Retail Unwrapped from The Robin Report

Eddie Bauer: The Robin Report Miss of the Week, 2.14.2026

Warren Shoulberg — Sat, 14 Feb 2026 05:01:00 +0000

They say the third time is supposed to be charmed but in this case it’s more like three strikes and you’re out. The third bankruptcy filing for this iconic outdoor apparel and home brand founded in 1920 is likely to be the last time and that’s a sad moment. For a long time, Eddie Bauer was one of the strongest names in this space, right up there with LL Bean, North Face and Patagonia. But a succession of owners who lost their way telling a wonderful origin story while loading on the debt in the process sent Bauer off into the retail wilderness. The label will no doubt stick around but in other people’s stores. It just goes to show that no matter how compelling a brand name is, it can crash and burn. After chapter 33 you can put this story down…for good.

What Does Hong Kong’s Quiet Comeback Mean?

Ross O'Brien — Tue, 20 Jan 2026 05:01:00 +0000

Last month, Prada reopened its flagship boutique in Hong Kong in Alexandra House in Central. This is after years of downsizing and store closures, both for the Italian luxury giant and Hong Kong retailers overall. Prada’s relaunched boutique is now its largest in the region—reportedly some 14,000 square feet over three floors.

You’d think this roaring comeback would have been accompanied by tremendous fanfare. Yet, except for a modest street campaign, Prada’s relaunch was a discrete affair—much like the rest of Hong Kong’s quiet retail bounce back in 2025.

Prada’s supersized return to its iconic post, however, might be an early signal of the luxury market recovery here in China—as well as a portent of how physical high-end retail is changing.

Hong Kong retail closed on a high note last year. Retail sales rose steadily over the year, and, $4.3bn in November were up 6.5 percent over 2024. Property transactions—always a bellwether of Hong Kong consumer confidence–soared to a four-year peak, up 15 percent over 2024, capping a nearly year-long sales streak.

While domestic consumer confidence is important to the Hong Kong retail scene, it is tourism that is seen as a stronger driver. Here, too, 2025 was a banner year: visitor arrivals were up 12 percent to nearly 50 million, three-quarters of whom were from mainland China.

But Hong Kong, like Prada, has not been making as much noise about these gains after working through years of sluggish post-pandemic recovery. This is partially due to timing. While economic numbers are robust, a number of recent somber events have dampened the mood here. These have included the horrific Tai Po housing estate fires, which claimed over 160 lives, curtailed many festivities over the holiday season, including the cancellation of the city’s annual New Year’s fireworks display.

All of this might be informing Prada’s low-key reopening, even as they prepare to open another new 8,000 square foot store in a high-concept immersive art, entertainment and luxury retail space over on Kowloon. Both these are experiential destinations, brimming with Instagrammable nooks and high touch concierge services, suggesting that dwell time and social media amplification are becoming as important metrics as ATV.

Prada, like retailers across Hong Kong, is finally enjoying the steady retail recovery with quiet confidence in the luxury market in an otherwise turbulent global economy, particularly for a city sitting on the fault line of a persistent U.S.-China trade rift.

Tip Fatigue Is Real: It’s Killing Trust

Phil Lempert — Wed, 26 Nov 2025 05:01:00 +0000

Let me be blunt. We’ve reached peak absurdity in American tipping culture, and retailers—particularly in foodservice—need to wake up before they alienate an entire generation of customers. A couple of weeks ago, I spent a few days at the Hilton Garden Inn in Ithaca, New York, and what I saw upset me enough to write this column. On the desk in my room was a placard asking me to tip for housekeeping, something we have all seen in hotels for decades. But this time it was different, it showcased a QR code to make my tipping ‘easier.’ I should add that the desk contained no note paper, pen or other typical amenities we have come to expect.

Research shows that consumers react negatively to service charges added for them, even when those charges would have been voluntary tips. They want to see the breakdown, but they also want to feel in control.

Tipping Burnout

I’ve been tracking consumer behavior for decades, and I can tell you without hesitation that the explosion of tipping prompts at every point of a transaction is not just annoying me and many customers; it’s fundamentally breaking down the trust between retailers and consumers. Nowhere is this more egregious than in quick-service restaurants, where you simply pick up your food and go, and in hotels, where you’re being guilt-tripped into tipping for services that used to be included in your room rate.

Most of Europe figured this out decades ago. They pay service workers a living wage, include service in the price, and treat tips as a genuine bonus for exceptional service—usually just 5-10 percent when it is deserved. But American retailers? We’re doubling down on a broken system and using technology to guilt customers into subsidizing corporate payrolls.

What Europe Got Right (and We Get Wrong)

Before I dive into the current American tipping disaster, let’s talk about how the rest of the world handles this. France legally requires restaurants to include a 15 percent service charge (service compris). In Germany, servers earn between €13-20 per hour before any tips. Sweden and Denmark have such strong labor protections that tipping is often rejected as unnecessary. Italy uses the term la mancia, which means “from the sleeve,” a gift, not an obligation.

What’s fascinating is that in the research in prepping this column I discovered the Journal of Tourism, Culture and Communication, that studied tipping patterns across seven European countries. It found that even though service is included, customers still tip when they receive good service. A 2023 study in the International Journal of Hospitality Management found that income and payment method are the strongest predictors of whether Europeans tip, while bill size determines how much, proving that social norms, not obligation, drive tipping behavior when workers are already paid fairly. The European model works because it’s honest and transparent. Menu prices reflect the true cost of doing business, including fair wages. Customers know what they’ll pay. Workers have income security. Nobody feels ambushed at checkout.

When American restaurants tried to adopt this model, it largely failed. Why? Because we’re the only ones doing it. Danny Meyer’s (the entrepreneur behind Shake Shack, Union Square, Gramercy Tavern and other award-winning restaurants) well-intentioned experiment proved that you can’t revolutionize tipping culture while your competitors across the street still operate on the old model. His innovation was to include service charges in the menu prices. Yet, customers perceived higher menu prices as “expensive” even though they were ultimately paying the same total amount. Meyer’s experiment was brilliant on paper: Raise menu prices, pay staff fairly across the front and back of the house, and eliminate the awkwardness and inequity of tipping. So why did it fail? Customer psychology. That $12 burger became a $14.50 burger. In a real-life example of illogical human behavior, customers wouldn’t pay what they perceived as more expensive, even though they would have willingly paid $12 plus a $2.50 tip.

Joe’s Crab Shack, the first large U.S. chain to implement a no-tip model, abandoned the experiment after just three months. Multiple high-profile restaurants that eliminated tipping eventually brought it back because they were losing front-of-house staff to competitors where they could still make tip money.

The Psychology of Why We Tip (It’s Being Weaponized Against Us)

A recent study published in Management Science by researchers at Tel Aviv University found that tipping is driven by two main forces: genuine gratitude for service and social conformity, that is, the pressure to do what everyone else does. How often have you been in a situation where you split a restaurant bill with another person and then ask, “How much of a tip are you leaving?” Conformity is particularly powerful.

Those digital tip screens are so effective and so manipulative. Research from ScienceDirect published in the Journal of Business Research found that explicit requests to tip actually create “psychological reactance—a threat to customer autonomy.” The study showed that when service providers explicitly ask for tips (especially through digital prompts), it triggers social pressure that hampers one’s perceived control. Customers feel trapped: say no and you’re a jerk; say yes and you’re now subsidizing a business model you didn’t agree to.

