The Falling American Dollar Continues to Pinch Small Businesses

[May 31, 2008.]

 

The American dollar over the past course of this new century has been hurt pretty bad in terms of value, both by lowered consumer spending and inflation. In fact, just recently it has hit a 12-year low against the Japanese yen and even an all-time low against the EU's euro, leaving the currency looking pretty bleak in the eyes of some investors. However, it wasn't just the juggernauts of international trade who have noticed the impact of the dollar's diminished value; small businesses that deal with imported goods -- either by direct retail or by means of marketing their products to other retailers -- have had a lot to be concerned over regarding the dollar's lost value.

Small businesses often tend to differentiate themselves from the larger, more prominent competitors by means of offering exotic and special products that give buyers something that they can't find anywhere else. Therefore, importing goods is just one way to accomplish that and secure a niche in the market, but it is getting increasingly hard for these small businesses to sell their goods at competitive levels when the weak dollar continues to drive up prices for products coming from overseas.

For instance, Dave Alexander, the owner of Brickskeller, a bar situated in Washington, D.C. that is famous and highly regarded for having the largest selection of commercialized beers, has made itself a notable exception to the businesses that compete with it. Brickskeller has established prices for beers that are extremely low when compared to its competitors; even common domestic beers that are sold at other bars in the local area don't match the prices of some foreign drinks

However, Alexander says that the prices for purchasing many of the beers that he imports have went up considerably in the past several months, mostly because of the American dollar dropping in value in comparison to the euro. This sort of problem affects his bottom line, leaving him concerned and frustrated, and in turn reflects on the general anxiety small business owners are feeling when it comes to the imported goods they rely on to stay in business.

Not all is lost though, says some financial advisors. They believe the best thing to do in the current situation is to adapt one's business strategy to reflect the changes in currency and to promote products that still remain within a company's budget. Another good idea is to ask suppliers to reduce their prices a bit in order to allow you to catch up on the changes and to adapt to the current value of your currency. This won't work with every supplier, but it may just be possible with those businesses that you have developed long-term, deep, immensely rewarding relationships with who can respect your trading with them.

The strategy for most businesses seems to wait it out and hope that the dollar turns around and helps them out again. Some small businesses are letting the costs of their goods cut into their profit margins so that they don't run the risk of selling less if they raise prices in order to maintain a particular income. In the end, businesses will continue to feel the pressure generated by the ailing economy while the dollar continues to stagnate, but these same businesses may very well see some hope through rigorous budget management.