How 2.7% Inflation Could Ruin Holiday Retail (And What to Do About It) | Fast Five Shorts
This week on the Omni Talk Retail Fast Five podcast, sponsored by the A&M Consumer and Retail Group, Simbe, Mirakl, and Ocampo Capital, we examine how tariff-driven inflation threatens the upcoming holiday season.
Inflation rose to 2.7% in June, its highest level since February, as President Trump's sweeping tariffs push up costs across furniture, clothing, and large appliances. Core inflation climbed to 2.9% annually, creating massive uncertainty for retailers planning holiday inventory and pricing strategies. With nobody knowing what tariffs will be in place during peak season, retailers face unprecedented challenges.
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⏩ Topics Covered:
📌 00:00 – Headline Introduction
📌 01:45 – Breaking Down the 2.7% Inflation Numbers
📌 04:30 – David Brown: Playing Chicken with the World
📌 07:15 – Holiday Season Impact Predictions
📌 10:20 – Chad Lusk on Cost Reduction Strategies
📌 13:35 – Pricing Precision vs Blanket Moves
📌 16:50 – Inventory Planning Under Uncertainty
📌 19:25 – Small Business vs Mass Retailer Challenges
For the full episode head here: https://youtu.be/sgweq_AtMms
#tariffs #inflation #holidayretail #pricingstrategy #consumerspending #retailmargins #costreduction #inventoryplanning #massretail #omnitalk
This podcast uses the following third-party services for analysis:
Podcorn - https://podcorn.com/privacy
Transcript
Tariff driven inflation may now be starting to emerge.
Speaker A:According to the Associated Press, inflation rose last month to its highest level since February as President Donald Trump's sweeping tariffs push up the cost of a range of goods, including furniture, clothing and large appliances.
Speaker A:Consumer prices rose 2.7% in June from a year earlier, the Labor Department said on Tuesday, up from an annual increase of 2.4% in May.
Speaker A:On, on a monthly basis, prices climbed 0.3% from May to June after rising just 0.1% the previous month.
Speaker A:Excluding the volatile food and energy categories, core inflation raised 2.9% in June from a year earlier, up from 2.8% in May.
Speaker A:On a monthly basis, it picked up 0.2% from May to June.
Speaker A:David, I hope you were keeping track of all those percentages as I was reading them.
Speaker A:What impact do you predict tariffs will have on retail for this upcoming holiday season?
Speaker B:Yeah, so it's a great question, Ann, and I think the short answer is don't know yet.
Speaker B:We're getting dangerously close.
Speaker B:But let's be honest, without getting into the whole political discussion, President Trump's playing a giant game of chicken with the rest of the world.
Speaker B:Right.
Speaker B:In terms of who's going to blink first, because I think nobody believes that high tariffs across the world are a good thing.
Speaker B:And if there isn't resolution, I think it's going to have an enormous impact on the holiday season across all categories, whether it's luxury goods, toys, apparel, it really doesn't matter.
Speaker B:Everything is going to be affected.
Speaker B:And you know, there's a, it's just a share of wallet issue.
Speaker B:Right.
Speaker B:People have so much money to spend on holiday gifts and family excursions and everything along those lines.
Speaker B:And I think you're going to see a rebalancing of how those dollars get spent to more experiential things as opposed to less material things if they still end up being, you know, kind of 20, 30, 40% expensive.
Speaker B:Right.
Speaker B:But, but we just, nobody can could tell you right now with any certainty what the tariffs are going to be when we get into the heart of the holiday season.
Speaker B:And anybody that says they can is, is, you know, either lying or, you know, hopeless, hopelessly optimistic.
Speaker A:Right.
Speaker A:Or, you know, and who knows what products will be on shelves.
Speaker A:Chris, you were just talking about this in the last headline, like we're already seeing out of stocks at Target and other places.
Speaker A:What do you think as a former merchant in particular, like what do you think we're going to see once we head into the holiday season as a.
Speaker C:Result of this, Yeah, I agree with David.
Speaker C:Like we don't know what tariffs will be in place during the holiday season.
Speaker C:But I do think there are some, you know, things that we can potentially bet on.
Speaker C:And everyone knows I'm on this show, knows I'm a betting man if you look at my Kentucky Derby track record.
Speaker C:But you know, I think if I was betting and looking at what's going to happen, I think there's, there's two things I'm, I'm pretty confident about.