Studies published in the Journal of Applied Social Psychology also reveal that tipping behavior reflects racial and gender biases. Female servers may tolerate inappropriate behavior to avoid losing tips, or more attractive servers of both sexes may receive greater tips. A Cornell University study also found that customers tend to tip servers of their own ethnicity more generously.

The Counter-Service Conundrum

Here’s the reality: Average tips at quick-service restaurants have declined from a pandemic high of 16.5 percent in 2021 to 15.8 percent in Q3 2024. Customers are pushing back. They’re tired of being asked to tip 20, 25, or even 30 percent when they’re standing at a counter, placing their own order, filling their own drinks, and carrying their own food to a table. This resistance is especially dramatic now when consumers feel the pressure as prices continue to rise across all sectors, from food and imported apparel to footwear.

In late October, PopMenu’s research found that a staggering 66 percent of consumers say they “sometimes or always” feel pressured to tip when an iPad or digital interface asks them to, even when it’s just a takeout coffee order. And it’s not a new phenomenon. I vividly remember the first time I bought a suit at the now-defunct (and much missed) Barney’s on Seventh Avenue and 17^th Street. My salesman quietly told me to be sure that I tipped the tailor at least $20 to make sure I received the best tailoring. And that was in 1975!

Behind the Curtain

Let’s talk about what’s really happening. For supermarket and restaurant delivery and takeout, 29 percent of diners don’t tip at all; only 12 percent say they tip 20 percent or more. This massive disparity tells me that consumers fundamentally don’t agree on what deserves a tip anymore for convenience and personal service.

The data is clear: Yelp reviews mentioning “tipflation” increased 399 percent from May 2023 to April 2024. Customers are willing to tip generously for full service and exceptional experiences, but they’re rebelling against tip prompts where minimal service is provided. A Horizon Media survey found that 81 percent of consumers preferred the status quo of voluntary tipping. Why? Back to Danny Meyer, 55 percent worried that building a service charge into menu prices would force them to pay the tip whether the service was good or bad. In fact, 52 percent wanted control over how much they paid rather than having a flat fee imposed.

The Hilton Horror Show

Back in Ithaca, when I checked into the Hilton Garden Inn, I saw tipping culture at its most obnoxious. Hilton is not the only one; major hotel chains are also placing these QR codes on signs in hotel rooms, asking guests to tip. Hilton’s CEO acknowledged he doesn’t tip housekeeping himself. Think about that. The CEO of a multibillion-dollar hotel chain doesn’t tip the housekeepers, but he’s asking me to do it! And here’s the kicker, many Hilton properties (including the one in Ithaca) only provide housekeeping every other day, or upon request. So, I’m being asked to tip for a service that’s been reduced or eliminated.

In 2014, Marriott started putting envelopes in hotel rooms to encourage housekeeping tips. But full disclosure, HEI Hotels & resorts CEO Ted Darnall admitted encouraging tipping was a way to avoid raising wages. There it is—the inconvenient truth. These corporations are using guilt-driven technology to outsource their labor costs to customers who are already paying premium prices for rooms. Technology brands are partners in crime. Hotels are now offering digital tipping through Apple Pay, Google Pay, and Venmo, making it easier than ever to guilt guests into tipping. They say this payment option is designed specifically to reduce “friction,” which is corporate-speak for making it harder for you to say no.

What This Means for All Retailers

Tip fatigue is real and measurable. The average tip on Square’s digital food and beverage transactions fell to 14.9 percent in Q2 2025 from 15.5 percent in 2023. The overall tipping average for restaurants came in at 18.8 percent in Q3 2024, down from 19 percent in Q3 2022. While .2 percentage points may not seem life-changing, in the aggregate, customers are actively tipping less because they’re being asked to tip everywhere at a time when most people are feeling the pinch on higher prices on just about everything.
Transparency matters more than ever. Research shows that consumers react negatively to service charges added for them, even when those charges would have been voluntary tips. They want to see the breakdown, but they also want to feel in control. This is why automatic service fees, including those listed as health and welfare for the kitchen staff, have sparked backlash.
Set reasonable expectations. If you must have tip prompts at counter service, list reasonable amounts: 15, 18, 20—not 25 or 30 percent. Better yet, make tipping truly voluntary. Here’s an idea. How about communicating “Tips are appreciated but never expected” at counter-service establishments?
Pay your people fairly. This is core to the problem. If you can’t afford to pay your workers a living wage without relying on customer tips, your business model is broken. Fix your model, don’t guilt-trip your customers.

The Bottom Line

We’re at an inflection point. The number of people who “always tip” has dropped from 77 percent in 2019 to 65 percent in 2023. This isn’t because customers have become stingy—it’s because they’ve been asked to subsidize corporate profits one QR code at a time.

For retailers, especially in foodservice, the message is clear: Respect your customers’ intelligence and their wallets. If you’re providing minimal service, don’t ask for maximum tips. If you’re a hotel charging $300 a night, pay your housekeepers a decent wage instead of asking guests to scan a QR code to make up the difference.

The companies that figure this out—that understand tipping should be reserved for authentic service, not automated transactions—will win the loyalty war. The ones that keep pushing QR codes and guilt trips will find themselves on the wrong side of a consumer backlash that’s already well underway.

Trust me on this. Your customers are keeping score. And right now, retailers are losing.

Blueberry Surprise

Sarah Holbrook — Tue, 07 Oct 2025 04:01:00 +0000

Are you enjoying your blueberries? I have a husband who doesn’t eat a lot of fruit. Honestly, he prefers fruit loops, but around 18 months ago, I spotted amazing looking blueberries in lots of grocery stores, and he was suddenly a fruit guy. The blueberries were large and crisp. They almost popped in your mouth and tasted like a tart little miracle. They were all imported from either Chile, Columbia, or Peru. I’ve learned that the blueberries, asparagus, and other produce imported from South America was part of a long-term effort by USAID to fight the war on drugs, setting up incentives to turn coca fields into produce for export to the U.S. It was a huge success as importers here ramped up sales of this beautiful fruit on a wide-scale basis over the past two years.

Then came the tariffs, and the miracle blueberries disappeared from the shelves. At least that’s what I’ve noticed. I recently bought the blueberries I could find on the shelves, but they are a soggy, sorry version of what I’ve become used to. Those South American berries have been replaced by locally grown, tariff-free inferiors. And my husband is back to fruit loops.

The intended consequences of the war on drugs initiative were a big success for blueberry fans. Let’s hope that the unintended consequences of the tariffs do not force farmers to turn back to their previous crops.

I miss the miracle blueberries!

Gen Z Is Resetting Retail Spending

Pam Danziger — Mon, 29 Sep 2025 04:01:00 +0000

Many retailers are uncomfortable, sitting on pins and needles as they anticipate the fourth-quarter holiday season. Retail has exceeded all expectations through August – total retail, including food services, is up 3.8 percent and 4.3 percent — if automobiles, the largest spending category, and gasoline stations, the most volatile, are removed. The threat of tariffs driving prices higher as the year progresses is ever-present and has everyone on edge. My TRR colleague Warren Shoulberg has weighed in on the paradox of retail growth. I’m going to focus on holiday.

