Furniture tariffs, luxury shopping vacations and how consumers spent this summer

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0:56Hey everyone, welcome to the Modern Retail Podcast, our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco. I'm here with co-host Melissa Daniels. How are you this week, Melissa? I'm doing well. Congratulations to Travis and Taylor. I cannot wait for all the wedding related Tavis content we're about to get. Sorry, what? Hold on. What is Tavis? Oh, Tavis? It's the portmanteau between Taylor and Travis. Tavis. Girl, I don't... Okay, I'm just going to move on. Okay, it's fine. Our inboxes are already full of brands getting on the bandwagon.

1:42But today we have other topics to talk about. So later on in this episode, you will hear a recap of what consumer spending this summer has been like with Melissa, who interviewed Sonia Lipinski of Alex Partners. But first, we have a couple of tariffs-related stories this week. So first up, we're going to talk about President Trump's announcement that higher tariffs on furniture are coming very soon. And then we're going to talk about another tariff story, which is that this one I thought was really interesting. Luxury shoppers are jetting off to Europe to shop for designer and luxury goods. We'll get into that.

2:27But yeah, first up, let's talk about furniture. Melissa, this is a space you cover pretty heavily, so I'm sure you'll have a lot to say about it. But yeah, basically, this past week, Trump posted on Truth Social that you are going to see tariffs, potentially higher tariffs on furniture coming in the next 50 days. Yeah, a lot going on there, but we don't really know much beyond that, actually. Yeah, I mean, it's interesting. The president said this would be tariffed at a rate yet to be determined. And his administration is conducting an investigation into the industry, which, you know, I don't know how much investigating there is to do.

3:08We know that a lot of furniture comes from overseas, particularly China. However, we also know that there are companies who do tons of manufacturing here. North and South Carolina in particular are places where we see a lot of manufacturing of furniture. Trump said that in his post too, that higher tariffs will bring the furniture business back to these states that have a presence in that industry. But if you talk to the brands who operate there, they know it's not that clean cut. It's just not that cut and dry. Yeah. And I guess I was a little confused because I thought that these companies are already, you know, dealing with tariffs, just like the flat rate of blanket tariffs that everybody's paying who are importing from these places.

3:57But this also came on the heels of the announcement that they're applying more tariffs on steel and aluminum. and that's going to impact household appliances. So everything from like refrigerators, washing machines, laundry machines, microwaves, all of that. So it feels like a little bit of a double whammy, but because of the touch and go nature of tariffs this year, I guess I'm kind of like, well, we'll see what this actually is because we never really know and things are constantly changing. Right, and it's also unclear, Is this just saying specifically finished furniture products that are coming in?

4:39Or is this going to affect people who maybe are just importing the upholstery for their furniture or certain components for their furniture, which, as you mentioned, are already being hit by tariffs? So there's a lot of wait and see. But, you know, it would be a big effect. the U.S. imported about$28 billion worth of furniture, according to U.S. International Trade Commission data for 2024. So it's not a small amount of the furniture that's sold in the U.S. that comes from places like Vietnam, China, Malaysia, Taiwan, Canada, Italy, Mexico are also places where we get furniture from. But I don't know.

5:18I feel like the brands I've talked to about this this week are still in that wait-and-see approach. They're certainly not making any changes off of a true social post at this point. I think we've all learned that these things can change on a dime. And so best to not, you know, change your business practices based off of a social media post. Yeah. So some of the countries that will obviously, that this will hit, you know, are China, Vietnam, Malaysia, Canada, Italy, Mexico, Taiwan. Like these are the countries that we import the most furniture from. And so I guess this is a good time maybe to talk about what are the brands that are going to potentially be impacted if this does go through.

6:04And that, you know, the big question mark is really for Wayfair, it seems like, because their stock tumbled the second this announcement happened. But then, you know, we'll also talk about, I mean, obviously, the U.S. has a really robust made-in-the-U.S. furniture industry. So some are actually a little bit more insulated. But yeah, what are your thoughts on Wayfair, which is already struggling right now? I mean, this comes at a pretty bad time for them. Yeah, I mean, I think Wayfair's response to tariffs up to now has been very much, we have a diversified supply chain, so we're able to weather this.

6:40I think they also feel like they can benefit from a trade down as consumers sort of feel the tariff pressure and prices go up in higher ends. But if there is a big tariff specifically on furniture that's imported, you know, there's no way that doesn't hurt Wayfair and its suppliers who are bringing furniture into the country, right? So definitely one to watch. But, you know, beyond Wayfair, RH, otherwise known as Restoration Hardware and Williams-Sonoma also saw their stock drop. So I think you'll find that analysts see this having a potential effect across the industry. Yeah, I mean, a lot of companies have already tried to diversify their supply chains to get ahead of the initial tariff announcements that we had back in the spring.

