The Hidden Costs of Tariffs – How Retailers Are Absorbing the Shock — Management One Inventory Planning

How Are Retailers Adapting to Absorb the Shock ?

Retailers are taking different approaches to manage the financial strain of tariffs. Fortunately, it’s not just guesswork, it’s about adapting strategically.

1. Absorbing Costs Through Margin Compression

Some retailers are choosing to take the hit, sacrificing margins to avoid alienating price-sensitive customers. While this can protect short-term sales, it’s not sustainable without a strategy to offset the losses elsewhere. Make sure to maintain your initial markup, or else you’ll undermine your overall profitability.

2. Adjusting Product Sourcing and Renegotiating Supplier Contracts

Retailers are diversifying their supply chains, shifting production to tariff-free regions, and renegotiating terms with vendors. Having fewer and meaningful vendors could allow for negotiation and potentially better prices and terms. Flexibility and strong supplier relationships are becoming key competitive advantages in 2025.