Tariffs are shaking up the commerce and retail space. Love ‘em or hate ‘em, you have to deal with them…In 2025, they could raise consumer costs by $830 per household. Retailers face tough choices, with the preponderance of their goods usually coming across a border: absorb costs, raise prices, or optimize operations. Product companies and wholesalers may take a double hit: manufacture overseas and get a hit importing, sell or distribute overseas and get hit exporting. The tough choices are different but the same: stop selling certain products, bite off onshore costs, close markets, raise prices, or optimize. Data analytics is the key to navigating these challenges.
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Key Takeaways:
- Supply Chain Costs: Tariffs increase costs, forcing retailers and wholesalers to rethink inventory and sourcing by measuring COGS carefully.
- Pricing Strategies: Data helps decide when to pass on costs or absorb them, depending on product sensitivity.
- Customer Behavior: Analytics predict how price changes impact demand, helping adjust marketing and inventory.
- Product Portfolio: As costs hit different products, and price and demand change, companies must evaluate and balance their product mix.
- Data and AI Tools: Platforms like Retlia and our partners enable real-time pricing, demand forecasting, and scenario planning.
Actionable Insights: Use data warehousing and business intelligence to track tariff impacts, optimize pricing, balance product portfolios, manage supply chains, optimize promotions, and run potential scenarios. Proactive planning and data-driven decisions keep retailers, etailers, and wholesalers competitive despite market disruptions.
Tariff Effects on Commerce Operations
Supply Chain Cost Changes
Tariffs can throw wholesale and retail supply chains off balance, leading to higher operational costs. For instance, U.S. auto import tariffs are typically around 2.5%, but tariffs in other industries or regions can be significantly steeper. Research indicates that retailers and brand owners alike often stockpile inventory to manage tariff uncertainties, which drives up working capital and storage expenses. These added costs usually force retailers and their partners to rethink their pricing strategies.
Price and Margin Impact
Goods companies face tough decisions: absorb extra costs or pass them on to customers. The approach often depends on the product category, as shown below:
| Product Category | Price Sensitivity | Common Tariff Response |
|---|---|---|
| Luxury Goods | Low | Increase prices to protect margins |
| Apparel | High | Combine cost absorption with selective price hikes |
| Electronics | High | Absorb some costs, offset with promotions |
| Essential Goods | Very High | Keep price increases minimal to retain customers |
| Food and Beverage | Moderate to High | Absorb some costs, adjust packaging sizes, or use promotions |
Take this example: A $200 jacket (with a $80 cost) hit by a 10% tariff sees a $8 cost increase. This could mean either shrinking margins or raising the price to about $210, and which move is right is highly dependent on consumer behaviors and some calculus. Such decisions directly influence customer behavior, making pricing strategies more critical than ever.
Customer Buying Changes
How customers react to price changes caused by tariffs varies. Luxury shoppers are less likely to be fazed by small price hikes, but those buying essential goods are much more price-conscious. In highly sensitive categories, even minor price increases can significantly impact demand. For instance, trendy accessories, seen as non essential, that are priced at $30 might see a drop in sales if prices rise to $31 or $33 due to added costs.
"By planning for these adjustments in advance, retailers can strategically position themselves to balance price competitiveness with profitability – staying agile and resilient as new tariff policies unfold." – Team IA, Impact Analytics
With real-time analytics, retailers can monitor sales trends, measure how sensitive customers are to price changes, and keep an eye on competitors. This helps them quickly adapt to shifting consumer behaviors and market conditions.
Product Portfolio Mix
The final place tariffs strike consumer brands and retailers is in their product mix. As brands evaluate which products are hit with the largest change in COGS and supply, as retailers and wholesalers measure the sensitivity to price, and as all commerce companies look for places to apply operational efficiency, all roads lead to product portfolios.
Not all products will experience these effects equally. Consider Columbia’s Sorel shoes, which included specialized machinery, tooling, and workforce which were invested in China; the company was able to move production of many other items out of China, but to move Sorel would have cost an additional $3m in machinery alone.
Actually, All Roads Lead To Data
Any commerce company who is doing any part of their business overseas now needs to be able to measure on both the cost side and the sales side.
For those retailers and wholesalers who don’t do, surprise, the cost of all your supply, the disruptions to the supply chain, and the changing consumer behavior will all impact you too, in the same dimensions: supply chain, price and margin, demand, and product mix.
Lets take a look at what we can do about optimizing our commerce business in this environment:
U.S. Tariff Impact: Strategies for Businesses to Stay Agile & Competitive
Data Management for Tariff Tracking
Managing tariffs effectively requires seamless data integration and analysis. Retailers and consumer brands need to combine various data sources to make informed decisions about pricing, inventory, and supplier relationships and transport.
