Glossy Podcast: Breaking down the Tariff Playbook — plus the latest news on Richemont, Chanel and Mytheresa

Summary

The Glossy Podcast: Breaking Down the Tariff Playbook
Release Date: May 23, 2025
Host: Danny Parisi & Zofia Zviglinska

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Introduction

In this episode of The Glossy Podcast, hosts Danny Parisi, a senior fashion reporter, and Zofia Zviglinska, an international reporter, delve deep into the current landscape of the luxury fashion industry. The discussion centers around recent earnings reports from major players like Richemont, Chanel, and Mytheresa, followed by an insightful conversation on strategic responses to the fluctuating tariff situation between the US and China.

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Earnings Review

Richemont's Robust Performance

The episode kicks off with an analysis of Richemont's latest earnings. Richemont, renowned for owning prestigious brands like Cartier and various luxury jewelry maisons, reported impressive revenues for the fourth quarter amounting to €21.4 billion, marking an 8% increase. Notably, their jewelry segment saw double-digit growth across all regions except Asia.

Danny Parisi highlights, "Their jewelry maisons were up like double digits," pointing out the stability in this typically volatile sector despite challenging economic conditions.

Zofia Zviglinska adds, "Richemont’s consistent and stable supply chain must be a significant factor in their strong performance," emphasizing the resilience of their jewelry offerings amid supply chain disruptions.

However, Richemont's watch segment faced challenges, with sales declining by 13%, particularly impacted by the Asian market's slowdown. This softening demand in China reflects broader economic sentiments rather than mere economic downturns, suggesting a shift in consumer psychology post-pandemic.

Mytheresa's Strategic Moves

Transitioning to Mytheresa, the conversation highlights the company's strategic acquisition of Netaporter and its integration into the Lux Experience umbrella. CEO Michael Klieger aims to differentiate the portfolio by targeting diverse consumer segments without causing internal competition among brands.

Danny Parisi observes, "Mytheresa's net sales growth in the last quarter was 4%, with GMV per top customer up by 18%," underscoring the brand's robust performance despite an overall luxury market slump.

Zofia Zviglinska notes the leadership appointments, "Heather Cameron is coming in as the NET a Porter CEO... Mirko Nobili is the new youth CEO," indicating a strategic emphasis on specialized leadership to foster unique brand communities within the conglomerate.

The collaboration with luxury giants like Prada and Balenciaga further cements Mytheresa’s position, although there are concerns about maintaining brand differentiation and managing the expanded portfolio effectively.

Chanel's Profit Decline

Chanel's recent earnings revealed a notable 30% drop in profits for 2024, the first significant decline since the pandemic. Revenue dipped by 4.3% to $18.7 billion, primarily attributed to reduced luxury spending in China.

Zofia Zviglinska speculates, "Price increases at Chanel, which have been contentious in the industry, might be contributing to the softness in sales," suggesting that elevated prices could be deterring consumers amidst economic uncertainty.

Danny Parisi discusses Chanel’s strategic move towards vertical integration, "Chanel is investing close to $600 million in vertically integrating their supply chain," aiming to gain more control and stabilize operations amid volatile manufacturing environments.

Additionally, Chanel has implemented a hiring freeze after rapid expansion, hiring 10,000 employees over the last three years, signaling a pivot to cost management in response to declining sales.

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Sponsor Segment: Listrack

Before delving into the tariff discussion, the podcast includes a segment sponsored by Listrack, a digital marketing platform specializing in beauty and fashion. Jamie Elden, Chief Revenue Officer at Listrack, discusses the importance of leveraging rich communication services (RCS) to enhance personalized consumer connections.

Jamie Elden states, "RCS messaging through mobile phones allows a brand to pull in their TikTok shop content, their reels, their influencer content all into a video environment on somebody's cell phone."

Listrack emphasizes the transformative potential of RCS in creating interactive and immersive marketing experiences, positioning it as a crucial tool for brands aiming to deepen consumer engagement in 2025.

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Breaking Down the Tariff Playbook

After the sponsor break, Danny and Zofia engage in a comprehensive discussion on navigating the uncertain tariff landscape between the US and China. As of the recording date, reciprocal tariffs have been suspended, reducing rates from 125% to 10% with a 90-day pause until August 10th.

Strategies to Mitigate Tariff Impacts

1. Raising Prices:

   • Danny Parisi explains, "When costs go up, your prices have to go up," highlighting the inevitability of price adjustments.
   • Brands like Base have adopted transparent communication strategies, openly discussing the impact of tariffs on their pricing. One example included a brand acknowledging tariffs as a "complete dumpster fire," fostering consumer empathy through honesty.

2. Transparency and Communication:

   • Zofia Zviglinska notes the rise of using social media, particularly reels, for direct brand-consumer communication. Brands are increasingly utilizing video content to explain tariff-induced price changes transparently.
   • Danny Parisi emphasizes the importance of aligning consumer sentiment with reality, stating, "It's taken some time for consumer sentiment to match with reality," indicating a need for clear and honest communication.

3. Tariff Engineering:

   • Zofia Zviglinska introduces the concept of tariff engineering, where brands modify products to qualify for lower import duties. For instance, Converse adds felt soles to their sneakers to classify them as slippers, reducing tariffs from 48% to 3%.
   • Danny Parisi remarks on the creativity of such strategies, "Tariff engineering is altering the product and the supply chain in ways to maneuver around some of the nuances of tariff law."

4. Diversifying Manufacturing Locations:

   • Brands are increasingly exploring manufacturing outside of China to mitigate tariff risks. Countries like Vietnam, Sri Lanka, and Mexico are becoming alternative hubs.
   • Zofia Zviglinska adds, "Diversifying your manufacturing is a smart and sustainable thing and probably good for the business," despite the complexities involved in setting up new manufacturing operations.

