Why Black Friday discounts could be stingier this year

Businesses are facing a tough decision this holiday season: Should they run a Black Friday promotion and risk seeing their profits drop, or should they charge full price and potentially turn off buyers? The answer to this question is becoming increasingly complicated due to sharply higher U.S. tariffs on imports, which are raising costs for many retailers.

One such business feeling the impact of these tariffs is Yun Hai Taiwanese Pantry, a New York City-based retailer that imports products from businesses and farms in Taiwan. The founder, Lisa Cheng Smith, has seen her costs jump by 20% to 50% this year due to the tariffs on imports from Taiwan and other Asian countries. In previous years, Yun Hai has offered a 15% Black Friday discount to drive holiday purchases. However, this year, Cheng Smith is uncertain how much of a discount she can afford to offer given the higher operational costs resulting from tariffs.

The decision on whether to offer discounts or not is crucial for small business owners like Cheng Smith. The holiday season from October to December accounts for a significant portion of their annual sales, making every day high stakes. Retail experts predict that higher tariff costs for retailers could result in fewer and less generous Black Friday discounts this year. While discounts are a tradition on Black Friday, retailers may need to be more selective in their discounting strategies.

Dan Peskorse, whose company Upstream Brands sells merchandise on e-commerce platforms, has also had to rethink his Black Friday strategy due to higher tariff costs. In previous years, Upstream Brands offered discounts of up to 30% on their products, but this year they have decided not to offer across-the-board discounts due to the impact of tariffs. Peskorse has taken steps to mitigate the effects of tariffs, such as raising prices and absorbing extra costs, but eliminating discounts is the last resort to protect the business’s profits.

The average U.S. tariff rate has increased significantly this year, reaching 16.6%, leading to higher prices for imported goods as retailers pass on some of the costs to consumers. This, coupled with a slowdown in holiday spending by lower-income consumers, has created a challenging environment for businesses this holiday season. Consumers are pulling back on holiday spending, prioritizing essential purchases over discretionary spending.

Discounts remain a powerful tool for incentivizing consumer spending, especially during the holiday season. However, retailers must carefully navigate the balance between offering discounts to attract customers and preserving their margins in the face of higher tariff costs. The holiday season is crucial for retailers, and getting their pricing strategy right is essential to ensure a successful selling season.

In conclusion, businesses are facing a complex decision this holiday season due to higher tariff costs and changing consumer spending habits. Black Friday promotions may look different this year, with retailers being more strategic and selective in their discounting strategies. Despite the challenges, retailers must find a balance between offering discounts to attract customers and maintaining profitability to make the most of the holiday season.