Buying decisions have always involved an element of gambling. Will the products I’m reordering continue to sell well? Do my customers share the national passion for this year’s hot color combination? Can I count on a strong holiday season, despite all the unknown economic factors?

Today there is a new gamble added to the mix: should I place large orders for delivery as soon as possible in order to avoid higher prices due to tariffs? We’ve received a number of emails from our vendors offering “pre-tariff” pricing for a limited time only, and it’s hard to know how to respond.

It was just a couple of months ago that I wrote about understanding tariffs (here is the link, in case you missed it). At that time we weren’t sure whether the tariffs would become a reality, but it looks like at the moment ad valorem tariffs on goods from Canada, Mexico, and China may be going into effect. The term ad valorem means the tariff is levied as a percentage of the price of imported products.

One result of tariffs is uncertainty for those engaged in international trade, according to Thomson Reuters. Unfortunately that would include almost every large and small retailer in the US, and many of our vendors. The offers of pre-tariff pricing are in anticipation of increases at the wholesale level that are yet unknown.

A few factors may be helpful in determining whether you should stock up at the current prices:

1. Do you have the cash to pay for goods now, rather than when you would have normally received them?
2. Are added storage costs going to eat up any savings?
3. Do you feel confident that the demand for the items you’re ordering will continue?
4. Would your customers stop buying the products if they went up in price?

The amount of the tariffs will influence your answer to the last question, and that is still somewhat of an unknown. In December the National Retail Federation was anticipating possible tariffs of 60% to 80% on goods from China when Meghan Cruz wrote, “Many small retailers say they will have to raise prices on consumers if new tariffs are enacted.”  But if the tariff stays at the current 10%, the impact is not significant. 

The additional 25% tariff proposed on imports from Canada and Mexico are a different matter, because they are much higher. Although the gift industry is not as dependent on products from our two neighbors, there are certainly valued vendors who would be affected. The stakes are higher when considering whether to gamble on pre-tariff orders from any of them.

Happy Retailing,
Carol “Orange” Schroeder

Note: there will not be a Specialty Shop Retailing blog next week