The retail industry constantly fluctuates and faces intermittent, but consistent, challenges given its dependence on consumer activity — specifically shopper spending — so a bit turmoil due to economics has always been in play.
But since January, when President Trump took office for his second term, it's been much more than a bit of turmoil facing the retail industry. It's been a tidal wave of pretty much panic given the White House's tariff threats, announcements, declarations and policy decisions. Check out this tariff timeline detailing the White House tariff actions.
The tariff decisions are driving fast change — retailers have been quick to react and consumers are already changing shopping behavior.
"Tariffs are creating a ripple effect across the entire retail ecosystem. And the best word to summarize this time is "uncertainty," Rob Garf, SVP of strategy and insights at Cordial said in an email interview.
"With 70% of U.S. adults anticipating higher prices and 43% already experiencing increases, we're seeing significant pressure on both retailers and consumers. The recent 28% year-over-year decline in consumer sentiment reflects growing spending shifts, particularly among the Boomer and Gen X demographics," he said.
Retailers face mounting inventory costs and must also make difficult tradeoffs between raising prices, cutting expenses or accepting lower profit margins.
"The fluctuating tariff situation has destabilized planning cycles and created an environment where consumers and retailers are forced to reevaluate their priorities and spending decisions," said Garf.
The lack of goods and lower demand due to higher prices could push some shaky retailers over the edge, according to John Harmon, managing director, technology research for Coresight Research.
"Many retailer bankruptcies are caused by excessive debt on the balance sheet, and retailers without a sufficient cash cushion could miss debt payments and have to file," Harmon said in an email interview.
Consumer reaction to the tariffs
Consumers are bracing for a long-term economic hit due to tariffs, according to data from NielsenIQ's recent "North America Tariff Sentiment Study.
The survey, which polled nearly 10,000 consumers across the U.S. and Canada in late March, revealed 61% of U.S. consumers and 86% of Canadians expect tariffs to negatively affect their country's economy this year, according to a press release on the findings. Consumers are adjusting behavior — planning to dine out less, delay major purchases or prioritize locally made products.
It's just one of several studies indicating that most consumers are very concerned about tariff decisions and the price increases expected to hit.
A strong majority, 55%, of U.S. consumers are deeply concerned about potential tariff-drive price increases, according to an Optimove Insight survey.
The study revealed 82% expressed concern about inflation, with 47% significantly changing their spending habits, according to a press release on the findings. Tariffs are tied with lifestyle costs, such as dining out and entertainment, as the second-highest spending concern (19%).
Consumers are already more cautious about spend, according to an Ibotta research report. Nearly three-quarters (74%) of respondents rated current economic conditions as "poor" or "fair," indicating a widespread lack of confidence in the financial landscape, according to a press release.
More buy now, pay later consumers, 25%, are using the payment option for grocery purchases, according to a Lending Tree survey. The figure is nearly double the 14% in 2024, according to a press release on the survey findings.
Nearly four in 10 consumers will go wherever the deal is best if retail prices jump due to tariffs and Baby Boomers will be leading the charge.
One trend now in play is deeper consumer interest in secondhand shopping, according to Keith O'Neill, managing director, retail, at Globant.
"Online resale platforms and thrift stores are seeing increased demand, especially among younger generations who are motivated by both affordability and sustainability. Retailers are beginning to see the secondhand market not only as a buffer against price volatility, but also as a strategic opportunity to attract new customers and maintain engagement in a cost-sensitive environment," O'Neill said in an email interview.
The secondhand trend is understandable given that a Yale Budget Lab report estimates tariffs could cost consumers $4,900 a year, with an average price increase of 3% across all goods.
Retailers react
For their part, retailers have already begun to react.
In mid-April the Ford Motor company announced it had already begun halting shipments of pick-ups, sports card and SUVs, according to a New York Post report.
Some car dealers are advertising "tariff-free cars" to buyers as a sales tactic, according to a Yahoo report.
Shein and Temu, two Chinese e-commerce sites known for their low-cost items, initially stated they plan to raise prices for U.S. consumers in response to President Trump's 145% tariff on imports from China. On May 2 Temu announced it had halted shipments of cheap goods from China to the U.S. after President Trump closed a trade loophole that allowed the fast-fashion giant to sidestep tariffs and customs checks, according to a New York Post report.
"All sales in the US are now handled by locally based sellers, with orders fulfilled from within the country," a Temu spokesperson told The Post in a statement.
Etsy is investigating ways for buyers to find businesses in their countries via shopping pages and promoting local sellers, according to a CNBC report.
One industry group predicts tariffs will cancel Halloween and cripple Christmas sales given production already underway and orders in place.
"This is an existential moment for our industry," Robert Berman, Halloween & Costume Association board member and president of Rasta Impasta/Imposta Costumes, a U.S. costume manufacturer, said in a press release. "Halloween isn't like other holidays. If products don't land on time or become too expensive for families, Halloween simply doesn't happen. There is no backup plan."
Harmon echoed Berman's concerns on the tariff impact on holiday sales seasons, stating it could also hurt the back-to-school season as well as Christmas.
