‘It’s too risky’: Tariffs are causing brands to back away from the US and expand abroad instead
Earlier this summer, Matthew Hassett, the founder of lamp and clock brand Loftie, realized he couldn’t depend on the U.S. market like he had in the past. Ninety-five percent of Loftie’s sales were from U.S. customers, but the company was stuck paying tariffs of up to 55% to bring in products from China. That number could change in November, when a trade truce is set to expire — and if costs go up even more, Loftie won’t have the funds to ship to the U.S. for the holidays.
Loftie needs components from abroad, and while it looked into operating a factory in Thailand, that turned out to be even more expensive than operating in China. “Until there’s some finality on these tariffs, it’s too risky to bet on being able to even sell here [in the U.S.],” Hassett told Modern Retail in an interview.
So, Hassett and his team made a new plan: to bump up the company’s international business. In the last few months, Loftie has increased marketing abroad, especially in Europe. It’s creating a website for Japan, translating its ads into multiple languages and offering shipping to new markets “week by week,” including Singapore, Hong Kong and Australia, Hassett said. The tactic is paying off: In August, 33% of Loftie’s orders were from international markets, up from 5% just 60 days earlier. And, the company is finally profitable for the first time since January.
Loftie isn’t alone in taking a more global approach. A number of brands that have historically bet on the U.S. market are now deploying resources elsewhere because tariffs are tanking their bottom lines, several told Modern Retail.
As Pat Mooney, the CEO of Footwear Unlimited, said on Monday on a call with members of the press, “Purse strings are tight.”
“It’s hard for us to be able to model out what profitability will be, because the cost of our goods is changing so quickly,” said Mooney, whose company oversees Frye, Spyder and Baretraps. “That affects expansion, that affects going after new markets, that affects everything a little bit, unfortunately.”
Looking to foreign markets
Wolf, which sells jewelry boxes and watch winders, dates back to 1834. It has offices in the U.S., the U.K. and Hong Kong, and manufactures in Asia. Historically, the U.S. has been its biggest market, accounting for 60% of revenue, through wholesale partnerships and its e-commerce site.
However, because of increased costs from tariffs, Wolf stopped shipping to the U.S. earlier this year, CEO Simon Wolf, the fifth generation to run the business, told Modern Retail. The company has a finite number of SKUs in the U.S., and it doesn’t plan to replenish the supply, unless “something is already sold, and I absolutely need it [shipped over],” Wolf said.
“We haven’t opened up to start shipping [to the U.S.] again,” Wolf added. “We’ve always carried massive amounts of inventory in the country, so we’re kind of insulated for a little longer, … but we’re shifting resources, whether that’s advertising money or events, out of the country, because, perhaps for the next three-and-a-bit years, I cannot rely on the United States anymore.”
Wolf said that the U.S. customer is unique and tends to spend more frequently, noting that “consumers buy here in a way that Europeans don’t.” But the brand is also paying tariffs of up to 55% to import its products into the country, Wolf said. Now, the company is focusing more on other markets — places like Australia, Indonesia, the Philippines, Singapore, Malaysia, Japan, South Korea and India.
“We’re shifting focus to those markets, instead of, I don’t want to say, wasting our time in the United States, but with that uncertainty, why would you [grow here], if you have the ability to grow a business somewhere else?” Wolf said. “The beauty of our product is that it’s not driven by fashion or culture. There is nowhere our product doesn’t sell well, because people love watches and jewelry, universally.”
Loftie, for its part, is “continuing on the path” to grow its international customer base, Hassett said. The company has started offering free shipping abroad — in part because advertising costs there are cheaper — and it’s adding different types of plugs to its products so they can fit into outlets in other countries. “We’re actually going to have a slight out-of-stock period [for clocks with E.U. plugs], because they’ve sold faster than we anticipated,” Hassett said.
Today, Loftie’s sales are up in many foreign markets, including the U.K., Canada, Germany, Switzerland and France. “We’ve already done more international sales in the first half of September than we did in all of August,” Hassett said. The company also hosted happy hours in Paris and London to raise awareness — and trust — abroad.
“I think we have to fight against the anti-American sentiment,” Hassett said. “I really want to show people in these markets outside the U.S. that we are committed to them and this is a long-term investment for us.”
Keeping a foot in the door in the U.S.
Still, even as companies look outside of the U.S. for growth, they’re not giving up on the market for good, executives told Modern Retail.
Wolf, for instance, was careful to stockpile inventory in the U.S. to continue selling to American consumers. It previously sent over 44 containers in the course of one week, when tariffs were paused, and is open to bringing in new shipments to the U.S. if the tariff situation changes. Loftie has two new products that are made in the U.S.: a room spray and a sleep supplement. “We’ll keep making those here,” Hassett said.
Loftie is also rolling out new software for its products, because “that works anywhere in the world,” Hassett explained. The company has an app that includes features like a sleep coach, meditations and app-blocking. In October, Loftie will start selling a physical card called a Focus Card that people can use to lock their phone if they need to hunker down and get something done.
Hassett wants Loftie’s U.S. customers to know that, even though the company is retreating from the country, it’s doing so “ironically, to protect U.S. jobs.” Despite increased costs from tariffs, Loftie hasn’t done any layoffs, Hassett said. It did, however, cut ties with some outside consultants, and it’s moving out of its current New York City office.
“To have the money to pay our team and our cloud bills and maintain our apps, we have to have new sales,” Hassett said. “If we can’t make sales in the U.S., we need to make them somewhere else. It’s just really us trying to keep in business for our existing customers to continue to serve them.”