5. Bonded Storage:

   • Danny Parisi explains bonded storage as a method where products are stored in specialized warehouses without paying duties until they are shipped out, allowing brands to take advantage of lower tariff rates when available.
   • This strategy involves higher storage costs but can lead to significant savings if tariffs decrease during the storage period.

6. Licensing Models and Supply Chain Partnerships:

   • Brands like Von Dutch utilize licensing to allow local partners to produce and sell products, reducing direct tariff exposure.
   • Zofia Zviglinska also mentions collaborations and local licensing as ways to distribute tariff burdens across different regions.

7. Shifting Market Focus:

   • Some brands are pausing or reducing their focus on the US market, redirecting efforts towards more stable regions like the UAE.
   • Zofia Zviglinska observes, "Brands have had to pull out some of that [US focus]," opting for markets with less economic volatility.

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Conclusion

The episode concludes with an assessment of the viability and sustainability of the discussed strategies. Diversifying manufacturing locations and implementing tariff engineering are viewed as long-term solutions that can provide stability amidst economic uncertainties. In contrast, raising prices and relying on transparency are immediate measures that require careful balancing to maintain consumer trust and loyalty.

Zofia Zviglinska summarizes, "Whether that's bonded storage setups, new factories, those are all longer-term plays," while Danny Parisi adds, "The stated purpose of the tariffs was to get people to manufacture in the US... it's extremely difficult and there's not the infrastructure."

The hosts emphasize the importance of adaptability and strategic planning for brands to navigate the evolving tariff landscape effectively.

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Key Quotes

• Danny Parisi [05:50]: "It feels like a good category to be in" referring to the resilience of the jewelry segment.

• Zofia Zviglinska [08:34]: "The biggest challenge now is for the company to realize how to target those customers without cannibalizing across the brands."

• Jamie Elden [23:29]: "What we're doing is we're becoming a shopping partner with that customer."

• Zofia Zviglinska [31:37]: "Brands are having deeper conversations with consumers through the reels format."

• Danny Parisi [36:47]: "Tariff engineering is altering the product and the supply chain in ways to maneuver around some of the nuances of tariff law."

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This episode of The Glossy Podcast provides a comprehensive overview of the current challenges and strategic responses within the luxury fashion industry, offering valuable insights for brands navigating the complexities of global tariffs and shifting market dynamics.

Transcript

[Kristina Ko]

Hello Glossy Podcast listeners. As you kick off 2025 and work toward your aggressive revenue goals, one digital marketing platform partner is all you need and that's listrack. Listrack is your beauty and fashion revenue insider. List Track understands the beauty and fashion space and is the proven go to Partner for revenue creation Powering personalized consumer connections for leading retailers and brands like Peter Thomas Rothschild, Anastasia Beverly Hills, John Varvatos and Oscar de la Renta, Listrack's powerful AI integration with Shopify allows you to access and unify your customer data to deliver personalized cross channel messages that resonate, engage and inspire your customers. Partnering with ListTrack gives you access to beauty and fashion experts who act as an extension of marketing teams, sharing proprietary industry benchmarks, data and real time behaviors and trends. Learn [e-mail] that's L I S T R A K.com.

[Jamie Elden]

I think it's going to be huge in 25 and in 26 because the beauty in the fashion industry love to put high powerful creative that they've invested in in front of consumers through all channels. RCS allows them now to leverage all the investment they've made on this content and use it in a mobile channel.

[Danny Parisi]

That's Jamie Elden, Chief Revenue Officer at List Track, our sponsor on this episode of the Glossy Podcast.

[Zofia Zviglinska]

Later in the show, custom talks with.

[Danny Parisi]

Jamie about how beauty brands are using personalization, working to stand out and new creative formats on the horizon. Hello and welcome back to the Glossy Podcast. I'm your host, senior fashion reporter Danny Parisi and I'm here with our international reporter Zofia Zviglinska. Hello Zofia. How's it going?

[Zofia Zviglinska]

Hi. Dang good. Great to be on.

[Danny Parisi]

Thank you for being here. We have a double dose of conversations with you and me. First we're going to do our classic news review kind of week in review segment first and then later in the episode you and I had a great discussion. First we're going to talk about some of the earnings that were reported this week. There were a ton of earnings, Urban Outfitters and Ralph Lauren and a bunch of companies. We're going to focus on three in the luxury space, Chanel, Mytheresa and Richemont and kind of compare some of the numbers and results from those three and see what kind of insights we can glean about the luxury industry later in the episode. After the break, Zofia, you and I recorded a conversation that we were calling the Tariff Playbook where we kind of laid out some strategies and philosophies that we have heard from brands in the fashion industry about how they're navigating the tariff situation, which is currently on pause, but who knows how long that will last? So stick around after the break for that discussion. First, let's dive into some of the earnings this week. So how about we start with Richemont, which, as you know, owns like Cartier and a lot of luxury jewelry companies. They until recently owned Yuke's Net, a porter, but they recently sold that to Mythereza, who we will talk about a little bit later. But their earnings were pretty solid. They had revenues for this quarter, which was the fourth quarter for them, were 21.4 billion euros, which is up 8%. And specifically their jewelry maisons, which is a big part of their business, were up like double digits. And then there's more numbers we can get into. They had growth across all regions except for Asia. And we can talk about why that might be. But I want to start with the jewelry component. It seems like the jewelry category is doing quite well, kind of across the board. Kering also said that their jewelry houses, their jewelry brands were some of the best performing in their recent earnings and their earnings were not great aside from that. So I don't know, what are your thoughts on Richemont in particular and then jewelry in general?

