Retailers started the year expecting a number of trends, from continued growth of AI and omnichannel to investing in sustainability. But the announcement of new tariffs impacted supply chain and manufacturing relationships that stateside retailers rely on to keep shelves full and prices stable.
With tariffs flip flopping, retailers find themselves in a precarious position that requires a rethinking of best practices to improve retail sales in the face of a potential recession.
Retailers are dealing with a double edged sword of increased costs from tariffs and a consumer base that’s pulling back on spending.
The HSBC Trade Pulse survey conducted this spring found that 72% of US companies reported increased operating costs due to tariffs and 77% anticipate those costs will rise even further by the end of the year. In response, customers are spending less.
Industries like consumer packaged goods (CPG) are seeing massive impacts from tariffs and many companies have to raise prices to stay afloat. Beyond this, supply chains that are still fragile post-pandemic are being disrupted yet again.
To combat this, retailers need to put additional effort into improving retail sales and getting ahead of supply chain challenges. Here’s what they need to do to put customer happiness first and recession-proof retail sales.
Tariffs will have a massive impact on pricing, demand, business costs, and loyalty strategies for all CPG brands, forcing them to rethink how they do business in order to remain competitive.
Before customers notice reduced stock in stores, products are getting held up in the supply chain. Fast-fashion retailers might be impacted more quickly because their inventory is created continuously and shipped quickly as trends change.
Others, like CPGs, might have a decent stockpile of products to work through. But it may get harder to replenish them as tariffs are implemented. Retailers must address current supply chain issues so that they can weather uncertainties as the political and economic climate continues to change.
In 2020, COVID snarled global supply chains, leading to out-of-stocks across product types. Since then, retailers have had time to work on supply chain visibility, and had the opportunity to become more efficient and resilient. Now’s the time to put those learnings to good use, as cargo shipments from China to the U.S. plummeted in April.
To improve supply chains with a possible recession coming, retailers can run a detailed cost analysis and diversify suppliers, warehousing partners, and manufacturing locations. Apple recently moved much of their manufacturing to India largely to reduce costs, diversify their supply chain, and to reduce their reliance on China.
Supply chain optimization takes time and logistical support on the ground, but it will ensure shelves stay full and that costs stay in line with projections in the future.
Retailers that pay attention to the customer experience and cater to their customers’ changing needs and expectations have a better chance at keeping those customers.
With copycat products popping up at a fraction of the price, retailers have to prove why buying from them is worthwhile. Providing a consistent experience gives shoppers something to look forward to and helps retailers stay top of mind.
U.S. consumer sentiment has dropped a stunning 27% YoY and continues to plummet as concerns over job security, inflation, and a volatile stock market climb.
While retailers deal with the myriad cost increases associated with tariffs, it might seem counterintuitive to consider discounts. Retailers can help shoppers stretch their dollar by offering discounts on higher margin products to lure them in.
Offering slightly discounted bundles with higher margin products might also help increase basket sizes if free shipping minimums are used strategically to be just above the average order value.
Many shoppers might be cutting down on their spending, but not all are. Targeting higher income shoppers was so impactful for Walmart, that it was mentioned in their November 2024 earnings call.
Determine who your highest margin customers are and continue to serve them with targeted ads, suggesting complementary products and new offerings that might please them and encourage loyalty.
According to “the lipstick index,” a term coined more than 20 years ago, an uptick in lipstick sales possibly predicts a recession because shoppers take comfort in the small luxuries while they’re cutting back on big ticket items in times of economic uncertainty.
Considering that, how can retailers make sure they are seen as a necessity when shoppers are placing fewer orders?
Becoming a must-buy means offering high-quality products at prices that customers can rationalize, even if they are buying less as the fear of price hikes due to tariffs sets in.
Offer unique products that shoppers can’t help but buy. Maybe even offer a limited edition product to build buzz and give an incentive to shop now.
With some economic indicators suggesting a recession is on the horizon, there are still many ways that retailers can improve sales from their fully stocked shelves. It will take more effort and extra attention paid to customer preferences and feedback, but retailers can’t afford to sit back and simply hope things work out.
