My dialogue with Steven Pawsey from Stevie Marx continues (see earlier posts: 1, 2 and 3). He is answering questions from you International BS Blog readers.
Shaun: What impact, if any, has the global financial crisis having on your business? Is there anything you can do to minimise the impact or is it a macro-level effect out of everyone’s hands?
Steven: Every business in the world has been impacted by the global financial crisis; a lot negatively and a rare few positively. Retail in Australia and the world over seems to be shot and I must admit I am not positive about retail sales in 2009 across the board. Consumer spending seems to have stagnated when the economy needs it the most and apart from some Government intervention the underlying problems we have are going to be more constant. It is also a problem when a lot of businesses have slowed or stopped spending as much as possible to try and protect themselves for the storm that is brewing.
As for Stevie Marx, it has been affected to a degree, but is in a very good position for 2009. I would expect retail sales will be softer in 2009 that would have otherwise been if Stevie Marx was created 5 years ago (and therefore would have experienced another boom year during its second year of expansion). Nonetheless, Stevie Marx has a long term vision for the umbrella industry and will still make good growth in 2009, and that is all that can be asked of a two year old company.
Ami: My friend also imports a range of products from China and he has found that due to the decrease in value of the Aussie dollar he is obviously making less money to the point where he is not going to ship in any more product until things improve again. Are you going through the same motions?
Steven: The Australian Dollar crisis (for importers) is one of the most pressing problems at the moment. Stevie Marx has been shielded nicely from this problem as FOB remains the only method of importation and this means we have traded in USD. So relatively dollar changes have not influenced our profitability. However, allot of other importers that I know of have had massive issues with shipments they were going to make large sums of money on now worthless or even some losing money. These shipments would have been costed up to 4 months ago when the dollar was sitting pretty about 90 cents, and suddenly a large depreciation has wiped their profit margin away.
As for Stevie Marx, we have had to re-cost all our umbrellas for 2009 allowing our retailers to make the same % margin as before, as they have to buy in USD and sell in AUD. If we were to keep prices relative then retailers would be hit with a massive loss which would ultimately lose Stevie Marx business.
Sookjin Ong: Apart from the forex issues, manufacturing costs in China are escalating too, and this might make it expensive for businesses to have their products manufactured in China. Have you considered expanding your production activities elsewhere in the near future?
Steven: This problem, along with the Australian Dollar, is really causing many wholesalers and importers hassles. Things in China have been tightening up for the past 4-5 months with the costs of inputs rising and their own currency problems. It has meant that no price quoted to me can last longer than 4 weeks unless I order immediately. Thus, if I had a meeting two months ago, I have to get the same goods requoted for my next meeting as there is a high chance prices have fluctuated (not greatly but by a percent or two). As for samples, there has been a severe restriction on the amount you can get as there is a shortage of umbrella frames at the moment in China. Thus, at the moment in the current economic climate, especially in China it can be very slow and frustrating. However, this is all part of the everyday challenges of doing business in the global economy.
I have not, and do not intend in look elsewhere for the production of umbrellas for Stevie Marx. I am satisfied with the model I have at the moment and believe it best serves Stevie Marx customers in both price and quality, while in Australia we have all our umbrellas designed with one of the best designers in the world.