Merchandising Strategies Amid Tariffs: Industry Adaptations From Q1 2025 Earnings

📈 This detailed report explores how leading companies are innovating merchandising strategies in response to tariffs, focusing on supply chain shifts, pricing adaptations, and operational agility to sustain growth in a challenging trade environment. 🌍

Deep Research

"what are different merchandising strategies being adopted in the industry in the light of tariffs"

Executive Summary

Executive Summary

This report analyzes the merchandising strategies adopted by leading industry players in response to tariffs, with a focus on supply chain, sourcing, pricing, and operational adaptations. Drawing from the most recent company disclosures and earnings transcripts of Visteon Corporation, Novanta Inc., Masimo Corporation, Terex Corporation, Air Lease Corporation, and The ODP Corporation, it identifies common trends and company-specific approaches aimed at mitigating tariff impacts while sustaining growth and competitiveness.

Key strategies include:

  • Supply chain regionalization
  • Diversification
  • Cost containment initiatives
  • Value-based merchandising
  • Enhanced operational flexibility

The report concludes with cross-industry insights and actionable recommendations for both immediate and long-term resilience in a tariff-impacted environment. 🎯

Introduction

Introduction

Tariffs have become a pivotal factor in shaping global industry strategies, directly affecting both supply chains and merchandising approaches. As tariff policies shift in response to geopolitical dynamics and trade negotiations, companies across various sectors must navigate increased costs, supply chain disruptions, and evolving market demands.

Objective:

  • Examine how major industry players are adjusting their merchandising strategies to address tariff challenges
  • Outline both tactical responses and long-term strategic positioning

This analysis offers a comprehensive view of the adaptive measures taken, setting a foundation for best practice sharing and future planning.

Tariff Landscape and Industry Impact

Tariff Landscape and Industry Impact

Recent years have seen the imposition of tariffs—especially between major economies such as the US and China—covering a broad range of goods, including manufactured components, finished products, and raw materials.

Direct impacts include:

  • Increased landed costs
  • Supply instability
  • Inventory valuation changes
  • More complex contract negotiations

The uncertainty and periodic escalation or easing of tariffs further intensify the need for agile and diversified merchandising approaches to sustain competitiveness and margins.

Key Merchandising Strategies

Supply Chain Reconfiguration

To minimize tariff exposure, companies are shifting production to regions not subject to certain tariffs (e.g., Mexico), diversifying suppliers (Vietnam, Indonesia, Malaysia), and increasing local sourcing. In-market manufacturing for local demand and customized regional supply chains are being implemented to create "tariff-proof" operations.

Production Footprint Optimization

Enterprises are relocating manufacturing facilities or creating dual manufacturing lines across geographies. For example, setting up duplicate production capacity in Europe or North America aligns supply with demand and bypasses certain tariffs. Forward inventory placement helps smooth cost impacts and supply disruptions.

Sourcing and Inventory Management

Mitigation strategies include shifting the product mix towards categories less impacted by tariffs and enhancing inventory management practices. Timing shipments, adjusting inventory levels, and selectively quitting orders that are no longer cost-effective are common to manage the financial impact of tariff-induced price increases.

Pricing and Contractual Approaches

Companies deploy surcharges, implement price increases, or negotiate cost pass-through mechanisms with customers to recover tariff-induced costs. Long-term agreements with escalation caps are being used to contain risks in sectors like aerospace.

Product and Market Diversification

To buffer against tariff volatility, firms are expanding into less-affected markets, launching differentiated and value-added products, and shifting towards value-based merchandising. Market focus is also directed toward resilient sectors like healthcare and infrastructure.

Operational Flexibility & Tech Solutions

Investments in digitization, automation, and flexible operational structures allow companies to rapidly adjust to market and trade policy shifts. Organizational changes and advanced management systems enhance agility and responsiveness.

Strategic Planning & Scenario Analysis

Given ongoing uncertainties, robust scenario analysis and detailed mitigation planning are vital. Companies develop contingency plans for supply chain reconfiguration or pricing based on potential policy changes, ensuring readiness to act once clarity emerges.