[Zofia Zviglinska]

Yeah, I mean, obviously Richemont does tend to lean quite heavily on its jewellery offering just because it has been something a little bit more stable. But I am surprised it's doing so well considering, I guess, the current environment. It's a very challenging sector, I think, supply chain wise. So they must have a very consistent and kind of stable supply chain to be able to perform so well.

[Danny Parisi]

Yeah, I think that's true. And I was talking with some jewelers this week for a story and if you just kind of look at the situation, it doesn't seem like jewelry should be doing that well. There's a lot of kind of headwinds. Gold prices are very high right now. And if you look at Rolex or watch and jewelry brands that kind of touch on gold, all of their gold like products are more expensive. The costs have gone up significantly there. There's also, if you're in, if you're in diamonds at all, that's like a very disrupted space at the moment, which I think you and I have both written about and we've talked about it on the podcast too. But lab grown diamonds have made the price of diamonds very unstable, kind of on both ends, on the lab grown end and on the mined diamond end and then you've got like tariffs kind of messing up everybody' business as well. And jewelry tends to be very international. A lot of precious metals are mined in places where they're and they're sold elsewhere. So just looking at that, you'd think that jewelry would kind of be facing a tougher period than it feels like it is. There certainly are. You know, not every jewelry brand is doing great. But noting Richemont's earnings, Kering's earnings, Pandora had earnings recently and they were doing really well as well. Feels like kind of a good category to be in.

[Zofia Zviglinska]

Yeah, definitely. And I think for Richemont in particular, what they mentioned on the earnings is that they haven't overproduced on some of their most well known and kind of well loved lines. So something like the Alhambra line or the Love line, those coming from the jewellery maisons are doing particularly well and they're leaning into those pieces because they're both high margin, they're kind of iconic, they have long term desirability. So it's not like a one off launch that they had this year. These are, you know, kind of signature miniature pieces for the brands and they're also coming out with them in limited availability. So maybe it's also just the scarcity model is winning out for them too.

[Danny Parisi]

Yeah, I didn't really do too deep of a dive on anything other than the jewelry category. Was there anything else you noticed that you want to talk about?

[Zofia Zviglinska]

Yeah, I mean for Richemont I think the interesting thing was that watches were doing quite badly. Sales were down across their specialist watchmakers by 13% and kind of significantly obviously impacted by Asia and Pacific. But it seems like that kind of category might be undergoing a little bit of pressure and I'm wondering if that's tariff related or more China related. It does seem like the kind of Chinese demand is weakening and it's not driven by economics, it's just more driven by people's psychological state. I think China got very scarred during the pandemic in terms of what to expect from future earnings and things like that. And I think for them now they're thinking about to conserve money when the Chinese environment in general is not doing maybe quite as well financially for the regular consumer, even if they are high end.

[Danny Parisi]

Yeah, and that's a good point about the kind of softening of demand in China I think I mentioned. But Richemont across all their brands had double digit growth in all regions except for Asia. So that kind of messed with their balance overall. One thing I Keep an eye on is the data that comes out each month about Swiss watch exports. They report pretty granularly about how many watches are coming out of Switzerland, which is where all the big brands are kind of based. And it's definitely been dropping the last couple of months. Although I have heard again from a jeweler I was talking to this week that you shouldn't put too much stock in if it's down 1% in one month. It's more useful to kind of look at it over the course of three months or six months or something. But I do see a little bit of a decrease even looking back the first quarter of the year, Swiss watch exports. So it definitely feels like that category has a little bit of challenge to it.

[Zofia Zviglinska]

Definitely.

[Danny Parisi]

Let's move on. Do you want to talk about Mytheresa next?

[Zofia Zviglinska]

Yeah, absolutely. For Mytheresa, I think that there's been some interesting moves since the YNAB acquisition. Michael Kligos, the CEO, has said that the company is looking at this, I guess, new portfolio of brands under the Lux Experience kind of umbrella as a way of, I guess, differentiating and kind of targeting different kinds of consumers with each one. Because Obviously you've got Netaporter, you've got Mr. Porter, you've got Mytheresa, you've got the outnet, all of these. Oh, and Yuke's, of course. And all of these are slightly different in terms of what kind of customer they're approaching. And I think the biggest challenge now is for the company to realize how to target those custom without necessarily cannibalizing across the brands. Because I think that that is something that might be a little bit of a concern. Some of the portfolio and the brands covered are relatively similar between something like mytheresa and Net A Porter, for example.

[Danny Parisi]

Yeah, yeah. And they're all luxury, but they're sort of slightly different shades of luxury. You know, the outnet is kind of the more affordable end, Mr. Porter, is menswear. Yeah. I had the same thought about cannibalization. Like you. If you keep expanding with new brands under one umbrella and they're all kind of operating in the same world, that's definitely a concern where you need to start thinking about differentiating them. As far as some of the numbers from Mythereza, like you mentioned, the CEO Michael Klieger has talked about them being sort of an outlier, I think, and he's said similar things the last couple of quarters. And it's fair because luxury in general has been sort of in a slump. But my Teresa has continued to have kind of really good performance. Their net sales growth in the last quarter was 4%. They also said their GMV growth, which is gross merchandise value per top customer is up like 18%, just under 18% compared to the same period last year. And then the last figure I pulled out here is that their average order value was increasing, increased like 9%. I know that's a, you know, a statistic that brands and retailers especially keep a very close eye on because if you've got high sort of average order value, you've got high lifetime value of your customers, it kind of changes your strategy compared to having low lifetime value, low aov. But a lot of customers, you can kind of like make a smaller audience go farther.

