Importers and Buyers Hail Rise in Dollar : Some O.C. Businesses Post Fast Price Cuts
It was Memorial Day when the young merchant banker wandered into Dansk Mobel Export Inc. in Los Angeles and made a very big impression. As a specialist in European currencies, he knew the time was ripe to buy Danish imports--to buy nearly anything, as a matter of fact, that was shipped here from overseas.
And buy he did--$62,000 worth. Exorbitant, you say? Perhaps, but a bargain nonetheless. For had he made the same purchases 18 months ago, they would have cost him nearly $15,000 more.
“He had been watching the rate, and he decided that this is the time to buy,” said David Sakol, Dansk president. “We’ve watched our prices come down. Our prices have dropped 19% since November, 1987.”
For the last six months, the once-weak dollar has surprised economists with a steady gain in strength. Last Dec. 31, for example, it was worth 123.61 yen; by May 31, it had risen to 137.86. And the stronger the dollar, of course, the more it buys.
It continued its months-long surge Friday, gaining sharply against the British pound, the yen, the French franc and the Deutsche mark, among other foreign currencies. While such strength makes many economists edgy, importers are ecstatic.
For it wasn’t too long ago that dollar doldrums made doing business overseas expensive at best.
Steven Shedd, co-owner of Steven-Thomas Antiques in Santa Ana, keeps a running tab on the dollar’s fluctuations on a personal computer in his office. His 20-year-old store specializes in European antiques, and Shedd said he has realized a savings of 5 to 15% in the last 18 months.
And he has passed on that bounty to his customers. Steven-Thomas Antiques heralded its recent semiannual sale with a flyer that gushed: “Due to the recent increased strength of the dollar, the savings will be even greater!”
Shedd lists a 1920s-era burl walnut china cabinet with beveled glass for $995. The storewide sale reduced the price to $689. Eighteen months ago, when the dollar was far weaker against the lira, the cabinet from northern Italy would have been priced at $1,195, Shedd said.
“When we price, it depends on the availability of a product at a particular moment, what we paid for the item and, recently, the favorable fluctuation in the dollar,” Shedd said. “It has allowed us 5% to 15% leeway to mark products down.”
But not all firms are so quick to respond to the dollar’s fluctuations. The larger the company, the less flexible it generally is in responding to changes in the marketplace. And those firms that keep large inventories and order far in advance also react more sluggishly.
“We don’t respond to the movement of the French franc or other currency as much as others,” said a spokeswoman for Trader Joe’s Co. in South Pasadena. “We buy well ahead. And we don’t wait for the dollar to change.”
Ramon Moreno, an economist with the Federal Reserve Bank of San Francisco, says that it usually takes at least a year for savings caused by the strengthening dollar to be passed on to consumers.
“If the exchange rate changes today, we will see an adjustment in import prices in about a year,” Moreno said. “The big surprise in the ‘80s has been that apparently import prices haven’t moved very much--or as much as we expected--in response to changes in the exchange rate. . . . These days, it may be as many as two years before you see the effect.”
The dollar rose fairly steadily from 1980 to the first quarter of 1985, Moreno said. It started a precipitous slide in 1987, the same year the so-called Group of Seven industrial nations intervened to stabilize the dollar. The dollar fluctuated through most of 1988.
“Since January, it’s been appreciating,” Moreno said. “That’s the big story of 1989.”
Paul Quackenbush, is the owner of Shamrock Imports, a beer and wine importer in Signal Hill. Shamrock has been in business for only three years, and during most of that time, the dollar worked against him.
“The way the dollar was behaving made prices go sky-high and drove a lot of people out of the business,” Quackenbush said. “You got to wondering, ‘Am I even going to have a business?’ Things were so expensive.”
But Quackenbush now says he is “right on the borderline,” poised to lower the wholesale prices for his European brews. And soon, he posits, those savings will be passed on to consumers.
“In beer,” he says, “that will be really big for us, make us competitive. Especially with the German beers, which just aren’t competitive now.”
Bitburger, Germany’s No. 1 selling beer, now costs $4.37 per six-pack wholesale, $5.99 retail. Come July, Quackenbush says, he’ll be lowering his Bitburger prices between 8% and 10%, to $3.87 wholesale and $5.49 retail.
The reason is the Deutsche mark. On Friday, the dollar was worth 2.0025 Deutsche marks, up from 1.9770 on Thursday and 1.7563 last Dec. 31.
In the imported-tile industry, says Edward Ghodsian, president of Los Angeles-based Emser International, business is so competitive that he has to pass on to his customers the savings he realizes from the stronger dollar.
Ghodsian keeps a running chart of the changing dollar on his office wall; it chronicles a 7% drop in the lira and a 5% drop in the yen in the last month. When he revises his wholesale price lists in the next two weeks, they will reflect the difference.
“There is a definite savings to the consumer, no doubt, right now,” Ghodsian said. “This is a fantastic sign, really. When the dollar is stronger, it means the economy is doing well. It’s good for everybody, really.”
