Most people thought this trade-war would be a short affair, but it looks like this may just turn into a long drawn-out, ugly battle between the two largest economies in the world. So as an Amazon seller or someone who imports their goods from China, how are you supposed to deal with this?
In this article we outline some options you have as Amazon Seller to limit the impact of this trade war. Here is a list of things you can consider doing to mitigate the impact of the current trade war.
Move to Hong Kong and become a cross-border seller
If you can, moving your business to Hong Kong can have a number of perks. From Hong Kong, you can sell cross-border and enjoy multiple tax perks including:
- Low profit taxes (8% – 16.4%)
- Sell duty-free into the United States
Source manufacturers in other countries
Many larger companies have already started moving their manufacturing away from China, even before the trade war. However, a quick search for watch manufacturers in Vietnam will show you that there really is no place like China for sourcing goods. But that doesn't mean you should give up. With the big players moving more and more manufacturing to other countries (specifically South-east Asia), you'll be finding more and more goods in those areas. Some of the best places for you to search are Vietnam, India and Mexico.
If you are able to source your goods outside of China, it's often advised to do this transition slowly, as problems may arise with the new purveyor that could cause a massive delays in your product line.
Pass on the cost to the consumer
Most businesses will pass the cost of the tariffs along to the consumer, but in some cases this isn't possible. Price sensitive products will have a tough time during the trade war.
Shut down product line
This isn't ideal, but it's better than losing money. If your customers won't eat the cost of the tariffs and/or you can't find a way to reduce your costs, then shutting down that product line may be your best option. It's better than losing money.
Avoid targeted product categories
This is a no brainer, but assuming new tariffs will remains limited to specific categories, you can just avoid products on the tariff list. Of course, this is easier said than done.
Negotiate with suppliers and manufacturers.
Talk with your suppliers and manufacturers to see what they can do to keep costs low. Maybe you can promise to raise your inventory levels for increased discount.
Consider pricing strategies.
Be aware if you’re a 1P seller with a Vendor Central account that Amazon doesn’t accept price increases as a rule. One way around that is to release a new version -- 2019 editions may be popular this year -- of a current product at a higher price. 1P sellers have more flexibility to set retail prices. Be careful not to increase your item prices above list prices, as doing so can keep you out of the Buy Box altogether. If you’re a reseller without brand registry ability, communicate with brands ahead of time about raising the list prices in question. Private label sellers have the most price flexibility of all those selling on Amazon.
Stock up on inventory.
It may be less expensive in the short-term to stock up on inventory ahead of the threatened January tariff increase, even if you have to look to third party logistics providers. Switching to Seller Fulfilled Prime may be another option that ends up cheaper now than paying the higher tariffs later. For FBA sellers, know that Amazon now determines your FBA capacity based on the sell-through rate of each individual SKU. This means that slower-moving items may end up with a cap on inventory levels. You may want to create an FBA shipment now to test those waters.
Although not ideal, there are ways to mitigate losses during this trade war. If you can think of any other ones, please let us know by leaving a comment below.