Retailers are preparing to flex their prices to adjust for tariff-related impact.
That’s according to data from software company 7thonline, shared exclusively with Sourcing Journal, which shows that 35 percent of retail executives said that, in response to a tariff increase, they would adjust product pricing.
Already, one-quarter of executives said they are managing tariff costs by passing the cost to the consumer; while some retailers, like Walmart, have been transparent about their plans to hike prices, others have stayed quiet. Other retailers have taken a different route; 22 percent of those surveyed said their companies have absorbed added costs affiliated with tariffs.
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Part of the reason for choosing to absorb costs could be concern over consumer sentiment. Retailers ranked decreasing consumer spending as their top concern for 2025, just ahead of the added costs associated with labor, tariffs and materials for products.
Max Ma, CEO and founder of 7thonline, said retailers’ worries are valid, especially when taking into account a fickle consumer.
“A lot of products, services, the price is pretty high. Even if you add 5 percent, it will have a big impact on consumer spending,” he said. “People are already price conscious, and then with this tariff effect, it’s going to be very challenging.”
And retailers seem less than optimistic about their ability to absorb tariff costs before passing them on; 34 percent of retailers said the only way they could avoid price hikes is with a 0 percent tariff increase, and a further 43 percent said the highest tariff increase they could afford to absorb was 25 percent.
Ma said for retailers, margins have always been tight, so adding costs to supply chains constrains their businesses further. He noted that many companies are attacking the issue in multiple ways.
“The margin is so slim. Apparel is five to 10 percent, so where is the room?” he said. “Many retailers…are pressuring their suppliers to lower prices, so they’re trying to do it on both sides.”
While many companies indicated they would change prices to adapt to added costs onslaught by tariffs, 14 percent of respondents also noted they would think about sourcing diversification. However, it’s not yet clear which countries will see lower tariff rates coming from President Donald Trump’s administration once the 90-day pauses are up, which can make deciding on alternative sourcing destinations a trying task.
Already, more than one-quarter of leaders said they have reduced their at-large inventory levels, and 24 percent have previously worked to diversify their suppliers. But still, more than 20 percent of retail executives said they worry about the resilience of their supply chains in the face of major disruptions.
Ma and other technology experts have long contended that artificial intelligence could play a role in helping retailers patch holes in their supply chains. But nearly half of retailers haven’t yet found their groove in using the technology to analyze and forecast demand. According to 7thonline’s data, 46 percent of retail executives said their company does not use AI for that task.
For Ma, the low adoption rate for analyzing and forecasting demand doesn’t come as a surprise—but he said some of today’s most profitable retailers have found success because of this type of technology, which could lead others to follow suit in the near term.
“Retailers have been slow to adopt the latest technology; I really hope this will wake people up, if they see success stories,” he said.
Among surveyed retailers already using AI in their operations, one-third said they use it for marketing and personalization, while one-quarter said they use it for inventory management and 22 percent use it for price optimization. Just 16 percent said they use it for demand forecasting.
Still, Ma sees promise for technology adoption coming down the pike. Seven in 10 retailers said they plan to maintain their spending on technology this year, and 22 percent said they would increase their spending.
Ma said he sees particular value in using AI for demand forecasting, inventory management and product development, but noted retailers need to consider their own problems—and whether adding AI into the mix will be a productive way to solve them.
“[Retailers] need to be really smart about technology. Not all technology is equal,” he said. “Going forward, they need to identify what AI technology can really add value for them, [and] what technology is most suitable for them to solve some of their top, immediate challenges.”
