressure. Watch the market leaders in both national brands and retailers for clues that prices are going up. When Nike and Apple move, it resets their whole industry.
Ladies and Gentleman, start your Excel programs!

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