Will tariffs affect online retailers in a particular way?
Tariffs impact all retailers, whether they’re a brick-and-mortar merchant or an online player—everyone feels the effects.
Smaller online retailers may feel more of the impact because they don’t have the financial scale or strategic supply chain relationships to front-load buying ahead of scheduled tariffs, which is a strategy leveraged frequently by enterprise retailers in 2019. They also don’t have the buying power that allows larger retailers to push back all or some of the tariff costs back onto the suppliers.
Online retailers can combat the pressure that tariffs place on margins by identifying cost-saving opportunities in other aspects of their sourcing and supply chain operations. Online retailers can leverage software to drive decisions around product design and partner diversification opportunities that can lessen the financial blow that tariffs could potentially deliver.
Are consumers likely to use retail websites differently because of tariffs, perhaps comparing prices more?
The short answer is yes. Consumers always look for the best deals, and online retailers battle amongst themselves to see who can offer the most competitive prices.
As tariffs increase costs for retailers and their partner communities, they must reconsider their pricing strategies to maintain profits while staying relevant in competitive pricing scenarios so common for ecommerce retailers.
How will the tariffs impact the holidays, Cyber Monday?
Potential cost increases due to tariffs will largely affect the annual buying strategies of seasonal-specific retailers and those reliant on holiday sales. While some have already kickstarted their buying cycles earlier in the year to avoid tariff risk, they’re still left with far less data to make informed sourcing decisions. That in itself is a catch-22.
Retailers with more of a bullish approach to buying will likely adjust their sourcing cycles to start earlier, but they still run the risk of experiencing major financial setbacks if consumer confidence drops ahead of the holiday season. For the more conservative retailers, while they hesitate to start buying cycles earlier in the year, they too run the risk of exhausting inventory and missing sales opportunities if consumer confidence is high.
Are ecommerce brands seeing the effects of the tariffs even more than brick-and-mortar retailers?
Tariffs hurt ecommerce retailers more. That’s because it’s easier for online shoppers to compare prices across multiple vendors and quickly change buying decisions. A brick-and-mortar shopper, however, is more likely to purchase an item on the spot, rather than price compare at a different store only to save a few dollars.
Since smaller ecommerce brands don’t have the scale to offset tariff impact on their initial markup unit (IMU), they’re more likely to lose customers due to higher product prices.
Will ecommerce see a dip in sales growth this year due to the tariffs?
The impact tariffs have on consumer behavior and pricing strategies remains to be seen, due to recent progress made in the trade talks between the U.S. and China. If the tariffs do remain in place, the impact will likely be felt equally across both brick-and-mortar and online retailers.
Many smaller web-only retailers source goods from China. Do you have any advice for them?
Start searching now for suppliers in alternative countries, particularly India, Vietnam and Cambodia. Seek out government-backed associations where suppliers are seeking new markets for specific product categories. Their suppliers tend to be smaller and willing to deal in minimum order quantities while also being more open to a partnership approach.
Bamboo Rose provides product information management and supply chain management software.