Speaker C:I think one, I think this will be the least well stocked shelves are across all of retail that we've seen for a long time.
Speaker C:And so, and so that then therefore means the proclivity we've seen for consumer spending to get pushed up into October by way of Prime Day, which kicks it off, is going to happen even more this year because people are going to need to get in there and get what they can when they can get it for those gifts and for the holidays.
Speaker C:So those are the two things I would bet on.
Speaker C:It's not going to be great stock position because people are probably waiting to decide where to place their bets, how much they're going to place.
Speaker C:They just don't know yet.
Speaker C:At least that's what I'm surmising.
Speaker C:But you guys, A and M group can probably answer that better than I can.
Speaker C:But yeah, I think you're going to see people trying to grab things as quickly as they can on deals early in the season too.
Speaker A:Yeah.
Speaker A:And I'm curious too, you know, Chad, we'll go to you next.
Speaker A:But I also wonder like the mass retailers that we're talking about, the Walmarts, the targets, you know, the, these guys are prepared more or have the ability to be more agile when it comes to these types of things.
Speaker A:I'm wondering what the small, medium sized businesses are going to do because they cannot tolerate the flux, the constant fluctuation.
Speaker A:And I think that also impacts, you know, when it comes to gift giving and holiday times of year.
Speaker A:You know, are we in the sea of sameness where it's like your options are whatever Target and Walmart and Amazon still have left in stock, stock and that's what you're going to get.
Speaker A:There's no, there's, you know, we had Kristen Sevilla on the show not too long ago talking about how it's the sea of sameness.
Speaker A:We're going to see, you know, all, all beige goods.
Speaker A:We're not going to see the, the like highlight pop of color in apparel or accessories that used to be that Intriguing and fun, more personal kind of gift.
Speaker A:So I, I'm curious, Chad, like what do you think shoppers are going to see?
Speaker A:Are they going to go the way of what David's saying where you know, that they're just going to have to cross their fingers and hope that they can get the best thing possible or are there things that your clients or that other retailers and brands can be doing now to kind of help still give people that thing to shop for that unique gift?
Speaker D:Yeah, really, really great avenues that, that you guys have laid out.
Speaker D:So if I first answer from kind of the advisory standpoint and then maybe the prognostication standpoint, listen with, with respect to tariffs and, and actually predating that to the last round of hyperinflation, what we're advising our clients is first minimize the impact as much as possible.
Speaker D:Right.
Speaker D:Leave no stone unturned.
Speaker D:When it comes to cost reduction, you have to approach it there first before even testing how much is too much for the consumer to bear in pricing.
Speaker D:Like a hard look of costs across the board, not just in, in cogs is, is mandatory.
Speaker D:But then as far as pricing and those that'll be more successful in that then have the, the ability to, to have more flexibility.
Speaker D:To your point and you know, when it comes to pricing like it, especially at this stage, it has to be precise.
Speaker D:Right.
Speaker D:Looking at consumer price elasticities, buy skew, being selective on where your hikes versus holds are, you know, blanket moves are going to be tough to do again more broadly or people are going to find themselves out of the market.
Speaker D:Right.
Speaker D:I mean as far as far as going into the back part of the year here, I mean, I agree.
Speaker D:Listen, we can't predict exactly where things are going to hit and how.
Speaker D:I think we are going to continue to see upward movement in kind of the staples and essentials categories.
Speaker D:So grocery, personal care, pet, you know, and private labels not exempt from these.
Speaker D:So I think we'll likely see them move together.
Speaker D:And where you may see more holds, especially for holiday season, here is in your more traditional gift giving, discretionary spend areas like apparel and it'll be tough, but electronics, right.
Speaker D:They're too important for the season.
Speaker D:And I love what David said.
Speaker D:We've already seen shifting last year toward experiences versus goods on holiday gift giving.
Speaker D:But I also agree, I mean I, I think it's important that where prices do rise, I expect significantly lower inventory positions for those items at holiday.
Speaker D:Right.
Speaker D:I think retailers will be more content to sell out, you know, than be left with tremendously expensive inventory piles and so it'll be those that can manage the SKU balance with how they're able to optimize and pointed pricing actions relative to inventory for the season.
Speaker D:Man, it's a tricky, tricky balance.
Speaker A:Well said.
Speaker C:I don't miss being in those rooms making those decisions one bit right now, especially during with this climate.
