When the COVID-19 pandemic hit in March, Susan Mocarski had to act fast before the crisis unraveled the hard work she had invested in her business.
Mocarski sells quirky, high-performance rain capes she designed herself that are popular among cyclists, and particularly in New York City. But when COVID-19 cases started to skyrocket in the U.S., her Providence-based company, Cleverhood LLC, saw domestic sales tumble.
Cleverhood had already looked to extend its reach to markets in Europe and Asia more open to Mocarski’s unconventional style of apparel, and after receiving a $6,000 grant from the U.S. Small Business Administration’s State Trade Expansion Program in the spring, she was able to market Cleverhood outerwear to foreign consumers, including creating a video with an international focus and running digital ads targeting geographic locations with language translations.
It’s proved to be a boon for business. Mocarski says her international sales have climbed 450% since April.
“We know that we have the appeal,” she said. “But the reality is we have to get it out there more.”
Traditionally, many small businesses have been hesitant to try to sell their goods and products overseas. The cost of attending in-person trade shows and missions and the time to build relationships with foreign customers may have been too heavy a price to pay for a strategy that might not boost profits in the end.
But for some Rhode Island businesses, the coronavirus pandemic has changed the calculations, providing the motivation to venture into foreign markets amid flagging sales in the U.S. and lowering the cost barriers because of the increased availability of government aid and a reduced need for travel to make deals.
The result: Local companies such as Cleverhood are exporting goods at record-high rates.
To capitalize on the situation, R.I. Commerce Corp. and the John H. Chafee Center for International Business at Bryant University have partnered to help usher Ocean State companies into foreign markets through grants and virtual missions, potentially providing a pathway for those who have never thought globally before.
“For the newer companies, it’s really about making contacts and having people notice you,” said Linda Woulfe, assistant director at the Chafee Center. “It’s a big opportunity for a small business. Now you don’t have to do a lot of the legwork you once had to do.”
[caption id="attachment_348289" align="aligncenter" width="1024"]
CHIEF INSPECTOR: Richard Fryburg, left, president of Subsalve USA, examines one of the company’s products as it’s being manufactured by employee Ray Stacy on the factory floor in North Kingstown. Subsalve is projecting growth in overseas sales heading into 2021. / PBN PHOTO/ELIZABETH GRAHAM[/caption]
AT A DISCOUNT
The opportunity was too good to pass up for EpoxySet Inc.
The Woonsocket company, a manufacturer of custom-formulated adhesives and other specialty chemicals, signed on to a federal COVID-19 relief program temporarily reducing or eliminating the cost of some export and investment services.
The relief program, offered by the U.S. Commercial Service, the trade promotion arm of the U.S. Department of Commerce’s International Trade Administration, expired Sept. 30, but it might have lasting effects for businesses such as EpoxySet.
The company received a 90% discount on “matchmaking” services that could connect it with prospects in Vietnam, Poland, Canada and Malaysia, according to Barry Siroka, EpoxySet’s business-development manager.
In addition, through R.I. Commerce and the Chafee Center, Siroka recently participated in a virtual mission to Germany by handing over product and manufacturing information to a marketing company tasked with tracking down German companies and distributors that might have an interest in doing business with EpoxySet.
“When you’re a small company, a 90% reduction in cost goes a long way. So, without having to travel, and for a small amount of money, I’m getting this great program and taking advantage of it,” Siroka said. “I’m hoping this will help allow me to increase my business presence in Germany.”
Indeed, some state officials see the shift in the way global business is being done – fewer plane trips, more videoconferencing – as an affordable opportunity to launch some companies into far-flung markets.
Katherine Therieau, who manages the trade partnership between R.I. Commerce and the Chafee Center, said while many of Rhode Island’s biggest businesses will look forward to in-person, elaborate and expensive trade missions and shows, smaller businesses are willing to step in only at lower price points.
“You can easily spend hundreds of thousands on a trade show,” Therieau said. “For the bigger companies, it’s sometimes just about the experience. For the smaller companies, it’s an introduction to trade before committing large amounts of money to any particular show.”