Zoomers will take the lead to create more meaning in their holiday celebrations this year because they feel the weight of the modern American lifestyle more acutely than any other generation. A McKinsey health study found Gen Z has the least positive life outlook, including lower levels of emotional and social well-being and higher rates of anxiety, depression, and distress than any other generation.

Tepid Holiday Season

McKinsey reported the U.S. is “settling in for a tepid holiday season.” A significant difference between the 4,000 adult consumers polled who plan to spend less (23 percent) compared to those who plan to spend more (19 percent) over the holiday season. Many shoppers plan to favor necessity-driving purchases, e.g., food, baby and pet supplies and gasoline, with “noticeable cuts” in what they term semi-discretionary purchases, such as personal care products, vitamins and supplements, toys and household supplies.

However, the sharpest declines are reflected in discretionary categories, including travel, personal care and home improvement services, jewelry, apparel and footwear, electronics and accessories. “This underscores a broader, cautious approach to spending as economic pressures continue to shape consumer behavior,” McKinsey reports.

The report also hints at “generational shifts” impacting retail results, but unfortunately, it doesn’t go into depth about those shifts, other than to mention that millennials will be the most proactive in early holiday shopping and Gen Z the most likely to wait until Black Friday to get their holiday shopping started.

Zoomers’ hesitation to start shopping early is likely caused by the challenging economic conditions the adults in this group face. The 69 million-strong Gen Z cohort, born between 1997 and 2012 (ages 13 to 28 years), is still coming of age as consumers. However, the leading-edge Zoomer adults are advancing into their earnings prime and developing spending habits that will likely carry on into their maturity. Unfortunately, this group has been the hardest hit by the shrinkage in the job market.

Cautious frugality may be the key words to describe their current perspective, given the life-threatening pandemic crisis they faced during their developmental years and the economic upheaval that resulted from it.

Striving for Financial Security

Gen Z adults face particularly challenging financial prospects. They come burdened by significant student loan debt, uncertain job opportunities, stagnant wages and rising costs for rent, groceries and other necessities after several years of soaring inflation. As a result, nearly three-fourths of Zoomers have taken steps in the last year to improve their financial status, including making a budget (64 percent), putting more money into savings (51 percent) and paying down debt (24 percent), according to a Bank of America survey among 1,000 Gen Z adults (18 to 28 years) conducted by Ipsos. In addition, nearly two-thirds (64 percent) are taking steps to reduce spending; 41 percent have cut back on dining out, and 23 percent are shopping at more affordable grocery stores. Walmart, Aldi and Costco are reaping the rewards.

As Zoomers climb the ladder to the “good life,” the ascent keeps getting steeper with new rungs suddenly appearing. Over half (53 percent) feel they don’t make enough money to live the life they want, and a majority (55 percent) don’t have enough emergency savings to cover three months of expenses. Holly O’Neil, BOA president of consumer, retail and preferred banking, said, “Even though they’re facing economic barriers and high everyday costs, they are working hard to become financially independent and take control of their money.”

With Zoomer adults taking intentional steps toward better financial health, the McKinsey’s “State of Consumer 2025” survey among 3,000 consumers conducted in May found Gen Z adults are less likely than previous generations to focus on achieving life stage milestones, such as marriage and having children, and “much more” likely to define themselves by financial security, career achievements and accumulating wealth.

Gen Z is known for its impatience in achieving success and wants to fast-track their careers. With their current economic situation they may become more pragmatic, taking a page out of Thomas Stanley and William Danko’s book, The Millionaire Next Door: “Wealth in America is more often the result of hard work, diligent savings and living below your means.”

Monkey-Wrench In Holiday Shopping

Gen Z’s cautious frugality is playing out in PwC’s recently released holiday consumer intentions survey, which found, for the first time since 2020, Americans plan to cut back on holiday spending. Zoomers are the drivers behind the decline. Holiday spending overall is projected to decline by five percent, with gift budgets taking an even sharper hit – slashed by 11 percent, more than double the rate of the broader cutback. PwC calls it a “spending reset,” where consumers are shifting focus to cherished holiday traditions away from material gift-giving. Instead, they’re seeking deeper meaning in how they celebrate –prioritizing connection, experiences, and intentionality over excess.

“We believe people will continue to prioritize holiday rituals and meaningful experiences,” PwC reports, noting that shared experiences are gaining ground for their value, flexibility and emotional resonance. “This behavior signals a pattern: Spending may shift, but the intent to maintain a sense of normalcy holds firm.”

Gen Z Driving the Spending Reset

Looking across the four generations included in the survey sample – 1,000 each among adult Gen Z, millennials, Gen X and boomers – Zoomers are the driving force behind the spending reset. They expect to drop holiday spending by 23 percent this year.

Millennials, the next generation older than Gen Z, the largest generational cohort in the U.S., some 77 million strong, and squarely in the workforce, are more optimistic expecting to hold back planned spending by only one percent.

Cautious holiday spending by these two generations, especially for gifts, could play havoc on retailers’ fourth-quarter results. Overall, the PwC survey found that more than 80 percent of the consumers surveyed across all generations plan to cut back on spending over the next six months, citing rising prices, new tariffs, and the higher cost of living.

Time for a Change

Net/net: Retailers can expect shoppers to be looking to economize more when selecting gifts this year. Yet, the most meaningful gifts don’t necessarily come from a store, but from the heart. A handwritten letter, a shared memory captured in a photograph or a handmade item crafted with love carries more meaning. And the greatest gift of all is simply to spend time together – engaging in family traditions or creating new ones that deepen connection and joy.

Zoomers will take the lead to create more meaning in their holiday celebrations this year because they feel the weight of the modern American lifestyle more acutely than any other generation. A McKinsey health study found Gen Z have the least positive life outlook, including lower levels of emotional and social well-being and higher rates of anxiety, depression, and distress than any other generation. Imagine the irony: Gen Z may be the ones to lead the way to more meaningful holiday celebrations this year, governed by financial discipline and cautious spending. And the spending habits they are developing in their formative years are likely to be carried on as they mature.

In the short term, this shift may unsettle retailers and consumer brands. But Gen Z is still emerging as a consumer force. Of the roughly 69 million Zoomers in the U.S., only about 45 million have reached adulthood. They account for about 25 percent of the population, but currently only around 15 percent of spending. This gives brands a window of opportunity to understand their values and evolve accordingly.

While it is impossible to predict exactly how Gen Z will reshape the marketplace, once they take center stage, one thing is certain: they will bring profound change. The question isn’t if, but when. And smart brands must be preparing now.

How Do You Explain the Recent Surge in Retail Sales?

Warren Shoulberg — Wed, 17 Sep 2025 04:01:00 +0000

Maybe you could call it a false positive. Over the past few weeks, we’ve seen a fairly steady parade of surprisingly positive numbers from all sorts of big public retailing companies. Many have been on the lower rungs of the economic pyramid, a territory that was projected to be suffering more than the retail field in general. Some were recent problem children of the industry; retailers that had been struggling to remake themselves in the face of the never-ending shifts in the buying psyches of the American consumer. And some were industry stalwarts that seem to have endless supplies of black ink when it comes to financial reporting.