"Retailers are likely in the process of placing their BTS orders now and would face the 10% tariff if they did not already stock up," he said. "Retailers could face much higher tariffs for holiday once the 90-day grace period expires. In addition, U.S.-China trade is essentially shut down, and it could be difficult for retailers to secure enough product for BTS or holiday."
What retailers should do
One strategy, according to survey from NuOrder, in its "2025 State of B2B eCommerce Report," revealed brands are focusing on supplier partnerships and demand forecasting in reaction to current economic threats rather than structural supply chain changes like nearshoring or reshoring. The data also revealed 44% of brands are focused on enhancing customer retention and loyalty and just 31% are planning to launch new product categories or SKUs.
Considering the tariff situation, as well as consumer reaction, one thing retailers shouldn't do is jump on the 'mark down' strategy, according to Talon CEO Christoph Gerber.
"There's no question marketers are concerned about impending restricted or reduced budgets, but it is important they now hold their nerve," Gerber said in an email interview. "Rushing to invest in blanket discounts is a knee jerk reaction that amounts to 'short term gain, long term pain.' While this might provide a quick sales boost, we have seen time and again that this kind of "distress discounting" ultimately erodes margins, and conditions customers to expect lower prices from brands."
Given that uncertainty and volatility seem to be the norm given the tariff situation, brands need to focus marketing budgets on activities that will drive long-term profitability and loyalty, said Gerber.
"Data-led loyalty programs and personalized, timely promotions are the strongest tools for marketers not just looking to drive short term sales but maintain and increase customer loyalty and ROI over the coming months," said Gerber.
Rethinking pricing, and getting more tech savvy, is a big focus for retailers at this point, according to O'Neill.
"Retailers are facing mounting pressure from shifting trade policies, prompting them to rethink their pricing strategies and operational models and requiring them to become more adaptable, strategic, and technologically-savvy," he said.
The tariffs are leading to higher import costs, especially for electronics and apparels, and that's forcing retailers to choose between absorbing the costs, and eroding profit margins, or passing the cost to the consumer, he said.
"As a result, many are deploying more nuanced pricing strategies, such as selective price hikes, added "tariff" fees (in order to offset additional costs without repricing), or preserving low prices on essential items while adjusting prices on less sensitive goods. Retailers are also leaning more on promotions, discounts, and loyalty programs to maintain consumer engagement, especially during a time when shoppers may become more price-sensitive and cautious with discretionary spending," he added.
Given retail's already slim margins, the tariffs have brought "margin mayhem," according to Garf.
He recommends retailers adopt a strategic approach, balancing short-term adaptability with long-term resilience.
"We see companies comprehensively assess their supply chain exposure and identify alternative sourcing options. Retailers will also develop multiple pricing scenarios that account for potential tariff changes while optimizing inventory, and shift marketing investments from paid to earned media to maximize impact while controlling costs.
"With this, they'll have to scrutinize all their technology investments with a sharper focus on ROI and recognize that different consumer segments are experiencing tariff impacts differently — they'll need to create targeted approaches for Boomers and Gen X, who appear particularly affected by economic uncertainty. The strongest retailers will weather the storm by leveraging AI to drive transparency and value, forecast supply and demand, and enable dynamic and personalized prices and offers," Garf said.
Boxzooka, which provides technology-driven logistics solutions, is working with clients to execute both short-terms and long-term strategies for mitigating the tariffs' disruptive effects on supply chain and revenue streams, according to Brendan Heegan, CEO and founder.
"Tariffs are all over the headlines and we know this for certain — there is a lot of uncertainty on the details, the timing and the percentage of increases," Heegan said in an email interview. "We're consulting with numerous brands on strategies to get their products state side as they juggle with production planning from new countries — moving out of China. Naturally, prices on goods are going to increase and each brand will look for strategies to do promotions accordingly and help offset some of the costs to consumers."
The company has seen several retailers already get out in front of production schedules and bring in additional product in Q4 2024 and Q1 2025.
"Smart strategies for larger brands with the financial ability to get ahead of these price increases. Smaller brands are challenged to make any buying decisions as the demand for apparel, home goods and non-essentials appears to be tapering," Heegan said.
Retailers should consider creating value with loyalty programs and bundling of products and consider highlighting products that haven't been affected by tariffs as "better value" alternatives, Heegan added.
"Holding the line on prices for high-frequency or flagship products, is prudent, making price adjustments elsewhere. Introducing lower-cost SKUs that are less impacted by the tariffs, so customers still have affordable options, is another way forward. The bottom line is that our creativity will be needed now more than ever as we move deeper into this uncertainty."
The worse strategy for retailers dealing with tariffs is to stand still, according to Coresight Research's Harmon.
"Doing nothing is the worst option, though the current environment is extremely volatile. Retailers have to balance the risk of having too much inventory, if they order while tariffs are at 10% and assuming they can get product within the 90-day window, versus adopting a wait-and-see attitude and facing higher tariffs possibly not being able to get product," he said.
"I think it's better to take a hit to margins by having to close out excess inventory than disappointing customers with empty shelves."