May 9, 2025
The initial objective of tariffs is to support growing business by protecting domestic industries. When tariffs change, the impact hits supply chains to pricing, leading to a trickle down effect to business operations and profitability. Fluctuation in pricing becomes a central pain point while businesses are forced to restructure product pricing and to look at the bottom line of their pricing.
There is a guarantee of a 10 - 35% increase in trade from tariffs as they continue to role out with new governmental regulations. With the impact of tariffs is hitting eCommerce businesses, there are ways to combat against the short term changes, long-term objectives, and to continue to deliver higher customer satisfaction that lead to profitability within your business.
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1. Re-examine the cost of production as your investment.
2. Add in the regular shipping costs associated with the calculation you have.
3. Take all areas of investment you make for each bulk order you have. Add in an extra % based on the duties of that country.
This simple calculation will tell you how much more you are going to pay for the items you order. You can then determine the percentage of profitability you get for each item.
Adjusting to the pivot in tariff pricing also means looking at areas that need to be adjusted. Thinking of structural changes for the present moment and through the next 5-10 years will reduce the loss from tariffs and support businesses that need to grow and thrive. Here’s the areas to look at with the change in tariffs:
1. Profit Margins. As inventory costs increase from the stamped on duty, profits will lessen. The quick reaction most eComm businesses have now is to change their pricing structure to keep profit margins the same. However, this means customers will pay the price for the tariff restructure and could cause a decline in demand and loyalty. Looking at incremental changes and structures can support better, longer lasting results without creating sticker shock prices.
2. Shipping and delivery expenses. Fuel surcharges, carrier fees, and other delivery based add-ons will reflect the tariffs and inflation. That means you won’t see the pricing go up in just the items, but also in the overall drive of the supply chain structure.
3. Last-mile delivery. Total delivery expenses account for over 50% of costs (Pitney Bowes, 2024). That’s not only going up, but profitability is going to chip away as those prices continue to soar.
4. Logistics. As everyone adjusts to the tariff changes, expect import and export changes to process, leading to delays as well as infrastructure changes that not only snowball from the pricing structure, but form the several structural setups that are interlinked to tariffs.
Calculating all the angles of your supply chain process can help to get through the changes in tariffs and prepare you for a bright future with your clients and a thriving business.
Taking a step back into your products and looking at what you’re selling can help to cut incrementally instead of raising prices against the board.
If you have a SKU that has a higher profit margin, the tariff is going to impact you less. It’s the difference of a 25% increase for $50 vs. $500. Line item your SKUs and identify where you are going to see the largest difference in costs by both tariff percentage from the country cost as well as from the average pricing considerations.
This may mean that there are some SKUs that you won’t have to hike pricing with. Or, you may find a way to make smaller incremental lifts so it’s not as much of an impact to your customers. For those that have a low to high product suite in place, incremental and margin based changes will help to reduce customer lash back with tariff roll-outs.
There will be time before the windfall of tariffs to set in place. That gives owners time to test and determine where and how to raise prices without a conversion break. Testing marginalization to determine where someone is price sensitive vs. where they don’t want to pay the cost will also support a better outcome.
When you look at pricing, break out the shipping, delivery, and other listing style costs. If you are on Amazon, Wal-Mart or other large channels, consider the difference in costs and how this will impact what you are selling. You may find that you can pull back from specific channels and lean into other opportunities that help to cut costs without pushing the extra duties on customers.
As the shake out of tariffs continues, there are some ways you can build to your advantage. Moving out of volatile countries can help to lessen the impact of tariffs. Forecast for the long-term and look at changes you can make in restructuring your supply chain. If you can cut costs from the source of the tariffs, it will support long lasting impact without the need to touch pricing changes. Many suppliers are finding options such as sourcing what is needed from diverse countries and bringing things like shipping supplies out of single based countries, offering an incremental change in cost.
To identify how or what can be altered, look at areas that have gaps in profitability. Find areas that have wasted spending, supply chain areas that cost extra and which should be saved, and look at ways to tighten your supply chain so it doesn’t have an impact on your profitability. Diversity within your supply chain is going to become a key for savings and a growing profit margin.
One of the tougher decisions being made by eCommerce owners is to cut spend with advertising and head count. Using this as a central point that is calculated can support longer term gain.
Cutting on wasteful spending and looking at incremental growth from other outlets gives a complete outlook on how to build without increasing profits. Looking at measurements of what performs well and what doesn’t, identifying where demand is best, highlighting leaky buckets where there is wasteful spending, and maximizing efficiencies can help to support continuous growth, despite the surrounding volatility.
Consider looking at your lens with hold out experiments that drive or delay incremental growth. To get to the heart of how you are impacted by tariffs, consider geo testing This will let you know if there is an area that doesn’t perform as well, allowing you to target less volatile geographies and to lean into growth in areas that don’t have the same impact.
Beyond the assessment of products, supply chain, and spending, is the ability to leverage marketing to offset the costs that are taking place. Many business owners are looking at reconfiguration of pricing with their promotions to change the outcome of pricing changes.
1. Product - Promotion Relationships. Are you looking at what products you promote to create buzz? If you aren’t combining your pricing with what you promote, you may not be pushing the most profitable products. Tie in your assessment of SKUs to what you promote, allowing you to use promotional materials to alleviate price increases.
2. Quantity based marketing. A product that is cheaper and has a duty stamped on top of it will be costly for a business. If you don’t have higher tier products, consider quantity changes. Upsells, adding more into the basket, and key ways to get higher value carts will help you to lessen costs.
3. Test your channels incrementally. The objective of any marketer is to scale business profitability while spending less. Find any gaps or areas that allow you to reduce how much you spend and to scale what works the best. This may relate specifically to the cost of each product, giving a holistic lens on what to focus on with scaling your channel.
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