Run the Numbers unpacks the data that’s driving top retail trends in the industry.
The United States’ protracted trade war with China continues to put pressure on retailers, a trend that’s even more concerning ahead of the critical holiday selling period.
While some companies have managed to reduce the impact of the additional 15% in tariffs that took effect this month, the second round of the fourth tranche — scheduled to hit American businesses in mid-December — leaves little wiggle room for retailers, who have bemoaned the need to raise prices for consumers to offset supply chain costs.
While many retailers have said they would take this approach, which would involve raising end prices for consumers in order to compensate for higher importation costs, new data from AlixPartners suggests that tactic could have significant consequences this holiday season.
The global consulting firm, which conducted a survey of 1,000 respondents, found that only 40% of shoppers would still buy a product if tariffs cause the price of that item to increase more than 10%. Additionally, nearly half of shoppers would choose to switch brands for a lower-priced option, while 11% would skip the purchase altogether. Such insights could spell trouble for fashion firms in particular, which tend to rely on consumers’ use of disposable income for items they want as opposed to the everyday essentials they need.
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“Retailers need to be vigilant to make sure that cost pressures resulting from tariffs don’t throw sand into the gears of what otherwise has the potential to be a very good season,” explained Joel Bines, global co-leader of the firm’s retail practice. “They need to track the fitness of their business frequently during this critical period and be ready to quickly adjust tactics and strategy accordingly.”
The study noted that just 41% of Americans attested to better financial health today from a year ago. This is down from 47% who said the same thing in a separate AlixPartners study conducted at this time in 2018. Meanwhile, 36% felt positive about the economic outlook. In 2018, confidence in the U.S. economy was at 45%.
“We saw a dramatic drop-off in consumer sentiment and future outlook,” added survey author Roshan Varma. “Retailers will need to focus on flawless execution throughout the remainder of the year. That, among other things, means being strategic about what differentiated value-added services to offer and then implementing them with highest of efficiency.”
Consumer goods make up the majority of President Donald Trump’s fourth list of tariffs, with $112 billion worth of Chinese imports — including footwear, apparel and accessories spanning home to tech items — subject to an additional 15% tax. Duties on the remaining $188 billion (for a total of $300 billion in the fourth tranche) will be implemented on Dec. 15.
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