[Zofia Zviglinska]

Yeah, definitely. And I think that part of that is also just going to be about making sure the operation side of things across all of these different brands worked. Kliga's appointed a number of different people already in terms of the leadership preset across these brands. I think Heather Cameron is coming in as the NET a Porter CEO. Toby Bateman, Jeremy Langmead are returning to Mr. Porter and Mirko Nobili is the new youth CEO and Sabaa Nakushbandi is staying on as CEO of the Outnet. And I think that Klieger comes from an entrepreneurship background because my Teresa is E commerce. It doesn't do things, I guess, the way that the traditional fashion industry does. And I think he's going to be trying to emphasize that with some of brands by focusing on entrepreneurship, on decentralization and again, as we mentioned, kind of building more unique kind of brand communities within each of these brands.

[Danny Parisi]

Yeah, and we should also mention that Mythereza has been pretty good, I think with partnering with and doing kind of like deep collaboration with a lot of big luxury brands. They have a pretty deep partnership with Prada. They also did a bunch of capsule collections and pre launch kind of collaborations with like Loewe, Balenciaga, Laurent, Bottega, Veneta, like big, big brands. And I think if you're a retailer like mine, Teresa, if your pitch is, you know, you should sell with us because we have these valuable customers, we have this reach, it feels like that's working. So my only real concern for them, which you know, you already voiced, is if they can keep all these new brands because they kind of added a lot of new businesses to their plate sort of all at once. If they can keep them all sort of stable and differentiated and healthy, or if they may kind of sell a few off or combine them or do some sort of messing around with the structure in the next couple years.

[Zofia Zviglinska]

Yeah, definitely. I think that that's going to be the thing to focus on. And the other thing is just it's going to be a little bit of a tough time now over at Motoriza because of this. And I think the next couple of quarters are expected to have a little bit of a hit because both of the cash transaction, but also the changes in the investment that's going to be needed into each of these brands. So I think it's going to be a. A relatively bumpy ride from here for them.

[Danny Parisi]

Yeah, for sure. Let's talk about Chanel. And I wanted to leave the most time to talk about them because I think they're a really interesting company. I feel like the last couple years, especially the last year, as we've been writing about the luxury downturn, there was a huge boom of luxury after the pandemic. A lot of luxury brands and conglomerates and retailers were doing really well. And then starting, I think, maybe middle of last year, maybe earlier, there was a pretty significant slump, I think. And Chanel was one of those companies that we talked about as being sort of above it. And, you know, they were an outlier, just like Hermes, like these mega companies that could kind of withstand it without seeing much of an impact. But that's changed. They announced their annual earnings for 2024, and for the first time since the pandemic, their profits fell like 30%, which they said was due to a sharp slowdown in luxury spending in China. Their revenue, which was $18 billion, $18.7 billion, which is still an absurd amount of money, but it was down 4.3%. It's really like the first time I think, in a while that Chanel has had to deal with that. And they're no longer the outlier. They're kind of more in line with what the rest of the industry is going through.

[Zofia Zviglinska]

Yeah, definitely. And I think that some of this can be down to some of the price increases perhaps, that the brand has been implementing, maybe not quite this year because it says that it's rolling those back. However, in previous years, those price increases at Chanel have been somewhat of a kind of contentious point in the fashion industry. I think it's one of the brands that has raised the prices the most on its products across the, you know, since the pandemic and even beforehand. And it might be contributing to some of that softness, not just in Asia, but also in the Americas, which are down 4.2%. On the other hand, you know, the brand is also invested quite heavily, I think, in some of the kind of retail areas. And while its fashion side is down, the new creative director, he'll be, I think, showing later this year will be, I guess, expected to turn around some of those fashion collections that have not been doing quite as well.

[Danny Parisi]

Yeah, that's Matthieu Blasey, who we've talked about before. And yeah, they're excited to have him, but I thought it was interesting in their earnings. They kind of talked about not expecting to see a huge amount of improvement this year, even with him. So I'm sure they're kind of. They're hoping that he can turn things around. But I think the phrasing I heard was little improvement this year. Yeah, it's interesting. They kind of like put this down to macroeconomic factors, which is, you know, the industry's favorite term. But I kind of always thought, as Chanel, of being like above, they're even more macro than the macroeconomic factors because they're so big. But that does not feel like it's the case anymore. They are still spending, like you said, they're investing in retail. They also said that they're going to spend close to $600 million in the vertical integration of their supply chain. I am not the CEO of a multibillion dollar business, but if I had that amount of money and could do that, I feel like now does seem like a good time to vertically integrate. Just because there's so much volatility around where you manufacture and who you're working with. And if you can be in charge of that, on the one hand, it sort of invests you deeper into whatever place. If you buy a factory, you can't just move to a different factory in another country the way you could if you're just contracting a manufacturer. If you own it, you're kind of embedded a little more deeply, but you also have more control. I think that seems to me like maybe a smart idea.

[Zofia Zviglinska]

Yeah, definitely. And at the moment, I think their manufacturing is mainly based in France and Italy. And obviously those are some of those areas that have been hit by, I guess, the lagging workforce across the luxury industry. And that's why you end up seeing companies like LVMH focusing so much on investment into future workers because their current, I guess, workforce is aging out. And I'm assuming it's the same thing with Chanel as well. So I think that this part of this investment will probably go towards training future workers to create the bags in Europe.

[Danny Parisi]

Yeah, that's A great point. I hadn't thought about that. But yeah, a lot of these big luxury companies, especially lvmh, do put a lot of money into training the next generation of watchmakers and leather workers and that kind of thing. Especially like you said, if they're manufacturing in Europe near their headquarters or near where they're based, that is a real issue. People who can make super high end leather shoes in Italy, that's like the number of artisans there who can do it has been shrinking for a while. So I definitely feel like some of the luxury brands are making investments there to halt that. And speaking of training, another statistic I found that I thought was pretty wild. Chanel has 38,000 employees and they hired 10,000 of them just in the last three years. And that kind of gives you a sense of sort of how Chanel has been doing that. They've hired a quarter of their workforce in the last year of more than a quarter. But at the same time, they now announced that they're doing a hiring freeze. And I think they also even had some layoffs somewhat recently in the last month or two. So, yeah, they definitely were in super boom time. Let's hire 10,000 people, period, for several years, and now it's grinding to a halt. No more hiring, and in fact, cutting down the workforce in some places.

