Index. P Supply chain: logistics and barriers P Conclusions: highlights and insights

Transcription

1 2017

2 Index P General Overview P Main Findings P Propensity (i.e., willingness) to import by country P Digital behavior P Main attributes other than price and product quality that importers value the most when assessing a potential vendor P Supply chain: logistics and barriers P Conclusions: highlights and insights

3 1. General Overview UPS Business Monitor TM Export Index Latin America 2017 is the result of interviews conducted with 2,170 small and medium-sized importers throughout the Americas about their online/offline purchasing behavior. Four industries were chosen for the BMEI 2017: industrial manufacturing, automotive, apparel and high-tech. These four export sectors were identified based on a cross section of the following four variables: 1. High participation in US trade 2. High participation in intra-regional Latin American trade 3. Demand/use of express courier services 4. Estimated density of exporters With the main industries of interest defined based on trade flows and other critical factors, UPS chose to focus on nine specific markets: Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Panama, Peru and the United States. Furthermore, as part of the selection criteria, the study interviewed small and medium-sized enterprises (SME) because this segment represents the lion s share of foreign trade transactions in the Americas, according to the World Trade Organization (WTO). An additional criterion applied to the sample was that all selected importers had to have performed at least five import transactions in the 12 months prior to the interview. Table 1.A: Sample broken down by country COUNTRIES AUTO. TOTAL Finally, in order to achieve the study s objectives, the individuals responsible for international purchases at each participating company were interviewed. The import decision makers were asked a series of questions based on a semi-structured questionnaire for a quantitative and qualitative result. UNITED STATES MEXICO BRAZIL COLOMBIA CHILE PERU COSTA RICA DOMINICAN REP PANAMA

4 The semi-structured questionnaire broke down the typical import process into five distinct stages: 1) search for new international suppliers; 2) contacting new international suppliers; 3) making purchasing decisions; 4) finalizing the purchase; 5) import process: supply chain. As a result, clear trends that extend across the four industries in the nine countries studied were identified among the region s importers. For more information about the total sample composition and methodology used, please visit pressroom.ups.com. 2,170 interviews INDUSTRIAL MANUFACTURING AUTOMOTIVE APPAREL HIGH-TECH 36% 22% 21% 21% Figure 1: BMEI 2017 sample summary 02

5 2. Main Findings The four areas where the survey revealed the most dynamic trends in the automotive industry were: Propensity (i.e., willingness) to import by country; Digital behavior 1 of automotive importers; Main attributes other than price and product quality that importers value the most when assessing potential vendors; Supply chain: barriers and logistics. By examining these four trends, a profile of the typical importer was created for each one of the four industries (apparel, automotive, high-tech and industrial manufacturing). 1 For the purposes of this study, an importer s digital behavior is defined by a respondent s positive responses to three questions: Do you search online for new suppliers? Do you make online purchases? Do you highly value exporters websites? 03

6 2.1 Propensity (i.e., willingness) to import by country and by sector In the first part of the questionnaire, importers were asked if they are currently searching for new international suppliers. The objective of the question was to determine the current demand for new suppliers in the Americas. In the case of the automotive sector, the percentage of importers currently searching for new international suppliers was 46%, which was in line with the study s average for all four sectors (47%). Table 2.1.A - Subsequently, the results for the automotive sector were broken down and analyzed by country (Table 2.1.B). The study s findings for this sector show that a country s propensity to import depends on the availability of locally produced products and an existing domestic automotive industry. For example, countries like the US and Mexico with important automotive industries 2 have a lower propensity to import than other countries in the region. The countries with the highest propensity to import have less developed domestic automotive manufacturing industries, such as Colombia, Costa Rica, Peru and Dominican Republic. Table 2.1.B: Ranking of import destinations for the automotive sector Countries Propensity COLOMBIA 54 COSTA RICA 52 PERU 50 Unlike industrial manufacturing, but similar to the apparel sector, only one out of five (21%) importers in the automotive industry looking for new suppliers indicated that they import raw materials for production. The vast majority within this sub-group of buyers said that they import finished products for resale. 04 DOMINICAN REP. 48 PANAMA 48 BRAZIL 46 CHILE 46 MEXICO 38 UNITED STATES 31 2 The level of development of the automotive sector in each country is based on data from the World Bank and Organisation for Economic Co-operation and Development (OECD).

