Sudden new pressures are impacting SMBs everywhere.
Unpredicted and unpredictable new tariffs are impacting some small and midsize businesses (SMBs) with immediate and substantial effects. Import tariffs are increasing costs on everything from raw materials to finished goods, affecting SMBs from the loading dock to the final sale. Retaliatory tariffs on exports diminish access to important markets overseas. And all this is on top of the usual challenges SMBs face in running their businesses every day.
Complex supply chains
The result is that businesses across sectors that import and export products subject to tariffs are suddenly facing extreme pressures to cut costs, and experiencing real disruption to their business models. To gain insight into this, I recently spoke with Michael Van Hagen, a senior executive at the Laufer Group, a logistics company that works with small and midsize businesses, who told me that importers and exporters are facing unprecedented chaos. He says:
“Tariffs are forcing importers and exporters to re-calibrate their supply chains and vendor networks. But it’s not easy for most companies, and for small and mid-sized businesses, it’s incredibly difficult. Supply chains are complex and often messy, so shifting production overnight isn’t possible for these businesses. If you’re manufacturing handbags in Shanghai, you can’t suddenly relocate that manufacturing to another location. It can take months, if not years, to get a manufacturing location approved, through trials, samples, quality control, and so on. And if you’re an exporter of machinery to China, you’ve invested years in building those customer relationships, so suddenly changing course and looking for new markets will take time.”
Pressure on margins
Import/export businesses are not the only ones affected. Even SMBs that sell the bulk of their wares domestically are impacted when the costs of raw materials and sub-components sourced from abroad increase. Other SMBs that sell to those companies can be impacted, as well. The effects can be significant. In the many industries where low margins are common, tariffs anywhere in the supply chain of 10-25% or more can mean the difference between profit and loss.
As Van Hagen explains further, “SMBs caught in the web of tariffs are forced to 1) absorb the additional duties, at least in the near term, which creates tremendous unplanned financial stress, 2) create strategies to communicate and pass on price increases to their customers to offset the tariffs, or 3) diversify their supplier relationships to spread their risk and preserve the viability of their businesses.”
What you can do
What does this mean to you as a marketer to SMBs? If affected industries make up a big percentage of your target market, there are several things to consider:
- If your product can help SMBs reduce costs, this is an opportunity, since tariff-affected SMBs are looking to cut costs everywhere they can.
- If your product requires a major outlay for the SMB, consider ramping up marketing efforts to non-affected industries.
- Marketing messages and content should have an extra emphasis on reducing costs.
Of course, most SMBs are not feeling the pinch of tariffs. For some of those that are, tariffs can represent a minor increase in costs. For others, the impact can be much greater. At minimum, the looming threat of tariffs is something you should have on your radar. If they impact a significant proportion of your customer base, make sure you’re adapting your marketing to show how your product or service can help minimize their effects.