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The day after the Super Bowl, ZapperBox quietly raised the price on Amazon of its over-the-air DVR. ZapperBox offers one of the best means of recording local channels from an antenna, and had been charging $275 for its flagship model. While the price hasn’t changed on ZapperBox’s website, it now costs $300 on Amazon. Gopal Miglani, ZapperBox’s founder and president, says he’s compensating for President Donald Trump’s 10% tariff on goods from China, which took effect on February 10. “We already moved manufacturing to Taiwan for the next lot and it costs much more there,” Miglani tells Fast Company via email. “Even if the 10% tariff is rescinded, we cannot go back to China. All these changes [are] very expensive.” For big tech companies like Apple and Amazon, the current tariffs may not move the needle much. Experts say those companies have lots of levers they can pull to avoid raising prices, at least if the tariffs don’t increase from here. The larger impact will be on smaller companies like ZapperBox, which will have to make tougher decisions about which costs to absorb and which ones to pass on. Its too risky Matt Ronge, the cofounder and CEO of AstroPad, is also contemplating price hikes. AstroPad makes a range of gadgets for creative workers, including a wireless dongle that turns spare iPads or Macs into secondary computer displays and a combination Apple Pencil tip and iPad screen cover that feel more like writing on paper. While AstroPad is also looking into moving some manufacturing to other countries such as Vietnam, it consistently sees higher quality and lower prices from China, where all of its products are currently manufactured. The factories and supply chains for U.S. production aren’t yet mature enough, Ronge says. “We are really trying not to raise prices if we can help it,” Ronge says via email. “First we are looking for changes we can make that wont affect product quality, like changing packaging. Only if we cant make that work will we look at raising prices.” The bigger impact, Ronge says, will be on AstroPad’s future product plans. He’s operating on the assumption that tariff wars will only continue to escalate, which means the company must be choosier about what it brings to market. Ronge believes other small device makers will face similar dilemmas. “Sadly some more experimental and innovative consumer electronics products wont make it to market in this environment. Its too risky,” he says. Levers to pull For larger tech companies, the outlook is murkier. While price hikes are possible, device makers may have an easier time shifting production outside of China or absorbing the costs instead of passing them on, especially if most of their money is made after the sale. Executives from Roku, for instance, said on an earnings call this week that tariffs wouldn’t have any material impact on its business. Last year, only 14% of its revenues came from device sales, with the rest coming from “platform” activities, such as ads and subscriptions. “From a device perspective any impact on our gross margin related to tariffs, we believe, would be immaterial, and we don’t expect any impact on the platform revenue side of the business,” Roku CFO Dan Jedda said. Ted Malone, a former senior product manager on Amazon’s Fire TV business and former vice president of TiVo’s consumer business, says larger companies may have other levers to pull as well. Amazon, for instance, could put more promotional emphasis on higher-end 4K streaming players instead of HD models with slimmer profit margins. “They can shift demand simply by shifting their promotions for what goes on sale for Prime Day, or whatever,” he says. Device makers may also have stocked up inventory in anticipation of new tariffs under the Trump administration, which may explain why prices haven’t immediately increased. Cori Masters, a senior research analyst at Gartner, refers to this as “inventory buffering,” and says it’s one strategy companies can use to at least delay price hikes. “Based on inventory buffering, they could choose to wait to pass through pricing until they’ve completed that inventory,” Masters says. In the meantime, device makers have already been finding ways to move more production out of China in response to previous tariffs. Trump had imposed tariffs on steel and aluminum (among other things) from outside the U.S. in 2018, and the Biden administration increased them for China last year. A Gartner survey last year found that 80% of companies had executed a “China-Plus-One” strategy that emphasizes more diverse supply chains. “They’re already making movements to diversify into a more regionalized or near-shoring type of strategy,” Masters says. Malone notes that such diversification won’t be easy for everyone. “For smaller manufacturers who don’t have that luxury to have six lines in Shenzhen, and three lines in Mexico, and four lines in Cork, Ireland, for people that don’t have the ability to distribute manufacturing like that, I think it’s a much bigger challenge.” Even device makers that primarily look beyond China may have trouble avoiding tariffs entirely. Nirav Patel, the founder and CEO of sustainable laptop maker Framework, says via email that while its laptops and mainboards are made in Taiwan, it relies on mainland China to produce the modules that users can install to expand functionality. “[W]e are taking this into account for future module pricing for U.S. customers in the Framework Marketplace as we also continue to diversify our supply base,” he says. More dire scenarios Even with work-arounds, some amount of price hiking seems inevitable, even for larger companies. CTA, a tech industry trade group, points out that 80% of smartphones come from China, and the average retail price is $1,000 for U.S. consumers. Even if consumers don’t pay extra up front, the group suggests that consumers may eventually absorb the costs through higher service fees from wireless carriers, who subsidize phones in exchange for long-term commitments. CTA has pointed to gloomier outcomes as well, on the assumption that 10% tariffs are just the start. Using hypothetical 60% to 100% tariffs on goods from China and 10% to 20% tariffs on goods from elsewhere, a CTA study estimates price hikes of 26% to 37% for phones, 46% to 68% for laptops and tablets, and 40% to 58% for game consoles. Part of what makes the actual impact of tariffswhen they̱ll result in higher prices, and by how muchis that no one knows what those tariffs will actually be a few weeks or a few months from now. “Trump had threatened up to 60% tariffs on China,” ZapperBox’s Gopal Miglani says. “And this kind of whiplash is untenable.”