Retail, inevitably a zero-sum game, has had more than its fair share of players who are on the borderline. Some, like Rite Aid and At Home, have ended up in bankruptcy, while Walgreens was acquired and taken private by private equity giant Sycamore. Macy’s is perhaps the most talked-about struggling retailer, but in its most recent quarter, it beat analyst forecasts.

Fake News?

So, are we to deduce that maybe the doom-and-gloom forecasts that have been circulating recently are way off base? Are the economic policies of the current U.S. administration really working and are things getting better? Could we be entering a time of milk and honey? The Golden Age?

Nah. As much as it would be nice to confirm that the people running our country actually know what they’re doing, there’s a much more realistic explanation for all this apparent positivity: This is the calm before the tariff storm. It’s the period when American consumers — terrified up to their credit limits — know that if they don’t pull their purchasing triggers right here and right now, they are going to get nailed this fall and into the fourth quarter when the full effects of the tariffs truly hit. Panic buying is as good a name for it as anything. There’s no other way to explain it. For an in-depth look at the unintended consequences of the tariffs, check out my TRR colleague Sarah Holbrook’s report that ran this week.

The Lower End

The soothsayers have been thinking that the bottom of the marketplace was going to get slammed the worst in any coming economic maelstrom. Sure, there would be some trading down, but it would be more than cancelled out by falloffs in buying activity by consumers most economically pressed. For these shoppers, it wouldn’t be a matter of trying to find the best prices; it would be that no price is low enough, and I’m not buying anything.

But if this prediction is true, it sure isn’t happening yet. We saw some of the big retailers that play the price game truly shine recently. Of course, leading the pack is Walmart, the biggest retailer on the planet, which has been on a spectacular hot streak recently. Its second-quarter results issued in August were up 4.6 percent in comp store sales for its U.S. operations, with its average ticket up 3.1 percent, which is pretty impressive considering its price points.

A lot of Walmart’s gains are market share gains as Target continues to struggle and the Boys from Bentonville get better and better at ecommerce. But also, Walmart has said it is bringing in more affluent shoppers, and that can only mean those consumers are trading down and sacrificing their normal retail haunts. No doubt they are smart enough to see what’s coming.

Down the highway, Dollar General had an even better quarter, with sales up 5.1 percent. Comps were lower than Walmart, up 2.8 percent, but there was a 1.5 percent increase in customer traffic and a 1.2 percent boost in average transaction purchase.

There were other wins on the lower steps of the retail pyramid, but it’s the increase in transaction size that, more than anything says consumers are bulking up in anticipation of the tariffs hitting the fan.

Turnarounds Turning Around

Retail, inevitably a zero-sum game, has had more than its fair share of players who are on the borderline. Some, like Rite Aid and At Home, have ended up in bankruptcy, while Walgreens was acquired and taken private by private equity giant Sycamore. Macy’s is perhaps the most talked about struggling retailer, but in its most recent quarter, it beat analyst forecasts, and its core group of GoForward locations showed positive sales gains. Overall revenues for the big department store player did decline, but this ended up being the most positive set of numbers it has issued in quite some time. Again, this is at least partially reflective of a better strategy that emphasizes enhanced merchandising tactics and the ongoing deemphasis of marginal stores. But you have to reason that consumers also reacted to the tariff timing, thinking they better get their fix of Macy’s national and private brand goods before prices go up.

Perhaps Macy’s closest competitor these days, Kohl’s, didn’t have quite as good a quarter as its top and bottom lines remain mired in soft territory. But the retailer beat most analyst projections and, as such, its stock got a nice boost this quarter. There’s still so much more work to be done here — a permanent CEO for starters — but the old rising tide theory certainly helped Kohl’s this time around.

The Usual Suspects

If you have to point to any retail sector that seems to keep outperforming everyone else, it’s, of course, off-price. And within that sector, it’s TJX. Its most recent quarter continued its hot run, as well as continuing to beat analyst forecasts. Ross and Burlington also had solid quarters, and while this proves the consumer continues to respond to the off-price model, it also confirms that shoppers believe these players are somehow immune to tariffs and have the prices to prove it. Of course, this is not exactly true, but often perception beats reality…in fact, it usually does.

Watch for off-pricers to continue to beat the rest of the field, picking up more market share as tariffs really start to impact the cost of goods across the entire retail spectrum. TJX and the rest will get hit too — despite their claims otherwise — but they will be better at hiding it in their cavernous, 16-turns-a-year assortments.

Coming Soon to a Store Near You

We also saw positive results across a number of retail sectors, including mid-priced fashion chains, home improvement big boxes and home and furniture retailers. But anyone paying attention and ignoring the partisan rhetoric can see that the first signs of the damage tariffs are doing to the American economy are starting to pile up now. This is only going to get more so. That’s why you shouldn’t be surprised to see the retail numbers that start to come out in October and early November telling a very different story from the ones we’ve just seen. Rather than across-the-board success stories, the winners will be more isolated and the list of losers longer. In the meantime, anyone in the retail business should savor what we’ve just seen. But don’t get used to it, it won’t last.

Which Next Gens Have Spending Power?

Jasmine Glasheen — Thu, 31 Jul 2025 04:01:00 +0000

Generation X has been the biggest spending consumer demographic in the world since 2021. Gen X is also called “The Invisible Generation,” as journalists often neglect them to focus on new(er) and shin(ier) millennials and Gen Z. Not to mention that it is the smallest generation in numbers sandwiched between boomers and their children. For decades, Generation X has been ignored because they were perceived to have little influence.

Generation X is better situated to survive the technological assault on consumers’ economic prospects. They may be leveraged between responsibilities to their aging parents and Zennial children, but they don’t face the student debt, housing, and career crises throttling subsequent generations.

Gen X Spending Power

But their spending power is very visible in retail; Nielsen reports that Gen X will spend $15.2 trillion in 2025. Their annual spend will peak at $23 trillion by 2035, and they’ll continue as the highest-spending global cohort until 2033.

While millennials are the world’s most educated generation, they’re also poorer than any other demographic was when they were circling age 40. White collar millennials are losing jobs left and right to AI, and they don’t own the homes or boast the hefty nest eggs of their Gen X predecessors. Sprinkle in unprecedented global political upheaval and it makes sense that, despite all of our talk about “Xennials,” Gen X and millennial purchasing behavior remain bifurcated.

A deeper look at the factors contributing to the spending rift between Gen X and millennials reveals the trends behind some otherwise thrifty millennial consumers’ willingness to take on debt.

“Negative Wealth” Dents Next Gen Spend

To say financial insecurity is on the rise since last year is an understatement. Nearly half, a solid 46 percent, of millennials say they do not feel financially secure––second only to 48 percent of Gen Z. As student loan forgiveness programs halt and many white collar jobs are replaced by AI, it’s not surprising that the world’s most educated generation is struggling to gain a financial foothold.

Saying that millennials are financially struggling is actually underselling the issue. Next gens are battling “negative wealth” –– their debt outweighs their assets, often leading to a strained financial life and potential negative health outcomes down the line. Managing this sort of stress may be why BlueCross BlueShield found millennials report an 18 percent increase in prevalence for depression and 37 percent increase for hyperactivity over to Gen X at the same age.

It’s easy to see why millennials are depressed––they carry an average of $78,396 in consumer debt. That’s in addition to the rising cost of living, skyrocketing student loan debt, and tariff concerns. In the era of artificial intelligence, their parents’ concept of lifelong job security is a thing of the past.

