WASHINGTON, Nov 26 — For Matt Hassett, founder of New York-based sleep wellness brand Loftie, the year-end holiday rush has always kept him on his toes.
But this time, it has turned chaotic as import tariffs on China, from where Loftie sources its sunrise lamps and phone-free alarm clocks, disrupted the supply chain.
"It has been very difficult to prepare. We have sold down to extremely low stock levels — we probably have about 10 per cent of the inventory we need," he said earlier this week.
United States (US) President Donald Trump's tariff flip-flop on goods from China, a lifeline for US retailers, has forced small firms such as Loftie to choose between paying steep levies or finding new suppliers at even higher cost.
Delayed orders, low on stock
When Trump threatened tariffs as high as 180 per cent on Chinese imports in mid-April, Hassett explored shifting production to Thailand, where duties were lower.
But when the rates on China were later cut to 20 per cent, the alternative factories with 20 per cent higher production costs proved more costly than the tariffs.
In the end, Hassett stuck with his Chinese manufacturer. But the scramble delayed orders, leaving him dangerously short of stock ahead of the year's busiest shopping season.
November and December typically account for a third of US retailers' annual profits.
Other small business owners are also struggling to balance inventory and supply changes, risking low stock levels in warehouses and on shelves during Black Friday.
Brooklyn-based Lo & Sons, which sells travel bags and accessories online, scouted up to eight factories between April and June in multiple countries, including India and Cambodia, before returning to its long-time supplier in China.
"On top of costing us a ton in tariff payments, the uncertainty prevented us from placing purchase orders. Now we are sitting on lower-than-ideal inventory," said its chief executive officer (CEO) and co-founder Derek Lo.
Big retailers easily absorb shocks
Big-box retailers such as Walmart and Costco can absorb supply jitters more easily than smaller firms because of their scale.
Operating margins for small retailers with total assets less than US$50 million (RM206.80 million) have plunged to -20.7 per cent, according to business analytics provider RapidRatings, leaving 36 per cent of them at a high risk of bankruptcy compared to 12 per cent of large retailers.
"For the first time since the pandemic, average profit has dipped into negative territory... disproportionately impacting smaller companies that lack the scale and resources to absorb these pressures," said RapidRatings executive chairman James Gellert.
Cutting jobs, dropping products
Uncertainty from tariffs led some businesses to place large holiday orders to get ahead of duties, but they risk being stuck with unsold items amid increasingly fragile consumer confidence.
More than a dozen small US retailers that Reuters spoke to also flagged significant cost increases, prompting some to cut jobs or trim offerings to save cash. The ripple effect of supply-chain disruptions can be seen across categories.
New York jewellery brand Haus of Brilliance shifted some production to Thailand and the US to offset around 50 per cent tariffs on India, its main hub.
The company has just completed its first production run in Thailand, and founder and CEO Monil Kothari hopes it will arrive in time for the holidays.
But "we will have shortages this holiday season and into next year", he said.
Loftie's Hassett also has a shipment landing in time for Black Friday, but he has missed out on sales.
"We could've made 50 per cent more sales if we had enough inventory," he said.
