The clock is ticking on the relative respite of the Section 122 10% tariffs on goods bound for the U.S.
The Trump administration is actively working to reinstate the higher rates levied via the IEEPA tariffs by mid-summer. Unlike the first time around, apparel companies at least have forewarning of the type of costs that could flow back into the supply chain. What happens over the next days and weeks could differentiate the winners from the losers.
According to Vickie Rotante, former SVP of product development and sourcing at Janie & Jack, who also held, brands and retailers have plenty of time to assess and rejigger supply chains, where necessary. The key, she says, is understanding the strengths not just of your internal team but of those of your vendors. It’s a lesson she’s learned over the years in leadership roles at QVC, Urban Outfitters and Dick’s Sporting Goods, and one she tries to impart to her current clients.
“I really believe in partnership. That’s a very common term used in the industry, often with not a lot of backup behind it,” she said. “We have to make sure that we are in it together, can pivot together and can move when necessary and not compromise business.”
Here, Rotante shares how she’s approached tough conversations with suppliers, the ideal way to diversify supply chains and the sourcing principles that have seen her through tough times.
Q: With potentially 150 days until the blanket 10% Section 122 tariffs expire and are replaced with something new, which may again be variable rates, what should sourcing professionals be doing? Is it possible to get prepared in that time frame?
VR: The most important thing I’ve learned in this journey is not only just about pivoting countries to mitigate tariffs, but really leaning into vendor partnerships more than ever. And leaning into vendor partnerships, where those vendors have multiple country sourcing opportunities. I would consider my supply chain at Janie & Jack as an example and in the past, as very narrow and focused on core suppliers that are able to pivot in this very volatile environment. What that means for the 150 days is you have to make sure you’re diversified in multiple countries with strong partners who are in it together. It’s a big lift. In core categories, the ones that keep the lights on, I make sure we have our core factories that we fit everything and we’re ready to go. We also have fit approvals in two other countries as a backup. That sounds like a lot of work, and it is, but what that prevents is if tariffs returned seven different ways till Sunday, we don’t have to panic. This 150 days represents how to get your supply chain insulated as best as you can for this current reality that we’re living in.
The other thing I’ve learned is there are some people out there who didn’t necessarily act with great integrity with their partners during tariffs, and I think that’s a mistake. In sourcing, as in life, people’s true character shows up when the times get tough. I always wanted to be known as that person who’s not going to leave my supplier behind.
HGI: To your point about diversification: Increasingly factory groups are expanding into new countries and regions, which can make it easier for their buyers to insulate themselves from shocks. Is that ideal or are there potential risks there?
VR: When people set up factories reactively, often those factories are not necessarily where you want to be. They don’t have the management. To me, it’s about who is setting up those factories in a smart way and a compliant way, in a way where they take their management from their strong facilities and put them over there for six months to make sure everything’s running correctly.
“What I challenge my partners with is determining what’s actually important to the customer. I want to design into the quality in a way that’s invisible to customer perception.”
—Vickie Rotante, Impera Group
HGI: In the cases where you were not able to move production or it didn’t make sense to, how do you handle those situations?
VR: We were unable to move sweaters. China still makes 80% of the world’s sweaters. In that case, we flew to our producers and we sat down with our core partners and told them we couldn’t move the product, and talked to them about how to make a tariff partnership in terms of financial compensation on both sides. We discussed what that would look like and how we needed to source differently to compensate for this and what the risk and rewards were like. It was about leaning into those partnerships, and recognizing that particularly factories who work with multiple brands, it’s good to hear what they’re doing, too. So, I learned a lot. They learned a lot.
In some cases, people were opening new factory locations in lesser tariffed areas, for example, China to Indonesia or to Vietnam. And the agreement was, we’d operate according to our plan for nine months. Then when the factory opens, we would give a certain amount of the business from the start. And we would send our people there to watch as well.
HGI: How is diversification affecting commitments? Because the factories say to me all the time, ‘even if we just had the line of sight to know that the business was coming in, that would make all the difference.’ How have you worked with your factories to make some commitments, but also giving yourself the flexibility that you need?
VR: We commit based upon all of those factors we discussed. We commit 80% of our business on a seasonal basis. [And give them an idea of] what that looks like for those seasons, as well as for yearly. [That projection] was based not only on what they’ve done, but other factors like factory performance. So, it’s 80% committed and 20% wiggle room.
Q: I know that brands are obviously watching their P&Ls and have to consider those first but it seems self-defeating if the supplier base becomes weak as a result of supply chain changes. What’s the domino effect?
VR: To go back to a factory and for support related to the tariffs, I think that’s fair. But to put that burden that many brands put on them, how are you making the people that make your product weak? It doesn’t make sense. The impact of that is suppliers closing, potentially. The impact of that is quality slipping. The impact of that is potentially reduced sales. To me, that never made sense. It was a short-term transactional fix without foresight.
HGI: The other risk seems to be the product itself with supplier changes and the general need to cut costs. How do you go about delivering quality garments in this environment?
VR: Sourcing, product development, merchants, designers, particularly merchants and designers, love to look at product and say, ‘That’s really important to the customer.’ What I challenge my partners with is determining what’s actually important to the customer. If we do a 14-color print, is it possible to do 12 or 10? And maybe some remain 14 and that’s what we do. But is that necessary for everything? Let’s look differently at how we cost engineer in advance, because we need to fix our margin, and I don’t want it the outcome to [affect] quality. I want to design into the quality in a way that’s invisible to customer perception.
As an example, we had two different Chino qualities. What if we do one quality, both very good fabrics, and we can leverage that quantity? It’s intelligently engineering without compromising aesthetic, brand DNA or quality in advance. And we came out saving a significant amount, which I consider one of my biggest accomplishments because it’s about changing people’s thinking. We’re a quality brand; we’re not looking to change that. But we have to look at what’s really important.
HGI: I’ve heard from suppliers who say brands could save time and money by leaning into their stock colors, which are already developed and ready to go. Instead, they insist on slowing down the process and eating into margins by using a custom color that the consumer could likely never differentiate.
VR: That’s right, and that’s a non-value-added change. If you want to spend the money, let’s spend the money on an upgraded fabric versus shades of a navy when both navies are beautiful.
HGI: The industry is currently working off of the flat 10% Section 122 tariffs. If we were to come out of all of this with a flat rate going forward, what would that mean for your sourcing plans?
VR: A blanket tariff would make me probably shift certain things back into China that we had to take out. Same thing with India. Those tariffs forced us into factories which are good, but maybe not the best choice. So, it would shift my thinking into product first sourcing, as opposed to tariff impact sourcing.
HGI: As we were discussing earlier though, then the new suppliers lose out. Is that a concern?
VR: I also wouldn’t just walk away from my former folks in Cambodia, let’s say, who came to the table and in many ways rescued some of these programs. I would still keep some business with some of the folks I moved to, like the sweater folks in Cambodia, even though I’d move a lot of it back to China. I wouldn’t be so transactional because that also puts people out of work. There’s a responsibility that we have as business people and as sourcing people that, okay, we’re going to have to make business decisions, and we’re going to have to move some to China because they do it better but I wouldn’t necessarily move it all. That’s not the way to do business.