Category:
E-Commerce
After bottoming out during the throes of the COVID-19 pandemic, the perception of conscious consumerism has ascended to new heights in recent years. On the surface the statistics are headed in the right direction. The majority of Americans believe it is important to support socially responsible products and services, and the majority have done so in the past year. Additionally, roughly a third of the country plans to spend more with such brands in the year ahead. But while the headlines suggest a cause for celebration for people selling to conscious consumers, the underlying data in the results from our agencys annual Conscious Consumer Spending Index tell more of a cautionary tale. Despite seeing a steady rise in socially responsible spending (three of our Indexs top scores in its 12 years have occurred within the last four years), one of the more concerning findings this time around was an all-time low in success rate for Americans in terms of following through on their intentions to support socially responsible brands. The big culprit for this disconnect? Price. It is easy to find research that affirms that consumers prefer to shop locally and will pay a premium for doing so. It is equally simple to confirm that consumers say they will pay more for socially responsible products and services. Unfortunately, these results are far more aspirational than they are realistic. Year after year, our Index shows that consumers prefer to shop at stores offering a buy one get one versus those offering to give a like product to someone in need or make a charitable donation for each purchase. Meanwhile, more than half of Americans say the price of do good products and services deterred them from following their hearts and supporting conscious brands. That tracks with other research showing that the majority of Americans want to shop local more frequently, but also cite price as the biggest barrier. In the same survey, almost 30% of Americans said they were morally opposed to Amazon, yet the vast majority of these people reported they shop there anyway. For the past 10 years, weve been asking Americans to name one socially responsible company or cause. This is unaided recall, so we dont provide options. Its up to respondents to come up with a name on the spot. Amazon has topped the list for six years running, while Walmart is always lurking near the top as well. Amazons reign at No. 1 on this list has been perplexing for years, but maybe theres a contingent of Americans trying to justify the fact that saving money is trumping morals. At the same time, online retailers such as Shein and Temu are invading American households on the daily. Research suggests that 152 million Americans use Temu regularly. It is the third most popular shopping app among millennials. There are obvious questions being posed about how socially responsible such sites are. Whats clear is these sites are offering products at significantly lower prices, and thats enough for many to click buy now. All of this tells us that consumers continue to be price sensitive when it comes to do good brands, and that when the economy is harder on the average American, this price sensitivity naturally increases. It seems fair to suggest that we need to double down on educating consumers that the price of a product or service does not equate to its costor its value. We have to push consumers beyond price as the determining factor, which can be challenging, particularly when 20% of American households say their income has fallen in the past year. For conscious consumerism to see continued growth, or at least avoid a cold plunge, we have to make stronger links with consumers and reframe the value prop of local, do-good brands as they shop. Just like we expect companies to lean into their purpose, even when profits suffer, we have to hold consumers to the same standard. Its entirely a different scale, and entirely a different proposition altogether. However, purchasing locally sourced, higher-quality products while reducing overall consumption could lead to less pressure on the pocketbook while fueling higher success rates on purposeful intentions. The problem is the average consumer isnt doing this mathyet. And if they are, they are coming up with the wrong answer. The fate of this movement relies on a better equation.
Category:
E-Commerce
Within Walmart, employees known as merchants make decisions about which products the company carries online and in stores, as well as pricing for those items. Naturally, the job involves plenty of data analysis, with merchants breaking down sales numbers by product category, sales channel, region, brand, item characteristics, and other factors. But manually running all of those reports and examining results using tools like Excel can be time-consuming, especially when merchants need to run multiple reports. “You can see how these reports can become time-consuming when analyzing customer behavior across so much data,” says Brian Knapp, senior vice president for merchandising transformation at Walmart U.S. “In fact, running and analyzing these reports can take hours, and we know that customer expectations are changing fast, and we need to be able to move with speed to respond to customer demand.” [Photo: Courtesy of Walmart] To help merchants quickly access and analyze relevant information, Walmart has introduced Wally, an internal generative AI tool that can dive into internal data to create responses in just seconds. Wally uses a familiar chat-style interface to retrieve relevant data from Walmart’s databases while accurately interpreting product industry jargon and category names (meaning users don’t have to worry about whether the database lists an item as, say, TV or television). Wally can then generate quick answers, tables, or full reports as needed. “We’re able to take some of the best practices we as a company have [learned] over the decades in analyzing this kind of data and generate a very high quality report for our merchants to then go use,” says Aditya Kumarakrishnan, a distinguished data architect at Walmart Global Tech. In a demo, Kumarakrishnan showed how a merchant could use Wally to analyze data about consumer electronics sales, probing details about televisions brands and prices for both in-store and delivery purchases. Wally can also help merchants manage both out-of-stock or overstocked items, and determine when to adjust prices or update sale info. The AI tool, first announced to the public on Thursday, was introduced to merchants about a month ago. So far, Knapp says, they’ve reported it has saved time they can then use on other tasks, and has made data more accessible to merchants. Wally has also been given access to training material that Walmart provides to its merchandising team, allowing it to make recommendations and interpret data in line with that internal guidance. Wally isn’t the only AI tool in use at Walmart. The company has previously unveiled an AI shopping assistant for customers and highlighted generative AI features to guide web customers to relevant deals. In an earnings conference call Thursday, CEO Doug McMillon said AI coding assistance and code completion tools helped save about four million developer hours last year. To make sure Wally gives accurate answers, Walmart has developed automated tests where the tool’s numeric responses are checked against known answers; the company even trained an AI judge to evaluate the software’s conversations based on human-annotated samples. Kumarakrishnan says his team also regularly reviews feedback from users on how the tool is working and other features it could offer. “There’s a whole group of us that love sifting through the feedback that merchants are giving,” he says. “There are questions that they’ll ask and they’ll want to know a slightly different angle, and that gives us a roadmap to go execute on for Wally.”
Category:
E-Commerce
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