State of emergency in Swiss foreign trade

Swiss retailers are in the grip of a crisis: This is roughly how the results of a recent survey conducted by the Swiss Trade Association among its 33 member associations can be summarized. Indeed, global trade is being put to the test, according to a statement by the association: the Ukraine war, the Chinese Covid strategy, sanctions in the Russian economic area, the efforts of the USA to reduce its technological dependence on China, the planned further digitalization of the Chinese economy and society, and the construction of new energy infrastructures in Europe - all these developments are driving the transformation of global trade in parallel. Rudolf O. Schmid, President of Handel Schweiz since June 2022, emphasized at the media briefing of the umbrella organization of Swiss trade: "Switzerland and its traders are called upon to move and adapt in the changed trade structures. As a small country, Switzerland benefits from the great advantage of being only partially subject to the foreclosures." Current figures also show this. For the third quarter of 2022, exports increased by 1.3 percent overall. Thus, 4.9 percent more watches were exported. While a minus of 4.4 percent was recorded in exports to Europe, those to China rose by 19.3 percent. The forecasts also give Swiss retailers cause for hope. The ETH Zurich's economic research unit expects GDP to increase by 2.3 percent in 2022 and inflation to fall from mid-2023; this should be only 2 percent by the end of 2023. Kaspar Engeli, director of Handel Schweiz, explained the relatively stable situation in Swiss foreign trade despite the "state of emergency": "Crisis mode is to some extent the normal case for many companies active in global trade."

Survey of 33 trade member associations

The survey results show that in recent months, half of the trading sectors were able to increase foreign trade sales by up to 50 percent. Just under a third lamented a slump of up to 20 percent. The crises triggered by the Ukraine war, rising commodity prices and potential energy shortages impacted foreign trade to varying degrees, with 93 percent of trading sectors facing the effects of higher commodity prices. The Ukraine war and future energy shortages are each changing foreign trade in 77 percent of firms. Nearly one-third of traders are already saving energy or building alternative energy solutions. The three crisis areas are primarily causing additional work for trading companies and problems in the supply chains. Retailers are still countering this with larger warehouses, which further increases the need for liquidity in the already capital-intensive retail sector.

Multiple roles in global trade

The constant state of emergency forces traders to be agile. Hans Christian von der Crone also knows this. The owner and CEO of the 10-strong Nimex AG in Adliswil is a full-blooded trader with a global network. He explains the robustness of crisis-tested Swiss retailing also with the well-established structures: "There are a lot of owner-managed family businesses in retailing. They pass on their experience from generation to generation. Long-standing contacts with trading partners all over the world are a second success factor that helps to build resilience even in uncertain times. Nimex is constantly exchanging ideas globally. This is how we find new products and land real sales hits time and again. What remains the same is a certain caution. Swiss retailers can't trump with size abroad. But we're known for being able to empathize with each other's mentality and maintain a respectful approach." Nimex's core businesses include watches and jewelry and toys. In the two core businesses, Nimex is in contact with a total of more than 100 partners worldwide. The fashion watches as well as jewelry are produced in several places such as Thailand, Taiwan or China. Traditional toys such as cars, dolls and accessories, collectibles and plush make up around 70 percent of the toy range. Here, about 70 percent of the goods come from China. Nimex also manufactures products itself or has them manufactured; whether in Europe, such as in Portugal, or in the Far East. For example, the company has been launching Swiss Made watches with local producers for years. The Swiss Made watches are then sold 95 percent worldwide. Prices range from CHF 150 to 500. The owner of Nimex explains, "Our watches, if Swiss Made, stand for Swiss quality, but they are still 'mass-produced'. Very many people in numerous countries are proud to be able to afford them." In addition, Nimex holds licenses for merchandising products. One of the most prominent is the now 90-year-old Globi brand. Globi or, for example, the Disney princess doll are perennial favorites that have sold well for years. In view of the change in markets, scarce raw materials and the energy crisis, Nimex is planning even more ahead today. Orders are placed earlier. The geopolitical changes have not led to a drop in sales at Nimex. The higher transport costs, especially for the larger products such as trampolines, are having an impact. In the case of jewelry, the additional costs are insignificant. For example, with 10,000 stuffed animals in 20 containers, the additional costs can be absorbed with minimal to no price increases.

Headquarters in Hong Kong, production in China, European warehouse in the UK

One of Nimex's long-standing trading partners is Herald Holdings, based in Hong Kong. The company was founded in the mid-1950s by the family of current Chairman Robert Dorfman and a second family from Hong Kong-China. Dorfman was on the online media call from Hong Kong, He explained the interaction of the two families: "We bring Western management and marketing techniques, and they bring a great knowledge of China and the manufacturing base." Action figures such as Star Wars and Avengers are produced for its largest customer, U.S. toy maker Hasbro. While Herald started out producing in Hong Kong, in the 1980s it moved manufacturing to lower-cost China, first through subcontractors and later to its own factories. Although China has long since ceased to be the cheapest country, relocation to Indonesia, India or Vietnam is out of the question for Herald, as Robert Dorfman explained: "The proximity to Hong Kong, as well as the cultural and linguistic proximity, make it possible to operate factories in China reasonably well. An almost unlimited supply of labor, readily available land, and perhaps the best infrastructure of any manufacturing country in the world gives China a big advantage. Herald looked at relocating production, but decided to stay in China and automate the manufacturing process as much as possible." Trade with European partners is handled by a subsidiary in the United Kingdom, which also maintains a large warehouse. Nimex AG, for example, can have goods delivered at short notice.

