Brexit and Tariffs Underscore Retail’s Global Reach

The notion that we all participate in a global economy is a fact that can be rather abstract — until it isn’t.

Consider retailers, particularly those in the U.S. and the UK, who for months have been watching, waiting and feeling the effects of two of the biggest political stories on the world stage: Brexit and the trade war between the United States and China. The players are powerful and the stakes are high. The outcomes of both will send ripples, or perhaps waves, through all sorts of industries.

Uncertainty has become one the one constant in the UK’s Brexit planning

For retailers in the UK, the complete fogginess around whether Britain will leave the European Union with trade and other agreements in place or with no such assurances has paralyzed some when it comes to planning. Some merchants in the UK have devised plans B, C and D to deal with supply chain, fulfillment and hiring, depending on just how the UK bids the EU adieu.

We spoke in the video below with David Buckingham about the effects of Brexit. Buckingham is CEO of Ecrebo, a UK-based company that provides tools to collect, manage and use comprehensive point-of-sale data.

In fact, we spoke with Buckingham in January. But you know what? His words are as true today as they were then. It’s not that nothing has changed. Local elections in England resulted in more than 1,000 politicians representing the two main political parties being voted out in what was called a “vicious backlash” by the New York Times. But that backlash did little to clarify the situation for retailers months after Brexit was supposed to be completed and settled.

What those responsible for running retail operations do know is that the UK will either leave the EU with trade guidelines in place, leave without trade guidelines in place or not leave at all.

The tit-for-tat tariff impositions by the U.S. and Chinese governments provide some uncertainty of their own. For a time, it appeared the two countries were close to resolving their trade dispute and that that would lead to a removal of and reduction in tariffs. But then negotiations appeared to be unravelling and the U.S. said it would broaden the range of products subject to tariffs and raise the percentage on the tariffs it was applying.

U.S. retailers are worried about tariffs

Retailers were quick to point out the harm that would do to their businesses. The National Retail Federation weighed in quickly and decisively.

“Tariffs are taxes paid by American businesses and consumers, not by China. A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses, especially small companies that have limited resources to mitigate the impact. If the administration follows through on this threat, American consumers will face higher prices and U.S. jobs will be lost,” David French, the NRF’s senior vice president for government relations, said in a statement.

Besides raising tariffs from 10% to 25% on select Chinese goods, the Trump administration has said that they might extend tariffs to toys, electronics and apparel — a move the Peterson Institute for International Economics says would affect 100% of toys and sports equipment imported from China, 93% of the footwear and 91% of the textiles and clothing.

The tariffs would affect 41% of apparel sold in the United States, American Apparel & Footwear Association CEO Rick Helfenbein told Fox Business. He said the fees would apply to 72% of footwear and 84% of accessories.

The increased tariffs would leave retailers in a tough spot — and they would certainly leave retailers considering raising prices, obviously never a popular move with consumers.

Transparency helps retailers share bad news with customers

But there are ways to make it more palatable. When the first round of tariffs were enacted last summer, electric-bike retailer Rad Power Bikes (a Signifyd customer) decided to clearly explain to its customers that the company would be hit by higher prices because of tariffs and that it would pass on some of the cost through higher prices. It’s the kind of transparency that has bred success among digitally native retailers.

And ultimately, Rad Power Bikes was able to share an even better story with its customers and potential customers. In January, the company said that through changes in operations and through other efficiencies it would be able to absorb 100% of the additional cost of tariffs. It dropped its bikes’ prices back to pre-tariff levels and rolled out a price-matching guarantee.

In the 21st century, retailers need to think and act globally. And no doubt that brings challenges with it. But armed with creative thinking around customer experience and treating customers like fans rather than consumers, it is possible to navigate the rapid changes that a global economy brings.

Photo by Kyle Glenn on Unsplash

Mike Cassidy

Mike is lead storyteller at Signifyd. A former journalist and a retail geek, he covers ecommerce and the way technology is transforming digital commerce. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.

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