Tariffs directly increase the cost of importing products. For Amazon sellers who rely on sourcing from overseas (commonly China), this can mean:
- 10%+ more per product, depending on the tariff.
- Reduced profit margins unless they pass the cost on to consumers.
Example: If a seller imports a product from China to the US at $5 and there’s a 10% tariff, their cost becomes $5.50.
Many sellers raise their prices to maintain profit margins, which can result in lower conversion rates if customers find cheaper alternatives. Some sellers can’t raise prices due to intense competition and are forced to absorb the cost, leading to lower profit margins.
What’s the Solution?
Before talking about what to do about it, let’s put it in perspective. Europe/UK and Canada have had tariffs on imports from China for a very long time. As a UK seller myself, tariffs have always been part of the equation for me. Yet, I’ve still been able to maintain a healthy profit on the UK marketplace. It’s just a case of factoring this cost in when calculating the profit margin before deciding to order inventory of a particular product from China. Profit margin calculation is covered in the course How to Start an Amazon FBA Store on a Tight Budget.
Getting back to the solution and what you can do to help mitigate the effects of tariffs.
Source Small and/or Lower Value Products – Since tariffs are often linked to the size/weight/volume/value of the item, it makes sense to source smaller, more compact products, and even potentially products with a lower value. Additionally, shipping costs from the overseas supplier to the US are based (usually) on the dimensional weight of the shipment. Smaller and more compact items are cheaper to ship because the dimensional weight is lower.
Switch to Cheaper Shipping – Sometimes it makes sense to use sea shipping rather than air. Sea is often significantly cheaper, with savings that far exceed the extra costs of tariffs. The downside is the time taken for goods to arrive in the US from China. 30 days is fairly normal, but up to 60 days is possible. Also, for very small order quantities, sea may not be a viable option. Even so, if you don’t mind waiting, a month or so for the goods to arrive, it’s worth checking with your supplier if he/she can organise sea shipping for you.
Test a Higher Selling Price – Try increasing the listing price, but not by a lot. An increase of 4% or 5% may not have any negative impact on sales, but you won’t know until you test it.
Improve Your Listing/s to Increase Conversion Rates – Could your listings be better? Take a critical look at them, especially the images and titles.
