Tariffize: Adapting Your Business to a Policy of Tariffs
In the ever-evolving landscape of global trade, businesses are often faced with the challenge of adapting to new economic policies. The potential increase in tariffs proposed by President-elect Donald Trump has stirred the waters for retailers and wholesalers alike, raising concerns about the impact such measures could have on demand and pricing strategies. With tariffs on Chinese imports potentially rising to as much as 60%, up from the current 20 to 25%, and similar increases from other countries, businesses need to brace themselves for potential shifts in market dynamics.
As we stand on the brink of these changes, it is crucial for businesses to strategize and adapt proactively. In collaboration with Indie Insights retail experts, we’ve compiled a comprehensive guide to help you navigate these murky waters effectively. Here, we delve into actionable strategies to safeguard your business amidst tariff changes, emphasizing key areas of focus that can propel you towards sustainable growth.
Focus on Your Selling Metrics
Increase Average Sales Per Transaction
When facing potential price hikes due to increased tariffs, one immediate strategy is to focus on raising the average sales per transaction. Encourage your staff to upsell and cross-sell to maintain higher transaction amounts per customer. For instance, increasing average sales from $100 to $120 can help absorb the repercussions of rising costs.
Expand Your Client Base
Growing your customer base is a prudent move against impending price increases. Transition new holiday shoppers into loyal repeat customers. A larger customer base reduces your dependency on individual transactions and mitigates the impact of price sensitivity.
Pay Attention to Your Assortments
Prioritize Depth Over Breadth
Avoid the pitfall of over-assorting your product lines. Instead, focus on buying in depth with vendors that guarantee the highest return on investment (ROI). A streamlined assortment allows you to negotiate better terms and potentially better savings with your key vendors.
Explore Domestic Opportunities
Consider diversifying your supply chain by sourcing from domestic vendors or exploring new categories that offer higher profit margins. Upscale offerings can target high-earners who are generally less sensitive to price changes.
Maintain Your Initial Markups
Guard Your Margins
Do not be tempted to lower markups in hopes of maintaining demand. Price increases will affect the entire market, and competitive pricing should not come at the expense of your margins. Assess initial markups carefully to ensure sustained profitability.
Adapt Pricing Strategically
Perform calculations to adjust pricing in line with new costs, giving you insights into your customer’s price tolerance. Aligning prices with current demand helps prepare for future markdown flexibility.
Change the Flow of Goods
Strategic Merchandise Planning
Alter your merchandise flow by transitioning out of fall and holiday stock earlier. Introducing resort and early spring collections by late December or early January could offer fresh appeal and keep customers engaged.
Align Marketing and Presentation
Ensure that your marketing strategies and in-store presentations reflect these changes in merchandise flow, capturing the attention of your audience with engaging and timely campaigns.
Research and Explore New Opportunities
Utilize the De Minimis Rule
Investigate the De Minimis Rule, which allows for certain imports to enter the United States duty-free. Understanding the nuances of this provision could lead to cost-saving opportunities.
Engage With Your Vendors
Stay in close contact with your key vendors to understand their responses to tariff changes and collaborate on strategies that benefit both parties.
Discover New Suppliers
Platforms like Faire offer a marketplace for exploring new vendors and product classifications with reduced risk, thanks to their return policies. Utilize such resources to diversify and strengthen your product offerings.
Embracing Change as Opportunity
While the prospect of increased tariffs may seem daunting, it also provides an opportunity to innovate and adapt. By proactively employing these strategies, you can take control of your business’s narrative rather than letting global events dictate your outcomes. With careful planning and execution, you can navigate through this period of change successfully.
Conclusion
The shifting tariff landscape demands vigilance, strategic adjustments, and a proactive mindset. By emphasizing the controllable aspects of your business operations and remaining flexible in your approach, you can face these challenges head-on. Remember, change is not just an obstacle but an opportunity to redefine your business strategies and emerge even stronger.
Checklist for Retailers Navigating Tariff Changes
Increase average sales per transaction by upselling and cross-selling.
Convert one-time customers into repeat clients to expand the customer base.
Focus on buying depth rather than breadth; prioritize key vendors.
Explore domestic suppliers to diversify product offerings with higher margins.
Maintain initial markups to safeguard profit margins.
Early transition of seasonal merchandise to maintain customer interest.
Stay informed about vendor strategies and adapt collaboratively.
Explore new supply avenues via marketplaces like Faire.