[Zofia Zviglinska]

Yeah, definitely. And I think that part of this probably comes down to the fact that workforce is typically one of the most expensive areas for brands. When you're thinking about the kind of headcount that Chanel has, it seems like that would be a significant portion of their budget going towards that. And if their sales are expected to be a little bit slower, which by the kind of results this time around, it does seem like that's the case, then maybe having that hiring freeze seems like a good decision just to weather out the storm ahead.

[Danny Parisi]

Yeah. Cool. I think that's all the time we have for discussion, but like I said at the top of the episode, we're going to take a short break and then, Zofia, you and I have what I thought was a very good conversation about the tariff playbook, how the brands that we are talking to are handling tariffs. Luckily, we're in a little bit of a pause period now, which makes it sort of an ideal time to really kind of think deeply about how you're going to handle things when they inevitably unpause. So anything else you want to tease from our conversation before we take a short break?

[Zofia Zviglinska]

Yeah, I mean, I think the main thing is there's so much terminology kind of floating around, you know, the different things that are affecting the supply chain, the ways that you can kind of mitigate. We go into all of that explaining some of those key terms as well as, you know, bringing in real life examples from some of the brands that we've talked about and you know, talk to, as well as they're facing some of these issues too. And I'm sure we'll be doing so much more of that in the coming months. But for now you could have a listen and hear what is affecting them and how they're dealing with.

[Danny Parisi]

Stick around after a short break to hear that.

[Kristina Ko]

We're going to take a quick break to hear from our sponsor. Hey Glossy Podcast listeners. Listrack consistently delivers results for their beauty and fashion clients, providing critical data, insights, opportunities and innovations to help them succeed over the holiday season. List Track launched the first rich communication services marketing campaign in the United States for its partner and client, the American Heritage handbag and fine leather goods brand Dooney and Bourke. The campaign proved the power of this revolutionizing mobile messaging format, more than doubling the revenue per cent. Compared to SMS campaigns, Bridge Communication Services RCS for short, has already made a splash globally and now it's available in the us. This Track's industry experts expect RCS to be the beauty and fashion marketers power tool in 2025, driving ROA by delivering rich interactive experiences that bring brands to life. Think enhanced media and photography, product carousels, multiple choice questions, polls, all interactions that go beyond the traditional copy with an SMS message. Now is the time to start creating your RCS strategy and listrack is here to help and guide you in reaching your customers via interactive messaging. That's listtrack.com L I S T R K.com.

[Danny Parisi]

I'm Kristina Ko, senior editor at Customers Digiday Media's and Glossy's In House agency. In this podcast inter social story sponsored by Listrac, we speak with Jamie Eldon, LizTrack's chief revenue officer about how beauty.

[Kristina Ko]

Brands are standing out, leveraging personalization and.

[Danny Parisi]

What creative formats are on the horizon.

[Jamie Elden]

I think we've all seen these brands that emerge on Instagram reels and they're on TikTok. They just appear and then suddenly they're everywhere and everybody's either wearing it, using it or talking about it. You know, like the direct to consumer brands that may have started in somebody's bedroom, basement, kitchen and within a year everybody's bought it. And that is a lot of these smaller brands are able to get that kind of Success quickly by leveraging social media channels. Influencers, specifically micro influencers, you know, that they can lean into to use the product, talk about the product. They really know how to connect with a consumer and specifically a younger consumer today. And that's where a lot of the larger, more you know, global brands and national brands, I think struggle is finding that unique voice to connect there.

[Danny Parisi]

While some beauty brands are finding success channeling their passion into social media posts, another way to stand out is through effective personalization.

[Jamie Elden]

What we're doing is we're becoming a shopping partner with that customer. We're making recommendations based upon what their likes are and their behaviors and that's something that we've been able to do at scale, cross channel across whatever device somebody's preferred method is. We then may pull in two to three blog articles or written content that Peter Thomas Roth done about best practices for skin care and healthcare and we might put that in the email as well because we might find that valuable to support the product. So again, you know, what we're able to do is really build this personalized recommendation journey for a customer not only by putting the right product in front of them that they're interested in, but hey, here's some interesting articles and content around this area that you're looking at and we're finding that that has become extremely valuable. It's kind of taking everything that they're interested in and putting it in one destination and when they open it up they feel that wow, this is exactly what I've been looking at and what I'm interested in.

[Danny Parisi]

As delivering unique personalized experiences becomes what.

[Kristina Ko]

Consumers expect, beauty brands now have access.

[Danny Parisi]

To new technology to develop highly impactful.

[Kristina Ko]

Mobile experiences that showcase their exceptional creatives.

[Jamie Elden]

In beauty and fashion. Brands really focus their creative prowess on around print, digital, outdoor. They spend a lot of money on those creatives to make them look beautiful and to really appeal to consumers. That creative discipline around those is now being transformed into email creative, SMS creative, mms. Creative Listrack is the first company in the United States to sell send an RCS message which is rich creative and that is going to be a game changer for the beauty industry and the fashion industry in 2025. Moving forward, RCS messaging through mobile phones allows a brand to pull in their TikTok shop content, their reels, their influencer content all into a video environment on somebody's cell phone. So what that means is it allows to create this unique rich creative experience with functionalities of they can shop, they can browse through catalogs, they can request something through this. It's a whole new way of a brand to communicate with a consumer through a cell phone. And it's going to be incredibly fascinating to see how that evolves over the next one to three years.