Gen X Built Wealth Before Upheavals

The bleak job outlook for just-launching Gen Zers and the AI-diluted professional landscape for (once) white-collar millennials informs both generations’ reluctance to spend. According to the World Economic Forum’s Future of Jobs Report 2025, by 2030, an estimated 92 million jobs will be displaced by AI. Unlike Gen X and boomers (many facing retirement in advanced leadership positions), millennials tend to be less established in their careers and thus more likely to be replaced by the AI workforce.

But Generation X is better situated to survive the technological assault on consumers’ economic prospects. They may be leveraged between responsibilities to their aging parents and Zennial children, but they don’t face the student debt, housing, and career crises throttling subsequent generations. Of course, shouldering the wellbeing of their parents and offspring means that Gen X is saddled with the most non-discretionary expenses such as mortgage payments, education, and healthcare.

In the years to come when their parents pass on, bequeathing their wealth to Gen X, it’s likely that a portion of Gen X’s non-discretionary spending will become discretionary. The Sandwich Generation may finally get the opportunity to spend selfishly.

Gen X Splurges While Millennials Scrimp

Here’s a next gen challenge. How can retailers sell to segments of young people who don’t accept traditional societal structures? Millennials are thrifty, prioritizing cutting back and being fiscally conservative. The oldest are entering middle age (that milestone may need revising since it is predicted this generation may live well beyond 100 years and middle age may shift to their 50s and 60s, not 40s). They lived through the 2008 recession and now face layoffs/industry upheavals due to business model changes. Home ownership and a secure retirement are elusive or off the table for most millennials. Some of them will never experience the financial security of their predecessors. Nonetheless, they want to lead fulfilling lives despite the dismal optics.

And therein lies the reason that some millennials are using non-existent discretionary income to fund positive life experiences. And many millennials (boomers, gird your loins) have no intention of repaying that student debt within their lifetimes. For some young folks who feel the employment system has been rigged against them since birth, the inability to pay off one’s “debt” to said system doesn’t feel like a character flaw.

The red flags are rising. The future of the loan and banking industry could change drastically in coming years. About 40 percent of Gen Z and millennials are already willing to use credit card debt for discretionary expenses. That’s a huge jump from the 20 percent of Gen Xers willing to do the same. The differences between the spending habits of both generations are less rooted in the criticism levied against millennials for lacking ambition or moral fortitude. It may be more a matter of pragmatism.

Generation X, on the other hand, spends more because they can. Despite dissimilar economic outlooks, one thing unites millennials and Gen X: They prioritize value. While Gen X believes they’ll get that value from trusted brands, millennials believe they’ll get value from rigorous comparison shopping on multiple channels. Both their priorities dovetail in the continued search for quality products at value-driven price points. In terms of next gens’ financial outlooks, retailers just might want to follow the money.

Rising Cyberattacks Ransom Retailers

Mark Faithfull — Tue, 17 Jun 2025 04:01:00 +0000

It’s the stuff that digital nightmares are made of. A successful cyberattack that included access to customer details forced a six-week shutdown of ecommerce and took over $400 million off the bottom line after a ransom note declared “Let’s get the party started.”

The future of retail is sovereign when it comes to data and European data has never been more under attack. What we see around the world is a loss of the rules and countries such as Russia and North Korea are centers of ransomware and a risk to retailers and therefore their relationships with their customers.

Little wonder then that Stuart Machin, the popular CEO of high-flying U.K. department store group Marks & Spencer, described himself as being in shock when the ransom note was sent directly to his inbox along with half a dozen of his senior execs.

Until June 10 there was little let-up for Marks & Spencer when it was finally able to reopen its website to shoppers, a full six weeks after it was forced to halt online orders following the hugely damaging cyberattack. On its website, M&S simply welcomed customers back with the message that shoppers, “can now place online orders with standard delivery to England, Scotland and Wales.” It also confirmed that deliveries to Northern Ireland would take several more weeks, as would the resumption of click and collect, next-day and nominated-day delivery and international ordering.

A $34 Million a Week Problem

It’s no wonder that M&S was trying to resolve the situation as fast as possible as it is estimated to have lost around $34 million in online apparel and homewares sales a week after it was forced to stop taking orders within days of when the infamous ‘threat actors’ collective DragonForce gained access to its systems over the Easter weekend in a follow-up to another attack by separate ransomware group, Scattered Spider

Beyond the embarrassing reputational damage, once the dust finally settles the company expects the hack to cost it over $400 million in profits this year, although about half of that is expected to be offset by insurance and other measures. Particularly galling was the fact that M&S had posted some strong and positive results – only to be bitten in the etail by the hackers.

In the meantime, shoppers have been able to browse online, and shop in M&S’s physical stores using cash or third-party cards since the hack. However, in-store stocks of food and apparel have also been affected, meaning M&S has lost out on sales during what in the U.K. had been an unexpectedly warm, sunny spring. M&S has also conceded that some personal information relating to thousands of its customers including their names, addresses, dates of birth and order histories, was taken during the cyber-attack.

M&S Recovers Slowly

With the website back up and running, Machin said that he expects the retailer to recover “at pace,” in part by bringing forward planned investment in the company’s IT systems and website during the rebuild forced by the hackers. Machin has fast-tracked that investment after originally earmarking three years for the upgrade but now looking to complete the project within 18 months. “I went into shock. It’s in the pit of your stomach, the anxiety. But you have to think: ‘Stuart, you have to lead this, you have to keep a cool head,’” Machin told U.K. publication The Mail on Sunday. “I have learned everyone is vulnerable. The hackers only need to be lucky once.”

Chronicle of a Cyberattack

So, what actually happened? On April 23 the hacker group DragonForce sent an abuse-filled email in broken English directly to Machin bragging about the attack and demanding a ransom payment. They had successfully infiltrated a London-based employee’s email account, apparently using the account from the Indian IT giant Tata Consultancy Services (TCS), which has provided IT services to M&S for over a decade.

“We have marched the ways (stet) from China all the way to the U.K. and have mercilessly raped your company and encrypted all the servers,” the hackers wrote in a message that also included a racist epithet. “The dragon wants to speak to you so please head over to [our darknet website].”

In addition to boasting about installing ransomware across the M&S IT system to render it useless, the hackers also claimed that they had stolen the private data of millions of the retailer’s customers and shared a darknet link to a portal created for DragonForce victims to begin negotiating the ransom fee. “Let’s get the party started. Message us, we will make this fast and easy for us,” the hackers said.

Cyberattacks on Both Sides of the Pond

The attack on M&S was not a lone-wolf operation. The news about the attack on one of the U.K.’s biggest retailers first emerged days before cyberattacks were also reported by U.K. convenience store chain the Co-op and upscale London department store Harrods. Both retailers had to shut down parts of their IT systems as a result. Or that after the cyberattack trend crossed the Atlantic, the FBI got involved when retailers became easy picking for sophisticated hackers determined to wreak havoc and extort money. Recently, sportswear brand Adidas and lingerie group Victoria’s Secret have also been targeted.

