Impressions on the Dollar and the U.S. Economy
There was an article in the Economist this week that discussed the challenges facing the U.S. housing market and it touched on the logistics market. It got a few of us over at Shipwire thinking about some recent trends in the global economy and how they may effect this year’s holiday shopping.
“The end of the dream” discussed the Inland Empire, the large swath of suburban strip malls, suburbs and warehouses East of Los Angeles. The article highlighted the beating this area took in the credit crunch/housing crisis that has been unfolding for the past year. It went on to cover more hard times ahead because the Inland Empire is “America’s warehouse: goods, mostly from China, are sorted and assembled there before being distributed across the country.” The Economist went on to say that the area’s tax revenues may continue to decline because import volumes into the largest ports near the Inland Empire warehouse district (Long Beach and Los Angeles) were down by 15% and 12% respectively. This was not a narrowly focused article on the Inland Empire; the theme is clear – Economic forecasters need to pay particular attention to inbound logistics and import volumes as they apply to local economic growth.
Shipwire is located in Sunnyvale and quite a few of the staff here live in and around the San Francisco area. One thing that has been noted walking around downtown San Francisco is that the streets and retail shops are very full. It has been fairly well documented in the New York Times, The Economist and some of the other big financial papers that the low dollar (versus other currencies) has bought a plethora of foreign travelers that are essentially on spending sprees. This has been fantastic for downtown merchants in the big U.S. cities of San Francisco, New York, Chicago, Seattle, etc. As we have documented in previous blog postings, the low dollar has also increased U.S. exports and international shipping. It is one reason we opened our UK warehouse and offered a promotion for international order fulfillment.
This brings us to two additional Economist articles, discussing the recent bounce in the U.S. dollar against the Yen and Euro. In “A Problem Shared“, The Economist writers detail the recent dollar increase. In “That Sinking Feeling” The Economist points out that the dollars rise is not an indicator of dollar strength; rather, weakness of the other economies.
Other than the obvious fact that we read the Economist here; what does all this mean for small businesses trying to sell through this holiday season? Reading these articles together, we can stitch together a big picture. Imports in the U.S. are down, this is causing warehouses to be less full (consider revisiting your warehouse lease) and, while hurting areas the Inland Empire of Los Angeles, seeing American exports rise. Over the past few quarters those exports were consumed by particularly hungry shoppers in Europe, Asia and worldwide (some of which are actually traveling to big cities in the U.S. to vacation/shop). The question is will we see international consumption of U.S. exports slow due to the rising dollar? Keep an eye out and also keep an eye on whether smiling international shoppers are still carrying bags of U.S. goods through customs as they return home from bargain hunting.
For online sellers the path is still clear – diversify and sell in multiple countries. Get inventory into Canada and Europe as U.S. exports rise and while the U.S. dollar is still historically low against these economies. Diversify your sales base across the U.S., Canada an Europe to pick up shoppers in their local countries as they may not be coming to you on their travel/shopping vacations in the coming quarters.
Shipwire put together a promotion and “5 Step Ecommerce Success” Guide to help merchants expand internationally.