The Strategic Moves Small Brands Are Making to Tackle Tariffs
As recent tariff regulations reshape the landscape for many fashion brands, small and independent labels find themselves navigating uncharted waters. In a world where business dynamics can shift overnight, brands like Stockholm’s Lisa Yang and London-based Miista are adopting innovative strategies to maintain their marketplace presence and profitability.
Adapting to Change: Lisa Yang’s Bold Move
Since Donald Trump introduced sweeping tariffs last month, Lisa Yang has rapidly refined its strategy by integrating its business directly into the US market. Chief Executive Samuel Stenberg explains, "By bypassing the complicated shipping process from Belgium, we can save on customs duties, which are now levied based on the price of the goods instead of their market value."
This shift not only addresses the increased customs duties—which have been reduced to 30% as of Monday—but also simplifies administrative burdens. With 20% of their sales coming from the US, Stenberg recognizes the compelling business case for this pivot. "Now, there is," he asserted.
The US accounts for 20% of Lisa Yang’s sales.
Challenges and Opportunities in the Fashion Sector
Trump’s volatile tariffs, which are presently in a state of flux, have plunged companies across the fashion spectrum into disarray. Independent brands, particularly those with limited diversification in their supply chains, are particularly vulnerable. These companies operate on thin margins and often rely on shoestring budgets, making them ill-equipped to absorb increased costs.
Joanna Rangarajan, managing director at Alvarez & Marsal, advises that "independent brands must proactively model different pricing and supply chain scenarios." Costly mistakes are not an option; brands must be prepared to act, not just react.
Creative Solutions: Miista’s US Fulfillment Focus
For brands like Miista, which generate over 40% of their revenue in the US, adapting to tariff pressures is critical. They are focusing on expanding their US warehousing operations to mitigate potential duties. Pablo Villasenín Sánchez, Miista’s business development director, emphasizes the urgency of this maneuver: "We’re trying to move fulfillment to the US to avoid surprise duties. The uncertainty is just too great."
Miista gets over 40% of its revenue from the US market.
Navigating Tariffs: A Cost-Benefit Analysis
Miista faced yet another hurdle when Canada imposed a 25% levy on US imports, thwarting plans for a Toronto pop-up stocked from New York. Undeterred, the brand went ahead anyway, opting to absorb the costs for the sake of consumer connection.
Conversely, Freja NYC, which sells 85% of its inventory in the US, has opted for front-loading inventory to shield against tariffs. "We have stock in our US warehouse until Black Friday," shares founder Jenny Lei.
Freja NYC founder Jenny Lei at the factory in Guangzhou, China.
Cost Mitigation Strategies Amidst Uncertainty
As uncertainty looms, brands are exploring creative ways to cut costs. Andrew Chen of 3sixteen reveals their shift to virtual meetings and reduced photoshoot expenses. "This situation has forced the brand to get more creative," he notes.
"Reassessing costs and protecting margins are vital," adds Rangarajan. "Once customers leave, it’s incredibly challenging to win them back."
The Pricing Dilemma: Should Brands Raise Prices?
In addition to adapting supply chains, brands face the pressing question of whether to increase their prices. While larger luxury brands can often absorb such costs without impacting their clientele, smaller brands, particularly those in the affordable luxury segment, must carefully consider their options.
Freja NYC’s Lei understands this dilemma all too well. "We’re an option for young consumers who want quality without a $2,000 price tag." If price hikes become necessary, she aims to provide customers with added value—like elevated packaging—alongside increased costs.
Looking Beyond the US Market
As brands evaluate their positioning, many are recognizing that they may need to pivot away from the US market entirely. “If tariffs force us to shrink our US exposure, so be it,” expresses Stenberg.
3sixteen already makes about half its goods in the US.
Brands like Miista are strategically targeting markets in Australia and the Middle East, while Freja NYC plans to expand into regions like Canada and Singapore. As Rangarajan notes, expanding into markets where brands already have some foothold is crucial for minimizing risk and maximizing opportunity.
Conclusion: Navigating Future Challenges with Resilience
In this unpredictable landscape, brands must adopt an agile mindset, exploring innovative strategies to mitigate costs and protect their customer base. As they adapt to ongoing changes, the resilience of these small brands will determine whether they thrive or simply survive in the face of economic challenges.
By staying proactive, leveraging creative solutions, and remaining connected to their core consumers, these brands are not just navigating tariffs—they’re redefining their futures.