[Danny Parisi]

You've been listening to Jamie Eldon, chief.

[Kristina Ko]

Revenue officer at Listrac, our sponsor, on this episode. And now back to the glossy podcast.

[Danny Parisi]

So, Zofia, thank you for joining. We're going to talk tariffs and the tariff playbook. I will not belabor this intro because I'm sure most people listening, very aware of the tariff situation. But just to kind of like lay out where we are right now, famously, the tariff rates have changed quite a bit and quite erratically. So at the time of this recording, which we're recording Wednesday, May 21, the reciprocal tariffs between China and the US were suspended. On May 12, they cut the rate down from 125% to 10% on imports from China and set a 90 day pause until it would go back into effect. So that's about August 10th. So we've got a little over two months before that time comes. There's supposedly lots of negotiations happening between the US Government and China, but also the US Government and lots of other nations, particularly, you know, China's not the only big manufacturing hub. There was initially 46% tariffs on Vietnam, 37% tariffs on Bangladesh, initially 20% on the European Union. All these places where a lot of fashion products get made, all currently set down to 10% at least until August 10th and at least until some sort of deal is set. Luckily, that's some relief for the brands who have been affected. But like you said, it could go back up at any moment. There's lots of uncertainty. So I wanted to talk a little bit about some of the strategies we've seen brands taking, how effective they are, what we're hearing from brands who are still trying to navigate this whole thing. Does that sound good?

[Zofia Zviglinska]

Yeah, I think that sounds great. Obviously, I'm here weighing in as the international party on the UK side. So watching this all from the outside.

[Danny Parisi]

This is why it's good to talk about this with you because we've got two perspectives here. We should also mention kind of some of the news recently is that Trump has been having some very public feuds with big American companies like Amazon and Walmart over the tariffs. Amazon was briefly considering putting like making the amount that prices were going up because of tariffs public to the consumer, which Trump was unhappy about. And there was conflict back and forth there. I think they opted not to do It. But more recently, Walmart was considering raising their prices to handle the tariffs. And Trump very publicly just told them to eat the tariffs, Eat the tariffs. So there's lots of kind of conflict back and forth with American businesses, many of whom are very unhappy, unsurprisingly. And the Trump administration is still kind of barreling through. Let's talk about some of the strategies we've seen of how brands are dealing with this. The first and most obvious one is raising prices. The most significant impact of the tariffs is that costs go up. And when costs go up, your prices have to go up, your revenue has to go up to match. That just makes sense. I think it's really tough to navigate your way around that without raising prices in some way. One thing that's come up in a lot of my conversations with brands is how to communicate this to customers in a way that doesn't piss them off more than they maybe already are. And then also kind of how much to do it by, how much you can absorb and how it's affecting consumer sentiment. So I've been talking for a while, but I'm just going to quickly say I think the interesting thing with communication is a lot of brands I think are opting for a very open, very honest, frank kind of announcement of price increases. There's the luggage company base, which I think a lot of people saw this post where they basically said the tariffs were a complete dumpster fire. That was an exact quote. And we're just very open about, like, this is crazy. We're still figuring out what to do, but we will probably be raising prices. So they announced it in a way that was very, I think, true and very not workshopped or very corporate. It was very open, like, yeah, we're still trying to figure it out. And I think a lot of people praise them for that, so I'll stop there. But I mean, what are your thoughts on kind of the raising prices and how to do it strategy?

[Zofia Zviglinska]

Yeah, I think obviously that openness and I think a lot of brands that I've seen have waded into that conversation with that approach. Also, interestingly enough, I feel like as a result, a lot of companies are actually turning to reels as a way of also having that direct conversation with the consumer. So they literally have the founder of their brand speaking in a video about why there is is a cost increase. Like they go into the supply chain specifics, basically trying to make it as transparent for the consumers to why that is happening. And obviously I think that that's banking on the fact that they would support them if they are more transparent as a result. And some of these videos have been very successful, especially when there's a deeper breakdown in terms of what components are affected. Where I think maybe right now that's probably a less impactful than it was two weeks ago when obviously the Chinese tariff rates were so high. But I think that that's still a very useful and new way that brands are communicating with customers. That kind of reels format.

[Danny Parisi]

Yeah, I think the transparency can really go a long way. Some brands I think have already cultivated a kind of reputation for transparency. Maybe they've already post videos showing you how the product is made, made behind the scenes. Some brands don't do that and have sort of cultivated this kind of mystique where you don't really see what's going on behind the scenes. And that could maybe be a barrier when you suddenly are like doing a front facing video in the warehouse trying to explain how it works. Another strategy in terms of raising prices. So I think a lot of the conversation has been how much can we the brand absorb? How much can the consumer tolerate? I actually talked to a brand a while ago, Sanctuary, a fashion brand, and they had actually worked out a deal with their manufacturer where they kind of split the increased cost among all three parties. So the brand absorbed a little bit, their manufacturer absorbed a little bit, and then they raised prices a little bit on the customer rather than just putting it all into the price, which would be from a financial standpoint, I'm sure brands would like that the most. But you also risk scaring off the customer. So. So there's ways to kind of spread it around, I think that work better than others. There's also the strategy. Our colleague Emily Jensen at Glossy wrote a great story a while ago about a sexual wellness brand called Dame that was adding a very clear like Trump tariff surcharge to their products. And so when you bought something, it would show in your order, this is how much is coming from the Trump tariffs. And with a picture of Trump's like hair next to it, which is, you know, making it extremely clear, maybe a little more extreme than what Amazon was going to do. And I thought that was an interesting strategy because it's like very clearly saying to the customer, this is not our fault, this is something we have to do because of extenuating circumstances.