In May, Adidas warned that its customer data had been compromised and confirmed that the cybercriminals had accessed certain consumer data through a third-party customer service provider. Adidas insisted that no passwords or payment details had been taken by the attackers and that it was in the process of informing its customers. “We immediately took steps to contain the incident and launched a comprehensive investigation, collaborating with leading information security experts,” the company said in a statement and added that the compromised data “mainly consists of contact information” relating to consumers who had contacted its customer service help desk in the past.

Meantime, the website for Victoria’s Secret was quietly taken offline after a prolonged “security incident.” Shoppers visiting the website during the several days of shutdown were met with a pink screen with the company’s statement rather than its usual selection of merchandise. The retailer had “identified” and was “taking steps to address a security incident,” according to a statement posted on its website. “We have taken down our website and some in-store services as a precaution.” At its first quarter earnings update on June 11, Victoria’s Secret CFO Scott Sekella conceded that the retailer expects to take a $10 million hit in its operating income as a result of the cyberattack.

Grocery retailer Ahold Delhaize USA was also targeted after the hackers managed to log into an account at one of its U.S. retail locations, but the incident was “isolated and contained,” according to an internal Ahold Delhaize report CNN said.

Meantime, health food wholesaler UNFI, the primary food distributor for Whole Foods, had to take some of its systems offline after a cyberattack on June 5 which has led, anecdotally, to some empty shelves at the upscale grocer. In a regulatory filing, UNFI said it became aware of an incident in its information technology systems, which has caused “temporary disruptions to the company’s business operations.”

A Sign of the Times

The recent spate of cyberattacks is worrying enough for the retailers impacted and have caused alarm across the industry, but the real question is what may be yet to come. Schwarz Digits CEO Rolf Schumann warned of cyberattacks at World Retail Congress in London in May as he claimed that the future of retail is sovereign when it comes to data and that European data has never been more under attack. “What we see around the world is a loss of the rules, because we live in a rules-based world,” he said, pointing to countries such as Russia and North Korea as centers of ransomware and highlighting the risk to retailers and therefore their relationship with their customers. “Look at the aggressiveness we face every day from the U.S. and China for our [Europe’s] data. How can we turn Europe into a data colony? Who owns the data owns the knowledge,” he said.

How darkly prescient those comments were. With seven retailers across the U.K. and the U.S. attacked within weeks of each other, the ransomware actors are becoming bolder and their attacks are becoming more frequent. In an increasingly dangerous and volatile world, cybersecurity is set to become a cornerstone of protecting privacy, service, and all-important consumer trust.

Tariff Shockwaves

Sarah Holbrook — Mon, 09 Jun 2025 04:01:00 +0000

When President Trump stood next to his super-sized tariffs chart on April 2nd, he looked wholly satisfied as he actualized his very own shock and awe moment. The world was expecting tariffs, but not a worldwide economic cataclysm. Now, the globe is in the throes of motion sickness as the tariff yo-yo continues to wind and unwind, following an all too predictable pattern.

The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Blindsided

Narrowing the focus to retail, the industry can’t be blamed this time for being caught flat-footed. Many retailers anticipated a moderate increase to the already existing tariffs on China. We searched for any analysis or warning signs that tariffs might be imposed on goods from Vietnam, India, Bangladesh, Germany, and well…everywhere except Russia and North Korea. No one expected the destructive (and self-destructive) scope and scale of the scheme; neither short sellers nor Cassandra got this one right.

Now two months into the madness, while we may feel ill, we are no longer shocked or awed. Wall Street has developed the TACO investment strategy, aiming to profit from the tariff gyrations, but collective consensus concludes that neither a plan nor fact-based roadmap exists. The OECD (Organization for Economic Co-operation and Development) surmises that the U.S. will bear the heaviest brunt of Trump’s tariffs. Quartz covered the OECD report on tariffs in a piece titled, “America is the biggest loser in Trump’s trade war, OECD says.” The Quartz article concludes, “The result isn’t always an immediate shock. More often, it’s a slower burn, where uncertainty and higher costs quietly erode economic momentum quarter by quarter.”

As the slow burn commences, the retail industry is shifting from paralysis to stumbling through, paying increased freight fees while rushing to land merchandise before the next possible tariff cliffs in July and on August 15. This is no way to run a railroad, nor IKEA U.S., Printemps U.S., or NIKE.

Tune Out the Short-Term Noise

TRR is not a news publication; we mete out strategy. As these words spill onto the page, a federal court has found many of Trump’s tariffs illegal, the administration appealed, and then the administration won a stay. The opposite may be true when you read this piece. Rather than react to the drama du jour, we have been thinking about the bellwethers that are signaling the medium and long-term effects of this disruptive circumstance, and how it may compound and complicate pre-existing and ever-present concerns.

If Trump wakes up tomorrow and decides to tactically unwind the tariffs on every country, spinning it as part of his plan all along, things will not magically snap back to where they were. This tactic will have a long tail. Beyond the complexities of shattered trust, other obstacles loom. Logistics have been splintered, ships are not where they should be, and their crews displaced or furloughed. Global consumer sentiment has likely changed leaving international consumers with a diminished appetite for importing U.S. brands (think New Balance, Jack Daniels, Ralph Lauren). Retailers placed aggressive, uninformed bets, accelerating inventory purchases with more urgency than planning. Further complicating strategy is the hard truth that the tariff issue does not exist in a vacuum. The system has been damaged. No matter what unfolds in the coming weeks, Q3 will bring empty shelves, higher prices, and declining demand. The White House does not control the basic laws of economics, nor can it escape the axiom, you break it, you own it. The time to start drawing the roadmap for the coming 24 months and beyond is now. Just make sure to add elevations and alternate routes to that roadmap, it is going to be a steep climb full of twists and turns.

Bellwethers

While considering your next steps, these are five disruptive signals to watch for:

Slowing consumer spending
Rising unemployment rates
Rising consumer bankruptcies
Rising avian to human bird flu transmissions
Eroding U.S. China relations

Slowing Consumer Spending

While the signals are weak, the May 30 estimates from the Bureau of Economic Analysis show that consumer discretionary spending dropped in April. April’s expenditure estimates on apparel and footwear dipped 3.4 percent, and other non-durable goods purchases dropped 5.9 percent. The impact of April’s decline will be reflected in the second quarter reporting, but PepsiCo joined Proctor & Gamble, Chipotle, and others in reducing the 2025 full-year profit guidance. The consumer goods giants and burrito stalwart blamed slowing sales on reduced consumer spending according to reporting in the New York Times. PepsiCo cut its 2025 profit outlook from the mid-single digits to even with the company’s 2024 results, while reporting a 1.8 percent decline in Q-1 2025 revenue during the company’s recent investors’ call. The Times quotes Jamie Caufield, PepsiCo’s C.F.O., “Relative to where we were three months ago, we probably aren’t feeling as good about the consumer now.”

Rising Unemployment Rates

Unemployment rates remained steady in April at 4.2 percent while many government employees and contractors scattered throughout the United States are currently on paid leave. While this cohort is technically employed, the future employment status of many government workers is uncertain.

While Walmart is showing no signs of “eating” the tariffs, the company was the first major retailer to announce staff cuts. It announced 1500 layoffs in the company’s Global Technology Team. Walmart may be the first but watch this space. There are already murmurs from Costco, Best Buy, Target, TJX, Macy’s and Urban Outfitters, according to The Wall Street Journal.

