Higher tariffs are one of an e-commerce brand’s worst nightmares. Whether you own a small or large e-commerce company, navigating new tariffs is challenging and can greatly impact your bottom line.
For reference, over 40 percent of small companies report their costs are increasing as a result of the Trump administration tariffs on Chinese goods. Luckily, with some foresight and planning, e-commerce brands can respond to tariffs and continue to grow as companies.
Get It Down On Paper
To understand how to protect your business and adjust to higher tariffs, you need a clear picture of what your current costs are and what your future costs might be. Although your e-commerce business will likely be somewhat impacted by tariffs, there is a chance that not everything you sell is subject to tariff changes.
With knowledge of how much you import and how costly the fees associated are, you can start to plan for the future. One approach you might use is to stock up on goods that will be subject to higher tariffs in the future.
Of course, this will decrease your on-hand cash and increase your inventory, but if it’s a calculated move, it might pay off in the long run. It may even be worthwhile to secure additional funding to make a bulk purchase now depending on upcoming tariffs.
Look at Alternate Suppliers and Negotiate
If you have a single supplier, you will not be able to price compare and negotiate with them. If you have several suppliers in mind who can make your products, you can price compare and see if any potential manufactures may even pick up the tariff fees in order to do business with your e-commerce company.
As you consider established and potential suppliers, see if any are willing to secure a rate for your company. If possible, see if you can sign a long-term deal when pricing is favorable before it increases. Another technique is to negotiate a price cap that will keep a healthy profit margin intact for your company, even with higher tariffs.
Try to Save or Alter Pricing
There are many ways to save money as an e-commerce business. One great way to cut down on costs is to manage inventory levels conservatively. The more goods you have that you’re not selling, the more money you have that’s tied up. However, if you need to stock up on extra inventory preemptively to avoid tariffs, this isn’t the best strategy.
Another underutilized money-saving technique is to keep your number of employees low and seek help through freelancers and contractors. Although having full-time employees has its benefits, it is really costly. Also, in today’s gig economy, there are generally more reasons than not to work with freelancers and temporary contractors.
If you’ve tried to save with little improvement, you might start to consider increasing your prices. This is particularly difficult as an e-commerce brand, though, as customers can quickly compare your prices to your competitors’ prices and buy the less expensive offerings. One quick way to try and combat this issue that can arise from increasing prices is to offer a price match guarantee.
Keep Your Customers Informed
There’s always the chance your customers will have to absorb the cost increase for higher tariffs. So, even if you have a plan to avoid this possibility, it’s smart to keep your customers in the loop.
Inform those who are loyal to your company that you are doing everything you can to keep your prices down, but with the changing landscape, it might soon cost more for them to receive quality, timely delivered products from you. A press release or an email campaign are great ways to transmit this information.
You might also take this time to see if you can increase your line of credit or secure additional loans. There is a chance that the administration will change in 2021, and if that’s the case, some of the current and future tariffs might be reversed.
Extra credit can help get you through this round of tariffs and keep your business afloat and your customers happy until the political and economic landscape changes.
Look Into a Tariff Waiver
As a U.S. business, you can request that some of your products be excluded from new tariffs. You will need to have a sound rationale on why exclusions should be applied to your products. Each item to be imported requires a separate application.
Applications for exclusion need to be sent to the Department of Commerce, the U.S. Trade Representative or both. Exceptions are granted on a case-by-case basis.
Your chances for tariff exemption improve if you’ve tried to source the product from non-Chinese suppliers, whether or not the product is related to Made in China 2025 initiative, whether additional duties will cause substantial economic harm to your business or the United States and more.
Try to Take Things In Stride
As alluded to above, if a new administration comes in, tariffs may change substantially. Some small business owners are taking a chance on the changes that might occur under new United States leadership and trying to wait out the current price increases.
Of course, this plan only works if you can afford to take a hit to your profits now and weather the storm for the next couple of years. Also, there’s no guarantee that tariffs will get better. In fact, there is always the possibility they will rise more. Waiting it out is an option, but it’s not an assured choice.
Moving Forward
Nearly every industry is impacted by tariffs, and all businesses within said industries—both big and small—feel the influence of higher tariffs. When it comes to the world of e-commerce, pricing is so competitive that the increasing costs of tariffs are especially hard to navigate and plan for.
Taking time to touch base with your manufactures, potential manufacturers, customers and planning ahead can help you stay on track through higher tariffs. Hopefully, the increased taxes on imports will decline again soon, but until that time, e-commerce businesses will have to work harder and smarter to see desirable results.