Inside Logistics

SMEs divided on international outlook

31% of micro business expect trade conditions to deteriorate


January 23, 2015
by MM&D Online Staff

TORONTO, Ontario—Micro, medium-sized and larger small businesses (SMBs) in Canada have a sharply divided outlook on international trade conditions for the next 12 months.  Compared to six months earlier, the number of respondents forecasting an improvement grew 26.1%, from 15.3% in June to 19.3% in December.

However, the percentage of all respondents forecasting a deterioration in overall global trade conditions grew only 4.3% over the same period, with 31% of micro businesses expecting a deterioration.

Larger businesses have the most optimistic outlook by a significant margin, with 38.8% seeing improved conditions, compared to only 20.1% among medium-sized businesses and11.5% of micro businesses. China is the most popular import market, as stated by 39.5% of all businesses surveyed, including 65.4% of the larger small businesses.

For future export growth, Canadian small businesses are looking to China (21.8%), other Asian markets (18.4%), Europe (14.0%) and the US (13.3%) as target markets. Larger SMBs are targeting China (27.3%) and Other Asia markets (18.0%), while mid-sized companies are targeting Other Asian markets (22.4%), China (19.4%) and Europe (13.7%) for future export growth.

Micro businesses are targeting China (21.1%),Other Asia (16.0%) and the US markets for export expansion. The number of countries overall with which SMBs trade has increased24.7% in the last 12 months, with larger SMBs expanding the number of countries with which they trade by 46.6% and medium-sized SMEs reporting growth of 30.8%. Micro SMEs reported growth of only 13.1%over the last 12 months.

On average, medium-sized SMBs trade with 1.6countries, and large SMBs trade with 2.3 countries. Asked about additional business investment, the total respondents said that internet-based sales and marketing are the main focus (27.4%),followed by technology support (25.4%), new product/service expansion(17.7%) and increased export market developing (13.7%).

While larger small businesses expressed the greatest interested in technology support (27.8%) and internet-based sales and marketing (26.8%), micro businesses overwhelmingly said they planned to invest in internet-based sales (31.0%), followed by technology support (20.9%) and newproduct/service expansion (17.1%).

Expecting increased export marketing was mentioned by 13.7% of overall respondents and most frequently by larger businesses surveyed (15.1%). This is unsurprising, given that segment’s confidence in international trade conditions, with nearly 40% expecting an improvement.

“Our global reach and expanding technology offerings address the diverse needs of Canadian small businesses of all sizes,” said Jonathan Rees, North American Managing Director at Western Union Business Solutions. “The increasing number of SMBs with global business have new layers of technological complexity and opportunities. As these smaller global businesses grow, versatile technology, risk mitigation and minimizing costs will rise in importance.”

Businesses from all three SME segments surveyed say they are spending more time on global payment issues. The number of all businesses reporting that currency movements are having a negative impact has grown by 13.4%, from 41.7% in the survey completed six months ago to 47.3%.

Of the three segments surveyed,medium-sized small businesses are much more negatively impacted (57.6%) than either the micro (45.4%) or larger segments (35.1%). Only 9.0% of larger small businesses report a positive impact on currency movements,the largest group to report a positive impact.

The interviewee distribution was composed of business owners/CEOs(47.8%), CFOs (13.8%), finance directors (13.0%), and treasurers (12.8%). Nearly 14% of survey respondents were exporters only, 22.1%import only, and 64.4% of respondents were both importers and exporters.

The independent research was conducted for Western Union Business Solutions, a division of The Western Union Company by East & Partners in November 2014 and surveyed the international trade and foreign exchange practices of 2,203 Canadian companies engaged in international trade. The report categorized businesses based on an annual enterprise turnover of up to CAD$100 million.

The geographic distribution throughout Canada was diverse and balanced with distribution across Montreal and Quebec (22.7%), Ottawa and Ontario (21.7%), Toronto(16.4%), British Columbia (13.3%), Edmonton and Alberta (10.7%), and other areas (15.2%).

Industry sector distribution included personal and other services (28.6%), property and business services (17.1%),construction (10.8%), retail (10.4%), wholesale (6.6%),accommodation/cafes and restaurants (6.5%), transport and storage(5.4%), agriculture / forestry / fishing (4.7%), and manufacturing(4.5%). The margin of error associated with this level of reporting is+/- 2.0% at a 95% confidence level.

(Micro SMEs: $1-5 million in annual revenue. Mid-sized SMBs:$5-20 million in annual revenue. Larger SMEs: $20-$100 million in annual revenue.)