Bracing for Tariff Fallout: How Retailers Can Prepare for Rising Costs
The global semiconductor chip shortage has already posed challenges for many industries in the past, and with the introduction of heavy tariffs on chips imported from Asian manufacturers, the situation is expected to worsen. New proposed tariffs are scheduled to be enacted on April 2nd, adding urgency to the already strained supply chain. Retailers, in particular, need to closely monitor the potential impact these tariffs may have on the cost and availability of essential hardware, including point-of-sale (POS) systems, computers, and registers. To mitigate potential disruptions, retailers should consider fast-tracking critical hardware replacements now, rather than waiting for the situation to worsen. With the looming tariff deadline just around the corner, it’s crucial for businesses to plan ahead. With technology at the core of modern retail operations, it’s essential to proactively prepare for these potential challenges.
“Regular price increases were extremely common during Covid with all the supply shortages. As the supply chain recovered, the frequency of those price increases drastically decreased. These tariffs are causing the first uptick I’ve seen since then. The worst part is the uncertainty. The constant back and forth on tariffs makes it very difficult to predict what is going to happen with pricing. This could result in price increases at any time without much, if any, notice.” – Luke Hersey, Fulfillment Specialist at Retail Control Systems.
Some suppliers have already begun raising prices due to tariff concerns. HP, for example, increased prices on its hardware, including POS terminals, mPOS terminals, workstations, and workgroup servers. Zebra has also announced a planned price increase at the end of April, although the details are still uncertain and will depend on how tariffs evolve. This could potentially affect products like barcode scanners, label printers, and mobile inventory computers.
How Chip Tariffs Could Drive Up Costs
Chips are integral to nearly every modern electronic device. Whether it’s the smartphones we use, the tablets in our offices, or the POS systems powering retail operations, semiconductors are at the heart of it all. These chips are responsible for the functioning of everything from checkout systems to inventory management and customer loyalty programs. When the chip supply chain is disrupted, costs can rise across hardware-dependent sectors.
“The majority of semiconductor chips are produced in Asia. These semiconductor chips are the base of pretty much all electronic devices. Under the previous administration, the CHIPS and Science Act was passed to start producing more domestically, but the current administration has voiced interest in defunding that act. The potential loss of the CHIPS act could increase our dependence on imported chips. Combining that with the already implemented tariffs on China and the possibility of additional tariffs still to come could result in significant increases in the price of electronic devices.” – Luke Hersey, RCS.
With the imposition of tariffs on imported chips, businesses may see higher prices for essential technology—meaning retailers could face steeper costs for new registers, computers, and other necessary equipment. Retailers will have to weigh the benefits of upgrading their systems against these increasing costs. For some, these price hikes might delay their ability to keep up with the latest technology or expand their operations. Additionally, the longer these tariffs persist, the greater the chance that retailers will face a backlog of orders, as demand for hardware outstrips supply.
Longer Lead Times for New Units
In addition to price hikes, the disruption caused by chip tariffs is likely to increase lead times for new units, particularly for high-tech equipment like POS systems. Retailers looking to upgrade their technology or expand their hardware inventory may face delays, leading to potential operational inefficiencies. For instance, new POS systems could be back-ordered, and essential hardware upgrades might take longer to procure, leaving retailers scrambling to fill gaps in their technology infrastructure. Long lead times could make it challenging for retailers to meet customer expectations, especially in an environment where quick, seamless service is critical. While 2-3 month lead times were fairly standard during COVID, some items experienced delays of 6 months or more, with 2 months typically being considered a long lead time under normal circumstances. During the pandemic, many manufacturers raised prices multiple times per year, with increases of 5% to 10% being quite common.
How Retailers Can Prepare
Retailers facing these challenges should take proactive steps to prepare for the potential impacts of chip tariffs and supply chain disruptions. It’s crucial to assess current technology needs, plan for possible delays, and consider alternative solutions to mitigate rising costs. By staying informed and anticipating supply chain issues, retailers can ensure their business remains adaptable during uncertain times. Partnering with trusted experts or exploring available resources can help businesses navigate these disruptions effectively and develop strategies to minimize their impact.
