Behind the Numbers: Reimagining Retail - Tariffs Are Here: Consumer Shifts, Surprising Outcomes, and Must-Watch Metrics

Released April 23, 2025 | Host: Sara Lebo | Guests: Rachel Wolf & Zach Stambor

Introduction

In the April 23rd episode of EMARKETER’s "Behind the Numbers," host Sara Lebo delves into the complex and evolving impact of newly imposed tariffs on the retail landscape. Joined by EMARKETER analysts Rachel Wolf and Zach Stambor, the discussion offers a comprehensive analysis of how these tariffs are reshaping consumer behavior, affecting various retail categories, and causing ripple effects across the advertising sector.

1. Overview of the Recent Tariff Changes

Sara Lebo begins by outlining the tumultuous timeline of tariff implementations in April:

• April 2: A universal 10% tariff was introduced on all goods imported into the U.S., unless a specific tariff had already been announced for that product.

• April 4: China retaliated by imposing a 34% tariff on U.S. imports.

• April 9: The situation escalated dramatically. Initial confusion led to the imposition of additional tariffs, including a staggering 104% on certain Chinese goods. Subsequently, President Trump reduced reciprocal tariffs back to 10%, only to later announce increases to 125%, and eventually clarifying them to 145%, with some Chinese products facing tariffs as high as 245%.

Sara Lebo [01:00]: "That's a lot of me talking, Zach. Rachel, how are tariffs impacting consumer behavior?"

2. Shifts in Consumer Behavior

Rachel Wolf highlights the bifurcation in consumer responses to the tariff-induced uncertainty:

• Proactive Shoppers: Eager to mitigate future costs by purchasing high-ticket items like cars and consumer electronics before prices rise.

• Cautious Consumers: Choosing to delay non-essential purchases, adopting a wait-and-see approach amid economic uncertainty.

Rachel Wolf [02:11]: "There's two camps of consumers. One is like, I need to get ahead of the tariffs... The other is saying, I'll hold off and wait to see how bad things get."

Zach Stambor adds that this heightened scrutiny extends to everyday purchases, compelling consumers to evaluate each spending decision more meticulously than ever before.

Zach Stambor [02:47]: "People are weighing every single purchase decision that they make in a way that they probably weren't just a few months ago."

3. Impact on Specific Retail Categories

The discussion moves to the uneven effects of tariffs across different retail sectors:

• Automotive and Electronics: Significant behavioral changes observed, with consumers accelerating purchases of cars and gadgets.

• Furniture and Apparel: Despite being non-essential, these categories saw unexpected sales increases in March, possibly due to consumers taking advantage of pre-tariff pricing.

• Beverages: Particularly hard-hit is the beer category. Constellation Brands, which imports Mexican beers like Modelo, Corona, and Pacifico, faces increased costs due to tariffs on both imports and packaging materials.

Zach Stambor [05:07]: "Constellation Brands was growing really well, and they just slashed their outlook because of the tariffs."

Rachel points out that even seemingly "American" brands like Pepsi are affected, with key ingredients sourced internationally.

Rachel Wolf [05:47]: "Even the price of soda is going up purely as a result of these new tariffs."

4. Ripple Effects on Advertising and Digital Spending

Sara Lebo connects the tariff implications to the broader advertising ecosystem, particularly digital and social media marketing:

• Reduced Ad Spend Growth: Heavy tariffs could constrain social media ad spend growth, potentially limiting it by up to $10 billion.

• Shift to Performance-Based Advertising: Companies may pivot from brand-building initiatives to more measurable, performance-oriented advertising strategies to protect margins.

Sara Lebo [06:55]: "If you look at our forecast, that is what is currently there. If you want to see the current environment, we modeled what we are calling a moderate tariff environment."

Zach Stambor [08:20]: "In the current environment, we think It'll be about 8%. But if we shift to the heavy environment, it'll grow just 4.5%."

5. Unexpected Outcomes and Global Brand Challenges

Rachel Wolf discusses the unforeseen challenges for global brands amidst rising anti-U.S. sentiment:

• Brand Performance Abroad: Companies like Nike, with significant operations in China, may struggle as Chinese consumers reduce their patronage of U.S. products.

• Complex Supply Chains: The interconnectedness of global supply chains means that disruptions can have widespread and unpredictable effects.

Rachel Wolf [10:08]: "If you're a global brand like Nike and you have a huge presence in China... what does that mean for your ability as a company?"

6. Retailer Response Strategies

The panel offers strategic advice for retailers navigating the tariff landscape:

• Adjusting Ad Budgets: Prioritize performance-based advertising over traditional brand-building to maximize ROI under tightened budgets.

• Transparent Pricing Communication: Clearly inform consumers about price increases due to tariffs to maintain trust and mitigate backlash.

Rachel Wolf [19:30]: "Be as transparent as possible and not just say, oh, we're raising prices because everybody's raising prices."

• Supply Chain Transparency: Ensure a detailed understanding of the supply chain to identify vulnerabilities and alternative sourcing options.

Sara Lebo [20:44]: "Make sure I have a clear and contemporary understanding of where each part of my supply chain is."

7. Key Metrics to Monitor

To effectively respond to the evolving situation, the panel identifies critical metrics for retailers:

• Grocery Inflation: Immediate impact on consumer spending patterns.

• Job Market Indicators: Unemployment rates and job openings provide insight into consumer confidence and purchasing power.

Rachel Wolf [16:39]: "The jobs report numbers are also going to be really instructive about how people are feeling."

8. Conclusion and Final Advice

As tariffs continue to create an unpredictable retail environment, Sara Lebo emphasizes the importance of adaptability and strategic planning. Retailers are encouraged to develop contingency plans based on varying tariff scenarios (low, moderate, heavy) and to remain agile in their marketing and operational strategies.

Zach Stambor [19:13]: "I would take a sharp look at my ad budget. I would cut out brand building initiatives, focus on performance-based ad spending like search."

Sara Lebo [20:37]: "If you're a retailer right now, what is one thing you would do tomorrow to prep for tariffs?"

Closing Remarks

The episode concludes with a reminder of the pervasive impact tariffs have beyond immediate pricing, influencing consumer behavior, brand strategies, and the very fabric of global supply chains. Sara Lebo thanks her guests, Rachel Wolf and Zach Stambor, for their insightful analysis and encourages listeners to stay informed through EMARKETER’s ongoing coverage.

Sara Lebo [21:28]: "Well, that is all we have time for today. So until next time we talk about tariffs."

This episode of "Reimagining Retail" provides an in-depth examination of the multifaceted effects of tariffs on the retail sector, offering valuable insights for marketers, retailers, and advertisers striving to navigate these challenging economic conditions.