SmartCommerce’s Post

Today's Retail Cities #5in5 was my attempt to bring facts to our strange #tariff situation with a touch of humor...I mean when our tariff rates are apparently just "trade deficit/imports" which I learned overnight after recording this you can't not at least make one joke - suffice it to say I never taught that when I was teaching grad students econ :). My key points: 1) This isn't a response grounded in conventional economic theory so expecting a conventional economic outcome/solution is irrational. 2)It creates an environment where hundreds of world leaders will either retaliate (driving our reciprocal response) or come to the US and try a bilateral solution on camera in the Oval Office for removing tariff levels not particularly grounded in anything (which you could argue IS the desired outcome). This means uncertainty will be the operating order of the day. 3) Economic panic should still be a little muted - imports are a relatively small part of the US economy (12%) - but that 12% went up in price on average 25% overnight (weighting the reciprocal tariffs by size of import nation), so that's a 3% bump in prices across the board if they're all passed through. In the retail world discretionary stuff goes up markedly more than most food (though obviously there are huge produce categories that are mostly imported). 4) Everyone thinks of apparel - a relatively small category in national economic terms but with huge disruption here, and apparel, home goods and toys are three categories whose price architecture is completely upended by this. The largest category in retail though that gets impacted is electronics - it's the 2nd largest import category (after machinery - which by the way will be a problem if the goal is rebuilidng the US's manufacturing base - we import over half the machines that run factories). 5) The notion that we're going to get to neutral balance of trade with a country like Bangladesh or Vietnam is just bad math - they make a huge chunk of the world's stuff and their domestic economies are the size of Delaware's. Certain uncertainty - don't plan for a specific outcome - build an organization that can respond to multiple scenarios without grinding to a halt. -Remove friction. -Create muscle memory for reassessing short-term tactics while staying clear on "true norths" -Realign innovation to take advantage of disrupted category price architectures -Focus on facts on the ground in your category, not narrative -The narrative though will shape consumer sentiment, and it's hard to find a narrative through line where this is positive in the short-term. The consumer is deeply gunshy about inflation after the last 3 years of it. Inflation fears will get stronger, not weaker, in the next few months. This was longer than 5 minutes - enjoy! #retail #tariff #ecommerce #economy