Navigating global tariffs: Retail challenges and technological solutions

A global trade war, characterized by escalating tariffs and retaliatory measures between major economic powers, casts a long shadow over the retail landscape.

While the immediate impact might be felt by manufacturers and international supply chains, the reverberations will inevitably reach retailers, significantly influencing consumer spending patterns and operational realities. Navigating this turbulent environment demands resilience, adaptability, and a strategic embrace of enterprise technologies.

Here are potential challenges retailers may face in the face of a global trade war, particularly concerning consumer spending.

1. Increased cost of goods: The most direct impact of tariffs is an increase in the cost of imported goods. Retailers sourcing products from countries subject to tariffs will face higher wholesale prices. To maintain profitability, they may be forced to pass these costs onto consumers, leading to higher retail prices across various product categories, from electronics and apparel to furniture and food.
    
2. Reduced consumer purchasing power: As prices rise due to tariffs, consumers' purchasing power diminishes. With the same amount of disposable income, they can buy fewer goods. This can lead to a decrease in overall consumer spending, particularly on non-essential items, impacting retailers' sales volumes and revenue.
    
3. Shift in consumer demand: Faced with higher prices on imported goods, consumers may shift their demand towards domestically produced alternatives, if available. This necessitates retailers to quickly adapt their sourcing strategies and inventory management to cater to these changing preferences. Retailers heavily reliant on specific imported goods might struggle to find suitable domestic substitutes in terms of quality, variety, or price.
    
4. Uncertainty: A global trade war breeds economic uncertainty. Consumers, worried about the broader economic implications, job security, and future price hikes, may become more cautious in their spending habits, postponing major purchases and focusing on essential goods. This decline in consumer confidence can significantly impact discretionary spending in retail.
    
5. Inventory challenges: Tariffs and trade restrictions can lead to delays in shipments, increased transportation costs, and difficulties in sourcing specific components or raw materials. This can result in inventory shortages for some retailers and excess inventory for others if consumer demand shifts unexpectedly.
    
6. Currency fluctuations: Global trade tensions can lead to volatility in currency exchange rates. For retailers dealing with international suppliers or operating in multiple countries, currency fluctuations can impact their purchasing costs, pricing strategies, and overall profitability.
    
7. Increased competition: As consumers shift towards domestic goods, local manufacturers may gain a competitive advantage. Retailers may face increased competition from these domestic producers who are not subject to the same tariff burdens on their inputs or finished goods.
    
8. Erosion of brand loyalty: In a price-conscious environment, consumers may be more willing to switch brands if they find a cheaper alternative, especially for commodity-like goods. This can erode brand loyalty, making it harder for retailers to maintain their customer base and pricing power.  

Despite these formidable challenges, enterprise technologies offer powerful tools for retailers to navigate the complexities of a global trade war and build resilience.

How retailers can leverage ERP systems to reduce tariff impacts

ERP systems provide a centralized platform for managing all aspects of a retail business, from inventory and supply chain to finance and customer relationship management.

In a trade war scenario, ERP systems can help retailers gain real-time visibility into their supply chains, track the impact of tariffs on costs, optimize inventory levels to avoid shortages or overstocking, and analyze profitability under different pricing scenarios.

Features like advanced planning and scheduling can help identify alternative sourcing options and adjust production or procurement plans swiftly.

Keeping customers engaged (and buying!) with CRM platforms

Understanding and retaining customers becomes even more critical during economic uncertainty. CRM systems enable retailers to build stronger customer relationships through personalized communication, targeted marketing campaigns, and loyalty programs.

By analyzing customer data, retailers can identify price-sensitive segments, understand shifting preferences, and tailor offers to maintain engagement and drive sales. CRM insights can also inform inventory decisions based on evolving customer demand.

Using low code for high returns

Agility to respond quickly to changing market conditions is paramount. Low-code development platforms empower retailers to rapidly build and deploy custom applications without extensive traditional coding. This allows them to quickly adapt their e-commerce platforms to highlight domestic alternatives, implement dynamic pricing strategies, create new promotional offers, or develop internal tools for tracking tariff impacts and managing supply chain adjustments. The speed and flexibility of low-code can be a significant competitive advantage in a volatile trade environment.

The cloud, the customer, and the global economy

Last but certainly not least (foundational, even), cloud infrastructure provides the scalability, flexibility, and cost-effectiveness needed to adapt to fluctuating demand and operational changes during a trade war.

With cloud-based ERP, CRM, and analytics platforms, retailers can scale resources up or down as needed, avoiding large upfront investments in on-premises infrastructure. Cloud services also facilitate better data integration and collaboration across different parts of the business and with external partners, enabling more informed and agile decision-making.

Furthermore, cloud-based analytics and AI/ML services can help retailers analyze vast datasets to identify emerging trends, predict demand shifts, and optimize pricing strategies in real-time.

Retail wins in times of tariffs

By strategically leveraging these enterprise technologies, retailers can gain better visibility into their operations, understand their customers more deeply, respond more agilely to market changes, and ultimately mitigate the negative impacts of a global trade war. While the challenges are significant, technology provides the foundation for building a more resilient and adaptable retail business in an increasingly complex global landscape.

Worried about how shifts in the global economy may impact your business? Argano can help you prepare for what’s to come. It starts with free consultation: contact us.