PPB September 2018

short term. People are reacting without clearly understanding the impact on raw materials and their business model.” Chuck Fandos, CEO of business services company Facilisgroup, says he is concerned about what happens to pricing as the issue goes forward. “Will it change item by item or across the board?” he asks. “The short answer is that nobody knows. We know prices will go up but not in what categories. I wouldn’t be surprised if, with this uncertainty, we saw more suppliers stop publishing year- long pricing, and reverting to the web and updating their prices as things change. “There are more questions than answers. And one thing that will be really hard for suppliers is that they have a base line built on years of knowing where their competitors are, and the cost and competitive structure of the marketplace,” Fandos says. “As this is brand-new to everyone, they’re going to be making decisions based on pricing information without knowing what their competition or the marketplace will be doing.” Ira Neaman, founder and president of Avenel, New Jersey, supplier Vantage Apparel, says distributors that sell products across all categories need to be careful with outstanding quotes and protect themselves with a provisional statement that says pricing may be adversely affected by future tariffs. “And, suppliers need to be aware of what is happening in their individual category if tariffs are likely,” Neaman adds. David Klatt, CEO of Tampa, Florida-headquartered supplier BIC Graphic North America, foresees a significant impact of the tariffs on the industry as a whole. He says, “We won’t know the impact to our own product assortment until the USTR evaluation is complete, but unfortunately, we do know that BIC Graphic will have to pass on a price increase to our customers as a result of these tariffs. This impact will affect all products, not just promotional items, so consumers purchasing similar products like bags, etc. should see these changes even at the retail level.” He notes, however, that nearly 50 percent of BIC Graphic’s order volume is produced in the company’s U.S. facilities and those products will not be affected by tariff implications. “This availability will provide options for distributors whose clients are budget-conscious and who may be dealing with increased costs in other areas of their business. Proactively, we already source product from other areas—South Korea, Vietnam, India, etc.—which also provides additional item options that will not be impacted by this tariff implementation.” With so much uncertainty about how the tariffs will play out, the most concrete, definitive step that many companies can take is to communicate with clients and establish expectations of how tariffs could affect prices going forward. Tom Goos, MAS, president of distributor Image Source, has found that while his clients are aware of the tariffs, they aren’t clear on what they cover. He says, “The tariff lists are very product specific right now, so at this point the issue is very narrow. But they’re in the news, and we’re not getting a lot of pushback, just concern. I think people understand the political environment and what’s happening there. “We’re communicating with our clients in advance—letting them know, for example, that if they’re placing a large backpack order there might be a tariff. Alongside educating our clients that this is something that they should expect, we’ve been looking at supply chains outside of China and how that relates with labor, and whether it’s an effective channel in terms of pricing, quality and delivery.” Goos expects the tariffs to be felt all the way through the chain, from the client up through the suppliers. He adds, “I wasn’t sure they were going take on the momentum they have, and it now seems to be skyrocketing. For me, it’s about educating my sales team on the issue, the questions they need to be asking and what they should let the client know.” Jeff Lederer, president of Prime Line, part of the alphabroder family, says, “The way we look at that is to be proactive and prepare. We’ve been indicating to customers on recent quotes that it’s a dynamic that we’re all trying to work through. We want to be fair and open, and be partners with our customers in this. “Regarding how this will impact our general purchasing, it would be on goods in the back 82 | SEPTEMBER 2018 | THINK