Global matters can have a bigger impact on small local businesses than you may expect. Learn about the challenges of the global market trickle-down effect and strategies that your small business can use to adjust to the everchanging global economy.
No one can predict when events will affect the economy. From supply chain challenges to importing and exporting shake-ups, global economic trends ultimately have a trickle-down impact—all the way down to small, local business owners. Importing and exporting has been greatly affected, primarily due to lockdowns and closures, delivery snags, and labor shortages. That’s why it’s wise to have contingency plans ready to keep your business running strong.
As a small business owner, find out what you need to know about dealing with potential issues, along with strategies for better navigating through them when they occur.
Inventory shortages and supply chain interruption
In a March 2021 survey, 44% of small businesses reported supply-chain problems and shortages.1 One likely reason: Smaller businesses are often the lowest in priority during times of supply chain constraints.
Take the ongoing computer chip shortage.2 A limited supply of the high-tech chips automakers need for their cars means that there are production delays in some new vehicles. So this means that when consumers go to dealerships and can’t get the car they want, they often keep their old car rather than turning it in for a new one. And this means that there are fewer cars for local used-car dealers, which negatively affects their businesses.
Anticipate and work through shortages and delays
Keeping watch on the global market may help you anticipate upcoming shortages so you can ramp up your inventory levels accordingly before problems arise, especially for materials and items that are key to your business. Be sure to factor in “shelf life” so that items will still be usable when you need them.
When delays are expected, be transparent and honest with your customers. On your website, take advantage of technology that alerts them upfront when something is out of stock, running low, or has delayed shipping to avoid disappointing—and possibly losing—customers.
Try to use the situation to your advantage. If large e-retailers and big box stores like Amazon or Walmart can’t fulfill two-day delivery promises, let your customers know that your local business has an option like buying online/pick up in-store.
Higher costs to import
Unfortunately, increased importing costs can cut into margins and/or require businesses to pass the costs onto customers, especially for smaller companies with less negotiating leverage when it comes to shipping and delivery challenges. For example, an Oklahoma restaurant was paying $200 for a case of gloves that would normally cost $40.3 This is an extreme example, but the alternative could be as drastic as going out of business.
Offset importing costs with creativity
Relying on one source for your supplies can backfire, as many businesses that relied on imported goods have discovered. Though your primary supplier may generally offer the best price, consider establishing relationships with local sources as well. The prices may be higher, but you will still have a supplier to keep you up and running when importing charges make your primary vendor’s items cost-prohibitive or unavailable.
Stay agile and creative: Consider alternative solutions to offset some of the increased shipping expenses. For instance, reach out to local businesses to see if you can combine your order into one large one to qualify for a discounted price. And if you do find yourself running low on certain items, consider shifting your marketing spend to point customers toward the goods and services you have available.
For the 9% of small businesses that export goods abroad, export challenges can be amplified during times of turmoil. The top three challenges that can arise for exporters concern foreign regulations (such as taxes, data localization requirements, privacy rules, and liability risks), tariffs and customs procedures, and payment collection.4
Adopt a strategic export plan
Expand your geographic marketing reach. Exporting to multiple regions can help insulate your business from downturn or unrest in a specific country or area. Limiting your exports to countries that fall under U.S. trade agreements can help reduce potential barriers and extra costs.5 The Small Business Administration also recommends working with an export management company with international contacts, which can help break into the global market and flourish.6
Global matters can have a larger impact on your small business than many realize. As a global leader in banking, Santander is well-positioned to serve as your trusted advisor. Contact your Relationship Manager or get in touch with Santander Bank today to discuss how global markets may impact you and how we can help your business.
1 Vistage. Small Business CEO Survey: Resurgent economy drives small business optimism. March 1, 2021.
2 The Guardian. Global shortage in computer chips ‘reaches crisis point’. March 21, 2021.
3 The Wall Street Journal. Snarled Supply Chain Trips Up Small Businesses. April 21, 2021.
4 U.S. Chamber of Commerce. U.S. Chamber, Google release new study on the economic impact of small business exports. October 30, 2019.
5 U.S. Department of State. Trade agreements – United States Department of state. U.S. Department of State. January 7, 2021.
This article is intended for informational purposes only. Readers should consult their own financial advisers, attorneys or other tax advisors regarding any financial or tax strategies mentioned in this article.
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