7:30And those are things that take a long time. You're not necessarily seeing the full effect of that yet. In April, RH announced it shifted a lot of its China production to Vietnam. It also moved a portion of its Chinese production to its North Carolina factory. But again, I think just moving some production to the U.S. doesn't insulate you from tariff costs completely because of, A, components that you have to get that are still going to be affected by tariffs, and B, this funky overall macro that we find ourselves in where people are being very careful on how they spend. Yeah, because you've also got the lumber and timber tariffs that were announced back in the spring too.

8:11So yeah, no matter what, I think if you're a furniture maker, you're probably going to be hit one way or another. But then you've got, you know, those, the made in the US players, like Lazy Boy and Ethan Allen, manufacture the majority of their stuff here. So their stock did not take a hit. Actually, I noticed some of them even finished a little bit higher that day. So yeah, obviously the market is watching pretty closely. But, you know, you've also written about how this is basically the latest hit in a series of challenges that furniture brands are facing. There's a lot of headwinds that have been hit with this year.

8:52What do you think, Samar? Yeah, the furniture and housewares industry has already kind of been navigating some challenges, particularly caused by a slower and stagnant housing market. When people aren't buying new homes, they're less likely to have homes to furnish, right? And even though people do renovate and update their spaces from time to time, nothing gets the furniture industry more excited than a housing boom. And that's just not happening in most parts of the country right now. And then again, you know, it's this overall macro where there's just a drop in demand for big ticket items and people being more tight with their budgets.

9:27So the furniture industry is not, it's not doing poorly. Like, I want to be clear, you know, when you look at what spending is in the monthly Census Bureau advanced retail stats and things like that, like it's been fairly level. It's not like we've dipped below, you know, where we were a few years ago or pre-pandemic. Like, we're still technically up on spending in this area. It's just not seeing the big up and to the right gains that they'd like to see. Yeah, I think, I mean, this is pointing to the obvious, but the reason that this feels like, you know, a slowdown, quote unquote, is because we're comping to those couple of years during the pandemic when this industry just saw a huge explosion.

10:11Everybody was, felt like everybody was updating their entire house. And so from there, you know, I think coupled with people pulling back on spending and probably not needing more new things, furniture, whatever it might be. This is why we're seeing this, what feels like a slowdown. So I think tariffs on top of all of that is worrying. Yeah. I mean, we'll have to wait and see exactly what these higher tariffs are going to look like. You know, reminder that the tariffs on China and Vietnam are already at 10 % and 20 % respectively. So anything on top of that is going It'll be hard to swallow. But let's move on to the next story of the day, also tariff related.

10:55And that's how tariffs on luxury goods are prompting wealthy shoppers to head to European destinations like Switzerland, France, and Italy to do their shopping. This is not something I personally would do, but I'm very excited to hear more about the people who are. Yeah. Yeah, I know, I wouldn't say firsthand, but I am pretty familiar with this process. So I guess I can speak to it a little bit. Yes, educate me. But, you know, this is, so CNBC had the story out this week, which is basically like a lot of wealthy Americans are finding this quote unquote loophole by, you know, kind of cushioning some luxury spending into their vacation time while they're, you know, jetting off to European cities.

11:41And so this practice has been around for years, to be clear. Like people have always bought designer goods while they've been abroad because, you know, there's a couple of things. Not only is the, you know, local market pricing lower over there than it is in the U.S., but then you also have the benefit of getting your VAT or getting like a tax rebate back when you return. Of course, you know, you are supposed to declare these at customs when you reenter the country and pay the actual duties. And now in this case, whatever tariffs apply. But that's kind of a, I don't know, a lot of people do, you know, kind of go through it without declaring it, which you could get in trouble for.

12:23This is not an endorsement, but I know people do do it. So, yeah, they save, you save a lot of money if you're buying like a Chanel bag, which is already thousands of dollars. But then, you know, in the last couple of years, people have been traveling abroad and saving a little bit of money on all different things because we've got favorable exchange rates, like the dollar to the euros are pretty decent right now. And so that trend kind of went into overdrive. Even things like, speaking of Taylor Swift, I know there was a lot of reports of Americans going to European cities to go see Taylor Swift.

12:59And Beyonce, I actually met somebody who went to see her in London because it was literally still cheaper to get tickets there. And like probably much better seats, even with the travel costs altogether. And, you know, you get a vacation out of it. So it was kind of like an experience. Um, so yeah, this trend has been kind of like burgeoning in the background, but now you've got tariffs on these luxury goods, uh, that are hitting pretty soon, um, or in some cases have hit. Uh, so yeah, now you've got people planning like entire trips around it. I don't know what your thoughts are on that. Sorry, that was a long winded answer.

