Price Elasticity Forbes 6.2MBWith additional threats of tariffs looming heading into the holiday season and murmurs of a coming recession thanks to an inverted yield curve, many retailers and brands have been fretting over whether to raise prices to offset the rising cost of goods imported from China. So far, only a quarter of retailers have said they plan to increase prices this holiday season because of tariffs, according to an Internet Retailer/Bizrate Insights survey published in August 2019.

As an example, Everlane is grappling with the need to increase prices to offset tariffs according to a recent New York Times article. According to the story, Everlane retails their cashmere sweater at $100 and “if Everlane wanted to maintain its current profit margin of 54 percent for the sweater, it would need to increase the price by more than just the increased duty charge, which is how it arrived at $124. Though each individual top would bring in more dollars in profit, Everlane assumes that increasing the prices would lead to fewer sales, which is part of why it focuses on preserving the margin.”

The Executive Vice President of Columbia Sportswear, which manufactures shoes, jackets, gloves and other outerwear, is also mixed on increasing prices, particularly since he believes that the tariffs may be short-lived. “The last thing we want to do is charge people more because of some policy that may be temporary,” he told the Washington Post. “Most trade policy gets developed over a long time and you can plan around it. . . . In this case it’s changing day-to-day. It’s impossible to plan or know what to do.”

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