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Local Importers Tap Growing Foreign Markets

November 8, 2010

Memphis Daily News

JEFF IRELAND | Special to The Daily News

In 2006, Mike Longo did something that – surprising to him – became controversial.

His Memphis-based retail company, Shelmar Inc., bought some clothing from a company in Iraq during the height of the war.

Longo saw it as a way to help a country’s struggling economy.

“We were the first U.S. company to cut a purchase order to Iraq,” Longo said. “Our very small – and I underline small – contribution to try and do something meaningful and help put people back to work in Iraq, and we were criticized for that. It’s enough to make your head spin.”

Four years later, Longo is a member of the ownership group of MLG Imports, a Memphis-based company that depends on the global economy as much as the one struggling in the United States.

According to area importers and exporters, as well as observers of the industry on a national level, there are profits to be made working with companies outside the U.S.

“There’s no better time than now to do business in China,” said Benjamin Wey, president of New York Global Group, a Wall Street advisory firm that has offices in New York and Beijing.

Wey said 150 million of the 1.46 billion people in China are now classified as middle class. At the turn of the century, he said, that number was closer to 20 or 30 million.

“More Chinese consumers are getting wealthier,” Wey said. “It wasn’t like that 10 years ago.”

MLG Imports got started a year ago and did $4 million in business the first 12 months. Longo and Jeff Presley, another member of the ownership group, project their business to triple over the next year.

Longo and Presley said they believe a good import business model can overcome the deficiencies of the domestic economy.

“The market maturing has created our opportunity,” Presley said. “The time is now to be a low-cost, zero-margin provider. … Instead of the mystery of the Orient, when it used to be you got an order because you were cheaper than some high-cost, Northeast manufacturer, now you need to be stable, have quality and logistics at a low margin. … The discipline in our business has helped us take market share.”

“It’s probably helped a little bit,” Longo said about the problematic United States economy. “Frankly we’re taking market share from others in some cases. Are we promoting and increasing the latent demand to begin with? Maybe a little bit.”

Don Lake is the vice president of global operations for Centrix, a Memphis company that is involved in a number of varied industries, including importing and exporting.

Like many companies that utilize overseas labor and products, he’s heard complaints about working with foreign companies when people are looking for jobs in the United States.

“My overall perspective is that importing creates jobs here as well,” Lake said. “You may take from one industry, but it adds to another. I definitely see both sides of it.”

“As soon as they put their iPhone down, I’ll start listening to them,” Longo said about those who complain about outsourcing when the domestic economy is struggling. “They’re talking, but they’re not voting with their wallet. As soon as they say they’re going to change their spending habits, I’ll start listening to them. The hypocrisy of it strikes me as very thick and very deep.”

Robert Grbic, the chief credit officer for Capital Business Credit, a New York-based company that provides supply chain financing solutions for U.S. importers that source the manufacturing of their goods overseas, has been in the business for 20 years.

He said distress presents opportunity, but he too has heard complaints from some about outsourcing jobs.

“If my customer wants to pay a penny for a plastic spoon, they have to have it made for half a penny,” Grbic said. “But … we have labor laws here. It’s all different in different industries. We always like to import less and export more. It could be done, but it takes a while.”

Meantime, U.S. companies that deal with other countries forge ahead. And like all businesses, they watch margins and try to make a profit.

“The cowboy days of the import business are gone,” Presley said. “The Internet pulled a lot of that margin out. … For those who are willing to be a value-add on narrow margins and apply expertise in systems, you can make money in the business right now.”