With a weak dollar turning U.S. goods into bargains overseas and prompting greater growth in export markets than domestic ones, many small companies are opening or expanding their export divisions. And now that international freight-and-delivery services have tech solutions in place to smooth the way through customs, selling abroad is not as complicated or costly as it once was, says Tim Yourieff, of Neil Pryde Sails. The Milford (Conn.) sailmaker brings in about $3 million in annual revenue and regards the Web as a godsend that, as Yourieff puts it, keeps making the global marketplace "smaller and smaller."
Yourieff spoke recently to Smart Answers columnist Karen E. Klein about his outfit's global perspective and its recent expansion into Denmark. Edited excerpts of their conversation follow:
Q: Your headquarters is in Connecticut, but your company is really an international presence in the yachting world, isn't it?
A:Yes. My partner, Bob Pattison, and our designer are the only three people who work in the U.S. All our sail manufacturing is done in a factory in Shenzhen, China. And we have sales reps all over the world selling our products, which range from tiny Sunfish sails that retail for $170 each, to huge sails for 100-foot yachts that might cost $30,00 each. We recently established a distributorship in Denmark, and from there we hope to expand our sales all over Western Europe and into Eastern Europe.
Q: How has the decline of the dollar affected your sales in the U.S. market and overseas?
A:We've always had sales worldwide but the U.S. has represented the lion's share of our business, particularly since the tariffs here on goods coming from China are low compared to those in Europe. But in the last few years, business in the U.S. has fallen off considerably. During that time, however, the dollar has declined 25% against the Euro, so that has made up for a lot of the disadvantage we had in Europe on the tariff issue. It lowered the cost of our product to Europeans and increased our sales to existing European distributors.
Q: How much of a difference have you seen?
A:In the past several years, our European sales have almost doubled. We used to do 90% of our sales in the U.S., 8% in Europe, and 2% in Asia. Last year, U.S. sales accounted for about 83%, Europe was up to 15% and we're still at 2% in Asia. Overall, business is down, although sailboat owners tend to be wealthier people, who are a bit more "recessionproof" than the general population. But while our sales are considerably down domestically, the increase in international sales helps smooth out the downturn.
Q: Between the language differences, the currency fluctuations and the delivery logistics, selling overseas sounds like a headache to many small-business owners. How do you wade through all the complexities?
A:It is tough, particularly since there are a lot of tiers in our business model -- the sales reps, the distributors' agents, us, the manufacturers. Being price competitive is not easy when there are so many layers. We have to maintain a very slim overhead and we do it by having all our systems automated, from placing orders to designing, processing, and shipping. Nothing is entered manually because we don't have the time or the personnel to do that. Because each boat is slightly different and each application is unique in terms of finishing details and technical specs, sailmakers used to take hand measurements, write up orders, and then go into the back of the shop cut the cloth. We actually were one of the earliest sailmakers to centralize manufacturing operations and we've been leaders in making custom sails on economies of scale.
Q: How does the automation work?
A:Over the years, we've developed pretty sophisticated software. Distributors take orders from all over the world and send them to us online, we process them here, our designer figures out the specs for each custom sail and sends them over the Internet to our factory in China. Within literally a few hours, the manufacturing plant is cutting and assembling the sails for drop-shipment back to the distributors. Because of this, and our excellent shipping contract, we can promise delivery to our customers within three weeks and we're able to stay very close to that, even during spring rush.
Q: What about the shipping? When you're dealing with exports don't you have to hassle with duties, freight cost, currency exchanges, and letters of credit for various customs brokers all over the world?
A:The wonderful part for us is that UPS handles all that for us under the terms of our arrangement with them, and they bill us in U.S. dollars. Otherwise, we simply couldn't do it. It would be far too time-consuming and we'd need to hire a lot of personnel we couldn't afford. They also deliver amazingly quickly. The product is shipped out of the factory in Shenzhen on Wednesday night and we get it here Thursday night or Friday morning, in time for the weekend when people are going to their boats and we need to get them their sails.
Q: Everything's so highly automated in your company. Do you still find that you have to travel quite a bit?
A:Oh sure. This is still a personal business, and we have to see our sales reps all over the world on a regular basis. They attend all the local boat shows and trade exhibits in their area, and we try to make sure that one of us is always there to help them out. One of our largest boatbuilders organizes rendezvous for us with their customers so that we can make presentations in person, get feedback from them, and educate them on how to use the sails.
Q: What advice do you give small and midsize U.S. companies who want to tap into the export market?
A:Get a hold of a rep from a package carrier who's willing to listen to your needs and meet them. That's how we found out about the customs brokerage and logistics services from UPS three years ago. A couple of good reps came to ask us how they could help us out in increasing our exports and we worked out this plan that has functioned really well. Not all vendors will work with you that nicely -- we tried customizing our telephone service and that vendor didn't follow through on its promises. But sometimes, it really does work out.