"Honestly, I have been surprised how little [the weak dollar] has increased my business," says John Ortley, manager of international sales at Evertek Computer, a small computer distributor based in Oceanside, Calif. "In discussions with my buyers they can see my pricing has become more attractive, but they are just not sending purchase orders at an increased level. The most optimistic statement I can make is that it has become easier to keep my [European] buyers' attention while discussing pricing." Ortley attributes the hesitant response to the global economic slowdown. "The ever-apparent recession seems to be running deep in the consumer's mind, which is driving everything," he says.
NOT THAT SIMPLE. Germany's soft economy is proving a particular problem, eroding the price competitiveness Ortley had expected to get out of the dollar's fall. Germany is a major distribution hub, and many American and European distributors are based there, Ortley says. As wallets in Germany stay shut, local outfits drop prices to move inventory, making the prices Ortley offers suddenly less attractive, despite the favorable exchange rate.
"I had really anticipated some pretty good things coming into the pipeline [when the dollar fell]," Ortley says. "We may still see that in August and September, our busy time of year.There's been some impact, but it's not overwhelming." Yet on the flip side, Ortley is getting hit with higher prices on goods he would normally buy from Europe. "There are definitely some deals we haven't done, because now they're too expensive."
Ortley's experience is not unusual. Although many U.S.-based exporters are seeing gains, others are still waiting for the dollar's decline to trickle down to the bottom line. Sluggish economic growth, seasonal buying patterns, and how competitors respond all play a role in export sales. Likewise, if contracts negotiated under strong-dollar conditions are still in force, or buyers still have overstocked inventories, exporters don't expect to see any effects from the dollar's fall for some time, even where other signs are favorable.
LAG TIME. "We'll have to see what happens when we renegotiate contracts for next year," says Margarita Perez, CFO for MD International in Miami. The outfit, which sells medical equipment primarily to Latin American markets, and was named the 2003 Small Business Exporter of the Year by the U.S. Export-Import Bank. "People take awhile to react to currency fluctuations," Perez notes. "They are taking more of a wait-and-see approach. This [exchange rate] can change in the next month."
Al Portney, owner of Worldwide Wine Services, an international wine merchant based in Wyckoff, N.J., is also playing a waiting game. While he expects the dollar's slide to translate into at least a 15 percent increase in sales for his company by the yearend, right now, not much has changed. "The decline of the dollar has at least eliminated a major hurdle," Portney says. "There is more-of-an-even playing field now with our primary competitors overseasbut there's a lot of product [still] out there. Right now, it's really replacement inventory that they're buying."
All the news is not disappointing, however. Overall, U.S. exports increased from May, 2002, to May, 2003, by 1.2%, or $1 billion, according to the Commerce Dept.'s most-recent figures. It's hard to imagine the newly dethroned greenback had nothing to do with that growth.
CORKS POPPING. Hedges Cellars in Issaquah, Wash., is a case in point. Foreign buyers who were unimpressed when the dollar was strong are now showing new interest in the small winery. "We just made a nice little sale to Austria for the first time in ages, and I'm sure it's because of the dollar," says co-owner Tom Hedges. "And we've got some great inquiries out of Britain and Sweden. Now, we can [match the prices they're willing to pay] and not lose our shorts, which would not have been the case two or three years ago."
Still, with so many factors in play, a straight-line relationship -- dollar down, sales up -- isn't a sure thing. While they welcome the greenback's devaluation, some exporters figure there are a few more things that need to shift for their sales to really take off. And for anyone competing with China's exporting manufacturers, the next step is clear: persuade the Middle Kingdom to stop pegging its currency to the dollar.
Frank Vargo, vice-president of the National Association of Manufacturers (NAM), says that given a choice between either a weak dollar or a Chinese currency that floats, he'd take the floating yuan, no question.
"We would vote for an Asian float," Vargo says, "because that would raise their currencies sharply and bring about the beginnings of the long-needed trade balance correction with Asia. Just four countries account for two-thirds of our global trade deficit in manufactured goods -- China, Japan, Korea and Taiwan. Those four Asian countries are the ones that are propping up the dollar by accumulating hundreds of billions of dollars of added reserves every year."
BEIJING'S DEAF EAR. Thanks in part to the efforts of groups like NAM, the Bush Administration has been getting an earful from exporters asking it to pressure China to devalue the yuan. But exports are driving China's growth and Beijing has so far shown no inclination to make any changes, despite increasing calls for action by officials around the world (see BW Online, 7/31/03, "A Rising Tide for Floating the Yuan").
Besides, even if China does float the yuan, it won't be welcomed by all players. In this, as in most things in our interwoven global economy, one company's fix is another company's worry. "If the Chinese currency floats, I think what would happen in our industry is costs would increase," says Evertek's Ortley. "Anyone who is manufacturing there or buying parts or goods from them initially is going to see increased operating costs."
Ortley says margins are so slim in his business, that even the smallest price changes can have a notable impact on profits. "Our prices would have to go up," he says. "Unfortunately, there's never a solution that works for all parties. You've got to adapt to each new change." Miller covers small-business issues for BusinessWeek Online in New York