At NRF, retailers plow ahead despite the prospect of tariffs

When it comes to the supply chain, “If anything, it feels like we’re in a constant state of disruption,” Sean Barbour, svp of supply chain at Macy’s, said during a panel at the event on Sunday. “It’s not so much, ‘Should we understand everything that’s happening?’ It’s, ‘Can we be thoughtful enough to adapt?'”

While tariffs were front and center in headlines the week of the election, at NRF, tariffs took a back seat to buzzier topics like artificial intelligence, marketplaces, social commerce and omnichannel strategies. Some of this may have been a matter of scheduling; agendas for conferences like NRF are often set months in advance, with little room for topic-switching. Still, the only on-stage discussion with the word “tariffs” in its title spent most of the time talking about technology and ended early. When executives did talk about tariffs at NRF, they did so in larger discussions about supply chains or economic uncertainty.

Data indicates that consumers are concerned about tariffs — making them a ripe topic for conference conversation. The NRF, which organized this week’s show, estimated that tariffs on six product categories would reduce American consumers’ spending power by $46 billion to $78 billion each year that they remain in place. More than half (52%) of respondents to a new survey from First Insight said that rising costs, including tariffs, will “significantly impact” their purchasing behavior.

Some executives mentioned that until Trump signs new laws or executive orders, talk about tariffs is speculative. “We’ve certainly had rhetoric, and then there’s policy,” Tony Spring, the CEO of Macy’s, said in a panel with Bluemercury and Bloomingdale’s on Sunday. “We want to be able to be a good trading partner with the rest of the world. At the same time, we want it to be a fair relationship, and so these kinds of negotiating tactics sometimes will come into play.”

But Balika Sonthalia, partner and practice leader of strategic operations for the Americas at Kearney, said tariffs would likely pass, as they did the first time Trump was in the White House. Still, without concrete policy, retailers are in a tricky position, she told Modern Retail in an interview. “In the retail world, there’s no client who hasn’t talked about it, but they need to see how it’s going to unfold,” she said.

Various speakers mentioned that they already diversified their manufacturing during Trump’s first term or earlier. Spring, for instance, said that Macy’s adjusted production of its private brands in 2016 and 2017. Similarly, Abir Thakurta, vp of supply chain at the furniture company Havertys, mentioned on stage that his industry “has always had to think of a diversified sourcing strategy.”

If Trump sticks to the promises he made on the campaign trail, tariffs on Chinese imports could be as much as 60%. China has long been dominant in manufacturing, especially in the clothing and semiconductor industries, but tariffs could prompt companies to look elsewhere. “A lot of other countries are seeing this as an opportunity to step up their game,” Thakurta said.

If tariffs do go into effect, brands and retailers need a game plan, sources told Modern Retail. First and foremost is seeing if there’s a way to avoid passing higher costs onto the consumer, Andrew Burton, CEO of the composable commerce platform Commercetools, told Modern Retail in an interview. “With tariffs, where people inherently first start is, ‘Can we get more efficient? Can we actually save a little more money? And can we cover this?'” he said.

Companies that fail to do so — and end up asking the consumer to pay more — could risk having their shoppers go over to a lower-priced competitor, Commercetools’ Burton explained. It’s reasons like this why Darpan Seth, CEO of omnichannel order and advisory firm Nextuple, equates tariffs with another economic hurdle. “Tariffs are like inflation — they just start with a T instead of an I,” he told Modern Retail. “They have the same effect of passing onto the customer.”

Retailers will likely have behind-the-scenes meetings with vendors at NRF to discuss potential strategies around tariffs. Nextuple’s Seth suggested renegotiating contracts with vendors, re-routing imports through countries that are tariffed at lower rates or stockpiling extra inventory before tariffs take effect — although he acknowledged that increasing inventory will require highly accurate forecasting.