13:35No, I, I mean, you're more of an international traveler than I at this point, I think. So I defer to your expertise. I will say, though, I think shopping on vacation is really fun to do. You know, and if you were planning a fancy trip to somewhere, you know, like France or Italy, where you knew you could score some great designer items while you're there and have that wonderful shopping experience of going into, you know, a flagship product. Like, what a wonderful day. You know, I could see it being really fun to do this. Oh, yeah. I mean, it's definitely part of the experience, too, right? Like I have friends and family who specifically want to go to like the Dior store to buy a Dior bag and you get kind of like the Parisian experience.

14:19So it's all part of that. But again, we're talking about, you know, luxury items here. But I think I guess I thought this was interesting because there's like a little bit of like a cottage industry that's also forming around this. So CNBC talked to like a travel advisor who's been like booking these shopping trips for wealthy clients. So I think, for example, she said that obviously Switzerland is a big destination. You know, if you're going skiing, she's booking them some sessions at like Rolex or Patek Philippe. So, you know, you can get yourself a luxury watch while you're there. And then, of course, if you're going to like, you know, France or Italy, you're probably heading to like, yeah, like a Dior or Maz Prada type of designer.

15:07And so, yeah, it's this is going to be a really interesting. And I guess my takeaway is that I was like, wow, that's how you know that it's pretty bad, is that even the uber wealthy are like, wait, I can save a couple thousand dollars on this. Yeah. I mean, I think that's maybe the most interesting underlying aspect to this conversation is that, you know, no one is immune to the effects of tariffs, right? It has this entire, it really casts an entire shadow on the whole economy, no matter what level of spending you're at. And I talked to a lot of folks who, you know, concur with me that everyone loves a deal.

15:42It doesn't matter how much money you have. Everyone loves a deal. If you can get something for less, you do. This is just how money management works. And I think people who have a lot of money sometimes know that better even, right? Because they are careful with their dollars in that way. But in the case of booking a European vacation so you can enjoy your designer bags, I mean, more power to you. I'm just going to try to make it to Dallas for the Portland Leather Goods opening at the Galleria this year. You know, yes, we all lead very different lives, obviously, as consumers. But as we spoke about on last week's live show.

16:21But, you know, speaking of spending, actually, we also have our featured segment for this week, which is you and Sonia Lipinski from Alex Partners. You guys spoke about just what spending has been like this summer, right? It's been very like up and down, I feel like. So I'm excited to hear it. Yeah, it was a really interesting conversation. We talked about some of the pull forward that we saw earlier in the summer and how kind of brands responded and how they're really looking ahead to holiday. I mean, forecasting is really hard right now. But I think looking at consumer summer spending habits kind of tells us a little bit about where people are at.

16:58And basically that, yes, people are still spending, but it's going to be more drawn out and it's going to be much more highly considered. So Sonia is a real expert in this space. She has a really strong retail background and works with tons of great brands. So yeah, I'm excited for folks to hear this one. Great. You can listen to it after the break.

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18:32Between the vacations and pool parties, one thing that we all did a lot of this summer? Shopping. According to the latest data from CNBC and NRF poll, total retail sales, excluding automobiles and gasoline, were up 1.45 % seasonally in July. Total sales are up 4.83 % year-over-year for the first seven months of 2025. And NRF also expects this year's sales to hit$5.42 trillion, which is somewhere between 2.7 % and 3.7 % where it was above last year. You know, we keep hearing about how hard it is right now, and that's very accurate with everything still going on with tariffs, employment, and a tough job market, and just the overall economy feeling somewhat precarious, but people are still spending.

19:22So that tells me that behind those headline numbers, there's a much more nuanced story going on here. People are not only changing how they shop, but what they buy and when, how often, and from who. So to help me unpack all this today, I have Sonia Lipinski of Alex Partners. Sonia has two decades of global operational experience consulting in the retail and fashion world, talking to experts about how to make their businesses work. So we're going to get into the state of the consumer this summer and how brands responded. Sonia, thank you for joining the Modern Retail Podcast today. So happy to be here, Melissa.

19:58Thank you. All right. Well, let's get into it. you know, talk to me a little bit about what you're seeing and your perspective on the state of consumer spending this summer and any sort of key factors that you see changing people's behaviors. So it is interesting, the data that you cited, because we have this feeling out there that the economy has been so challenging. There's been so much disruption, so much uncertainty. And yet we see in the data that the consumer is still out there spending. So we do have to scratch our heads and say, what's going on? And what we see is we're working with retailers and brands across the country and even internationally, but really focused in the U.S., is that the consumers got some different behaviors that we're seeing happening.

