As 2025 approaches, President Elect Donald Trump’s proposed new tariffs are poised to reshape the landscape of international trade, with implications for U.S. retailers and brands. These tariffs, which target a broad range of imported goods, are designed to bolster domestic production and reduce the U.S. trade deficit. However, the move could create some turbulence for businesses that rely on global supply chains. Retailers, particularly those in industries like electronics, fashion, and automotive, are already bracing for higher costs and are looking to adjust their strategies to minimize impact.
A Columbus Consulting team of supply chain/sourcing, end-to-end planning, allocation and PLM experts were asked what retailers/brands should be considering now to safeguard their businesses from the proposed tariffs.
Here are their collective insights:
THE TOP 3 THINGS RETAILERS SHOULD BE ADDRESSING NOW
- Assess your category of business and analyze how the last round of tariff increases impacted your business to best define potential impact and create target KPIs/risks and opportunities.
- Protect your core categories/items by ensuring you have established/alternate sourcing means in non-targeted countries (Vietnam, Thailand, Sri Lanka, Spain, Portugal). In addition, you should consider pulling goods in earlier to avoid the immediate tariff impact on retail prices so that you can create a more gradual path to safeguard profit margins.
- Plan for potential container shortages now and extended shipping windows with possible bottlenecks caused from retailer reactions and proactive actions that can shift the production/delivery timelines.
EXPERT ADVICE ON WHAT AVOID
- Don’t overreact. The specifics on tariffs have yet to be negotiated and are often used as a bargaining chip which may not amount to the threatened levels. Don’t disrupt your business model for “what ifs.” Plan on different scenarios so you can act, but prioritize your focus and communicate with the organization across departments to stay aligned.
- Avoid knee jerk reactions to increase inventory levels across assortments to avoid early cost implications. Businesses still need to manage cash flow and stock piling goods will eat into that and have residual impact across the organization. Unlike pulling key category goods earlier, overinvesting in inventory is not a scalable solution.
- Minimize immediate shifts in sourcing and production until you consider open production levels and quality adherence. Pulling goods from Mexico, Canada or China and moving production to other factories without proper vetting on capacity and QA can result in other issues down the line ultimately impacting consumer satisfaction and generating higher return rates.
BEST IN CLASS PRACTICES
- Look for continuous improvement in your supply chain by embracing frequent assessments and audits. Teams should be constantly looking for better/new/more efficient sourcing and production partners. Don’t wait until you need more diversity in your supply chain to act. In turn, retailers should be developing stronger relationships with their key factories for more favored considerations when needed. Factories will reward and help their primary clients over smaller accounts when necessary.
- Know your timelines. Moving production to established factories takes approximately 6 months. Creating a new relationship, vetting, sampling, auditing, pre/post production rounds and compliance can take a year or more. Also, do your research on transportation from materials to factories to ports to US docks to fulfillment/warehouses. Not all countries have the same network or sophistication to absorb larger production and seasonal demands.
- Look across the product lifecycle for margin efficiency. Retail prices are only one lever businesses can use to increase sales and optimize profits. Here are some ideas for consideration:
- Re-evaluate non impactful design elements; though not always ideal, sometimes changing a button or eliminating a small pocket or nonessential element can reduce cost of goods without impacting the brand.
- Revisit packaging; bulky packaging or excess product collateral adds to the cost and may take up valuable container space.
- Assess transportation costs from raw goods to warehouse and store. Near sourcing may be physically closer but might present other challenges like higher labor costs and lower volume capacity. Be aware of new global occurrences like the re-instatement of the Red Sea routing and weigh benefits with “on time” arrival rates and other hyper political/vulnerable mapped paths.
- Consider the dollar cost average with a more diverse production plan across factories and related impacts to cost. Can you blend some increases with some savings and create blended margins to better balance disruptions?
- Look for opportunities earlier in the chain with lower duty- and duty-free product/material choices/companies to minimize the impact of tariff costs at the end of the production cycle.
- Consider an external end-to-end audit for internal processes, partner portfolios, and systems to confirm or identify areas of improvement and be proactive in establishing a longer-term, more resilient sourcing/supply chain discipline. Knowing your vulnerabilities now will help to safeguard your business against any unpredictable occurrences, tariffs, or otherwise.
Regardless of what the near future holds for retailers and tariffs, the industry has been down similar roads before. Prior trade agreements, COVID shutdowns, labor strikes, and geo-political disruptions have all presented challenges for retailers and, collectively, we have “figured it out.” Strong, strategic retailers will find new ways to thrive and weaker, less prepared retailers will lose market share and have to reset to compete again. While we don’t always have visibility to what is ahead, we all know that change is inevitable and that retail is an industry of continuous evolution. Developing a culture of being adaptive and agile is critical to staying relevant and prosperous.
CONTRIBUTORS TO THIS ARTICLE:
Jeff Gragg, Managing Partner, Columbus Consulting, Former Retailer CIO, CTO and COO
Rich Pedott, Partner, Columbus Consulting, Planning, Allocation, Sourcing and Supply Chain Expert
Nancy Marino, Associate Partner, Columbus Consulting, Global Sourcing and Buying Expert
Jayne Twaddle, Consultant, EMEA, Columbus Consulting, Supply Chain Leader
ABOUT COLUMBUS CONSULTING
Columbus Consulting delivers solutions that drive true value and have been transforming the retail, grocery and CPG industries for over two decades. We are a retail consulting company of industry experts. Our approach is simple, if you do it, we do it. We are more than consultants; we are experienced practitioners who actually sat in our clients’ seats. We understand the challenges, know what questions to ask and deliver the right solutions. Columbus offers a unique, consumer-centric approach with an end-to-end perspective that bridges functional & organization silos from strategy to execution. Our specialties include: unified commerce, merchandising & category management, planning & inventory management, sourcing & supply chain, data & analytics, accounting, finance & operations, people & organization and information technology. Let us know how we can help you. To learn more, visit COLUMBUSCONSULTING.COM.