Comparative Company Case Studies

Comparative Company Case Studies

CompanySupply Chain ReconfigurationProduction Footprint OptimizationSourcing/Inventory ManagementPricing/Contractual ApproachesProduct/Market DiversificationOperational Flexibility/TechStrategic Planning/Scenario Analysis
Visteon CorporationRegional shifts to Mexico, supplier diversificationEvaluating relocation in NALocal sourcing, simplifying supply chainCost pass-through to OEMs, customer negotiationsExpansion into less-affected markets, innovationFocus on product launches, optimize global footprintActive scenario planning, monitoring
Novanta Inc.Second-source vendors, manufacturing in China/EuropeDual/duplicate lines, regionalized manufacturingSourcing rebalance, optimize inventoryPricing increases, surcharges, long-term agreementsFocus on medical/software, new product launchesCost containment, efficiency initiativesRegionalization plans, contingency models
Masimo CorporationShift from China/Malaysia, domestic expansionExploring domestic manufacturingInventory timing, product mix managementPrice adjustment, supplier negotiationsStrategic market/product focusVertical integration, flexible sales teamsScenario planning, delayed capex decisions
Terex CorporationSourcing re-balance, global supplier collaborationUS-based, USMCA facilities, capex adjustmentForward inventory, cost-effective sourcingSurcharges, price increasesFocus on resilient end-marketsDigital/automation investmentMonitoring tariff changes, flexible actions
Air Lease CorporationMinimal direct exposure, delivery planningFlexible fleet expansionDelivery/fleet timing, adaptabilityLong-term agreements, escalation capsUsed aircraft/organic/inorganic growthStrong liquidity, capital flexibilityScenario modeling for production shifts
The ODP CorporationShift sourcing to Vietnam, Indonesia, domesticInventory management, quit unviable ordersSupplier contracts, cost pass-throughValue-based merchandising, focus on low-tariff goodsAgile management systemsDaily monitoring and rapid response decisions

Company Spotlights

Visteon Corporation

  • Shifted production to Mexico (USMCA-compliant)
  • Diversified supplier base
  • Negotiated cost recovery with OEMs
  • Simplified and optimized supply chain
  • Expanded into less-affected markets
  • Ongoing scenario planning and operational flexibility ⚙️

Novanta Inc.

  • Sourcing adjustments to tariff-exempt vendors
  • Manufacturing in China/Europe for local markets
  • Long-term regionalization and duplicate lines
  • Pricing adjustments (surcharges, increases)
  • Cost containment and strategic acquisitions
  • Robust scenario analysis and permanent mitigation focus

Masimo Corporation

  • Moved production out of China/Malaysia
  • Exploring domestic sourcing
  • Tuned inventory management (timing, mix)
  • Short/long-term pricing strategies
  • Detailed scenario planning
  • Organizational restructuring for responsiveness

Terex Corporation

  • Forward-placed inventory, sourcing re-balance
  • Global supplier collaboration
  • Surcharges and localized price adjustments
  • Digital tools and automation investments
  • Focus on resilient end-markets
  • US-based/USMCA-compliant manufacturing

Air Lease Corporation

  • Minimal direct tariff impact
  • Contractual agreements shift tariff risk to customers
  • Long-term purchase agreements with escalation caps
  • Flexible fleets and delivery schedules
  • Strong balance sheet and capital management
  • Ready for organic/inorganic growth

The ODP Corporation

  • Shifted to value-based merchandising
  • Diversified sourcing (less from tariff-heavy regions)
  • Increased domestic procurement
  • Rigorous inventory management
  • Adjusted pricing with suppliers
  • Agile management systems

Cross-Industry Insights

Cross-Industry Insights

Common strategies across companies:

  • Regionalization & Diversification: Nearly all companies are moving toward more regionally based supply and production networks.
  • Cost Pass-Through: Price adjustments, surcharges, and contract renegotiations are widely implemented.
  • Product/Market Shifts: Emphasis on value-oriented merchandising and pivoting to resilient or less tariff-exposed markets.
  • Operational Flexibility: Investments in technology, management systems, and structural adjustments enable rapid responses.
  • Scenario Analysis: Proactive, detailed planning for various tariff scenarios is universal.

💡 Differences arise in contractual risk management (leasing vs. manufacturing), supply chain complexity, and the emphasis on innovation vs. cost containment.

Recommendations

Short-Term Actions

  • Rebalance Sourcing: Shift critical sourcing to low-tariff or exempt regions.
  • Review & Adjust Pricing: Implement surcharges or renegotiate contracts for cost recovery.
  • Enhance Inventory Management: Adjust inventory and shipment timing to manage cost impacts.
  • Strengthen Agility: Empower teams with tools for quick decision-making in response to tariff news.

Long-Term Strategies

  • Invest in Regional Production: Establish/expand regional manufacturing and duplicate lines.
  • Diversify Product & Market Portfolio: Expand into markets with lower tariff volatility or higher resilience.
  • Digitize & Automate Operations: Invest in advanced technology for supply chain and management systems.
  • Deepen Scenario Planning: Regularly update and rehearse mitigation plans for a range of tariff outcomes.

Conclusion

Conclusion

In the current tariff environment, effective merchandising strategies hinge on agile supply chains, proactive pricing, regional diversification, and robust scenario planning. The examined companies demonstrate various adaptive measures that balance short-term mitigation with long-term resilience-building.

🚀 As tariff landscapes continue to evolve, continual investment in operational flexibility and strategic foresight will be essential for maintaining competitiveness and sustaining growth.

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