Rising Consumer Bankruptcies

The New York Fed recently released a mix of good and bad news in its Q1 household debt and credit. Total household debt increased by $167 billion and stood at $18.20 trillion by the last count. The agency reported, “Credit card balances fell by $29 billion from the previous quarter to stand at $1.18 trillion; auto loan balances declined by $13 billion to $1.64 trillion, marking only the second time balances have fallen from a prior quarter since 2011.” However, the awakening burden of student loan debt paused since 2020, and grew by $16 billion to reach $1.63 trillion. Gen X borrowers nearing retirement age owe a portion of the debt.

Buy-Now-Pay-Later platforms are showing signs of stress. Public Media’s MARKETPLACE reported on BNPL debt balances. “Affirm users have an average outstanding balance of $736, and the 30-day delinquency rate stood at 2.4 percent for the first three months of this year, according to company reports.” In the broadcast, Senior Litigation and Policy Council for the Center for Responsible Lending Nadine Chabrier suggested that BNPL consumers tend to be “financially vulnerable.”

In January, shortly before major staff and service reductions, the Consumer Financial Bureau released findings. The Bureau discovered that more than one-fifth of consumers using BNPL loans in 2022 had subprime or deep subprime credit scores. The CFPB research also revealed that “More than three-fifths of BNPL borrowers held multiple simultaneous BNPL loans at some point during the year, and one-third had loans from multiple providers.” New York State is looking into regulating the lenders.

After reading these statistics, it should come as no surprise that Americans are increasingly bankruptcy curious. Consumer Affairs consulted data gathered by Legal-Shield, a legal service provider. “Americans making legal inquiries for declaring bankruptcy reached their highest levels in the first quarter of 2025 since 2020,” said Matt Layton, LegalShield senior vice president of consumer analytics. Layton continued, “Consumer bankruptcy concerns are rising not because of short-term volatility, but due to sustained financial pressure on household budgets.”

Rising Animal-to-Human Bird Flu

While only one animal-to-human death has been reported and the risk to the general population is low, the CDC reports the risk to humans exposed to infected animals is moderate to high. Had Covid never happened, one might read this report with a shrug, but it did, and no one should. Rather than simply shrugging, Health and Human Services Secretary Robert Kennedy Jr. seemingly discounted any concerns as his department canceled a $766 million government contract with Moderna to develop a bird flu vaccine. We know and understand the risks, should this grow out of control, to our industry, the economy, and humanity. Again, watch this space.

Eroding U.S.- China Ties

This area is heavily covered in general news. We will simply highlight areas of specific concern to our industry.

Rising Risk of Conflict in the Taiwan Strait
An invasion or hot war involving Taiwan would disrupt global access to advanced semiconductors. Taiwan produces over 90 percent of the world’s most sophisticated chips, which are foundational to everything from AI-driven retail personalization to mobile commerce, smart logistics, and cloud infrastructure. A disruption here is not theoretical—it would be catastrophic for both operational continuity and innovation roadmaps.
S. China Semiconductor and Tech Escalations
The ongoing U.S. semiconductor ban, and China’s countermeasures, including the suspension of exports related to aircraft and high-end chipmaking materials, signal that we are entering a phase of prolonged economic warfare. This affects not only chip availability but also global price volatility and supplier unpredictability for tech-enabled retail. While government incentives like the U.S. CHIPS Act are signals of a pivot toward onshoring, timelines are long, and capacity short-term is limited.
Rare Earth Minerals & Magnetic Leverage
China’s tightening of exports of rare earth minerals, used in electric motors, batteries, and high-efficiency manufacturing, reinforces the uncomfortable truth: The U.S. does not control all strategic levers in the tariff race. As tariffs rise and supply lines shrink, retail infrastructure, especially in logistics and automation, may become costlier and slower to upgrade.
Targeting Chinese Students and the Erosion of Soft Power
S. visa restrictions for Chinese students raise questions about whether the U.S. is playing offense, defense, or committing an own goal.
Global Realignment of Alliances and Trade Agreements
Watch for emerging regional alliances (such as ASEAN-led trade blocs or BRICS currency moves) that may signal a shift away from Western-dominated global trade norms. This can impact sourcing decisions, shipping routes, and even the relative importance of current markets.

Eyes Open

This is a complicated time to lead a retail organization or brand. Long-term strategies are easy to advise but challenging to develop. A deeper challenge is nurturing a nimble, anticipatory culture, particularly in times of stress. We encourage you to start by keeping your eyes open for the non-obvious signals that will impact our industry and lay the foundation for future success by having the courage to think about the unthinkable and prepare for the climb out of this mess.

Unintended Consequences of the Tariffs

Sarah Holbrook — Mon, 28 Apr 2025 04:01:00 +0000

Doing business in Spring 2025 is not for the faint of heart. The recent economic (and other) shockwaves serve as a reminder that the future does not proceed from the past along a neat and projectable trajectory. Until we learn to anticipate disruption and be prepared, we will continue to face new dilemmas that look a lot like today’s as we await the thwack of the descending sledgehammer that is the ever-evolving U.S. tariff gambit. As with the pandemic, the retail industry finds itself stunned by events, sitting ducks exposed to today’s shapeshifting economic caprices while relying on words like “unimaginable” to conceal its unpreparedness.

Could an iconic global retailer like IKEA begin to close stores in the U.S. due to tariff impacts? Might a U.S. company (Wayfair, Walmart, Restoration Hardware) try to create a domestic version of IKEA, or would the domestic tariff advantage be blunted by parts and input tariffs on the manufacturing of goods?

Stunned Paralysis

The tariff churn persists, and some strategists seem paralyzed by its unpredictability. However, our team at The Robin Report has covered the 2025 tariff imbroglio with ongoing reports from different perspectives offering thought leadership, APAC reporting with a keen eye on China, and the U.S. retail perspective, all with insightful analysis.

This report takes a different tack. We are not presenting an action plan or strategic solutions. Instead, we present a systemic analysis of the unintended consequences of the tariffs: what has happened, what may happen next and a range of plausible implications that are worth considering. This is intended to help you think differently about a macro issue (like the tariffs) that may have a dramatic, lasting effect on our economy at large and the retail industry specifically.

Mapping Consequences

Our map is complicated which is why this report presents it in a simplified format, but it is a systems perspective on how unintended consequences can derail a business and an economy. If you think of the tariffs as an interconnected case of causes and effects, you may become as alarmed as we are.

Breaking It Down

Systems thinking is a required tool for foresight and we are looking at the current economic upheaval through a systems lens. Our mapping is based on three steps.

Our process starts with today’s macro events
We then connect these events to retailing and the economy
Then we drill down to uncover plausible outcomes and what-if questions that may change life in the U.S. as we know it

The process behind this exercise is to help with scenario planning for contingencies. This is not simply an intellectual exercise; it can reveal areas of both vulnerabilities and opportunities. Additionally, if you get in the habit of working through plausible but surprising events, words like unimaginable become erroneous.

Macro Events

We started with the key driver behind the discord roiling retail: the uncertainty caused by the international tariff rollout by President Trump with the three global tariff models:

Retaliatory tariffs on U.S. exports
Sustained, stepped-up tariffs on goods both finished, and component parts imported from China
Varied, shifting, “tailored” tariffs

Next, we looked at the immediate impacts demonstrated in the model and asked what-if questions to reveal their implications:

Worrying shifts in the U.S. bond market as the 10-year U.S. treasury yield increases indicate anomalous U.S. Treasury sales.

