Retail CEOs enter the second Trump Administration with more experience in dealing with potential tariffs. They have spent the past few years refining their strategies and diversifying supply chains to reduce rising costs.
Major retailers are now better prepared to handle any economic challenges, thanks to the lessons learned and plans refined during Trump’s first administration.
Diversification of the supply chain and strategic negotiation
Laura Alber, CEO of Williams-Sonoma, told Yahoo Finance that the World Economic Forum in Davos (Switzerland) saw the initial wave of tariffs and reduced China’s exposure to the company by half.
Many retailers, in response to tariffs implemented during Trump’s initial term, have diversified their sourcing channels and explored alternatives to China. They have also mastered the art of negotiating with suppliers, reducing prices and keeping costs low.
Alber said, “[Vendors] are willing to help us meet our tariffs because they wish to maintain their business.”
This is a very competitive situation. They do not want to lose business.
Threats to tariffs are looming large
Joe Feldman, senior managing director of Telsey Advisory Group, said that the proposed tariffs would include a duty of 10% on Chinese imports before February 1, and a possible 25% on imports coming from Mexico or Canada.
The retailer will be likely forced to raise prices in three to six month if the proposed tariffs become law.
Williams-Sonoma sources about 25 percent of their merchandise from China, and 81% comes from Asia or Europe.
Alber described this as a “huge advantage” in delivering made-to order furniture quickly.
Clothing giants are ready to adapt
Since the Trump administration, Ralph Lauren and Gap also actively diversified their supply chain.
Ralph Lauren CEO Patrice Louis stated in an interview at the WEF with Yahoo Finance that they have reduced their dependence on China as a source of sourcing from more than 50% down to low- to midsingle-digits.
The company is ready to deal with a “more volatile” environment, he added.
Gap’s CEO Richard Dickson said, in a similar way, that, while less than 10 percent of Gap products are now produced in China, the remainder of their supply chain is located throughout Southeast Asia, Central America and Europe.
Dickson, a company executive who emphasizes the importance of value to its business, added: “We are constantly developing new markets and product developments.”
He said, “It is our responsibility to determine the value proposition so that we can offer our customers the best products at the lowest prices and with the most effective execution.”
Are consumers going to be the ones who suffer most from price increases?
How consumers react to price hikes is yet to be determined. Ralph Lauren’s Louvet admitted that the new tariffs would “likely translate” into “higher consumer prices.”
According to William Blair analyst Dylan Carden, shoppers who are less willing to accept new prices increases may not be as eager to do so in 2019 than they were last year, when Trump first implemented his initial wave of Chinese Tariffs.
Carden, who spoke at an ICR Conference in Orlando earlier this month, said that “inflation has been a major issue for many years.”
According to him, a 25 percent duty on clothing would result in a 5 to 10 percent increase in the price of apparel.
Carden also stated that retail is an industry “without pricing power,” and that it becomes more difficult to increase prices by 5%-10% on top of a price that has already grown 5%-8%.
This Post Will Shoppers Pay the Price? As new information unfolds, the post Retail CEOs assess impact of Trump tariffs to consumers could be updated.
This site is for entertainment only. Click here to read more
