China Tariffs: Ground Zero is the Sales Floor

As the China tariffs become an unfortunate reality throughout our industry, we reached out to some of our members for their thoughts on how the tariffs would be impacting their business. Following are some thoughts from one of our retail partners, Kjerstin Klein at Willi’s Ski and Snowboard Shop, in Pennsylvania.

In this trade war between the U.S. and China, Ground Zero is the sales floor. It is at the retail level that we will feel the net result of the administration’s chaotic tariff tactics. As we kick off the 2019-20 season, retailers in the snowsports industry are struggling to confirm product arrival and working closely with vendors to try to determine what products will deliver under the wire and what will be subject to possible tariffs. Teamwork between vendors and retailers is absolutely critical because only together can we come up with new pricing strategies to deal with the increased costs for those products that may be hit with tariffs. This uncertainty is challenging. The back-and-forth on tariff decisions has made it impossible to establish a strategy to handle what may or may not come … it’s like trying to hit a moving target. As we open our doors for the season, we retailers are trying to balance the risk we face as the result of increasing prices (​which will likely decrease unit sell-through) with the need to sell the merchandise we have committed to buy. The increases, changes in MAP and wholesale, require us to reexamine our open-to-buy, spend time contacting our reps and vendors and where necessary, retagging items then updating our prices in our point of sale system … all at a time of year when we don’t have time to spare.

While we are through the worst of it for this product cycle, next year will likely be more of the same. With the likelihood of decreased sell-through due to the increased prices, the possibility of having to increase markdowns to maintain sell-through is not an attractive option as it will decrease the margin we rely on to keep our staff paid and doors open. This continued uncertainty will force retailers to take a critical look at their open-to-buy. The fact is that snowsports retail is already a gamble. We gamble on the weather. We gamble on sell-through. We gamble on margins. It is a risky business and retailers have accepted that. This is a whole new layer of risk and it is untenable. Retailers will likely make moves to mitigate the risk by decreasing their total open-to-buy, decreasing the purchase of high-end and/or low-margin products or simply not buying products that have a history of low sell-through performance. At Ground Zero, retailers have already taken steps to minimize their risk by improving efficiency, trimming operating costs and decreasing extraneous expenditures – the only place left to trim expenses is in the open-to-buy. The risk that products may cost up to 30% more, due to tariffs, in the next selling cycle, will have a direct effect on how retailers choose to buy for the 2020-21 season.

The snowsports industry has faced many changes and challenges over the years. This situation may be the wake-up call that the industry needs for vendors and retailers alike to be reminded of their partnership requiring them to support one another. The challenge caused by the tariffs may be a tipping point with a positive outcome – a chance for each part of the supply chain to reevaluate the way they operate and find new ways to collaborate so we survive the tariff challenge until the dust settles. It would be great to come out on the other side, stronger together – partners ready to meet our mutual end-goal, which is to bring a variety of great products to market that suit the snowsports end-users of all levels.

Kjerstin Klein
Willi’s Ski and Snowboard Shop
Pennsylvania

SIA

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