7 In addition to the BMEI 2017 import propensity indicator, exporters assessing opportunities in the region should take into consideration the evolution of imports in each market and the market size. To provide additional context, the development (increase, decline or unchanged) of the industry s most representative tariff items (i.e., specific products) in recent years was analyzed. Table 2.1.C: Automotive import statistics broken down by country 05

8 Another important element for exporters to consider when assessing new potential foreign markets for their products is the legal framework in place for foreign trade flows, such as free trade agreements or preferential tariff agreements. Table 2.1.D: Intra-regional trade and preferential tariff agreements Reference: FTA, free trade agreement; PTA, preferential tariff agreement; NTA, no trade agreement in effect. The import propensity analysis (Table 2.1.B), the evolution of automotive imports (Table 2.1.C) and the trade agreements in effect by country (Table 2.1.D) provide exporters with useful elements to identify priority markets or those with the greatest opportunities. 06

9 2.2 Digital behavior Importers digital behavior was measured based on survey responses, which indicated whether: 1) they use online channels to search for suppliers (see Table 2.2.A); 2) they value a supplier s website when evaluating a new vendor (see Table 2.2.B); and 3) they import products purchased 100% online (see Table 2.2.C). Positive responses to each of the three questions were averaged per industry to create an indicator of the degree of importers digital behavior in each industry (see Table 2.2.D). Table 2.2.A Table 2.2.B VALUE ASSIGNED TO AN EXPORTER S WEBSITE Table 2.2.C Table 2.2.D DIGITAL BEHAVIOR BY SECTOR - - While online purchasing behavior for the automotive industry is 35% on average, and 38% on average for all four industries, in the case of automotive importers seeking new international suppliers, 43% indicated that they purchase imported products online. This is a behavior similar to that seen in industrial manufacturing. 07

10 The study examined the digital behavior of automotive importers in each market and crossreferenced the findings with each country s propensity to import found in Section 2.1, which illustrates the best-suited markets to deploy online strategies for attracting and retaining new customers: Table 2.2.E: Importers digital attributes and propensity to import by country Four of the five countries with the greatest propensity to import Colombia (54%), Costa Rica (52%), Peru (50%) and Panama (48%) were also the four countries with the highest level of digital behavior in the automotive sector. Furthermore, those companies that purchase imported products online are more likely to import than those who do not make online purchases (56% vs. 42%). 08

11 Among those who said they were looking for new suppliers, six out of every ten automotive importers (61%) indicated that they use Internet search engines to find them. Moreover, four out of every ten (41%) said that they use international fairs and trade shows for this same purpose. In the automotive sector, three out of every four importers seeking new international suppliers (77%) indicated that an exporter s website influences their assessment of the potential vendor. This response was well above the average of the study (59% of all companies surveyed) and the industry (64%). Companies who do not purchase imported products online tend to require more formalities in their relations with international suppliers, with 25% indicating that they have written international sales contracts, against 17% in the case of those who buy imported products online. 09

12 2.3 Main attributes that importers value the most when assessing potential vendors, other than price and product quality When evaluating a supplier, importers look at several aspects, from the product itself to the services a seller may offer to facilitate purchases. Product quality and price were the two top responses, followed by greater flexibility in payment terms and after-sales services. Interestingly, the majority of respondents cited several factors as highly important. Three out of every four (74%) automotive importers cited four factors as highly important: price, quality, logistics services and flexible payment terms, with no single one heavily outweighing the others. After-sales support, logistics tracking and promotional tools were still rated as highly important by over half of all respondents in this sector. Based on the findings, exporters proposals for importers need to address several factors. Logistics tracking tools and promotional tools which received the least responses were still rated as highly important by 62% of all respondents. As such, they should not be discounted from proposals submitted to prospects. TABLE 2.3.A MOST IMPORTANT ATTRIBUTES THAT INFLUENCE THE EVALUATION OF A POTENTIAL AUTOMOTIVE VENDOR 100% 90% 80% 70% 60% 94% 89% 77% 74% 70% 62% 62% Highly important Fairly important Not at all important 50% 40% 30% 20% 10% 0% 5% 10% 1% 1% 17% 20% 7% 5% Product quality Price Shipping and Flexible payment logistics services terms offered 25% After-sales service 29% 27% 6% 9% 11% Logistics tracking tools Promotional support/tools *Percentages may not total 100 due to rounding. 10

13 Overall, two responses tied as the third most important variable after price and product quality when evaluating a potential supplier and a product. When evaluating a product, adaptation to local demand 3 and quality certification of production processes were cited as the third most important variable (Table 2.3.B). When evaluating a supplier, logistics and flexible payment terms were cited as the third most important variable. TABLE 2.3.B THE THIRD MOST IMPORTANT VARIABLE AFTER PRICE AND PRODUCT QUALITY WHEN EVALUATING A SUPPLIER: WHEN EVALUATING A PRODUCT: APPAREL Flexible payment terms Adapted to local demand AUTOMOTIVE Logistics / Flexible payment terms Quality certification of production processes / Adapted to local demand HIGH-TECH Flexible payment terms / Logistics Quality certification of production processes INDUSTRIAL MANUFACTURING Flexible payment terms Quality certification of production processes It is worth noting that in the case of the US and Mexico, the two countries with the largest automotive industries in the Americas, 4 importers cited quality certification of production processes as the second most important variable, over price. Exporters in the automotive industry should ensure that these variables are clearly reflected in their product presentations, websites, promotional materials and any other communications and marketing pieces. 3 Product adaptation is the process of modifying an existing product so it is suitable for different customers or markets. 4 The level of development of the automotive industry in each country is based on data from the World Bank and OECD. 11

