Tariffs are hot news in April 2024. And for small and mid-sized ecommerce retailers, they have become a quiet force reshaping how—and what—we sell.

The latest increases under Section 301 are more than a policy shift. They’re a reminder that global trade isn’t frictionless anymore.

This week, we’re looking at tariff mitigation not just as a cost problem, but as a chance to improve inventory quality. When thin margins meet rising costs, the obvious move is to cut back. The better move may be to get sharper. That means phasing out underperforming SKUs, sourcing smarter, and being more selective about what sits on the shelf or in the warehouse.

Mitigation isn’t about returning to normal. It’s about building new resilience.

— Ecommerce Shelf Life Staff

Mitigating Tariff Impacts: How SMBs Can Offset Costs and Improve Inventory Quality

Tariffs are no longer a temporary trade disruption—they are a structural cost. For ecommerce and retail SMBs, the escalation of U.S. Section 301 tariffs through 2026, particularly on electronics, batteries, steel, and semiconductors, has introduced a permanent layer of friction into sourcing and inventory management.

What’s less discussed is that these same tariff pressures can be used to sharpen operational discipline. Businesses that respond strategically are not only reducing cost exposure but also upgrading their inventory—resulting in more resilient supply chains, better-quality products, and more substantial margins over time.

From Cost Control to Quality Control

SMBs often respond to tariffs by looking for cheaper sourcing options. But there’s another path that focuses on product quality and mix as a form of mitigation.

Tariff pressures can serve as a forcing function to reevaluate what you sell and why. Use the moment to:

• Eliminate SKUs that combine high tariff costs with low margins or poor sell-through.

• Replace commodity items with upgraded alternatives that justify higher price points.

• Consolidate vendors in favor of those offering better quality control and communication.

For example, a business might replace a $30 low-end product with a $35 item made domestically or in a tariff-neutral country. If that new product reduces returns and supports premium positioning, the tariff actually catalyzed an upgrade.

Inventory Optimization: Less Can Be More

Tariffs complicate inventory planning. Businesses used to lean heavily on just-in-time (JIT) models to keep holding costs low. But when supply chain delays and sudden tariff hikes enter the picture, JIT becomes riskier.

Some retailers are responding with “frontloading”—buying large volumes of affected goods before tariff increases hit. This can work when forecasts are accurate. But excess inventory from misjudged demand eats up capital and storage.

A smarter path for many is targeted inventory quality. Focus stocking decisions on SKUs that meet three criteria:

• High margin after tariffs

• Reliable sell-through

• Minimal return rates

This selective approach improves working capital efficiency while building resilience. It’s not about buying more—it’s about stocking smarter.

If you’re not already, begin tracking landed cost—including tariffs—at the SKU level. Knowing which items carry the highest tariff burden helps inform decisions about pricing, promotion, and phase-out schedules.

Sourcing: Diversify, Negotiate, Upgrade

SMBs that rely on Chinese imports are particularly exposed. Reshoring to U.S.-based manufacturers is by far the best option in almost all cases, and a close second is diversifying across tariff-neutral or lower-tariff countries to reduce long-term risk. Just be sure any new supplier arrangements meet U.S. Customs’ rules for “substantial transformation.” Goods assembled in a third country must undergo real processing to qualify as non-Chinese for tariff purposes.

Staying with Chinese suppliers? Use tariff pressure as leverage:

• Negotiate price sharing on duties.

• Ask for longer payment terms to improve cash flow.

• Consolidate orders for better rates.

You may not always succeed, but even modest supplier concessions can offset tariff costs enough to invest in better-quality goods or packaging. And remember that in 2018, Chinese suppliers almost uniformly covered the cost of tariffs to avoid production disruptions.

Duty Deferral: Using FTZs and Bonded Warehouses

For high-value goods, tools like Foreign Trade Zones (FTZs) and bonded warehouses can help SMBs improve cash flow and reduce landed cost variability. These facilities allow you to delay or even eliminate duty payments under specific conditions.

• FTZs allow indefinite storage and enable duty reduction if imported parts are transformed into lower-tariff finished goods. They also allow weekly customs entries, reducing fees.

• Bonded warehouses allow storage for up to five years with deferred duty and are ideal for simpler use cases like storage, repackaging, or re-export.

Both tools are increasingly accessible through third-party logistics providers (3PLs). For businesses focused on inventory quality, these facilities also offer better control and tracking—important when minimizing damage, spoilage, or other quality risks.

Pricing with Precision

When costs rise, pricing has to adjust. But instead of reactive across-the-board hikes, use pricing as a strategic lever tied to product value.

Options include:

• Value-based pricing: Price premium products based on customer perception of quality, not just cost.

• Dynamic pricing: Use tools to adjust prices in real-time based on competitor moves and inventory levels.

• Bundling: Combine products in a way that masks tariff-driven price increases while delivering better perceived value.

If price increases are necessary, communicate clearly. Explain that tariffs—not greed—are driving cost changes. Reinforce the improvements: higher-quality goods, better service, and more reliable fulfillment.

From Reactive to Proactive

Tariff mitigation isn’t just a defensive maneuver. For ecommerce SMBs, it’s an opportunity to upgrade operations, rethink product lines, and deliver better customer experiences.

Yes, tariffs increase cost and complexity. But they can also prompt overdue cleanup—shedding low-margin SKUs, prioritizing supplier relationships, and improving inventory quality across the board.

In a constrained environment, discipline becomes your edge. Smarter sourcing. Better product curation. Clearer pricing. That’s not just surviving a tariff—it’s building a business that is stronger on the other side.

Ecommerce Quick Tips

• Audit your top SKUs for tariff exposure — Know what you’re really paying. Map landed costs at the product level to find where tariffs are quietly eroding your margin.

• Phase out low-margin, high-tariff items — Every SKU should earn its keep. If it can’t cover its cost with profit left over, it doesn’t belong on the shelf.

• Negotiate smarter with suppliers — A strong relationship can trim your costs. Ask for price sharing, extended terms, or upgraded quality in exchange for loyalty.