For decades, most US retailers operated on a simple premise: sell as much cheaply priced stuff as quickly as you can. That lucrative, volume-based strategy is about to be tested like never before.
President Trump’s tariffs threaten to upend the far-flung global supply chain that offers American consumers a wide selection of highly discounted apparel, furniture, and electronics. And some industry observers say it’s about time.
While the current arrangement has benefited both sellers and consumers, it has also papered over vast inefficiencies, allowing retailers to produce enormous financial and environmental waste.
A reckoning is “long overdue,” said Jeff Bornino, a former top supply chain executive at Giant Eagle and Kroger grocery chains who is now North America president for the TMX Transform consulting firm.
It shouldn’t have taken tariffs to come to this. The tariffs and supply chain disruptions just might force retailers to more carefully select what goods they offer consumers
Instead of trying to sell everything to everyone, the industry will perhaps narrow its merchandise to better-selling products or items that appeal to specific shoppers.
Such a realignment could have big impacts on New England retailers such as Framingham-based TJX, which have thrived under the current system by reselling deeply discounted items that have quickly cycled through mainstream retailers’ inventories.
Already, Trump’s plans have forced some manufacturers and retailers to alter course, whether boosting prices to offset rising costs or finding vendors who manufacture goods outside China, Mexico, and Canada, the primary targets of Trump’s tariffs.
For example, toy maker Hasbro, based in Pawtucket, R.I., in March indicated it may raise prices to offset the cost of tariffs. Temu, the Chinese e-commerce giant headquartered in Boston, reportedly is now requiring vendors to manage their own pricing, shipping, and marketing while the company focuses on running its online marketplace. Such a move will lead to higher prices as vendors lose economies of scale.
Temu did not respond to a request for comment.
Analysts also suspect retailers will order more goods up front this year to try to get ahead of additional tariffs. On the flip side, supermarkets might stop stocking some products that only generate modest sales.
But these moves are only half measures, Bornino said.
The problem is an industry that has long prized volume and market share over profits. Retailers don’t want to lose any sale, so they tend to order too many products from low-cost factories in China, which leads to warehouses and stores filled with unsold merchandise in America.
It’s the reason why department store chains like Macy’s hold enormous clearance sales despite absorbing big hits to profit margins.
It’s also the reason why TJX — which operates brands such as T.J. Maxx and Marshalls — has been so successful. The company, along with other off-price retailers like Ross Stores and Burlington, buy the excess merchandise on the cheap and sell it to consumers.
But the global supply chain that makes this all possible first started to buckle in 2020 when countries, especially China, shut down factories to contain the coronavirus. The moves led to a widespread shortage of once-common items like toilet paper and cleaning supplies.
The pandemic, along with rising conflicts between China and the United States and its allies, have prompted companies to shift production toward South America, Europe, and southeastern Asia.
Last year, the American Chamber of Commerce in China released a report that showed 41 percent of its members are now considering relocating from China to developing Asian countries, compared to 29 percent in a previous survey.
So, places like Cambodia, Indonesia, Thailand, Philippines, and Vietnam have grown as places where folks have factories and where our goods are coming from, and that’s been a growing trend.
“In addition to that, there are places like India, Brazil, and Turkey that have really been growing as a source of goods,” he said. “The supply chain has been diversifying. And there’s production in the US, in Mexico and Canada.”
But experts say Trump’s tariffs — 10 percent on Chinese imports and a planned 25 percent on goods from Canada and Mexico — have been hugely disruptive.
“This is a time of significant uncertainty, ” said Monica Gorman, managing director of Crowell Global Advisors and a former top official in the US Commerce Department. “It’s difficult to predict, including which players in the system will ultimately absorb the costs of the tariffs.”
In its conference call with analysts, Shah said Wayfair is working with its vendors on how to respond.
“Our suppliers are doing what they can to optimize their business so that they can provide that price value to customers,” he said. “Otherwise, they don’t win . . . We try to help them by providing advice and guidance on what we’re seeing, what we think is happening.”
As for TJX, the situation is more complicated. In its annual report, the company notes among the risks to its business is that “Many of the products sold in our stores are sourced in locations (particularly in China, India, and southeastern Asia).”
But in a recent conference call with analysts, chief executive Ernie Herrman said its buyers don’t consider tariffs when purchasing merchandise from vendors.
“Their strategy is not to factor in tariffs or any other costs that actually can play into the picture here,” Herrman said. “It’s really not up to them to have to worry about what the vendor is getting caught up with in terms of tariff or inflation or other costs.”
But TJX has been increasingly ordering merchandise directly from manufacturers, not just retailers looking to unload inventory. And those manufacturers could simply pass the cost of tariffs to TJX.
The most likely scenario, experts say, is that retailers will pass the cost to the consumer by raising prices. But one possible strategy is to specifically identify the reason behind the extra cost to consumers.
“Communication is key: companies can be transparent explaining tariff-related price hikes on their website or store signage to effectively manage customer perception,” according to a report by Grant Thornton.
Still, any price hike might turn off consumers already used to low prices, especially on items like apparel, said Carol Spieckerman, president of Spieckerman Retail consulting firm.
“The floor for lower prices has never been so low,” she said. “It’s an impossible standard for apparel retailers. The expectations for value have never been higher.”
This article was originally published by Thomas Lee in The Boston Globe on April 1 2025.