Against the odds, many small and midsize businesses (SMBs) in the U.S. are successfully conducting international trade.
Global trade challenges like tariff disputes, inflationary pressures, geopolitical conflict, and other harsh realities can create uncertainty about international business prospects. Yet operational matters that once posed significant roadblocks – like cross-border payment and shipping – have become easier to handle for many businesses. Thankfully, many global trade routes that have previously broken down in recent years have been redrawn and strengthened. As a result, many smaller companies today see solid growth potential abroad, especially as e-commerce and digital trade strategies have proven particularly successful over time.
Global Trade by the Numbers
In 2023, American small business trade statistics registered a sharp spike as government officials took a new look at how goods and services have been flowing between the U.S. and other countries. Data released in March 2023 by the Small Business Administration (SBA) placed the number of smaller exporters at 1.3 million, an almost fivefold increase over previous estimates. It can be worth noting that this large increase came about, in part, because shipments of products valued at under $2,500 and service exports such as software-as-a-service were included in export data for the first time.
This and other official tallies of small exporter growth have catalyzed new government support. For instance, Commerce Secretary Gina Raimondo announced in mid-2023 that small businesses would be a top priority of the U.S. National Export Strategy. New grants and other trade promotion support soon followed her promise to help more small businesses break into international markets.
Global Trade Opportunities
Billions of people with internet access and purchasing power live outside the U.S. This vast and growing segment of the global population has helped drive new levels of trade from SMBs in the U.S.
Many smaller companies today see solid growth potential abroad, especially as e-commerce and digital trade strategies have proved particularly successful over time.
Additionally, many aspects of conducting business abroad have simplified. The U.S. Chamber of Commerce credits e-commerce platforms and other digital tools for creating many new global trade opportunities, empowering SMBs in various ways:
- Online search, trade intelligence platforms, and other tools that make it easier to find new customers.
- E-payment systems that ensure fast, inexpensive, and secure transactions across borders.
- Cloud technology that gives smaller businesses the ability to conduct their international operations more like major multinational companies do.
- Logistics companies have minimized many of the shipping, customs clearance, and other hassles of fulfilling orders worldwide.
Global Trade Challenges
The challenges in doing business abroad can vary significantly, depending on whether an SMB is exporting online, working with overseas partners, establishing foreign operations, or taking another approach. The obstacles can also change from one country to the next and from one product category to another. Some common challenges include:
- Volatility: SMBs’ risks can increase in global markets. Currencies can gain or lose value as the U.S. Federal Reserve Bank and other central banks continue to combat inflation. Shipping prices rise and fall with supply and demand, not to mention fluctuating oil prices. Changes in consumer demand can be even harder to predict from afar.
- Disruption: Pandemic-related disruptions to global supply chains may remain fresh in everyone’s memories, though new routes and buffer inventories have since shored many of them up. Still, extreme weather and other factors can pose growing risks.
- Government red tape: It can be difficult for SMBs to keep up with the latest tariffs, regulatory changes, and new customs systems implemented by foreign governments. Each year, the U.S. National Trade Estimate Report on Foreign Trade Barriers rates countries on a litany of trade restrictions large and small, with examples including import licensing, unnecessary labeling, and the blocking of cross-border data flow.
- Financing: Many U.S. SMBs lack the working capital to expand exports and can find it difficult to secure the trade financing needed to fill this gap.
Overall, the challenges of doing business abroad can disproportionately burden SMBs.
“Unlike larger companies, smaller businesses with fewer products, service lines, and resources usually cannot carry the increased costs of data localization, forced technology transfers, and arbitrary application of regulation to U.S. firms,” the U.S. Chamber of Commerce explains.
Why Sell Abroad?
Despite challenges, trade promoters such as the U.S. International Trade Association and the Chamber of Commerce point to several ways that international trade can boost SMB growth and profitability, such as:
- Expanding their customer base to a large addressable market.
- Smoothing business cycles, such as seasonal demand for products.
- Extending product life cycles by marketing them abroad as they mature in the U.S.
- Increasing the revenue from intellectual property by licensing it overseas.
- Decreasing production costs, as producing in higher quantities lowers raw materials’ cost per unit.
- Reducing the risks of operating in a single market, which can expose a company to a unique set of economic pressures, market trends, or other business risks.
Global Trade Strategies
With strategic planning, SMBs can conduct overseas trade with confidence. Companies can answer key questions well in advance, such as defining the best entry point for exporting, the realistic export potential for their particular product, and whether their infrastructure may be able to support sales and shipments abroad.
Here are some top-level strategies currently in play for many SMBs:
E-commerce platforms
Amazon, eBay, and other e-commerce platforms can handle many of the headaches typically associated with exporting. Amazon, for example, enrolls its marketplace sellers in its export fulfillment program by default, “at no extra charge,” offering help to identify export-eligible products, fulfill international orders, handle import duties and customs clearance, and ship products abroad.
Meanwhile, in March 2023 eBay reported that at least 93% of the small businesses on its platform in each of 18 countries surveyed are exporters. In the United States, over half sell to 10 or more countries – a far higher number than among “traditional” exporters, the company said. Despite trade challenges brought on by the pandemic, the Trade Promotion Coordinating Committee's 2023 National Export Strategy, released in June 2023, notes many small businesses in rural and underserved communities "adopted new technologies, digital sales strategies, and virtual platforms at high rates" to become exporters.
Outsourcing
Companies of all sizes and ambitions can outsource at least some of the more challenging aspects of global trade. In fact, over half of the 177 global trade professionals surveyed for the Thomson Reuters Institute's 2023 Corporate Global Trade Survey Report, released in September, said they take this approach, with the most commonly outsourced tasks being customs clearance and regulatory compliance.
Partnerships
As international business strategies become more ambitious, SMBs may forge relationships with overseas advisors, distributors, or joint venture partners – or even buy a foreign company. The many benefits partners can bring include in-country networks and knowledge of local regulations, business practices, and customer preferences.
Innovation
As with so many business endeavors today, artificial intelligence (AI) is also being put to work to improve international trade. For business development, AI-driven market intelligence tools can analyze trade databases, market reports, social media, and other data to help understand overseas markets and identify customers. To clear customs without hitches, AI-powered software can analyze documents, detect anomalies, and flag potential risks.
Government support
Companies can take advantage of U.S. trade agencies’ recent push for more small business exports, including by seeking funds from the SBA’s State Trade Expansion Program or tapping into its new alliance with the International Trade & Forfaiting Association for educating exporters on trade financing. The government’s growing portfolio of tools and services also includes help in finding markets, meeting potential partners, and improving operations.
The Takeaway
Many U.S. SMBs are becoming more empowered to expand their businesses internationally. Despite significant political and economic challenges, digital innovations and other developments are chipping away at some of the biggest operational barriers to trade. Examples include e-commerce platforms’ global reach, cloud services for international collaboration with partners, and logistics providers’ increasingly automated handling of customs clearance. Beyond technological trends, global supply chains have been strengthened, and the U.S. government is mustering its trade promotion forces in a new push to expand small business exports. Global trade is not without risks, but the risk/benefit ratio is improving for many smaller businesses to succeed.
A version of this article was originally published on April 21, 2023.
Photo: Getty Images
