With summer well underway in the United States, retail executives are increasingly concerned about the looming Christmas season, now less than 22 weeks away. This period typically sees businesses, especially those selling consumer goods, finalizing their holiday orders and pricing. However, President Donald Trump’s inconsistent trade policies have thrown a wrench into these plans. Balsam Hill, an online retailer specializing in artificial trees and holiday decorations, anticipates publishing fewer holiday catalogs due to the unpredictable tariffs that the president frequently alters.
Mac Harman, CEO of Balsam Hill's parent company, Balsam Brands, stated that the ongoing uncertainty has forced them to expend significant effort in continually adjusting their orders and logistics. Unpredictable tariffs on foreign goods have left retailers wondering about the availability and pricing of items for the holiday shopping season. In general, U.S. retailers tend to begin their holiday preparations in January and finalize a majority of their orders by the end of June, a timeframe that has already been disrupted by fluctuating tariffs.
The ramifications for consumers could be significant: holiday shoppers may find that stores lack specific gift items when the crucial shopping months of November and December arrive. Some suppliers have opted to cut back on their holiday offerings rather than risk incurring hefty tariffs or having unsold merchandise. Retailers are still determining how to set their prices, with many predicting that consumers will encounter increased costs, although the extent of these increases is partly contingent upon whether Trump’s latest tariffs take effect.
The U.S. toy industry, which sources around 80% of its products from China, faces particular challenges. American toy manufacturers typically ramp up production in April, but this year, the process was delayed until late May due to a 145% tariff imposed on Chinese imports. Greg Ahearn, President and CEO of the Toy Association, reported that the tariff situation has drastically impacted manufacturing activity within the toy sector compared to the previous year.
As Chinese factories begin to fulfill orders, there is a growing concern regarding the potential inability to replenish supplies of popular toys that may emerge in the fall. Retailers generally engage in planning their Christmas strategies during summer months, and Dean Smith, co-owner of JaZams—a pair of toy stores in Princeton, New Jersey, and Lahaska, Pennsylvania—has been actively exploring pricing scenarios due to significant increases from distributors, some rising as high as 20%.
Smith has recognized that passing on such hefty price increases to consumers could deter purchases. He adjusted his strategy to maintain a reasonable profit margin without excessively raising prices. This led to a difficult decision of eliminating half of the products he typically orders. Hilary Key, the owner of The Toy Chest in Nashville, Indiana, shared a similar dilemma, opting to forgo product testing this year out of fear that delayed orders could face exorbitant import taxes.
The challenges extend to toy vendors, with numerous notices of price increases flooding Key’s inbox. For instance, product costs from Schylling, a manufacturer known for nostalgic toys, rose by 20%. Key expressed concern over not being able to offer an appealing assortment of products, crucial for meeting the diverse needs of her customers.
Overall, retailers are grappling with the unending adjustments required by the government’s shifting tariff policies. Recent changes announced by the president targeted various imports from significant trading partners, effective only next month. This temporary reprieve offered companies a chance to import seasonal merchandise before tariffs rise. The Port of Los Angeles experienced record import activity this June as businesses rushed to secure holiday shipments. Director Gene Seroka described this as a “tariff whipsaw effect,” where port activity surged once tariffs were paused and slowed once they were enacted.
Retailers, like Smith and his partner Joanne Farrugia of JaZams, shifted their holiday order timelines earlier this year to secure essential items at favorable prices. They even expanded their warehouse space to manage the increased stocks. Observing consumers purchasing items in anticipation of holiday trends further underscores the shift in buying behavior due to the looming threat of price hikes.
In conclusion, Balsam Brands’ Harman admitted that this year’s selection of holiday items may not be as extensive, which he regrets. He acknowledged the challenges posed by the current economic climate and pledged his company's commitment to delivering joy during the holiday season despite the hurdles. The retail landscape is poised for a turbulent holiday period, with price increases, limited inventory, and changes in consumer behavior as key factors influencing the upcoming shopping season.
