Global Uncertainty Prompting SMEs to Forfeit Advantage of Strong Loonie
90% of holiday inventory to come from Canada despite overseas cost-savings
MISSISSAUGA, ON, Sept. 26, 2011 /CNW/ - Canada's small businesses are choosing to forfeit cost-saving opportunities in the U.S. and overseas in the run up to the 2011 holiday season, seeing Canada as one of the few safe havens in the international economy.
According to a quarterly survey of small and medium-sized enterprises (SMEs) commissioned by UPS Canada and released today, 90 per cent of SMEs' holiday season inventory will come from within Canada's borders and a comparable percentage of that inventory (91%) will be sold within Canada as well.
The numbers come on the heels of the most recent international currency valuations that peg the loonie at $0.97 USD, a figure that would normally prompt a business to seek cost-saving opportunities internationally or across the border.
"Given the instability in the U.S. economy this year, as well as the volatility in European markets, many businesses are hunkering down and focusing on the Canadian market, which has remained relatively steady thus far," said UPS Canada President Mike Tierney.
Yet, the numbers also serve as an indication of growing isolationism among Canadian SMEs, many of which are ruling out the possibility of exploring export opportunities in emerging markets. Despite recent predictions by Export Development Canada that markets outside the U.S. will account for half of Canada's exports by 2025, 66 per cent of SMEs interviewed say they have no intention of ever exporting to emerging markets.
Those SMEs that do engage in export are still predominantly anchoring to the U.S. market with 30 per cent increasing exports to the U.S. in the past six months compared with 18 per cent who have increased exports to emerging markets.
However, there is some evidence that the overwhelming reluctance to pursue cost efficiencies overseas may dissipate as the global economy improves. In fact, one in four SMEs surveyed (24%) say that current economic conditions are a primary barrier to starting or expanding an export practice.
"Many small businesses rely on the holiday season to bring in a significant portion of their annual revenue, so they're reluctant to seek out new opportunities overseas — be they import or export — at that time of year because they naturally see the volatility as too risky," said Tierney. "However, I would encourage these businesses to seek cost savings and growth by exploring international opportunities during quieter periods."
Almost one-third of SMEs (29 per cent) see export as either a risky endeavour with questionable ROI or not worth the investment and headaches. Only one in five (21%) see it as a competitive necessity that offers significant growth potential.
The survey further revealed that many SMEs prefer to keep commerce close to home. Asked which countries would be their top three choice targets among a new group of emerging markets, Mexico was selected by the highest number of respondents (66 per cent) with South Korea and the Philippines as the runners up (44 and 42 per cent respectively).
About the survey
From August 12th to August 22nd, 2011, an online survey was conducted among a sample of 548 Canadian small and medium business owners who are Angus Reid Forum panel members. The margin of error on the full base — which measures sampling variability — is +/- 4.1%. Discrepancies in or between totals are due to rounding.
UPS (NYSE:UPS) is a global leader in logistics, offering a broad range of solutions including the transportation of packages and freight; the facilitation of international trade, and the deployment of advanced technology to more efficiently manage the world of business. Headquartered in Atlanta, Ga., UPS serves more than 220 countries and territories worldwide. The company can be found on the web at UPS.com and its corporate blog can be found at blog.ups.com. To get UPS news direct, visit pressroom.ups.com/RSS.
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