14 2.4 Supply chain: logistics and barriers In order to complete the behavior profile of automotive importers throughout the Americas, the supply chain within the sector was analyzed, highlighting the main obstacles indicated by the participants. In all four sectors, importers cited delivery delays as the number one obstacle they face (28% on average). The differences from one sector to another were found in the case of the second and third most common obstacles. In all four sectors, importers cited additional import expenses and domestic logistics as the second and third most common obstacles with automotive and industrial manufacturing mirroring one another. (Table 2.4.A) TABLE 2.4.A OBSTACLE NO.2 OBSTACLE NO.3 APPAREL Additional import expenses (17%) Domestic logistics (17%) AUTOMOTIVE Domestic logistics (19%) Additional import expenses (18%) HIGH-TECH Additional import expenses (20%) Domestic logistics (15%) INDUSTRIAL MANUFACTURING Domestic logistics (17%) Additional import expenses (17%) The two markets with the highest import volumes (Table 2.1.C) are among the countries with the lowest number of import obstacles: Mexico and the US. (Table 2.4.C) Table 2.4.B Obstacles by sector - Table 2.4.C: Obstacles in the automotive sector by country COUNTRIES On average PERU 1.48 BRAZIL 1.38 COSTA RICA 1.24 CHILE 1.12 UNITED STATES 1.01 COLOMBIA 0.96 MEXICO 0.90 PANAMA 0.90 DOMINICAN REP

15 Table 2.4.D: Management of the logistics process in the automotive industry In those cases where imported products are sent to the company s warehouse after clearing customs, importers cited less than one barrier per import operation (0.98). In contrast, when the products are delivered to a distributor, the number of obstacles reported rose to

16 3. Conclusions: highlights and insights UPS Business Monitor TM Export Index Latin America 2017 takes an in-depth look at the purchasing behavior of small and medium-sized buyers in the Americas and, in particular, their preferences and actions throughout the import process. As a result of the responses received, several opportunities have been identified for Latin American small and mediumsized exporters. The fact that the results were consistent throughout the nine countries surveyed in all four industries reflects the fairly homogenous foreign trade conditions in the region. However, a closer look at the behavior of importers within the four industries analyzed throughout the nine countries did reveal several key insights based on: An analysis of the propensity to import of the industry and by country Digital behavior of importers within the industry Influential product attributes besides price and product quality Logistics and barriers along the supply chain In the automotive sector, nearly half (46%) of the small and medium-sized importers interviewed indicated that they are currently looking for new suppliers (marking the sector s propensity to import). In order to identify markets for exports and the strategies to deploy in each one, an analysis was conducted of the sector s import evolution in each country, the size of the import market (as measured by the current volume of imports of the main representative tariff headings in the sector) and the existence of trade agreements that facilitate the importation of products with a reduced tariff or 0% (in the case of free trade agreements). Although the automotive sector has one of the lowest proportions of importers who buy products online, the sector s use of Internet search engines to find new suppliers was one of the highest in the study, as was the proportion of importers that highly value supplier websites when evaluating a potential business partner. Exporters should evaluate both of these elements when devising international promotion strategies for their products. A cross-country analysis of the two behavioral variables mentioned above (propensity to import and digital behavior) reveals that Colombia, Costa Rica and Peru are the three markets with the highest proportion of importers seeking new suppliers and the most 14

17 marked tendency toward digital behavior. At the same time, automotive imports in these countries have risen in recent years. The study also highlights the importance that importers place on the quality of the products they buy (particularly in US and Mexico), which is as important as price. However, in the automotive industry, the importance of logistics and shipping solutions provided by the vendor as well as flexible payment terms are two elements that must be considered by exporters to address these markets. Finally, even though importers in the automotive sector cited the lowest number of import barriers of all four industries analyzed, exporters can differentiate themselves by adopting a closer relationship with their buyers, supplying logistics services to reduce delivery delays and damaged products, particularly in the markets of Peru, Brazil and Costa Rica. When targeting importers in the automotive sector, exporters should initiate trade activities in markets with a high propensity for imports, existing trade agreements in place with the exporter s country and, where possible, a local industry that is open to international competition or an economy with varied market niches. The complete UPS Business Monitor TM Export Index Latin America 2017 study (available at pressroom.ups.com) contains data for all four sectors. The BMEI 2017 s findings illustrate the overall behavior of importers in the Americas throughout the import process. It also contains a series of recommendations for Latin American exporters. 15