Outdoor Companies Express Concern About Tariff Threats at 2019 Outdoor Retailer Summer Market

Retailers wait with bated breath as the public hearings on President Donald Trump’s proposed tariffs on Chinese goods move into the fourth day of testimony.

Despite finding themselves halfway across the country, industry attendees at the 2019 Outdoor Retailer Summer Market trade show in Denver are also keeping a close eye on trade developments between the United States and China.

As companies and consumers mull the impact of the proposed 25% levy on $300 billion worth of Chinese imports, which would hit products like outdoor apparel and hiking boots, the Trump administration has already slapped added duties of 25% on $200 billion in Chinese items.

The consensus? Tariffs are already sapping the strength of the outdoor recreation economy, with retailers and shoppers paying an extra $1.1 billion on backpacks, hats and more due to new tariffs in the period between September 2018 — when they went into effect — and April 2019, according to the Outdoor Industry Association.

“These are significant taxes on an industry that fuels economic growth and healthy communities across America,” said Patricia Rojas-Ungar, the organization’s VP of government affairs. “To date, these tariffs have caused so much unpredictability for outdoor companies that many have had to slow or cancel job-creating investments and have resulted in higher costs for businesses in every corner of the country.”

The subject remained top of mind at the trade show, where business leaders spoke with FN about future plans for their supply chains amid increasing costs, particularly for small- and medium-size brands, which could involve nixing categories or even killing labels entirely.

“Some brands may not be able to pivot production to other countries, and the larger brands are quickly grabbing up manufacturing capacity, so smaller brands or brands new to a category could be pushed out,” said Zachary Osness, VP of global sales and merchandising at Sole and its ReCork recycling program. “This could create a more monopolized brand structure and inhibit innovation in the industry, as small brands struggle to transition manufacturing and keep prices competitive.”

Sole itself intends to raise footwear prices by $5 if the fourth tranche of tariffs are implemented, which Osness describes as a nominal increase, with the brand itself absorbing the vast majority of the cost. (The company manufactures its footbeds at a factory in South Korea, so its core business will not be affected by the added tariffs.)

“We hope the tariffs will eventually be repealed if they do go into effect, and we don’t want to increase and then lower our prices, which is why we’ve made this decision,” Osness said. “We refuse to compromise sustainability and quality as these conversations continue.”

While Eastman Footwear Group doesn’t plan to scale back on production at this time, CMO Brandy McCarthy explained that the company is still in the process of figuring out its relationship with key partners as well as how to mitigate the risks posed by tariffs.

“We’ve known that it was going to happen for a while, but now it’s looking at us in the face,” he said. “The most important thing is to make sure that we have the value of the product, and we don’t take anything out of the product to be able to cover any costs.”

Many corporations have already indicated that they may have to raise prices for consumers in response to the tariffs, including La Sportiva.

The company has already begun reaching out to key retail partners to inform them about the impact of additional tariffs, but Lantz expects the cost to cut into La Sportiva’s investments and marketing efforts. With about 53% of what it sells (in units) coming from China, president Jonathan Lantz told FN that it would have to absorb a small amount of costs while passing on the majority to shoppers.

“The main idea is to let the consumers know that this isn’t a tariff that’s being paid by China; it’s being paid by U.S. companies and U.S. consumers,” he said.

Lowa Boots is a relative outlier in the industry. According to general manager Peter Sachs, the company does not source or produce goods in China or Mexico. (Trump recently threatened to slap a 5% tariff on all imports from Mexico unless it took measures to crack down on immigration — a warning he reneged on a few days later.)

“We build everything in Europe,” Sachs said. “[But] we’re also consumers. We don’t like higher prices, whether we buy food, clothing or automobiles. We don’t think [tariffs are] the right way to do business.”

With interview contributions from senior athletic and outdoor editor Peter Verry and business reporter of strategic content Madeleine Streets.

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