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 mediumsized importers throughout the Americas about their online/offline purchasing behavior. Four industries were chosen for the BMEI 2017: industrial manufacturing, automotive, apparel and hightech. 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 intraregional 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 mediumsized 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 HIGHTECH TOTAL UNITED STATES MEXICO 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 semistructured questionnaire for a quantitative and qualitative result. BRAZIL COLOMBIA CHILE PERU COSTA RICA DOMINICAN REP PANAMA

4 The semistructured 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 HIGHTECH 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 hightech industry were: Propensity (i.e., willingness) to import by country; Digital behavior 1 of hightech 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, hightech 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 hightech, the percentage of importers currently searching for new international suppliers was 48%, which was in line with the study s average for all four sectors (47%). Subsequently, the results for the hightech sector were broken down and analyzed by country (Table 2.1.B). The most attractive target countries to initiate and continue internationalization actions with are Costa Rica and Mexico. Table 2.1.A Table 2.1.B: Ranking of hightech import destinations COUNTRY Propensity COSTA RICA 60 MEXICO 60 DOMINICAN REP. 58 UNITED STATES 54 BRAZIL 48 PERU 44 COLOMBIA 40 PANAMA 34 CHILE 32 04

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: Import statistics broken down by country and by sector 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. In Mexico, where 60% of all hightech importers interviewed indicated to be looking for new suppliers, imports over the past five years have been growing at an annual rate of between 10% and 20% (Table 2.1.C). Also, the country has signed trade agreements with almost every country included in the study (Table 2.1.D). Table 2.1.D: Intraregional 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 hightech 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 As seen in Table 2.2.D, the hightech sector has the highest degree of digital behavior of the four industries analyzed in the BMEI Two out of every three hightech importers (65%) seeking new suppliers cited Internet search engines as the preferred channel for establishing contact, up from one out of every three (29%) when considering the entire sector (including those not seeking new suppliers). 07

10 Meanwhile, one out of every two importers looking for new suppliers (49%) in the hightech sector indicated that they are contacted by potential suppliers via , up from 21% for the sector. The study examined hightech importers digital behavior in each market and crossreferenced the findings with each country s propensity to import found in Section 2.1, which illustrates the bestsuited markets to deploy online strategies for attracting and retaining new customers: Table 2.2.E: Importers digital attributes and propensity to import by country Unlike the automotive and industrial manufacturing industries, hightech imports are characterized by notable online activity. In the breakdown by country of hightech importers responses to the three questions that make up the digital behavior indicator in this study, Costa Rica is the market with the highest degree of online behavior in the importing process. At the same time, it is the country with the highest propensity to import, along with Mexico. 08

11 In Dominican Republic, nearly eight out of ten respondents (78%) said that they go online to purchase the products they import, the highest in the hightech sector. On average, one out of every two importers (50%) in the hightech industry make online purchases, compared to one out of three (35%) in the other three sectors, making hightech the sector with the highest level of online purchasing activity. Furthermore, 59% of those companies seeking new suppliers make purchases online, the highest response of the four industries surveyed. One out of every four (24%) hightech importers who purchase imported products online conduct their transactions on B2B online marketplaces or platforms, the highest number of respondents using these tools of the four industries analyzed. One out of three hightech importers (36%) who said that they are looking for new suppliers but do not buy imported products online cited international fairs or trade shows as their preferred channel for contacting new suppliers. In line with the above, of those companies looking for new international suppliers, eight out of ten (82%) said that their evaluation of a potential supplier is influenced by its website, up from the 66% on average for the sector, and the average for all four industries (59%). The behavior described reflects the strong digital behavior in this sector, which exporters should take into consideration when designing their digital promotion and online sales strategies. 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 aftersales services. Interestingly, the majority of respondents cited several factors as highly important. Three out of every four hightech importers (75%) cited five factors as highly important: price, quality, logistics services, flexible payment terms and aftersales services, with no single one heavily outweighing the others. Logistics tracking tools and promotional tools were still rated as highly important by over half of all hightech respondents. Like in the other three sectors analyzed, product quality is the main factor assessed by hightech importers when making a purchasing decision. However, a breakdown by country reveals that shipping and logistics services offered by vendors is second most influential differentiator in Colombia, Chile and Peru, even more so than price. TABLE 2.3.A MOST IMPORTANT VARIABLES THAT INFLUENCE THE EVALUATION OF A POTENTIAL HIGHTECH VENDOR 120% Highly important 100% 80% 97% 86% 78% 77% 75% Fairly important Not at all important 60% 55% 55% 40% 20% 0% 2% 1% 12% 2% Product quality Price Flexible payment terms 34% 16% 17% 18% 6% 6% 7% 11% Shipping and logistics services offered Aftersales service Logistics tracking tools 29% 16% Promotional support/tools *Percentages may not total 100 due to rounding. 10