Key Tariff Performance Metrics
To handle tariffs effectively, it’s important to track specific performance indicators across your business. Here’s a breakdown of the metrics that matter most:
| Metric Category | Key Indicators | Purpose | KPI Preparedness: Ask Yourself |
|---|---|---|---|
| Cost Impact | Direct Cost Increase %, Margin Erosion Rate | Understand immediate financial effects | Can I track the cost of each product, line, or brand?
Can I compare across sales channel and region? Can I trend each segment and comparison over time and see change? |
| Supply Chain | Lead Time Changes, Supplier Cost Variations | Keep an eye on supply chain disruptions | Can I attribute supply chain costs at the level of products, sales channels, and customer segments? |
| Customer Response | Sales Velocity, Category Demand Shifts | Gauge shifts in consumer behavior | Given current data practices, when would I notice a change in a given category or market?
In my data, am I able to analyze past examples of customer response to price changes? |
| Inventory Health | Stock Turn Rate, Days of Supply | Evaluate inventory management | Do I know my current position on every product?
Am I set up to notice change in rate? Do I have forecast or expectation of sell-thru rates? Wholesalers: can I measure turn rate at my retailers/dealers? |
These metrics become critical for tariff-sensitive products. For example, the National Retail Federation highlights that tariff proposals significantly affect pricing in categories like clothing, toys, furniture, and household appliances. Monitoring these indicators helps retailers focus on products that need immediate attention.
Using these insights, Retlia’s platform simplifies tariff tracking and improves decision-making.
Using Retlia‘s Data Tools
Retlia provides tools designed to tackle tariff-related data challenges. Its data-powered analytics allow retailers and consumer brands to:
1. Automate Data Integration
Retlia’s system pulls data from multiple sources, such as:
- Point-of-sale, wholesale and ecomm transactions
- Supplier cost updates
- Inventory levels
- Customer behavior trends
This creates a unified view, making it easier to plan pricing and manage inventory.
2. Enable Dynamic Scenario Planning
The platform can be used to predict outcomes for different strategies, like absorbing costs or adjusting prices.
"Being prepared, adaptable, and analytical is crucial to effectively navigate the evolving tariff situation." – Sudip Mazumder, Senior VP, retail industry lead, North America at Publicis Sapient
3. Streamline Exception Workflows
Retlia can be used to flag products that need urgent action based on:
- Margin thresholds being crossed
- Changes in demand, including through your retail partners
- Price and promotion testing results
This automated system ensures quick responses to market changes caused by tariffs, helping retailers stay competitive.
Additionally, its drag-and-drop reporting tools let retailers create custom dashboards for tariff-affected categories. These visualizations make it easier to spot trends that might be missed when looking at raw data.
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Supply Chain and Inventory Solutions
Using insights from tariff performance, AI-driven analytics help make supply chain management more efficient, even during tariff fluctuations. By applying predictive modeling and AI tools, retailers can keep stock levels in check while cutting tariff-related expenses.
Supply and Stock Forecasting
AI tools make stock forecasting smarter, helping retailers adjust their orders based on tariff risks. Different product categories require tailored approaches depending on how tariffs impact them:
| Product Type | Forecasting Focus | Risk Management Strategy |
|---|---|---|
| Luxury Goods | Long-term trends | Maintain higher inventory buffer |
| Apparel | Seasonal demand | Use just-in-time ordering |
| Electronics | Price elasticity | Plan strategic pre-ordering |
| Essential Goods | Base demand | Keep consistent stock levels |
Retailers can also perform SKU-level elasticity analysis to see how tariff-driven price changes influence demand. This helps fine-tune stock levels and order schedules for each product type.
Key areas to monitor for managing tariff risks include:
- Seasonal and promotional demand patterns
- Tariffs’ effect on pricing and costs
- Variations in lead times from different suppliers
Even when forecasts miss the mark, data-backed contingency plans can help keep operations steady.
Supply Chain Backup Plans
Effective contingency plans rely on data to create flexible sourcing and delivery strategies.
"The key is to be proactive by anticipating various tariff impacts through robust planning and agile responses." – Sudip Mazumder, Senior VP, Retail Industry Lead, North America at Publicis Sapient
Here are some essential strategies to handle tariff challenges:
-
Diversify Your Supplier Base
Use supplier performance data to find reliable alternatives:- Look at historical delivery reliability
- Check for cost flexibility
- Ensure suppliers are geographically diverse
-
Fine-Tune Delivery Timing
Use AI to analyze trade data and prepare for supply chain risks:- Adjust lead times for items sensitive to tariffs
- Plan alternate shipping routes
- Coordinate deliveries from multiple sources
- Manage warehouse space effectively
-
Adopt Dynamic Inventory Controls
Automate inventory adjustments to respond quickly to tariff changes:- Change safety stock levels
- Update reorder points
- Reallocate warehouse resources
- Revise delivery schedules as needed
Price Setting with Data
Using data to guide pricing decisions helps retailers handle tariff impacts while keeping customers satisfied. Advanced analytics make it possible to set prices that strike a balance between profitability and market demand.
