Dive Brief:
- Increased tariffs on products imported to the U.S. hit “effectively all product categories,” but they pose an elevated risk to discretionary product categories such as electronics, apparel, sporting goods and toys in particular, according to a Monday report from PitchBook shared with Retail Dive.
- Increased uncertainty with consumer demand is expected to also slow venture capital and private equity-driven deal activity and deals that do materialize will feature more strict structures, according to the report.
- Companies that paused efforts like IPOs, mergers or financing are unlikely to restart them in the current environment.
Dive Insight:
When coupled with a looming de minimis elimination, the complex web of tariffs imposed by the Trump administration is set to benefit big retailers as smaller merchants struggle.
“Merchants like Shein and Temu and swaths of small and medium-size businesses face higher prices with the potential for weakened demand,” PitchBook’s Senior Analyst for E-Commerce and Retail Eric Bellomo noted in the report. “This should benefit the likes of Amazon, Walmart, and Costco, in addition to the Chinese merchants that account for half of Amazon sellers and may well have patience and operational efficiency to gain share in the near term.”
Shoppers are predicted to prioritize value options like private labels, with PitchBook flagging that individuals earning more than $100,000 annually “were the fastest-growing cohort for value retailers like Walmart and T.J. Maxx.”
In the electronics category, major gaming console companies are facing obstacles de-risking their portfolios. In response, Nintendo demoed its new Switch 2 gaming console at a higher-than-expected price and delayed preorders, per PitchBook. Citing a challenging economic environment, Sony in a blog post on Sunday announced increased retail pricing on its PlayStation 5 console in select markets in Europe, Middle East and Africa, as well as Australia and New Zealand.
Additionally, depending on the severity of imposed tariffs, hardware sales could decline by three to 10 million units throughout the decade, per projections from PitchBook.
While the Trump administration announced exemptions to reciprocal tariffs on certain electronics (such as smartphones and electronic integrated circuits) late last week, officials noted that the electronics tariff exemption is only temporary as it prepares more sector-specific tariffs.
Consumers increased their purchases of big-ticket products last month, with electronics and appliance purchases rising 1.5%, according to Retail Dive’s analysis of Census Bureau data.
The outlook for the retail industry overall is expected to be “bleak” in the second half of 2025 and into next year, according to a report from Moody’s Ratings analysts this week. Apparel, footwear and department stores could see some of the largest negative impacts.