[Zofia Zviglinska]

Yeah, I think that was a very humorous way to take it. But obviously for a lot of brands this is a very serious issue. So adding some levity just brings a little bit more media attention to why this is an important issue for them. And yeah, I think the surcharges in particular are something that is scaring brands a lot because at the moment any price increases are incredibly felt, I think by customers. The amount of discretionary spending that's out there is already limited enough.

[Danny Parisi]

Yes. And I'm sure this will come up again. But we hosted a tariff town hall with Glossy and our sister publication Modern Retail earlier this week had a lot of brands, investors, retailers, people from all across the industry joined to kind of share their thoughts. I won't quote anybody specifically, but a lot of questions and concerns were around consumer sentiment, how consumers are feeling. There's obviously a lot of pressure on their wallet, but also kind of who they're blaming things on and where are they going to spend the, like you said, the discretionary money they still have. If groceries are more expensive, they have less to spend on clothes, for example, they probably will still buy some clothes, but it's like, like who are they going to spend with? So there's a lot of concern I'm hearing from the industry about what the consumer is thinking. But at the same time there's also sort of a gap between what consumers feel and reality. Like they can feel when things are more expensive, obviously. But it's also like tariffs took a little time for the effect to actually hit. And at the early days a lot of people didn't even know what tariffs were. I know, I talked to a lot of brands who are like having to explain to people like, no, tariffs are something we pay. When it's like 145% on China, that's not China paying, that's us paying. And so there's a little bit of a. It's taken some time for consumer sentiment to match with reality. But I think we are now kind of in that stage where people are directly feeling and seeing and understanding the effects on their own finances.

[Zofia Zviglinska]

Yeah, definitely. And I think a lot of that is affecting, you know, the possible back to school spend, which I think why a lot of these brands, bigger brands, were lobbying with Trump earlier this month just to make sure that those sales were not affected. And in terms of other brands, I think there's been some interesting supply chain strategies that we're going to talk about a little bit more, focusing on methodologies that we've seen through brand examples that have worked and have proved to be quite effective. I'm going to start this one off with the biggest one. I think that the main one here is tariff engineering. So modifying the product basically either through designs or materials to fit into the categories with lower import duties under something that's called the Harmonised Tariff Schedule. So something that brands use to decide which category their tariff item falls into. And I think that we've seen that before with adding something like synthetic zippers to garments or sourcing components from countries with favourable trade agreements. I think the one that I saw, which was quite interesting, is that Converse adds felt soles to classify their sneakers as slippers and that reduces their tariff rate down from 48% to 3%, which is a lot, right?

[Danny Parisi]

Yeah, I didn't know that. That's a really interesting one. So that's. Tariff engineering is altering the product and the supply chain in ways to kind of maneuver around some of the nuances of tariff law.

[Zofia Zviglinska]

Yeah, definitely. And the main thing here is that you still have to do it within the kind of legal boundaries, so it has to reflect a kind of commercial reality. So something that is affecting you, something that you can apply almost immediately, something like adding pockets or adding felt soles, and that is what ends up making the product go into a lower kind of tariff category.

[Danny Parisi]

And I imagine there's limits. Like, you couldn't classify your Converse sneakers as pajamas or something. I don't know, like, it's got a. Well, I mean, maybe actually slippers, but I mean, you couldn't classify it as like. I don't know, I can't even think of a category. But, like, it has to be somewhat related to what the actual product is. Yeah, that makes sense. Yeah. There's a lot of ways that I've heard from brands that they're kind of tinkering with their supply chain. I mean, that's a big one. A lot of the companies that I've spoken to immediately, you know, a lot of them were already manufacturing heavily, if not entirely in China. And so as soon as this even became a conversation, they started going to other countries, talking with people in Sri Lanka, Vietnam, Cambodia, lots of other places. South America, lots of countries in South America as well. And that is a good idea, I think, but it's also not easy. You know, we've talked about this before, but it could take months and months to set up a new factory in a new country. You might have to travel there, you have to meet people, you have to do samples, you have to make sure that they can make the thing that you're trying to make. There's. There's a lot that goes into it. I spoke with a brand last week, Bog B O G G and they had the CEO was telling me that they immediately started some of these conversations. They were making everything in China. And then once the tariff kind of like rollback happened last week, all these conversations were kind of moot because China sort of became more like the most economical again. But she was like, well, we already spent all this time talking to these people doing samples, so we'll just keep rolling. And then now they do have partnerships with manufacturers outside of China as well, probably. She was saying, like, you know, China's still the most economical, but now we're more diversified and we should always be sort of de risking. So it ended up being not wasted time. But it's tough. I mean, this is like what the. The U.S. federal government wants people to do, which is move their production out of China, ideally to the U.S. i think a lot of people are not doing that because it's extremely, extremely difficult and there's not the infrastructure. But I do hear from a lot of brands about moving their production to other countries, sometimes near shoring, like to Mexico, But I think for the most part, it's other countries like Vietnam and Sri Lanka.

[Zofia Zviglinska]

Yeah, definitely. And there's also kind of other ways of doing it where you're actually transporting things through different countries. So even if you're maybe not manufacturing in places like Mexico, if you move your product to Mexico and make that product, then travel through the US it does end up being cheaper on that tariff rate. Again, if we are expecting more tariff changes. And I think that that's something that you referred to, and I know that you talked about in the tariff town halls, that there's this kind of environment of uncertainty right now. It's not really certain that these tariff rates will stay the same. And I think that most brands right now are. Are, as you said, de risking their supply chains by moving things around and also having a plethora of different countries to rely on for their production. Just mentioning, I think, two other different terminologies that we've seen come in use in terms of our reporting. So from my side, it was licensing. I've seen companies like Von Dutch, which exclusively use the licensing model where basically local partners are allowed to produce and sell the product, meaning that there's essentially kind of less oversight and less production management from the main brand, and that ends up again reducing the kind of direct import exposure. So other brands like Shein and Tima already use this. They basically license out their brand to be produced in China. But I'm sure that there are other ways as well. I know that you talked about bonded storage. Can you explain that a little bit more.

