Target leans on vendors in trade war
Target has sent a letter to suppliers insisting they absorb any costs related to increased tariffs on Chinese-made product.
“We have delivered on this guest-centric plan with your cooperation, hard work and partnership and appreciate the work we’ve done, together,” wrote Mark Tritton, Target’s EVP and chief merchandising officer, in a letter dated August 27.
Mr. Tritton added, “As we look forward, Target will continue to keep guests at the heart of our strategy and continue to rely on your help and cooperation as tariff changes continue and uncertainty remains. Target will not accept any new cost increases related to tariffs on goods imported from China. Our expectation is that you will develop the appropriate contingency plans so that we don’t have to pass price increases along to our guests.”
News of the letter was first reported by Oregon Public Broadcasting (OPB). A Target spokesperson confirmed the letter but wouldn’t say the guidelines were standard policy or intended for select vendors.
Several analyst reports in recent weeks have assessed that larger retailers are better positioned to manage tariffs. According to a Barron’s, Telsey Advisory Group’s Joseph Feldman wrote in a mid-August note, “These megaretailers should be able to manage tariffs more effectively, given their wider product base and global sourcing capabilities.”
With the latest round of tariffs set to arrive in two phases, Sept. 1 and Dec. 15, they are expected to have a bigger impact in 2020, although suppliers could ask for some price concessions this year. Retailers on a recent quarterly conference call indicated discussions with vendors over mitigation strategies and pricing changes are ongoing.
“In most cases, the big retailer will have the power, but sometimes the supplier has the power, too, if they have a monopoly in a category or their brand is super strong,” Bruce Winder, co-founder and partner at the Retail Advisors Network, told Adweek.
Even smaller niche stores, however, have leverage they can use against a vendor reliant on their shelf space.
- Target Refuses To Raise Prices Over Tariffs, Putting Pressure On Suppliers – Oregon Public Broadcasting
- Target’s August 27 Letter To Suppliers – Oregon Public Broadcasting
- Target’s Tariff Strategy Might Haunt the Retailer – Adweek
- Target, Walmart, and Amazon Will Only Get Bigger as Tariffs Hit Retailers – Barron’s
DISCUSSION QUESTIONS: Is Target making a wise move in insisting that suppliers absorb costs tied to the tariff war? What advice would you have for any retailer — large or small — on using their leverage to offset price increases tied to extraordinary forces such as tariffs?