Herald's challenges are similar to those of Swiss retailers: disrupted supply chains, rising costs for raw materials and the shortage of chips. Relief is evident in the shortage of electricity. In addition, Herald has expanded its stock of raw materials and goods, which is possible thanks to its healthy financial situation, despite the now longer payment terms. The Chairman of Herald Holdings notes, "The world is simply a mess right now; relationships are fragile everywhere. Even as the political clamor between countries grows louder, trade continues. Trade is a necessity." Sustainability is important to the group. It relies on recyclable raw materials, whether plastic or metal. A lot of work has gone into environmentally friendly packaging. Robert Dorfman emphasizes, "We are a responsible manufacturer and ensure fair working conditions in terms of ventilation, accommodations and food, for example. If we weren't that kind of company, we simply couldn't be in business anymore."

80 percent of new customers are not familiar with free trade agreements

At Nord-Transport AG in Arlesheim, 35 employees take care of transports within Europe and overseas, as well as customs and logistics. Up to 25,000 orders are processed each year. These include toys, sporting goods such as trampolines or scooters, but also stones, marble for bank buildings, wooden boards for tables - the whole spectrum of commercial goods. Nord-Transport AG has been working with Nimex AG for almost 30 years. Pascal Felten is a member of the management of Nord-Transport and explains: "For me, Nimex is an example of a customer who plans for the medium and long term and works together with foresight."

Free trade agreements are an "absolute enabler" for trading companies, Pascal Felten knows from daily experience. For Nord-Transport, they are an administrative advantage, because customs processes are simplified. They are also a marketing tool. Pascal Felten: "Based on the Seco statistics, we see that up to CHF 400 million were still collected for customs duties on goods from countries with free trade agreements. This is partly due to the complicated and constantly changing regulations. Our specialists are specially trained and educated. Nevertheless, they need some time to familiarize themselves with the formal requirements of the free trade agreements. 80 percent of our new customers - mostly SMEs - are not familiar with the free trade agreements. This is where we can provide valuable support." For Nord-Transport, problems on the supply chains determine everyday life. Pascal Felten gives examples: "Delays are caused by service disruptions in shipping line services. By June this year, only one out of ten ships had arrived on time; the remaining 90 percent were delayed by at least three days. Another problem is high ocean freight rates, which at times had increased tenfold." When it comes to diesel or other oil-based inputs, the energy crisis directly affects Nord-Transport. Whenever possible, the company relies on renewable energies as well as long-term cooperations with subcontractors and does not just look for the cheapest price. Pascal Felten: "Wherever possible, we work with partners who also use alternative fuels or electric drives and hydrogen drives. On the shipping company side, we prefer partners who operate their fleet sustainably and plan for the future."

Global trade in medical technology

This year, Jil Bachmann was the best apprentice at 7S Medical International to complete a shortened apprenticeship in the commercial trade sector. She decided on the apprenticeship after completing her bachelor's degree in political science and geography, because she wanted to get to grips with foreign trade not only in theory, but also in practice. 7S Medical International is a subcontractor of the Stöckli Group. and a medical technology company specializing in orthopedics. Implants such as plates, screws, nails and bone replacement products are traded worldwide. These are used together with the appropriate instrument set in the treatment of fractures. A typical product is Heracles - a femoral neck nail produced by the supplier exclusively for 7S. Femoral neck fractures are among the most common indications worldwide. The products distributed by 7S are manufactured in China and Portugal, among other countries. From the manufacturer's site, they arrive at the central warehouse in Belgium. Orders from suppliers and deliveries to customers are coordinated from Oberkirch in Switzerland. Jil Bachmann explains why the warehouse is located in Belgium: "One of the reasons is that far fewer medical products are patented in Belgium than in other EU countries. From Belgium, we deliver our products to Hungary, Serbia, Slovenia, Croatia, Malaysia, Panama and even Saudi Arabia, for example." In recent years, faltering or collapsed supply chains have been a recurring concern for 7S. For example, power shortages at production facilities in China disrupted entire operations. Customers had little to no understanding for delivery delays. After all, the hospitals had planned operations and were dependent on the corresponding products. In recent months, there have also been price increases, which will be passed on to customers from 2023. 7S sought direct talks with all distributors and was able to reach an agreement.

Production in Switzerland, export to China

18-year-old Thomas Stjelja was also one of this year's best apprentices to complete his commercial apprenticeship. His employer is the SFS Group in Heerbrugg, a leading global supplier of precision molded parts, mechanical fastening systems, quality tools and logistics systems. The products often invisibly perform mission-critical functions in technical devices such as cars, smartphones and aircraft. During his apprenticeship, the budding business economist also gained an insight into foreign trade. In export, for example, he personally experienced what interrupted supply chains mean in everyday life. He explains, "We export around 70 percent to European countries from our Swiss production sites. To China, for example, we supply the world's smallest thread-forming miniature screws for hearing aids with a diameter of 0.5 mm. During the Covid pandemic, due to the closed port in Shanghai and various lockdowns in China, our screws did not arrive on time and could not be delivered. Production was severely delayed at the Chinese producer, resulting in late deliveries to end users. At times, the machines were at a standstill; this at several customers."

Source: Trade Switzerland