[Danny Parisi]

Yes. So bonded storage is a term I also learned from Kim Vaccarella, who's the CEO of Bogg. Bonded storage is a warehouse in the country you're importing to where you pay extra to store your product there, but you don't have to pay duties on that product until you take it out of the warehouse. The way it works normally without bonded storage is you import product, you pay the duties when it arrives, and you send it to one of your warehouses. With bonded storage, it stays in the warehouse, you don't take it out, but you also don't pay duties until the moment that you are decide to take it out. It costs more, I've heard figures of like 25 to 30% more than a regular warehouse for storage. But you can wait, you know, if you had brought in product when it was, you know, 145% tariff rate on China and brought it out and paid the duty, right then that's a huge expense. Whereas if you had paid the 25% extra for bonded storage and then waited till now when the pause happened and things are down to 10% and then brought it out altogether, that's much cheaper. So it's a little bit more expensive in regular costs of upkeep and for the time that you're storing it. But it could be a very valuable way to dodge some of the tariffs. Let's talk about our last topic, which I think will have a little bit less to say than some of the others, because I think the supply chain and prices are the two bigger ones. But it should be mentioned I've seen a good number of brands just fully pausing orders to the US stopping orders to the US or even less extreme, just kind of shifting their attention to other markets. I've seen Woodswool, which is a Chinese athletic wear manufacturer, they paused all their orders to the US for quite some time. A British beauty retailer called Space NK did the same thing. Consumer electronics companies that are based in China, like RADA is 1 8bitdo, which makes video game peripherals, just paused orders entirely to the U.S. i think it's like, like kind of not a bad idea, especially if you're an international business who has, who has strong markets elsewhere. And the US is kind of in this very crazy, tumultuous moment that you just kind of shift your attention to more reliable markets, you know?

[Zofia Zviglinska]

Yeah, definitely. I think that there's a little bit more, I guess, like stability in other markets. And I think that especially for, you know, brands that have relied on The US market over the last year, which I think pertains more to luxury, but also to some other categories as well. The Americas in general were supposed to be a very stable environment for growth. And I think that these tariffs have shown that unfortunately even America is not as stable. And as a result, brands have had to pull out some of that. I did actually speak to a lingerie company a couple of weeks ago around how they're potentially pulling out some of their marketing spend from the US and focusing more on regions like the uae because like the customer segment there is still growing. There's no kind of recession impact and it ends up being a better kind of value deal for them.

[Danny Parisi]

And I think some of the other markets are kind of seeing that and capitalizing on it. I mean, I know the EU countries have been discussing ways to kind of strengthen their relationships with each other, but also with other regions that are not the U.S. i remember a couple months ago Japan, China and South Korea signed a trade agreement to kind of bolster trade between their markets. There's, I think, a lot of interest in kind of finding ways to not be so reliant on the US market given all the chaos. Let's do a quick conclusion and just talk about how viable and sort of realistic or long term some of these solutions are. I think some, like we talked about diversifying your manufacturing, moving away from just China and instead having things manufactured in lots of different places and having a lot of options for when some part of your supply chain gets hit. That's really tough. But I feel like that's the most, from what I've heard, a smart and kind of sustainable thing and probably good for the business, even if tariffs weren't a huge issue. Others like raising the prices and things like that are not great from a consumer perspective and there's a risk of kind of angering people, but maybe is necessary in the short term. I don't know. What do you think?

[Zofia Zviglinska]

Yeah, I mean, I think that that's exactly it. Right now it's all about that long term or short term planning. And I think that at the moment, if you do have budget to think about your long term, then a lot of these kind of options could help you shore up some of the uncertainties in the economic climate that might be coming up. So whether that's bonded storage setups, new factories, those are all longer term plays. But I think for shorter term options or certain things that might be kind of safety nets. Right now you could be thinking about collaborations because a lot of those can happen between different countries and as a result you can rely on each other's supply chains. The local licensing that we mentioned before, as well as doubling down on D2C because a lot of the kind of direct consumer side of things is maybe not quite as affected as wholesale, which is something we also have mentioned in our coverage. I think that making sure that your own supply chain is as stable as it can be makes you also a reliable partner for the future. You know, if you are thinking about wholesale transactions.

[Danny Parisi]

Yeah. And then last thing I'll say, and then we will wrap it up. The stated purpose of the tariffs was to get people to manufacture in the us. That's the one thing that I really don't hear a lot about from the brands that I'm talking to, even the ones that want to or are trying to. It's not something you can do very quickly. There's not the infrastructure. And I think a lot of brands are just kind of trying to survive rather than thinking long term about building a new factory in Tennessee or something. So it's not really happening, basically, from what I've heard. And when I say not really, it's like, yeah, some brands are thinking about it, but they're just trying to survive and they're not really thinking that long term. So who can say if they're actually working or not? But. But I think that's all the time we have. But thank you so much, Zofia, for sharing your thoughts and discussing the tariff playbook with me. I hope it was helpful.

[Zofia Zviglinska]

Yeah, definitely excited to see how this kind of rolls out. And I'm sure we'll be doing an updated version in a month or so before the next tariff deadline is up. And that's all the time that we have this week. Don't forget to give us a rating and a review on Apple Podcasts. Spotify, wherever you're listening to. This really helps us out a lot. Thanks for listening.