President Trump’s recently announced tariffs, particularly the 54% rate on Chinese imports, are sending ripples of impact throughout the consumer brands industry. This move is prompting brands to make tough decisions across various aspects of their operations. One immediate consequence is the shift in retail media spending, a change that could significantly reshape the $62 billion industry.
According to Bryan Gildenberg, a retail industry analyst, the impact of these tariffs varies greatly depending on the product category. Gildenberg notes that categories such as toys and games, with the highest tariff rates and import percentages, are the most heavily affected. Consumers in discretionary categories, faced with higher prices due to tariffs, may opt to trade down or postpone their purchases.
The repercussions of these tariffs extend beyond mere product pricing as brands now find themselves reevaluating how they engage in customer acquisition and retention through retail media. Amazon sellers have already started reporting marked reductions in advertising budgets and strategic shifts in campaign objectives. This shift directly affects retail media allocations, with discretionary categories facing the most significant strategic challenges amid the tariff landscape.
Industry experts, including consultants, agency owners, and brand operators, concur on the consistent response patterns observed among their clients in light of these new tariff pressures. Several emerging trends are now shaping how brands navigate the evolving retail media and e-commerce ecosystem.
Immediate Ad Spend Reductions May Hit Amazon’s Ecosystem
Many brands selling on Amazon are resorting to cutting advertising spend as one of their initial responses to counteract the margin compression caused by tariffs. This reduction in advertising spend could potentially disrupt the platform’s historical trend of rising ad investments.
Prem Gupta, a former Amazonian and agency owner, notes that many brands are trimming their pay-per-click advertising spending to address the tariff-induced challenges. Sellers are faced with tough choices: absorbing the tariff costs to maintain pricing and customer loyalty, which strains profit margins, or increasing prices at the risk of losing sales momentum and visibility on algorithms.
For brands heavily reliant on international manufacturing, like Eagle Creek, the tariff increases present a substantial financial burden. The CEO of Eagle Creek highlighted the significant additional costs brought about by tariffs, leading many brands operating on narrow margins to contemplate unavoidable advertising cuts.
Strategic Shifts in Campaign Objectives
Brands are not just slashing ad spend; they are fundamentally rethinking their retail media strategies to prioritize efficiency over growth in the face of tariffs. This shift is especially noticeable among direct-to-consumer brands that historically used retail media primarily for customer acquisition and market share expansion.
E-commerce recruitment specialist Harry Joiner recommends that brands prioritize Amazon ad inventory for high-performing products and margin-enhancing ASINs (Amazon Standard Identification Numbers) while de-emphasizing broad brand campaigns in the short term. The objective is to focus on visibility and margin protection during the initial response period to tariffs.
This strategic reallocation also extends to marketing decisions at the SKU level. Brands are conducting detailed analyses of contribution margins to identify which products can sustain advertising support in the post-tariff environment. This data-driven approach allows companies to concentrate their remaining ad dollars where they can yield the most efficient returns.
The Contrarian Case for Maintaining Ad Spend
While many brands opt to scale back on ad spend in response to tariffs, some industry experts propose a contrarian approach: maintaining advertising investment while competitors retreat. These experts suggest that now is the time for brands to capture market share while competitors are on the back foot due to tariff-induced challenges.
Jason Landro, co-CEO of digital marketing agency Nectar, advocates for sustaining ad spend rather than reducing it, emphasizing the need to enhance advertising efficiency through conversion optimization. Instead of simply cutting back on investment, brands should focus on improving conversion rates and click-through rates to leverage the tariff disruptions as potential growth opportunities.
E-commerce strategist Katharine McKee echoes a similar sentiment, emphasizing the importance of finding ways to recoup lost profits during downturns. While cuts may be easier than growth, McKee stresses the need for strategic decision-making when contemplating advertising reductions. Marketi…