Now comes Wayfair, the e-commerce home-goods site, with a kind of case study of their impact. Tariffs are hurting their business, executives said — not necessarily because they make their products more expensive, although they do, but because they make their customers more wary.
Wayfair reported quarterly earnings last week and forecast a significantly slower pace of sales growth next quarter than investors have become accustomed to. The company said that outlook in part reflected challenges related to tariffs, which jumped to 25 per cent this summer on many of its products and had also created headwinds in the third quarter.
On a conference call with investors, Wayfair executives said that certain items on their marketplace — some with a lot of customer reviews and enticing product images — have gotten more expensive as suppliers raise prices. This, it turns out, appears to be causing customers to spend more time deliberating over their purchases: should they go with the highly rated but more expensive item? Or should they take a chance on something that’s cheaper but has fewer reviews?
Executives also said that as suppliers of more expensive items saw their sales volume sink, they would sometimes cut prices. The result, they said, was a “repetitive cycle of volatility” as customers tried to figure out how to get the best value for their money.
Wayfair leaders said this is consistent with what they’ve observed in their business over time: any kind of significant price movement — even downward — results in consumers taking their time before clicking the buy button.
Of course, not every consumer business will see the same dynamics as Wayfair. Home furnishings purchases are generally more carefully considered, because couches, coffee tables and the like are expensive and are a hassle to return. But fellow retailers (and Washington lawmakers) should nonetheless consider Wayfair’s a cautionary tale.
The impact of tariffs on the consumer economy is often discussed rather simplistically: they will cause prices to rise, which means shoppers will buy less stuff. Wayfair’s experience shows it is more complicated than that. Yes, consumers will change their behaviour, but not always in a straightforward or predictable fashion. And this uncertainty complicates the response for manufacturers, retailers and, not incidentally, consumer brands.
Last week, for example, toy giant Hasbro saw its shares sink nearly 17 per cent after it reported disappointing earnings that reflected tariff-related difficulty. Certain retailers cancelled toy orders that were to be imported directly from China and instead put in orders as domestic shipments from Hasbro. The maker of My Little Pony and Play-Doh was left scrambling to accommodate the changes, and ultimately wasn’t able to ship all the orders in time.
Few US retailers and consumer brands will be able to escape the impact of President Donald Trump’s trade policy. At this point, the best they can do is to commit to being flexible — and to analysing their data for the potentially weird ripple effects of tariffs.