U.S. Market Environment – challenges and opportunities, August 2020
Over the last five months, COVID-19 has transformed the economic and business environment in the United States.
The unemployment rate for July stood at 10.2% compared with 3.5% in February. Real GDP for the second quarter was down 32.9% compared to the preceding quarter. Each of the 50 states has in place coronavirus containment measures. These differ by state but include: travel restrictions, social distancing rules, limits to the operation of certain businesses (bars, sporting venues, etc) and the requirement to wear face coverings. While states hit harder during the initial months of the pandemic, such as New York, have done an effective job of ‘flattening the curve’, other states such Texas and Florida saw a significant rise in cases, hospitalizations and deaths over the summer months. Here in Texas the reintroduction of social distancing and the introduction of mandatory face covering has stopped an alarming upward trend in cases. Many businesses are still allowing (or insisting) that their employees work from home, and face-to-face interaction is limited to where it is absolutely necessary. Many families keep social interactions to a small circle of close friends and family.
With ~30 million Americans claiming unemployment benefits, many U.S. consumers (including those that are still in work) have significantly modified their spending habits resulting in a significant drop in demand across many sectors (bricks & mortar shopping, travel, fuel). This consumer behaviour, combined with concerns about the impact of COVID, the outcome of the November U.S. elections and the timing of a vaccine, make uncertainty a pervasive sentiment. Companies are highly cautious with spending, resulting in a delay to capital expenditure plans, hiring, expansion, etc, if not canceling those plans outright.
These headwinds face all businesses, but let’s turn to challenges, and opportunities, specific to Kiwi exporters. Taking the challenges first, key are:
- Travel Restrictions. Keeping existing client relationships ‘warm’ and identifying and nurturing new client relationships is probably the biggest challenge faced, other than for those businesses that sell online. Digital provides an adequate (but far from optimal) substitute for maintaining existing relationships, less so for pursuing new business. For many companies, the choice will be between leveraging local partners to help maintain their brand, to win work and/or to then execute work and pursuing their market strategy remotely
- Freight Cost, Timing and Storage. A further challenge for those businesses exporting goods to the U.S. is that airfreight costs and transport times have increased. I also understand from NZTE that warehousing space is increasingly at a premium due to backlogs and an increase in the volume of e-commerce.
Turning to opportunities:
- Leveraging New Zealand’s success in managing COVID. This has further enhanced the awareness of New Zealand and its brand. Exporters can (and should!) leverage elements of the NZ story such as the clean and green image, Kiwi ingenuity,
- Emphasize New Zealand’s credentials as a stable, secure, resilient and reliable supply chain partner
- For exporters targeting business customers, products and services that can help companies reduce capital or operating expenditure, simplify their operations or operate more quickly, are likely to be well received
- For exporters targeting consumers, products and services that provide a low cost, safe and easily accessible way to ‘escape’ from the restrictions of COVID are also likely to be popular with many of America’s ~330 million consumers
Advice for exporters:
- Be creative in how you engage with customers. The effective and efficient use of digital sales/marketing is key, but I have seen businesses doing things like using physical mailing to get customers’ attention
- More than ever, it’s crucial to clearly and concisely articulate the value of your product/service. Case studies that quantify the value to the customer can be particularly powerful
- Don’t ignore customers that are not buying right now. Nurture those relationships, stay connected and be willing to help with whatever they need
- Keep a finger on the pulse of the market: gather as much information as you can from sources like NZTE, ExportNZ, your partners in the U.S. and – most importantly – your customers
- Look for opportunities to increase your profile. There has been a proliferation of online conferences run by businesses, professional groups and trade bodies that, while a poor cousin to in-person trade events, these provide an opportunity to maintain your profile from home
- Lastly, start planning today for what the post-COVID world looks like. Reimagine how your company wins, executes and makes a profit from the U.S. market, being sure to focus on customer needs and your strengths/ weaknesses relative to your competitors
Chris Perfect is an expat Kiwi based in Houston, Texas. He supports businesses looking to enter and grow in the U.S. market, and is currently one of the external advisors in NZTE’s Beachhead Advisor program. Reach out today for advice and support: email@example.com +1-281-435-8974