Real-time Price Adjustments
AI-powered pricing tools now give retailers the ability to adjust prices instantly in response to tariff changes. According to Gartner, by 2025, most large global retailers will implement real-time pricing to better align with shifting demand patterns.
Several factors come into play when making price adjustments:
| Product Category | Pricing Strategy | Tariff Response |
|---|---|---|
| Luxury Items | Premium pricing | Full cost pass-through |
| Basic Apparel | Competitive pricing | Partial absorption |
| Electronics | Market-based | Supplier negotiation |
| Essential Goods | Value pricing | Maximum absorption |
To successfully execute real-time pricing adjustments, retailers should prioritize:
- Monitoring market conditions continuously
- Updating prices instantly across all sales channels
- Syncing pricing changes with inventory systems
- Analyzing competitors’ responses regularly
While real-time adjustments help align pricing with current market conditions, understanding how sensitive different products are to price changes is crucial for refining these strategies.
Product Price Sensitivity
Beyond real-time adjustments, assessing how sensitive products are to price changes (price elasticity) plays a key role in making smarter pricing decisions. Once prices are adjusted quickly, retailers need to analyze how individual products react to cost changes to ensure their strategies remain effective.
Understanding price elasticity is especially important when dealing with tariffs. Products vary in how much price changes affect their sales, and this determines the best way to manage increased costs.
"They need to leverage data and AI to categorize SKUs into strategic buckets… Where the rubber meets the road, the result of this exercise will be definitive answers, at the SKU level as to where to preserve the margin, pass on the cost, and adjust as needed. Given the volatility of tariffs, this exercise should be repeated periodically, and then AI can take care of the rest." – Experts at Impact Analytics
Key factors to consider when analyzing price sensitivity include:
- Historical sales data at various price points
- Seasonal demand trends
- Competitor pricing strategies
- Behavior of different customer segments
- Levels of brand loyalty
AI tools can model different pricing scenarios, helping retailers predict customer reactions to price changes. This allows for smarter decisions about when to absorb tariff costs and when to pass them on to customers.
Customer Response Analysis
Understanding how customers react to tariff-driven price changes helps retailers anticipate sales trends and adjust marketing strategies with the help of advanced analytics.
Sales Pattern Prediction
Retailers can use machine learning models to predict how different customer groups will react to price changes. These models provide insights that help businesses manage inventory and allocate marketing budgets more effectively. Key data points include:
| Data Category | Prediction Focus | Business Impact |
|---|---|---|
| Purchase History | Repeat Buy Rate | Inventory Planning |
| Price Sensitivity | Demand Elasticity | Protecting Margins |
| Seasonal Trends | Peak Buying Times | Timing Promotions |
| Cross-category | Product Substitution | Stock Allocation |
By analyzing these factors, retailers can anticipate shifts in customer behavior, especially during uncertain tariff periods. This approach enables more precise marketing and inventory strategies.
Customer Group Marketing
Targeted marketing becomes critical during times of tariff uncertainty to maintain sales levels. AI-driven promotional tools allow retailers to offer personalized deals to customer segments most affected by price changes.
Key strategies for effective customer group marketing include:
- Analyzing customer behavior to understand reactions to price changes
- Establishing loyalty programs that strengthen customer relationships and ease price transitions
- Designing promotions tailored for price-sensitive customers
- Using cross-sell techniques to pair tariffed items with complementary products
Scenario planning is also a must. Retailers should prepare for a range of outcomes, from stable tariffs to steep increases, while keeping pricing strategies and competitive positioning in mind.
Conclusion
Data analytics helps retailers tackle tariff challenges by guiding decisions that safeguard margins and strengthen customer loyalty.
Here are some key tools and their business benefits:
| Capability | Business Impact | Risk Mitigation |
|---|---|---|
| Data-Driven Pricing | Adjust costs quickly without cutting into margins | Preserves profitability |
| Demand Forecasting | Plans inventory with precision | Avoids overstock issues |
| Customer Behavior Analysis | Creates targeted marketing strategies | Keeps sales steady |
| Scenario Planning | Develops proactive strategies | Reduces potential disruptions |
"Leveraging AI and related technologies will help retailers speed up decision-making and improve precision. Being prepared, adaptable, and analytical is crucial to effectively navigate the evolving tariff situation." – Sudip Mazumder, Senior VP, Retail Industry Lead, North America at Publicis Sapient
Through data analysis, retailers can simulate pricing strategies, predict demand changes, refine inventory plans, and launch focused marketing efforts. Real-time "what-if" scenarios allow fine-tuning strategies before committing to significant investments.