President Donald Trump may have “saved Christmas,” but many retailers are still on edge, even if it appears that the White House, for now, has listened to their fears.
Top brands are preparing for a consumer backlash sparked by the Trump administration’s trade wars and tariff policies, which are exerting upward pressure on prices at retail stores. Retailers are especially vulnerable, so they have been pushing back, with limited success. However, J.C. Penney has adopted a strategy that may have an impact. It involves taking a stand for a particular subset of consumers—namely, women and girls.
Consumer brands are feeling the squeeze
Until recent months, ordinary consumers have been somewhat insulated from the impacts of White House trade policies. A widely criticized 2018 tariff on imported solar panels, for example, has been counterbalanced by favorable state-level policies, among other factors.
Manufacturers also began warning of higher prices when the Trump administration imposed tariffs on imported steel and aluminum last year. However, those effects take some time to trickle through the supply chain.
Retailers are much more vulnerable. They began to step up their warnings in May of this year, after new tariffs were imposed and the president alluded to another new tariff list in the coming months.
Walmart CFO Brett Biggs told reporters in May that “increased tariffs will lead to increased prices for our customers,” the Associated Press reported. By June, Macy’s and J.C. Penney also joined hundreds of brands and manufacturers outlining their case against the president’s trade policies.
Disproportionate impact on women and girls
J.C. Penney drew attention to the impact on women, girls and families in a formal letter to the Office of United States Trade Representative dated June 17.
Retail Dive was among the many trade publications taking note of the letter. It outlined how the addition of new tariffs would “hurt Penney's core customer: middle-class females who shop for their families on a ‘marginally’ higher household income than the U.S. median.”
So far, coverage of the letter has been largely confined to the trade press. One exception is CBS News, which noted that “of the 19 items the retailer listed as ‘priority items’ hit by the tariffs, 13 are women's and girl's apparel.” The list includes everything from women’s sweaters and tank tops to underwear, sleepwear and footwear.
Working women at risk
The letter itself minces no words. Writing on behalf of J.C. Penney, attorney David Spooner emphasizes the impact on women shoppers:
“The Administration’s proposed tax increase disproportionately hits women’s and girls’ apparel, but this understates the impact on women. Women often do the shopping for their families, and so feel it acutely when the government increases taxes on basic household items…Increasing taxes on boy’s shoes, kitchen appliances, sheets and blankets and curtains, and hundreds of other basic clothing items and home goods, will hurt all moms who don’t have inexhaustible disposable income. It will force them to make tough choices.”
Left unsaid is the impact on women who lose their jobs as a result of brick-and-mortar store closures, though that impact looms large behind Spooner’s words.
Women have long dominated employment in the retail sector, but the rise of e-commerce has introduced a new dynamic. As brick-and-mortar fades from the picture, warehouse and delivery worked—characterized by a male workforce—is rising.
By 2017, analysts were already noting that women were losing jobs in retail while men were gaining. The Trump administration tariffs may accelerate that trend.
Analysts have been warning that retailers are especially vulnerable to the new tariffs. One estimate puts 12,000 stores at risk for closure this year. That estimate appears to be on target. Last month, CNBC reported that Coresight Research’s running list of store closures has topped 7,000 in 2019.
That figure has been offset by slightly more than 3,000 new retail stores so far this year. Nevertheless, the number of closures is set to exceed, by a large margin, the record high of 8,139 listed by Coresight in 2017.
J.C. Penney’s plans will add to the list. Earlier this year, the retailer announced the planned closure of 18 department stores and 9 home furnishing stores slated for 2019. That’s a far cry from the total of 146 stores Penney closed in 2017 and 2018. Nevertheless, additional closures are not out of the question for 2020 and beyond.
Fasten your seat belts
With a new round of tariffs set to take place this September—in advance of the holiday shopping season—analysts are already warning of more trouble for retailers. On August 6, UBS observed that apparel, footwear, electronics and toys are “rather elastic,” making it more likely that consumers will resist price increases.
J.C. Penney, for one, appears to have a strategy for ramping up its case against the tariffs. The company’s June 19 letter includes a stinging reference to a beloved children’s book:
“Indeed, List 4 includes a proposed tariff on Christmas ornaments. For goodness sakes, a tax on Christmas ornaments? One wouldn’t think the Administration would seek to emulate the Grinch, who left little Cindy-Lou Who with walls devoid of ornaments and ‘nothing but hooks and some wire.’”
With its emphasis on women, girls, families and Christmas, J.C. Penney has zeroed in on areas where the Trump administration is perceived to be vulnerable.
That conversation has already caught the eye of the trade press. It would not take much to move the issue into the mainstream of both social media and conventional media as well.
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