1/3 of Retail executives to adjust pricing over tariffs concerns

Concerns over tariffs have yet to be calmed, as US consumers and retailers alike remain pessimistic in regard to the impact of rising prices.

27 percent of US consumers polled by TransUnion, a credit reporting agency, expressed worry about their household finances for the next 12 months - but they are not alone. Retail executives across the nation are also uneasy, with 73 percent expressing concern about additional increases in tariffs over the upcoming 12 months, according to a new survey.

As retail leaders look to adapt their retail strategies in 2025, a report from 7thonline, a retail Saas company, looks at the potential impact of rising tariffs, changing consumer demand, and rapid advancements in AI. Based on insights from 105 leading retail executives, retailers continued to feel pressure from all sides.

Tariff Pressures are Forcing Retail Leaders to Rethink

Unsurprisingly, many retail executives are already exploring options on how to manage increased costs over the next year due to growing tariffs. In the face of ongoing economic uncertainty, retailers are making strategic adjustments, from revising supplier agreements to shifting increased costs to consumers, as they work to maintain stability and protect margins.

While half of the retail executives questioned have yet to make a specific decision in response to the growing tariff costs, among those who have, some of the most common solutions include passing the costs onto the customers (24 percent) and eating the costs internally (22 percent).  The majority say they could withstand no more than a 25 percent tariff increase before passing costs on to consumers, with 35 percent indicating that their immediate response to any new hike would be to raise prices, highlighting the narrow margin many operate within.

Although 36 percent of the executives polled report a rise in demand, a slightly higher percentage, 39 percent to be exact, have seen a decline. Amid growing concerns over consumer spending and escalating costs, and with one in ten acknowledging weak forecasting capabilities, retail leaders are contending with an increasingly volatile and unpredictable demand environment.

Amid evolving consumer preferences, branded e-commerce platforms are emerging as the strongest growth driver, with 33 percent of retail executives noting increased engagement on their own websites. Pointing to a rising appetite for direct-to-brand interactions, traditional brick-and-mortar stores (14 percent) and social commerce channels (12 percent) also capture a smaller share of shifting demand.

Retail Execs are Rethinking Supply Chains

Tariffs are not the only area of concern - more than 20 percent of retail executives surveyed acknowledge a lack of confidence in their supply chain's ability to withstand disruption. In an effort to strengthen resilience, many are reducing inventory, broadening their supplier base, and directing capital toward infrastructure improvements that support greater flexibility and operational continuity.

Next to these tactical steps, retail executives are also shifting their long-term focus toward smarter merchandise planning. More responsive pricing strategies (20 percent) and speed to market (14 percent) top the list of investment priorities, reflecting a push to become more agile amid ongoing supply chain uncertainty.

Retailers are Carefully Exploring AI - to an Extent

One in three retail executives is currently leveraging AI for demand forecasting, with 34 percent anticipating it will become a key driver of profitability over the next two years. While overall tech investment levels remain steady, broader adoption is being held back by limited in-house expertise, budget pressures, and ongoing questions around return on investment.

Several retail executives revealed that they are testing AI across various functions, with the most traction seen in marketing, inventory control, and pricing strategy. Yet, just 16 percent currently are using AI  for forecasting and demand, even as awareness of its strategic value grows.

Looking ahead, the retail sector faces the dual challenge of responding to near-term pressures while advancing long-term goals. For retail leaders, the focus for 2025 and beyond will be on enhancing agility, sharpening predictive capabilities, and deepening strategic planning to remain competitive in a volatile global and local market.