How retailers can grapple with tariffs and their impact on consumers

Let's set aside the debate on tariffs being a tax on consumers and causing inflation and economic slowdown. 

The rapid enforcement of these tariffs has stunned global commerce, akin to the shock experienced during the COVID-19 shutdown, perhaps even worse. Retailers and brands appear to be scrambling to understand the impact on their businesses, focusing on survival. Many are revisiting their Covid-19 supply chain response playbook for short-term relief.
 
The swiftness of the tariff enforcements and the unpredictability of when the next change might come, severely hampers companies’ ability to plan for the long-term. Wrong decisions can prove to be extremely costly one-way or the other.

Today’s global supply chain is multi-tiered and extremely complex. Reconfiguring and/or rebuilding them may take years and still struggle to achieve the efficiencies and productivity gains that has been achieved over the last three to four decades.
 
If supply chain shocks lead to price increases, consumers may change their consumption patterns, switching products or consuming less. This can cause companies to struggle with demand forecasting. Without confidence in future demand, leaders might conserve cash and wait rather than invest in innovations to improve productivity and competitiveness.

Revisiting the COVID-19 supply chain disruption response playbook may not suffice for tariff disruptions. Companies should treat this as a new world order in commerce and re-evaluate their entire operating model to survive.

As margins get squeezed, the margin for error in assortment planning, inventory control, pricing & promotions, omni-services and returns gets to be narrower, amplifying mistakes more than ever.