The impact of tariffs on Customer Experience
19 Feb 2025
5 min read
The proposed tariffs being planned by the Trump administration are expected to have a negative impact on the overall ecommerce sector.
For clothing companies, 80% of clothing items in the US are imported, and the Footwear Distributors and Retailers of America state that 99% of shoes and footwear sold in the US are imported from different countries. If there are tariffs on these imports, then retailers will have higher costs to deal with.
Beyond the more macro-economic factors, we wanted to take a look at what the likely impact on customer experience will be. But first, let’s remind ourselves of the situation.
What is happening?
The Trump administration campaigned on imposing tariffs on other countries, particularly China, in an attempt to stop cheap imports. In particular, it has taken aim at the “de minimis” trade rule. This rule allows imports up to $800 that are shipped directly to the consumer to be tariff free. This is how Chinese companies such as Temu and Shein have been able to keep prices low.
China has been hit with a 10% tariff, while Canada & Mexico had tariffs announced and then delayed. There have been passing threats towards the European Union as well.
If these all come to pass, and tariffs on other countries are imposed it could have a dramatic impact on the ecommerce industry. There is a school of thought that this is a negotiating ploy, and the eventual settlements will be more minor than is currently being talked about. Whatever you think of Donald Trump, he does not deal in nuance, so running to the extreme may be a way to push things just far enough.
How is this affecting ecommerce businesses?
The good news is that if you buy all your raw materials and manufacture your products entirely in the US, you are not going to be affected – plus your competitors will struggle. The bad news is that almost no ecommerce business works like that.
Since the last round of trade wars in 2017, lots of firms diversified their supply chains to reduce reliance on China. We are likely to see more diversification to other countries not affected by tariffs. Which countries to choose is another challenge because who knows where tariffs will be imposed next.
Ultimately ecommerce businesses are faced with a choice: pass on any cost increases to consumers, swallow the costs, or look for cost-savings elsewhere. With recent inflation driving prices up, passing the costs on will be challenging for any business. Likewise, with thin margins, simply swallowing the costs will also be a challenge for most businesses. So they’re left with cost-saving. That’s where Customer Experience comes in.
How will tariffs impact customer experience?
As ecommerce brands look for efficiencies, there will be knock-on effects on customer experience.
Upheaval in the supply chain = a host of customer service queries
Finding cheaper suppliers is the most obvious thing a brand can do. If a brand moves one of its suppliers from China to say, Vietnam or India, then there will naturally be some adjustment, or growing pains.
However, this is unlikely for most brands as it takes years – typically 3 – to vet and onboard a new supplier in a different country.
If brands are able to accelerate a planned switch anyway, the resulting disruption in the supply chain could mean later orders, slower production times, and a whole host of quality issues that customer service agents will need to manage. Being able to detect these quickly will be essential to maintaining a great customer experience.
Change in materials, more customer education
This may be the prompting some brands need to change the methods of production and the materials used. As a result, customer experience teams will need to update materials and educate their customers about why these materials are better, or to persuade them that there is no degradation in quality.
Cost dissatisfaction
We all love our customers, but it’s fair to say that some customers can direct their feelings in the wrong direction. As a result, if brands increase their prices, then expect some customers to express annoyance at this. Even if a brand has no other choice, a loyal customer may still find it a bitter pill to swallow.
Breaking down how costs have gone up, and trying to educate customers as to why it’s inevitable and why they should still shop with you will be necessary.
Packaging
Packaging is a subtle but important part of the customer experience for some brands. Think about the times a brand has sent your item in a beautiful branded box – how special does that feel?
Some brands may feel that they would rather sacrifice the luxury of amazing packaging in order to keep prices low or save elsewhere. When we’re talking fine margins, anything is at risk.
Needing to cut costs in customer service
This is the big one. “Customer service is a cost center, not a value center” is a phrase we hear a lot (and also believe to be wrong!). The sad reality is that when you are looking to cut costs, things that feel less necessary are the ones to go. For some brands that will mean reducing the overall cost of their customer service.
This could mean reducing operating hours, or headcount, or even outsourcing customer service. All of which is likely to have a negative impact on the customer experience, with customer service being less available and stretched more thin. Or it could mean using outsourced staff who may not be as good.
Planning costs
Knowing how many resources you’ll need to cope with the peaks throughout the year is a constant challenge for CX leaders. Being able to plan better can provide some efficiency savings because you haven’t oversupplied your customer service teams.
AI can help
For brands looking for long-term cost reduction without sacrificing customer service, this potential crisis could be an opportunity to invest in AI. Being able to use AI to answer common or mundane customer service questions will allow you to answer more tickets with fewer staff.
AI can also help analyse the queries that do come in, looking for negative sentiment and other patterns. For example, if there is a common complaint about a model of shoes that is made in one particular factory, then you can use this data to step in and fix the problem at source.
Plus, being able to review past ticket data and project forward will help customers to be as efficient as possible with planning their CX costs for the year. This is especially important for rapidly growing ecommerce brands looking to scale, and it’s another way that AI can help.
Having round-the-clock support can also mean elevating your customer experience even further. At a time when prices are increasing, brands need to be showing value, so being able to offer 24/7 support, fast answers, and automatic ticket resolutions is one way of doing it.
For more information on how AI can help your team weather this storm, speak to our team today.