Proactive Planning for Technology Upgrades
Retailers facing the potential impact of chip shortages and tariffs can benefit from proactive planning. Forecasting future technology needs and securing essential hardware ahead of time can help businesses lock in current prices, avoiding the pressure of rising costs as the situation develops. By preparing early, retailers can ensure they are well-positioned to handle any disruptions in the supply chain.
“This will depend on the specific customer, but POS terminals are likely the most critical devices to prioritize for upgrades, especially with the impending end of life for Windows 10 in October. Devices such as the NCR XR5 and XR7, Aures Yuno, Sango, and Jazz, and Touch Dynamic Acrobat, which are older standard terminals no longer sold, should be replaced to ensure smooth operations moving forward.” – Luke Hersey, RCS.
A proactive approach to this challenge is conducting a hardware lifecycle audit. Retail Control Systems (RCS) offers this service to help retailers assess their current technology and develop a strategic plan for hardware replacement. By categorizing hardware into critical, important, and non-essential groups, businesses can prioritize upgrades based on urgency. This tiered strategy ensures that the most pressing needs are addressed first. A well-thought-out purchasing strategy from RCS can help mitigate the effects of chip shortages, preventing delays and minimizing the risk of increased costs when sourcing new equipment.
Emergency Solutions
Retailers can explore temporary solutions or upgrades to extend the life of their current systems. If facing delays in receiving new hardware, businesses can implement emergency solutions such as hardware optimization or software updates to improve the performance of existing equipment. These solutions can help maintain smooth operations despite supply chain disruptions, ensuring that retailers can continue serving customers without interruption.
Alternative Options
As global chip shortages and tariffs impact international supply chains, retailers should also consider alternative solutions to meet their needs. Cloud-based options, for example, may be less affected by hardware delays. These systems offer flexibility and scalability, enabling retailers to access the latest software updates without relying heavily on physical hardware. Exploring such alternatives can help ensure businesses remain functional even if supply chain issues persist.
Stay Informed
Retailers should keep themselves informed about industry developments and how tariffs and shortages might affect their operations. One of the key advantages of partnering with Retail Control Systems (RCS) is their unwavering commitment to keeping you informed. RCS’ Account Managers collaborate closely with you, providing timely updates and strategic guidance to help you stay ahead of potential challenges. They also conduct Quarterly Business Reviews to uncover new opportunities and identify areas for improvement. This proactive approach ensures you’re always equipped with the insights needed to make the most informed decisions for your business.
Streamlined Operations and Efficiency
Optimizing operations is critical for managing disruptions. Integrated systems that streamline functions like inventory management and customer engagement can help retailers maintain smooth operations even during challenging times. RCS provides end-to-end solutions designed to optimize the efficiency of your operations. With RCS, you can integrate inventory management, customer loyalty programs, and other essential functions directly into your POS system. This level of integration minimizes the need for multiple, separate systems, allowing for smoother operations and better customer service. Even in the face of supply chain disruptions, the right technology partner ensures that your business can continue to function seamlessly.
Conclusion
Heavy chip tariffs are poised to affect retailers that rely on technology for daily operations, particularly those dependent on point-of-sale systems, inventory management software, and other essential hardware. While these tariffs are an unfortunate reality, taking proactive measures now—such as planning for upgrades, maintaining an emergency fund, and exploring alternative solutions—will help mitigate their impact on your business.
Retail Control Systems (RCS) is here to guide you through these challenges and ensure your operations continue to run efficiently, no matter what the future holds. By staying ahead of the curve, being adaptable, and having the right support in place, you can safeguard your business against the disruptions caused by chip shortages and tariffs. RCS is your trusted partner in navigating the complex world of retail technology, and they’re committed to helping you emerge stronger, no matter what challenges arise.
