Could Tariffs On Chinese Goods Open A Door For Small Businesses?
Rytis Lauris is the cofounder and CEO of Omnisend, a marketing automation platform built for e-commerce.
We are at the beginning of a potential trade war with China, but the majority of Americans view tariffs on Chinese goods negatively and are worried that the tariffs will drive up prices. Shoppers looking to save money may shift to low-cost marketplaces like Amazon and Temu, but there's an elephant in the room: Marketplaces and tariffs are heavily intertwined. Many of the goods sold on these marketplaces are manufactured in China and thus subject to tariffs. The questions then become: How will tariffs impact these companies and how will they impact consumers' willingness to shop with them? More importantly, what is the effect on small to medium businesses and what can brands do to make the most of this potential opportunity?
Temu has established its reputation as a low-cost marketplace and competitor of Amazon. Most of its products are sold by Chinese manufacturers and shipped directly to consumers via low-cost shipping options that take upward of 30 days, and because of the low price of products, orders were previously exempt from de minimis (no duty on imports valued less than $800).
Yet even with low prices and increased popularity, trust in the platform remains low. My company surveyed 4,000 people across the U.S., U.K., Australia and Canada and found that only 6% of shoppers surveyed trust Temu over Amazon. If prices increase, will they continue to shop on a less-trustworthy site? Twenty-nine percent say no, reporting that if prices increase on Chinese marketplaces like Temu they'd immediately stop buying or buy less. One in five, however, said they will still shop there unless the increase is more than 20%.
Amazon also relies heavily on Chinese manufacturers and sellers that use the Fulfilled by Amazon (FBA) program. In this model, goods sold on the platform are imported and subject to tariffs. Amazon's Temu competitor, Amazon Haul, follows a similar business model as Temu, where manufacturers ship directly from China to consumers. Thus, a rescission of de minimis exemption has the same impact as it does on Temu.
Takeaway: Beyond de minimis, any Chinese good, whether it's sold on Amazon, Walmart or another retailer, will face the same tariff. If prices increase with one retailer, it's logical to assume they'll increase with the others. When shoppers say they'll stop purchasing from Temu if prices rise, it may be moot if prices simultaneously increase at other retailers. If Amazon and Temu both see drastic price increases, it could leave the door open for small and medium-sized business (SMB) ecommerce brands to seize some of their lost market share. But will it be possible?
While large corporations may have the financial flexibility to adjust their supply chains to lessen the impact of tariffs, most SMBs don't have the same luxury. Many source their materials or finished goods from China due to cost efficiency and supply chain reliability, but don't have the buying power to demand lower prices.
Some companies may pivot to domestic manufacturing, but this transition takes time and may not solve the issue. Domestic manufacturers may not be fully equipped to take on the influx of production, and even if the products are manufactured in the U.S., many of the materials are sourced from overseas, exposing them to tariffs. Not to mention, the labor costs of domestic manufacturing are typically higher, which is one reason so much manufacturing happens offshore.
Others may look to alternative countries such as Vietnam or India for lower-cost production, though shifting supply chains is a complex process that involves logistical, regulatory and quality control challenges. Plus, these countries are also currently experiencing higher tariffs, albeit at a lower rate than China.
Takeaway: Even though price increases can make large retailers like Walmart, Amazon and Temu less attractive, it doesn't mean it will make SMBs more competitive. In fact, it could weaken their positioning, especially if a recession comes to fruition. This leaves consumers between a rock and a hard place, forcing them to make tough decisions.
E-commerce is in for an uncertain year as shopping behaviors change, forcing brands to adapt. As we navigate 2025, I believe businesses must focus on reinforcing their value to consumers and maximizing marketing channel sales.
Whether it's fast and free shipping and returns, product quality or exceptional customer service, brands can highlight these value-adds in their emails, websites and social media channels. Some brands may be forced to lower their minimum threshold to qualify for free shipping to compete, but proving value to customers is essential.
Brands can also use high-performing marketing channels, such as automated email marketing, to generate sales and increase customer retention. Use behavior-based emails to target customers at high-intent stages of their shopping journeys. Dedicated post-purchase emails can also engage shoppers and improve their experience, resulting in repeat purchases. With fewer sales to go around, retention is key to profitability. By reassessing competitive differentiators and streamlining marketing channel return on investment, brands can formulate a plan to weather the storm and grow at a time when spending is expected to slow.
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