Top US retailers absorb tariff pressure ahead of holiday shopping season

WASHINGTON: Prices for electronics sold online at top US retailers were up slightly heading into the critical US shopping season, but sites including Walmart Inc and Inc have held prices steady for many other popular holiday products despite the pressure from tariffs on Chinese imports.

The analysis is based on a pricing study conducted for Reuters by retail analytics firm Profitero, which examined online prices from seven large retailers for 21,000 products.

The firm compared product prices during October and November last year to those this year in key holiday categories including appliances, electronics, toys and video games across Walmart, Walmart-owned, Amazon, Target Corp, Best Buy, GameStop and Staples.

On average, the prices the retailers charged for electronics were 2.3% higher than the year-ago period, while across all the categories, prices were 0.9% higher, said Keith Anderson, senior vice-president for strategy and insights at Profitero.

That’s lower than the average rate of inflation during the same period, which stood at 2.4% in 2018 and about 1.8% in 2019 so far.

In categories such as toys, prices dipped 0.2% and video games fell 2%, according to Profitero, which has not looked at year-over-year changes in pricing across the sampling of retailers and categories in the past.

Walmart and Target did not comment on the study but pointed Reuters to past comments from executives about how they have managed tariffs by working with vendors and diversifying their supply chain. Amazon did not immediately comment on the study. Best Buy declined comment and GameStop did not respond to requests for comment. Staples asked to see the study but did not comment.

America’s trade war with China threatens to push up product prices, which could hurt consumer spending this holiday season, a period which makes up nearly 40% of annual revenue for many retailers. The two countries are currently struggling to strike a preliminary trade deal.

About US$539 bil worth of goods came into the United States from China in 2018, making the country the largest supplier of imported goods, the US Trade Representative said. US President Donald Trump has imposed tariffs and threatened more as leverage in trade negotiations with Beijing.

But while tariffs have driven up costs of goods for many retailers, at least the large firms have so far refrained from passing that cost pressure to shoppers, according to interviews with researchers, consultants and retail companies.

EBIT margins for all retailers excluding Walmart have been declining since October 2018 and at 6.7% are at their lowest since 2010, according to an analysis by Oxford Economics.

Consumers not seeing full effects

“Right now, nobody wants to be grinchy and steal Christmas so they are passing on as little as possible,” said Jeff Unze, a president at BorderX Lab – an e-commerce platform, which connects American retailers with Chinese consumers, and tracks pricing changes in both markets.

On Sept 1, the US imposed a 15% tariff on many consumer goods from China that increased the cost of goods sold for most retailers. For example, Dollar Tree said tariffs will increase its cost of goods sold by about US$19 mil in the fourth quarter if tariffs are fully implemented.

In the Profitero analysis, Walmart’s products were only 0.4% more expensive compared to a year ago on a sample of over 6,000 popular holiday products. Amazon was 0.6% pricier on 9,200 products. A sampling of 1,200 items sold online by Target were 0.9% less expensive than during the year earlier period.

By contrast, chains such as Staples were over 4.7% more expensive, and the goods sold by Best Buy were priced at 1.1% more.

The study did not include popular categories such as apparel and accessories, which have largely not been subject to the Trump administration’s latest tariffs but are likely to face a 15% tariff in a new round scheduled for Dec 15.

Consumer price index data, through October, shows that televisions, phones, computer accessories, video and audio products accounted for four of the top five largest year-over-year price declines by category.

The data is based on sampling by the Bureau of Labor Statistics only through October, however. In contrast, Profitero looked only at online pricing at seven retailers during October and November. – Reuters

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