#logistics-operations
Thread
Hey! I’m wondering how have other high AOV ($150+) brands dealt with tariffs. Have you found a way to avoid price increases?
What we’ve done:
1. Price increases (we increased prices around 5% in May, now looking for another 10-15% increase in August)
2. Discussions with factory
3. Optimized shipments
I'm curious, where do you manufacture your product, and how do you ship to consumer?
@Matt Hertz - ThirdPerson.co China. We have 3PL in US
Ah, got it. Have you explored drop shipping direct from China into the U.S.? I understand de minimis is off the table, but the tariff would be the same should you import into the U.S. via container, and this way you would improve your cash-conversion cycle, while eliminating the cost (and timing) of freight. Just a thought!
We have, but it would be more expensive + risky. are big, bulky and fragile. Plus we want to offer 1-4 day shipping
I had no idea this was your company! I was gifted your watch winder and absolutely love it 🙂 Amazing!
Yup, totally hear you on the risk. Not sure if it would be more expensive though - since the orders maintain a "local experience" (i.e. they get USPS/domestic UPS/FDX Ground labels - not international).
As well, I've seen brands like yours take advantage of that sort of "drop ship" model to help with faster lead times (start selling inventory within days of manufacturing- not waiting weeks or months to ocean freight product to US), which of course helps with stronger cash flow. You also only pay tariff upon selling goods, not when the container of product hits the port. Not sure if you ship international, but if you do, of course those would still remain duty-free from China.
Something to seriously consider, happy to chat more about it.
Aside from that, shaking down your suppliers (happy to connect you with an alternative freight forwarder who I've found to be extremely cost competitive) is a valuable move. On a less operational level, I've seen brands increase prices for new products, thereby reducing the "shock" for existing catalogue. As well, reducing promos throughout the year (e.g. father's day, memorial day sales, holidays etc) - consider "only" a 10% sitewide sale vs 20%. The consumer tends to be fairly healthy in today's market, and given your customer is likely more affluent, reducing the "tax cut" you give them would likely have little impact on sales.
Hope this is helpful - happy to chat offline, as a happy customer!
The folks at Portless are pretty switched on about this!
^ Portless is great, but they don't work with big and bulky --> focus on < 2-3 lbs
@Andres Alla For products that require significant tooling at the manufacturer, I have seen some clients have the manufacturer shift costs to tooling (increase in set-up costs) and reduce the purchase price per unit, thus lowering tariff impact.