DTC Briefing: Tariff-proofing takes center stage in 2025 planning

One of the things Trump has been consistent about is his desire to levy more tariffs. 

Unsurprisingly, that’s at the top of most CEOs’ minds as they plan for next year. It remains to be seen how big the proposed tariffs will be — during the campaign, Trump proposed at least a 10% tariff on all goods, plus upwards of 60% on goods from China specifically. As a result, some companies have been laying the groundwork to build new manufacturing lines or to change factories. For other companies, tariff-proofing their businesses involves rethinking their margin structure — and figuring out which costs to pass on to the consumer. 

“There are theories out there of what the new administration might do. But those things don’t happen overnight,” said Aaron Luo, co-founder and CEO of handbag brand Caraa. In the meantime, interest rates remain high and shoppers are still worried about inflation. “[There’s] no indication that that’s going to change [anytime soon],” he said. 

There are a few tasks at hand for CEOs. They have to decide whether or not to start shifting some of their manufacturing now in order to prepare for tariffs, or to wait until more concrete details are unveiled about what these tariffs will look like. And, they have to figure out what kind of sales growth to forecast for next year as they seek to figure out how proposals like tariffs could impact the spending power of their core customers.

It’s even more difficult to figure out what to do when dealing with a president-elect who frequently announces policy changes on social media with no prior warning. On Monday, Trump wrote on Truth Social that on January 20, he would sign an executive order “to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders.” He said it would remain in effect until both countries did more to deal with the Fentanyl crisis and illegal immigration. Trump also said he would pose an additional 10% tariff on China.

All of the interviews for this briefing were conducted before Trump made this announcement, and it’s unclear how these specific tariffs could alter CEOs’ plans further. Some had thought, for example, that brands would respond to steep tariffs on China specifically by shifting more resources toward Mexico.

For Luo, this year’s story has been one of conflicting consumer signals. And that’s continued into the start of the holiday season. He said that Caraa experienced a bigger-than-usual drop in sales in the two weeks leading up to Black Friday — indicating that more consumers than ever before were waiting until Black Friday to make big purchases. 

For now, Luo isn’t preparing to shift any manufacturing until he sees exactly what the proposed tariffs will look like. Caraa manufactures its products in China and Southeast Asia, but Luo said his company was previously hurt before by shifting its manufacturing too early.

“If your supply chain is not fully built out, and you pull the trigger a little too early, it just increases a lot of your costs,” Luo said. 

For Chip Malt, co-founder and CEO of cookware brand Made In, the proposition of shifting manufacturing has been a little less daunting. Made In already produces some of its products in the U.S., but now that Trump has been elected, the company is “bolstering and ramping up its U.S. production,” and has spent hundreds of thousands of dollars building out new tooling lines and new manufacturing lines. 

Malt actually thinks that the next year could be a boon for a company like Made In that “does very little sourcing out of China in the first place.” While Made In can prepare to ensure its supply chains aren’t hampered by certain trade policies, it can’t prepare for how consumer demand will shake out next year.

Given that Made In operates in a higher income, discretionary category, Malt said, the type of customer his company serves could benefit from a booming stock market next year.

“If you get this tale of two cities… where the rich feel very rich because the stock market is up, and the poor feel very poor because inflation is crushing, what are the industry shifts that could happen next year as a result of that?” he said.

It points to a bigger task at hand: CEOs are also trying to figure out what type of sales growth to forecast for next year, as well as the overall consumer mood.

Ronak Shah, co-founder and CEO of supplement brand Obvi, said on Friday that his company was “seeing a lot of softness” in the early days of its Black Friday sale. That, in turn, is impacting 2025 planning, as Obvi is trying to figure out how long this softer demand environment will last. He said that Obvi is projecting a softer first quarter at least.

For companies that can convince customers that they are offering a product they need at the right price, growth is showing no signs of slowing. 

Jolie, a startup that makes filtered showerheads, sent out an email to customers last week outlining exactly how the price of Jolie’s showerheads could change if the maximum proposed tariffs were actually implemented, encouraging them to buy now to lock in the best price. 

Ryan Babenzien, co-founder and CEO of Jolie, said that the email is on track to be among the top five best-performing emails sent by Jolie this year, according to revenue. 

Despite the challenging consumer environment, Babenzien said, Jolie has “seen exceptional growth,” he said.

“We have a really, really, really big market in America and regardless of the economy or inflation, we think we still have tons of upside because people shower every day. It’s an essential part of their day, and we offer an incredible value proposition,” he said.

As a result, Babenzien said “we feel really great about next year.” While he did not share specifically how much growth Jolie is projecting, he said the company is focused on expanding its wholesale presence in retailers like Ulta and Nordstrom, as well as professional salons next year.

How brands plan for 2025 also depends on whether or not they are venture-backed and profitable. That determines how much wiggle room they have to make more expensive upfront investments to protect their business against tariffs — even in a softer demand environment. 

For example, even though Obvi is planning for a more muted first quarter, Shah said the company is still looking at ramping up inventory investments to get in more product ahead of any potential tariffs.

“We were lucky to have an extremely profitable year,” Shah said. “Because we had that, it’s okay for us to say, ‘You know what, let’s go 20% a little bit larger on our expected inventory.’”

Luo said that brands essentially have two choices next year if tariffs do cause some of their costs to increase. They either pass the bulk of those increases onto the consumer or decide to eat some of those costs themselves. But that could leave brands with worse overall margins and less money to spend on things like marketing or new hires.

Caraa doesn’t have a clear answer yet. In the meantime, the brand will likely try to conserve more cash with smaller inventory buys as it waits to see how things shake out next year. 

“In the midst of chaos, we try just to stick to our playbook and be more conservative,” Luo said. 

What I’m reading

• Helen of Troy, the parent company of Hydroflask, OXO and more, has snapped up nail care brand Olive & June for $240 million. 
• Business of Fashion examines how Crocs is trying to turn around HeyDude, a brand that it acquired in 2021 with the hopes that it would drive a lot of growth for its parent company, but has instead been a sore spot as of late. 
• Bath & Body Works is one company that’s seeing strong holiday demand so far, and as such, is projecting that it will see a smaller-than-expected drop in annual revenue for 2024.

What we’ve covered

• Handbag startup Bogg has been on a tear this year, as it’s projected to do $100 million in revenue this year, up from $54 million, and has been compared to Crocs and Stanley. Now, its products are coming to Target. 
• Temu no longer requires an invite code for U.S. sellers to join its marketplace. 
• Wonder has plans to become a food delivery “super app” after acquiring Blue Apron, and now, Grubhub.