How retailers can mitigate the impact of tariffs with AI

Retailers have no control over tariffs but may be able to soften their effect using artificial intelligence.

Although the details seem to change almost daily, at least some products entering the U.S. from Canada, China and Mexico are subject to new tariffs. To minimize the pressure any tariffs may put on internal costs as well as prices passed along to customers, retailers should consider applying artificial intelligence in the following key enterprise areas:

Sourcing and procurement

AI-enabled procurement solutions can help retailers quickly and efficiently locate imported goods sourced in a (legal) way that avoids or reduces the added costs of tariffs. 

For example, a wholesaler, reseller or liquidator may have stock you need from a country that is subject to Trump-imposed tariffs that was imported before tariffs went into effect. 

In addition, a seller of tariff-eligible products with excess inventory may be willing to provide it at a reduced cost, lessening the blow of the overall price retailers have to pay for a product subject to a 20-25% premium.

Finally, in some instances a comparable product manufactured and shipped from a country not subject to heightened tariffs may suffice as a more affordable replacement. This is especially true for manufacturers and importers that operate in multiple markets.

Of course, it goes without saying retailers should never try to work around tariffs by dealing on the gray market, black market, dark web, or any other ambiguous or illegal source of goods.

Distribution and inventory management

By utilizing AI to optimize distribution and management of imported goods after the tariff has been paid, retailers minimize the associated expense of handling goods between the time they are acquired and the time they are sold.

AI-equipped distribution systems can help retailers move products through their supply chain in the most direct and efficient way possible, reducing fuel and manpower costs by utilizing strategies such as less-than-truckload (LTL) shipping and route optimization. 

And by leveraging AI in their inventory management activities, retailers can take cost-reducing steps such as storing items as closely as possible to where they will be fulfilled, accurately forecasting demand to minimize overstocks and understocks, and locating items in the supply chain to ensure orders are filled with products in the most cost-efficient points in the enterprise.

Pricing and promotions

Finally, retailers can apply AI to the pricing and promotions of tariffed goods to create situational price breaks and supplemental purchase opportunities which let them recoup price discounts through sales volume.

For example, dynamic pricing can enable retailers to quickly respond to short-term demand surges caused by occurrences such as weather or live entertainment and sporting events.

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In addition, AI-enabled promotional management software can help retailers link tariff-eligible products to targeted cross-sell and upsell offers that increase market basket size, clear inventory, and boost customer satisfaction and loyalty.