13 In the case of Colombia, aftersales service was the second most important factor, while in Costa Rica that second place is occupied by flexible payment terms. Finally, the only country where importers indicated that price is the most important variable, outweighing product quality is Dominican Republic. Like in the automotive sector, hightech importers cited two variables as the third most important after price and product quality when evaluating a potential vendor: flexible payment terms and logistics. Quality certification of production processes was the third most important variable that they cited when evaluating a product (Table 2.3.C). 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 HIGHTECH Logistics / Flexible payment terms Flexible payment terms / Logistics Quality certification of production processes / Adapted to local demand Quality certification of production processes INDUSTRIAL MANUFACTURING Flexible payment terms Quality certification of production processes * Product adaptation is the process of modifying an existing product so it is suitable for different customers or markets. As for the product attributes, after price and product quality, the third most important variable in the case of Chile is quality certification of the production process and adapted in terms of local demand. In the case of Colombia, the suitability of the product in terms of local demand is the second most important variable, above price. Based on the findings, exporters proposals for importers need to address several of the different factors cited as important by respondents in order to capture new customers and build loyalty. 11

14 Hightech importers cited the highest use of promotional tools of the four sectors analyzed in this study. Over half (55%) of hightech importers cited promotional tools as highly important when assessing a new supplier. Furthermore, nearly seven out of every ten (67%) reported receiving promotional support from their suppliers (Table 2.3.B), the highest in the BMEI 2017 and well above the average of all four industries (57%). Table 2.3.C 12

15 2.4 Supply chain: logistics and barriers In order to complete the behavior profile of hightech 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: additional import expenses and domestic logistics (Table 2.4.A). However, unlike the other three sectors where there was little to no variation between the second and third obstacles, hightech importers clearly indicated additional import expenses as the second largest obstacle (20% versus 15% for domestic logistics). 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%) HIGHTECH Additional import expenses (20%) Domestic logistics (15%) INDUSTRIAL MANUFACTURING Domestic logistics (17%) Additional import expenses (17%) 13

16 Table 2.4.B: Management of the logistics process in the hightech industry Participants were asked to indicate who was responsible for hiring the international shipper (Table 2.4.B). Like in the other three industries surveyed, the importer is responsible for hiring the freight services. A breakdown of the results by country reveals a slight variation with the US and Peru as the two countries with the highest level of reports of suppliers hiring the international shipping services (46% and 42%, respectively). Whereas in Chile, only 16% of the importers indicated that their international supplier hires the shipper or courier. 14

17 Damaged products was not cited as a major problem in the sector; less than 10% of participants reported receiving damaged goods. A breakdown by country revealed specific markets with higher levels of damaged products above the average for the sector: Mexico (16%), Dominican Republic (13%) and the US (12%). In those cases where the importer reportedly hired the shipper, the percentage of damaged products received was higher than when the exporter was responsible for hiring the shipper (13% vs. 8%). Almost six out of every ten hightech importers (63%) return damaged products to their suppliers, the highest of all four industries surveyed. In the case of the total sample, five out of ten (50%) return damaged goods. (Apparel was the lowest at 43%.) Among those who cited delivery delays as the main import obstacle, 73% hire thirdparty transportation to deliver their imported products, up from 69% for the industry overall. As discussed in section 2.1, the countries with the highest import volumes (see Table 2.1.C) are those where importers cited the highest number of obstacles, however, the obstacles cited do not seem to impact their propensity to import, which remains high. Table 2.4.C: Obstacles by sector Table 2.4.D: Obstacles in hightech by country COUNTRIES On average BRAZIL 2.86 UNITED STATES 1.7 MEXICO 1.7 COSTA RICA 1.32 DOMINICAN REP. 1.2 PANAMA 1.18 PERU 1.1 CHILE 1 COLOMBIA

18 3. Conclusions: highlights and insights UPS Business Monitor TM Export Index Latin America 2017 takes an indepth look at the purchasing behavior of small and mediumsized 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 Of the four industries analyzed, hightech importers had the highest propensity to import. In order to identify export markets and the strategies to deploy in each one, an analysis was conducted of the evolution of total imports in the sector 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% (i.e., free trade agreements). A breakdown by country highlights the Mexican market s propensity: six out of every ten (60%) importers interviewed said that they are looking for new suppliers. Mexican imports have been growing at an annual rate of between 10% and 20%, and the country has signed trade agreements with most of the other markets in the study. The hightech sector, given the nature of its products, is the sector with the highest digital behavior indicators in the importing process. (See Section 2.2 Digital Behavior on page 7.) As a result, the hightech industry is clearly the bestsuited sector to deploy digital online strategies for attracting and retaining new customers. 16

19 Whether ensuring that an exporter s website uses tools like search engine optimization to improve its ranking in Internet search engines or listing products on online B2B marketing platforms, an exporter can leverage the online behavior of buyers in this sector to their advantage. The study also highlights the importance that importers place on the quality of the products that they buy, more important than price. However, in hightech, other variables such as flexible payment terms and shipping and logistics solutions offered by the provider, were also highly valued by importers when evaluating a potential supplier. Consistent with the study s findings regarding the types of website content hightech importers value the most on a supplier s website, certification of the production process (i.e., manufacturing process) was the most important variable when assessing a possible product to import. Finally, the sector cited the highest number of import obstacles of the other three industries analyzed. The sector demands a greater degree of involvement in every aspect of the logistics chain, compared to the other sectors. 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. 17