What if foreign governments are dumping U.S. treasuries because they fear financial instability, or are they retaliating for U.S. tariffs?
What if institutional and individual investors are dumping U.S. treasuries because they fear financial instability?
How will the increase in 10-year treasury yields impact the U.S. deficit in 10 years and what might that mean then for the U.S. economy in 2035?
What if this yield increase triggers interest rate hikes which then increase borrowing costs (think mortgages, auto loans, credit card rates) and inflation and how will that impact retail?

The strength of the U.S. dollar declines.

We know this makes imports more expensive for U.S. consumers. What does that mean for retail?
We know this makes exports less expensive for foreign consumers. How might this impact retail?
Since a declining dollar + the tariffs make parts that are essential in domestic manufacturing more expensive, what does that mean for U.S. retailers who want to sell U.S.-made goods (think Walmart)?

Direct foreign investment in the U.S. slows.

Could an iconic global retailer like IKEA begin to close stores in the U.S. due to tariff impacts? Since we are speculating, might a U.S. company (Wayfair, Walmart, Restoration Hardware) try to create a domestic version of IKEA, or would the domestic tariff advantage be blunted by parts and input tariffs on the manufacturing of goods?

How Macro Events Will Impact the Retail Industry

What will it mean for retail if the economic trust the U.S. has earned over decades is questioned and the U.S. dollar’s position as the global reserve currency is challenged by the E.U. or China?

Since the U.S. has broken or altered existing trade agreements such as the USMCA and AGOA (the tariff-free trade agreement with many African nations), will other nations trust any future agreements? If not, how will that affect retail?
What is the impact of imports from other countries if the 10 percent tariff rate lasts for the entire Trump Term?
Tariff advertising slump: Should a brand launch an ad campaign for a car that costs $4000.00 more than it did a year ago? Should a brand or retailer plan a Christmas ad campaign for a new toy that will cost up to triple its current price?
Inbound international tourism drops: What if tourists boycott U.S. travel despite attractive exchange rates?
Will outlet malls suffer from tariffed goods price increases and decreased tourist footfall?
Since travel agents specializing in Disney World vacations have reportedly seen a dramatic drop in bookings from Canadian visitors, will that have a ripple effect on retail beyond Disney?

Imports from China begin to vanish as tariff rates create a de facto trade embargo.

Will Americans begin buying products directly from Chinese factories in an attempt to avoid tariffs?
Since 5 Below has already stopped importing goods from China, will U.S.-produced goods stock the empty shelves? Or will the tariffs nullify the store’s pricing strategy and thus eliminate its competitive advantage?
Bloomberg and WSJ report that Amazon is starting to cancel orders from Chinese suppliers; does that mean many essential items will be unavailable to U.S. consumers? How will consumers respond?

Businesses slow or halt investments in the U.S. due to tariff uncertainty.

Microsoft halts a planned $1 billion investment in an AI data center in Ohio after tariffs are announced. This means many planned jobs will never materialize. Is this a sign of a coming recession?
Stellantis lays off workers in the U.S. and halts production in Mexico and Canada. What is the impact on retail in the affected communities? What is the impact on car sales in the U.S.?
Walmart issues a rare mid-quarter warning on tariff losses. What if Walmart starts laying off workers? Will they begin using more automation in stores? Will customers care if Walmart continues to offer good value?
BNPL firm Klarna puts planned IPO in the U.S. on hold. Is this another sign of an impending recession?

Consequences for Retail and the Economy

Next, we moved to informed speculation and looked for plausible, potential consequences of the global tariffs. We broke those into two buckets, recession and inflation. Within the two buckets, we broke recession into consumer impacts and retail industry impacts and dug in from there.

Recession and Unemployment

Student debt defaults. As the pause in student debt repayments ends, what are the longtail consequences of damaged credit ratings for large numbers of millennials and Gen Z. consumers who can’t make the payments as unemployment rises? Will enrollment in higher education decline? Will we have enough educated leaders for the future?
Loss of health insurance. Since our health insurance system is tied to employment, what if medical debt and personal bankruptcies cause sustained financial hardship and long-term decreased spending?
Credit card defaults. What if there are large numbers of personal bankruptcies and how could that impact retail?
BNPL defaults. What if the lending platforms collapse under the weight of unpaid debt?
401K and IRA and investment portfolios shrink. What if the declines shatter the “Wealth Effect” psychology? Will wealthier consumers cut back on discretionary spending?
Food and housing insecurity. How will local crime accelerate? How will society become more polarized between the haves and have-nots?
Drop in new housing construction. Drop in demand for durable goods. What would this mean for Best Buy, Home Depot or Restoration Hardware?
Retail closures, consolidations, bankruptcies. Profitability declines, layoffs and retail real estate glut with the rise of mall vacancies. Can malls reinvent themselves again?
Shareholder pressure forces new platforms for resale and barter.
What if in-store crime increases? Will shoppers reject in-person shopping again? What will this mean for local retail?

Inflation

Retirees and fixed-income consumers are pinched and discretionary spending declines.
Inflation expectations can cause hoarding of essential items (think toilet paper) which generally drives prices higher.
Shoppers substitute brands for value and price solutions.
Lower income groups struggle to meet basic needs.
Interest rates increase if the Federal Reserve moves to slow spending. What is the longtail impact if a generation of potential homeowners become permanent renters because they are unable to build real estate equity?
Declines in retail profitability.
Countries could stop exporting their foods and beverages to the U.S. This could lead to an SKU reduction at the grocery store. What if customers can’t get their Kerrygold butter or aged Parmigiano Reggiano cheese? Will consumers shift to domestic substitutions or take the tariff hit through specialty retailers?
Pressure to increase employee compensation. What are the consequences if this leads to fewer employees and more automation?
Retailers are squeezed between the higher costs of goods and shrinking consumer spending.
Small-footprint ethnic grocery and gourmet stores may be forced to shutter due to the lack of availability and inability to negotiate with distributors or importers.
Stockouts and shortages occur due to increased inflation expectations and hoarding.
Potential interest rate rise hampers growth.
Freight shippers cancel or delay transit as volume drops.
Importers scramble to find new suppliers as factories close.
Ports back up because U.S. Customs is not fully prepared for new tariff processing.
Ports back up as importers can’t pay fluctuating tariffs on already shipped goods.
As fewer ships arrive in ports, trucking companies and distribution centers could face impending crises, forcing staff cuts, increased reliance on automation, consolidation with competitors, or failure.
High costs may drive innovative solutions: AI inventory and on-demand manufacturing technology may increase efficiencies and reduce waste.
Shoppers find discounted alternatives to grocery stores as online subscription services for imported staples like coffee pop up.

Working Through

We encourage you to construct your own unintended consequences scenario planning to identify the hidden dangers and long-term impacts of today’s events. As the churn continues, the risk of stunned paralysis remains at code red unless you build a permission structure that empowers your teams to imagine the unintended consequences of change. Use findings as a foundation for analysis and in the process, you may discover insights previously blocked by common assumptions and groupthink. If you shift your culture to anticipating the future, you may avoid those unintended consequences.