20:40So one of the things is, though, they are feeling the pressure of the macro economy, of all of the inflation we've been talking about for months and months, and they are trading down a lot. So we're seeing a lot of the more discount retailers, some of the mass retailers, off price, really doing well and disproportionately well compared to others in kind of the macro industry. The other thing, though, is that, you know, we've seen a lot of sales and promotions, and customers more than ever are really looking for a deal. So it's kind of interesting. We do a lot of consumer surveying and a lot of studies.

21:17And last year, about this time, we launched our Consumer Sentiment Index, and we asked consumers, what's really important when they're shopping across different retail sectors. And, you know, really it was focused on mostly fashion, apparel, footwear, those kinds of discretionary buckets. And, you know, across many of the sectors, if we take out luxury, we take out some of the higher end technical and athletic apparel. Otherwise, consumers are looking for the best deal and they're looking for value in purchases. They're looking for that kind of price and quality and value equation. I think when we relaunch this fall, which we're doing right now, I expect that we're going to see a shift where that best deal rises above all across all the various sectors in these discretionary buckets.

22:05That's what we're seeing out there. That is so interesting to me, because yeah, I think we've always sort of operated under an assumption that there are customers out there who are willing to pay more for something, pay a full price if they feel that it works. But maybe we're starting to see that shift a little bit where some of those folks are coming down to, well, maybe if there's something that works just as well or serves the same purpose but is a lower price, I'm going to go for that. Yeah. So it's interesting. I think that's generally the case. And then there's always variations depending on how you slice it, right?

22:41So we do a lot of work in the footwear industry. And we launched our back to school footwear survey just this July. And so now we're starting to pick up on some of that real time summer consumer and what they're doing. And from that little slice, we had 78 % said that the absolute lowest prices were the most important factor causing them to shop and to purchase footwear. It was up from something like 70 % slightly up from last year, but it really was a meaningful stat in itself. But the one thing I found interesting is that although I think it was 54 % said they would buy cheaper brands, so it's this whole trading down effect, there are still some loyal brand followers, particularly in the footwear space.

23:32So 54%, they would trade down, but it was almost 49 % said they would actually buy less, but make sure they were buying the brands that they wanted. So every time you've got some big declarative statement, and we all like to make them, you know, and media likes to make them, there's always something more to it. So we could just say everybody's trading down, everybody's trading down. But what we really see is that brand still matters. Right, right. And it's going to vary based on the category even among one personal consumer and in one household, right? I mean, there are certain things that even I know I'm willing to trade down on certain brands.

24:10It doesn't matter to me as much. But maybe I have no problem getting the generic allergy medication. It doesn't make a difference to me today. But there maybe are certain snacks that I really want that name brand or I really want that one that I've been buying for years. for, you know, I think makeup comes to mind. There are some things that I try to find that dupe and it doesn't work. And I got to go back to the prestige brand. Exactly. Whatever you're putting on your skin, especially what you're putting in your body, you're putting on your skin. People want to kind of raise the bar a little bit.

24:42And then it's also the brand in apparel and footwear that they're just really loyal to, that they're showing to the world that they kind of, they're aligned with that brand and it means something to them when they walk out the door. Right. So let's get into what all this sort of translates to for people who are running brands and operating in this environment right now. I mean, I talk to brands all day, every day about this. And, you know, there are certain ways I feel like they can play into it where, okay, we know people are trading down. So how do we become the affordable luxury option? Or, okay, we know that people are looking for a little treat.

25:19How do we position ourselves as something that's really going to brighten their day at a lower cost. And there's sort of strategies from how they talk about their brands that can resonate. So I'd love to hear a little bit about what you're hearing and how brands are managing to stand out in that environment. Yeah. Well, can I add one nuance to it? Because all of those things are true. And now they're true in this environment where we have tariffs, of course, which has been another theme of the summer. So we've got this highly promotional environment, this consumer is that either trading down or looking for a good deal.

25:56And we're heading into back to school and fall, where the impact of all of the tariffs we've been talking about for months and months are really going to hit the floors. They're starting to now, but even now there's still all of that promo happening, all of the sales. By the time we kind of shift into, you know, September and even October, we're going to have kind of like the clean new inventory that have been susceptible to these higher prices. So now retailers and brands have to say, what am I going to do to keep that consumer? We expect there's going to be a pretty significant pullback. When we ask consumers, you know, what they were doing with shopping back to school, a lot of them were pulling forward.

26:39So they were buying earlier, which might be contributing to a lot of those positive numbers we're seeing. but we expect that they shopped earlier to try and kind of get ahead of the tariffs and that could very well decrease their spending later and back to school and into holiday. I'm so glad that you brought up tariffs because it has been a huge theme that we've been covering. And when I think about some of those numbers that showed year over year increases in spending, I'm also realizing that that will represent some pull forward in there, right? And what happens when that drops off. So if you're a brand looking at those numbers and trying to do your forecasts, I imagine that's something they're trying to take into account.