Client Letters: Inflation, Tariffs and AI-Oh My!
The past week has been marked by bewilderment, awe, and uncertainty. Are the current waves of inflation, tariffs, and AI disruption truly different from the pandemic-driven buying frenzy, port strikes, the rise of vertical factory brands, or the pay-to-play models we’ve seen over the past five years? Yes—but only in form, not in principle.
One constant remains: brands must stay agile to adapt to the ever-evolving, globally connected consumer. Retail and eCommerce are no strangers to bottlenecks or relentless pricing pressures.
So what levers are today’s leading brands likely to pull?
Price Increases - With increased tariffs, vertical factory brands are likely to scale back on advertising spend and face mounting pricing pressure. We’re accustomed to no-name brands undercutting retail prices while dedicating 15–30% of revenue to advertising. If the proposed tariffs hold, national brands will benefit from improved advertising efficiency, narrowing the pricing gap with factory-direct competitors. Stronger conversion rates will further support price increases for national brands. Bottom line: Take the opportunity to raise prices where feasible.
Direct Shipments - As retailers and marketplaces increasingly operate like distributors, large brands are turning to programs like Amazon’s AWD to ship directly into Amazon’s warehouses. These programs offer significant cost savings—not only by bypassing traditional 3PLs, but also by reducing exposure to rising FBA fees. Bottom line: Streamline your supply chain and identify opportunities for cost takeouts.
Bigger Does Not Equal Better - In good times, we tend to over design and extend well beyond our core offering. Grooming is the self policing needed to ensure long term sustainable businesses. Bottom line: Take comfort in elimination your under performers.
Embrace the Tech Driving Consumer Habit Change - AI falls squarely into the “gradually, then suddenly” category. We first discussed the rapid rise of OpenAI’s ChatGPT in mid-2023, following its December 2022 debut. Fast forward to today: ChatGPT boasts 500 million weekly users, Google is in crisis mode with Gemini, and every major player—OpenAI, Perplexity, Claude—now offers its own take on search. SEO is out. GEO (Generative Engine Optimization) is in. Bottom line: Understand how your brand is positioned in AI-driven discovery versus traditional search.
Recency bias can play tricks on the mind, making today’s challenges feel more daunting than those of the past. But that doesn’t have to be the case. We’re here to help—with tools, tips, insights, and strategies that make a difference. As both advisors and operators, we bring fresh ideas and grounded solutions to the table. Our promise remains unchanged—yesterday, today, and tomorrow.
Ryan