PROBLEM OF IMPORT
Of course, foreign trade hasn’t been a bright spot for everybody.
The value of goods shipped out of the U.S. between January and August was down by more than 16% compared with the same period last year, according to the World Institute for Strategic Economic Research, an international trade database. In Rhode Island, the decline stood at about 10%, while New England as a whole posted an 11% drop.
Daniel Dwight, CEO and president of Cooley Group, acknowledged that the pandemic has created some headwinds in the area of foreign trade for the Pawtucket geomembrane manufacturer.
“Video hasn’t been the most effective when building a relationship with a new customer,” Dwight said. “But it’s the second-best alternative and you can have people from all different locations join on one call with you.”
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FOREIGN PARTNERS
Rhode Island businesses exported $1.58 billion worth of commodities to 175 countries in the first nine months of 2020, down 9.51% from $1.74 billion in the same period of 2019. Here are the state’s top 10 trading partners: / Source: World Institute for Strategic Economic Research[/caption]
Cooley has increased its customer base 10% this year, but Dwight said the company’s international sales are off slightly because of postponed projects that were slated to use Cooley products. He did not disclose how much they had declined.
Unreliable supply chains during the crisis have added to the challenges, according to Elizabeth Robson, professor of international business at Johnson & Wales University. In many cases, production at manufacturers has been slowed by the delay of components arriving from abroad.
“We do have a large import side in Rhode Island because our manufacturers not only use domestically produced products but imported components in the goods they’re manufacturing,” said Robson, who also serves as president of J.F. Moran Co., a customs brokerage company in Smithfield. “Many of these manufacturers had to pivot.”
That’s what Maternova Inc. did.
The Providence company, which produces medical devices focused on maternal, reproductive and child health, exports 80% of its products to hospitals, humanitarian agencies and governments around the globe. But when COVID-19 hit, supply-chain problems prevented the shipment of key components needed to manufacture certain Maternova products.
Instead, the company began distributing rapid COVID-19 tests, according to CEO Prakash Veenam.
And then it focused on business development, using a grant of just under $10,000 from the SBA’s State Trade Expansion Program to expand its presence in Latin America by building an all-Spanish website.
“We’re finding there’s a lot of demand [in the Latin American market] and there’s an ability to pay for medical devices and diagnostics,” said Meg Wirth, Maternova’s founder and president.
Woulfe, who oversees the SBA’s State Trade Expansion Program for the Chafee Center, said the SBA has done a pivot of its own.
The STEP grants are usually designated to finance trade show and trade mission trips. But since many were either canceled or postponed until next year, the SBA now allows money to go toward digital promotion.
Under the new parameters, which went into effect on Oct. 1, eligible Rhode Island companies can apply for up to $10,000 in matching funds to cover a multitude of expenses, including the design and development of a website with an international focus, online market listing fees, e-commerce platform and hosting fees, expenses to set up websites that will accept foreign payments, and virtual trade missions and shows.
‘WHOLE NEW ANIMAL’
For some companies, business with other countries has never been better.
North Kingstown-based Subsalve USA Corp., which manufacturers products such as lift bags, flotation bags and bomb-recovery systems, had planned to attend several in-person trade shows this year, but all were postponed.
That hasn’t hurt sales in foreign markets, though.
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SHIPPING OUT Here are the values of the top 10 commodities exported from Rhode Island in the first nine months of the year, compared with values from the same period a year ago./ Source: World Institute for Strategic Economic Research[/caption]
Typically, 50% of Subsalve’s $6 million in annual revenue comes from more than 30 countries worldwide, executives say. Now that percentage stands to climb much higher.
The company teamed with Lombardi Undersea LLC to create oxygen-treatment hoods that treat COVID-19-related respiratory ailments without the insertion of breathing tubes, a product expected to boost sales.
