NEW YORK — As the U.S. government imposes new tariffs on imports, many consumer goods companies are innovating to avoid hefty pricing upturns. Among their strategies are selling gadgets without batteries, providing toys in minimal or no packaging, and offering more products that require self-assembly.
These tactics are tightening the belt as the economic backdrop sees fluctuating tariff impositions by President Donald Trump. With U.S. consumers already feeling financial pressure from inflation over recent years, businesses are attempting to absorb rising costs attributed to tariffs rather than risk losing sales by passing on the entirety of these hikes to their customers.
Faced with changing market conditions, companies are getting creative. The practice of shrinkflation, where product sizes decrease while prices do not, might resurface. Meanwhile, companies are also exploring adjustments to their supply chains and looking for unseen areas to economize, inevitably impacting both visible and invisible factors in their pricing models. Nonetheless, these measures can only partially counteract rising costs, and not eliminate them entirely.
A major hitch in the supply chain has emerged with new tariffs. Trump imposed an additional 20% tariff on all Chinese imports, along with a 25% tax on steel, aluminum, and automobiles that the U.S. imports. The aim is to stimulate domestic manufacturing among other objectives. Other potential tariffs on imports from Canada and Mexico and additional duties on commodities like copper and pharmaceuticals loom on the horizon.
Supply chain expert Kimberly Kirkendall advises clients, including U.S. manufacturers of household goods and food items, to focus on short-term savings given the current climate of economic uncertainty. The recommendation is a collaboration with suppliers to discover potential cost-saving measures.
Even small companies reliant on international suppliers feel the pinch, like Shirt Story, an online apparel brand from Connecticut. Owner Sasha Iglehart foresees the potential for increased taxes on European imports, prompting her to seek local options as alternatives.
Many enterprises are examining their product specifics to determine what can be revised or replaced. Abacus Brands, a toy company in Los Angeles, expects to offset a $10 increase in retail prices by substituting slightly thinner paper in its instructional books. Aurora World also contemplates fewer paint colors for its toys to reduce costs.
Packaging optimization is another focal point, with companies revisiting how material reductions can align with eco-conscious trends. For example, Basic Fun’s CEO Jay Foreman is proposing novel packaging choices that could make products more cost-effective, albeit at the risk of toughening up their appeal.
There’s an emerging inclination to reduce production costs further, like Abacus Brands’ shift from plastic to cardboard inserts, significantly lowering costs per unit. These production changes, driven by tariff concerns, could be realized just in time for holiday inventories.
Moreover, as companies trim extra product features, consumers may have to handle more assemblage at home. Firms, including those involved in the manufacture of planters or wedding gifts, are vetting non-essential accessories from their offerings to manage costs.
Shrinkflation, an idea where products are reduced in size without price adjustments, might become a more widespread tactic again under the scenario of new tariffs. According to Edgar Dworsky, this concealed cost strategy could mean reduced quantities, like toilet paper rolls, as businesses strive to manage expenses.