As retailers continue to grapple with the widespread tariff implementations that have raised the average US tariff significantly, merchandising teams find themselves at the frontline of response efforts. With consumer sentiment already showing concern about potential price increases, strategic merchandising decisions are important. This blog explores targeted merchandising actions retailers may consider implementing to help mitigate tariff impacts while maintaining customer loyalty.
Understanding the Merchandising Challenge
The current tariff landscape presents unique challenges for merchandising teams:
- Increased tariffs across many different countries of origin
- End of de minimis exemptions for goods from China and Hong Kong
- Varying consumer price sensitivity across product categories
- Consumer confusion about tariffs but clear expectations of price increases
Recent consumer surveys indicate that many US consumers believe tariffs will affect the prices they pay, with vehicles and produce being the categories where they expect the most significant impact. This awareness creates both challenges and opportunities for merchandising strategies.
Five High-Impact Merchandising Strategies
1. Strategic Assortment Optimization
The first line of defense against tariff impacts is a comprehensive review
and adjustment of your product assortment:
Analyze Product-Level Tariff Exposure:
- Map your entire assortment to country of origin and applicable tariff codes
- Calculate tariff impact on landed cost for each SKU
- Identify products with highest tariff vulnerability
Implement Targeted Assortment Changes:
- Prioritize domestically produced alternatives where available
- Shift sourcing to countries with lower tariff rates for specific categories
- Consider private label expansion in heavily impacted categories
- Prune SKUs where tariff impact makes them economically unviable
2. Price Architecture Redesign
Rather than implementing across-the-board price increases,
consider a strategic redesign of your price architecture:
Segment Your Assortment by Price Elasticity:
- Analyze historical price sensitivity data by category and price point
- Identify where consumers are most and least price-sensitive
- Consider competitive positioning in each category
Implement Tiered Pricing Strategies:
- Absorb more tariff costs on highly elastic, traffic-driving items
- Pass through more costs on less elastic, destination purchases
- Create new “bridge” price points to minimize perception of increases
Enhance Value Perception:
- Bundle products to obscure individual item price increases
- Add features or services to justify necessary price adjustments
- Develop new opening price points with alternative specifications
3. Strategic Promotion Planning
Promotions take on new strategic importance in a high-tariff environment:
Redesign Promotional Calendar:
- Shift promotional focus to less tariff-impacted categories
- Create targeted promotions for domestically sourced items
- Develop alternative promotion types that preserve margin
(e.g., loyalty points vs. direct discounts)
Implement Surgical Promotions:
- Use data analytics to identify specific customer segments most price-sensitive
to tariff-impacted items - Create personalized offers for these segments rather than broad discounts
- Test different promotional approaches to find optimal balance of volume and margin
Leverage Vendor Support:
- Negotiate shared promotional funding with vendors seeking to maintain volume
- Develop exclusive product offerings with key partners to justify premium positioning
- Create joint marketing programs highlighting product quality and value
4. Category Role Recalibration
The strategic role of different categories may need to shift in response to tariff impacts:
Reassess Category Roles:
- Review current category roles (traffic driver, margin builder, destination category, etc.)
- Evaluate how tariff impacts affect the economics of each role
- Identify categories where role shifts may be necessary
Implement Strategic Shifts:
- Elevate less tariff-impacted categories to traffic-driver status
- Shift heavily impacted categories from traffic to margin roles
- Consider category expansion in areas with domestic supply chains
- Evaluate potential category exits where tariff impacts fundamentally change economics
5. Enhanced Customer Communication
Thoughtful communication about value proposition in the face of tariff-driven
changes as part of merchandising strategy:
Develop Category-Specific Messaging:
- Create clear, simple explanations of value proposition
- Highlight quality, durability, and total cost of ownership
- Emphasize non-price attributes (sustainability, ethical sourcing, etc.)
Train Customer-Facing Teams:
- Equip sales associates with talking points on tariff impacts
- Provide specific value messaging for key categories
- Develop responses to common customer questions
Leverage Digital Touchpoints:
- Update product detail pages with enhanced value messaging
- Create content highlighting product quality and durability
- Develop comparison tools that focus on total value rather than just price
Implementation Framework:
The 60-Day Merchandising Response Plan To implement
these strategies effectively, consider this structured approach:
Days 1-15: Assessment and Prioritization
- Complete product-level tariff impact analysis
- Identify highest-risk and highest-opportunity categories
- Develop category-specific response strategies
- Establish success metrics and monitoring approach
Days 16-30: Strategy Development
- Design specific assortment changes by category
- Develop revised price architecture
- Create updated promotional calendar
- Plan category role shifts
- Develop customer communication materials
Days 31-45: Implementation Preparation
- Brief cross-functional teams on merchandising strategy
- Train customer-facing staff on new messaging
- Update systems for pricing and promotion changes
- Prepare marketing materials for revised strategies
Days 46-60: Phased Implementation and Monitoring
- Roll out changes in prioritized waves
- Monitor customer response and competitive reaction
- Make real-time adjustments based on performance data
- Establish ongoing review process for continued refinement
Conclusion: Merchandising as a Strategic Advantage
While tariffs present significant challenges, they also create opportunities for merchandising teams to demonstrate strategic value. By implementing these targeted approaches, retailers may not only mitigate immediate tariff impacts but may also build more resilient merchandising capabilities for the future.
The current environment of “slowbalization” – characterized by rising protectionism and regionalized supply chains – suggests that tariff considerations may become a permanent feature of retail merchandising strategy. The organizations that develop sophisticated approaches now may be
better positioned for long-term success in this new reality.
By viewing tariffs not just as a cost challenge but as a catalyst for merchandising innovation, forward-thinking retailers can emerge from this period with stronger customer relationships and more resilient business models.
This blog is part of our ongoing series on navigating the changing tariff landscape. Stay tuned for our next installment on starting supplier conversations.
All content provided herein is for educational purposes only. It is provided “as is” and VEYER does not warrant the accuracy of the information provided, nor does it assume any responsibility for errors, omissions or contrary interpretation of the subject matter herein. The information provided herein should not be relied upon as a replacement for professional legal or regulatory