And Subsalve President Richard Fryburg said as China is perceived to be a growing threat by many U.S. allies in East Asia, military customers in Japan, South Korea and Taiwan are shifting what Subsalve products are in growing demand, including an underwater ordinance disposal system used to remove mines or bombs.
“We’ve got some very large military contracts that will occur in 2021, which could [more than] double our sales,” said Fryburg.
The foreign-trade growth is on a similar trajectory at AVTECH Software Inc., a Warren-based developer and manufacturer of environmental monitors for data centers and computer rooms.
The company established a distribution center in Ireland last year and has seen a 25% growth in overseas sales, particularly in Europe and the Middle East, according to Rick Grundy, CEO and president.
Grundy acknowledged there have been challenges, particularly in the early weeks of the pandemic when the feeling of uncertainty was pervasive. Even now, “trade during COVID has been a whole new animal,” he said.
Still, the company is on track to finish the year with higher sales figures than the year before.
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IMPORT ISSUES: Elizabeth Robson, professor of international business at Johnson & Wales University and president of customs brokerage J.F. Moran Co., says difficulty getting imports during the pandemic has hindered some of Rhode Island’s manufacturers. / PBN PHOTO/MICHAEL SALERNO[/caption]
STAY VIRTUAL?
What does the future hold for foreign trade? It’s an open question.
Robson, the Johnson & Wales professor, said imports coming into Rhode Island are returning to pre-pandemic levels, which in turn will help local manufacturers that have run short of components needed to build their products and ship them abroad.
“There are very few exporters who are not also importers, said Robson. “The two generally go hand-in-hand.”
At the same time, it’s unclear when the traditional ways of conducting global business – in-person trade shows and missions and face-to-face interactions – will return. The end to COVID-19 is not yet in sight.
“We ask ourselves every day if these virtual events are here to last,” said Mark Murphy, director of the Chafee Center. “It’s a possibility. But then again, many things are uncertain.”
At Cleverhood, Mocarski isn’t looking back to the methods of the past to drum up foreign business. Virtual alternatives have worked well for her company and others like hers, and she believes the options will only get better.
“The in-person missions are time-consuming, costly and not very sustainable,” she said. “If we do continue to develop this, Rhode Island businesses could have a real opportunity.”
Mission possible: Trade officials pivot during crisis
Months ago, the John H. Chafee Center for International Business at Bryant University and R.I. Commerce Corp. had big plans for the week of Oct. 18.
Officials were going to lead a group of Rhode Island businesspeople on a trade mission to western Canada, with stops in British Columbia, Alberta, Saskatchewan and Manitoba. The goal: to get companies access to the Canadian market and develop contacts in face-to-face meetings with government officials and business leaders.
The coronavirus pandemic put in an end to those plans, but it didn’t snuff out the demand among businesses wanting to increase their international sales.
So instead, R.I. Commerce and the Chafee Center are trying something new: a virtual trade mission to Canada, touted as an opportunity at gaining the same access that in-person meetings would have offered.
State officials are still recruiting participants.
According to Katherine Therieau, who manages the trade partnership between R.I. Commerce and the Chafee Center, participating Rhode Island companies will receive an initial market assessment and undergo an in-take evaluation to ensure that a company’s products and services will have a sufficient market demand to justify their participation.
Companies will then receive a customized market research report with facts on the competitive landscape, pricing and local regulations, in addition to a list of potential trade partners that they can vet and prioritize, Therieau said.
In the mission’s last step, at least five virtual meetings will be scheduled with interested partners that will take place by videoconferencing, and are scheduled at the partners’ convenience, with a completion goal of Dec. 20.
So far, three Rhode Island companies in sectors ranging from manufacturing to the law are in the middle of the process.
Why Canada? It’s been Rhode Island’s largest trading partner for years. In fact, between January and August, Rhode Island businesses exported $267.7 million worth of goods and materials to Canada, according to the World Institute for Strategic Economic Research.
Alexa Gagosz is a PBN staff writer. Contact her at Gagosz@PBN.com.
