The impact of tariffs on Customer Experience
19 Feb 2025
5 min read
The proposed tariffs being planned by the Trump administration are expected to have a negative impact on the overall ecommerce sector.
For clothing companies, 80% of clothing items in the US are imported, and the Footwear Distributors and Retailers of America state that 99% of shoes and footwear sold in the US are imported from different countries. If there are tariffs on these imports, then retailers will have higher costs to deal with.
Beyond the more macro-economic factors, we wanted to take a look at what the likely impact on customer experience will be. But first, let's remind ourselves of the situation.
What is happening?
The Trump administration campaigned on imposing tariffs on other countries, particularly China, in an attempt to stop cheap imports. In particular, it has taken aim at the “de minimis” trade rule. This rule allows imports up to $800 that are shipped directly to the consumer to be tariff free. This is how Chinese companies such as Temu and Shein have been able to keep prices low.
China has been hit with a 10% tariff, while Canada & Mexico had tariffs announced and then delayed. There have been passing threats towards the European Union as well.
If these all come to pass, and tariffs on other countries are imposed it could have a dramatic impact on the ecommerce industry. There is a school of thought that this is a negotiating ploy, and the eventual settlements will be more minor than is currently being talked about. Whatever you think of Donald Trump, he does not deal in nuance, so running to the extreme may be a way to push things just far enough.
How is this affecting ecommerce businesses?
The good news is that if you buy all your raw materials and manufacture your products entirely in the US, you are not going to be affected – plus your competitors will struggle. The bad news is that almost no ecommerce business works like that.
Since the last round of trade wars in 2017, lots of firms diversified their supply chains to reduce reliance on China. We are likely to see more diversification to other countries not affected by tariffs. Which countries to choose is another challenge because who knows where tariffs will be imposed next.
Ultimately ecommerce businesses are faced with a choice: pass on any cost increases to consumers, swallow the costs, or look for cost-savings elsewhere. With recent inflation driving prices up, passing the costs on will be challenging for any business. Likewise, with thin margins, simply swallowing the costs will also be a challenge for most businesses. So they're left with cost-saving. That's where Customer Experience comes in.
How will tariffs impact customer experience?
As ecommerce brands look for efficiencies, there will be knock-on effects on customer experience.
Upheaval in the supply chain = a host of customer queries
Finding cheaper suppliers is the most obvious thing a brand can do. If a brand moves one of its suppliers from China to say, Vietnam or India, then there will naturally be some adjustment, or growing pains.
However, this is unlikely for most brands as it takes years – typically 3 – to vet and onboard a new supplier in a different country.
If brands are able to accelerate a planned switch anyway, the resulting disruption in the supply chain could mean later orders, slower production times, and a whole host of quality issues that customer service agents will need to manage. The agent's knowledge becomes crucial in these situations, as it enables them to quickly understand and resolve the customer's issue, minimizing delays and frustration. Being able to detect these quickly will be essential to maintaining a great customer experience. Analyzing customer interactions can help identify recurring problems and improve service during supply chain changes.
Change in materials, more customer education
This may be the prompting some brands need to change the methods of production and the materials used. As a result, customer experience teams will need to update materials and educate their customers about why these materials are better, or to persuade them that there is no degradation in quality.
Cost dissatisfaction and customer satisfaction
We all love our customers, but it's fair to say that some customers can direct their feelings in the wrong direction. As a result, if brands increase their prices, then expect some customers to express annoyance at this. Even if a brand has no other choice, a loyal customer may still find it a bitter pill to swallow.
Breaking down how costs have gone up, and trying to educate customers as to why it's inevitable and why they should still shop with you will be necessary.
Packaging
Packaging is a subtle but important part of the customer experience for some brands. Think about the times a brand has sent your item in a beautiful branded box – how special does that feel?
Some brands may feel that they would rather sacrifice the luxury of amazing packaging in order to keep prices low or save elsewhere. When we're talking fine margins, anything is at risk.
Needing to cut costs in customer service
This is the big one. “Customer service is a cost center, not a value center” is a phrase we hear a lot (and also believe to be wrong!). The sad reality is that when you are looking to cut costs, things that feel less necessary are the ones to go. For some brands that will mean reducing the overall cost of their customer service.
This could mean reducing operating hours, or headcount, or even outsourcing customer service. All of which is likely to have a negative impact on the customer experience, with customer service being less available and stretched more thin. In call centers, efficient call transfer processes become even more critical during periods of reduced staffing to maintain service quality. An increased call transfer rate can negatively impact customer experience, leading to longer call duration and more customers being transferred to another agent, which often results in frustration and lower satisfaction. Outsourcing can also affect the transfer means and transfer rate, potentially increasing the number of transferred calls and impacting first call resolution. Reducing transfers and achieving fewer transfers is essential for maintaining high customer satisfaction, especially when resources are limited. The first agent plays a crucial role in resolving the customer's problem without unnecessary transferring; when a transfer is needed, warm transfers and warm transferred calls help ensure a smooth handoff to the receiving agent or second agent, minimizing the need for customers to repeat information. IVR voice menu systems and support for multiple languages are important tools for contact centers and call centers to route calls efficiently, reducing the need for call transfers and ensuring that one agent can resolve the issue whenever possible. Monitoring resolution rate compared to previous periods helps contact centers assess the impact of cost-cutting measures on customer experience.
Planning costs
Knowing how many resources you'll need to cope with the peaks throughout the year is a constant challenge for CX leaders. Being able to plan better can provide some efficiency savings because you haven't oversupplied your customer service teams.
Call Center Operations: Navigating Tariff-Induced Challenges
Tariff changes can create a surge in customer calls and inquiries, putting significant pressure on call center operations. As customers seek clarity on shipping delays, price changes, or product availability, contact centers often face a spike in call transfers, which can quickly lead to excessive call transfers and increased customer frustration. In these moments, the ability to deliver exceptional customer experiences becomes a key differentiator.
One of the most effective ways to maintain high customer satisfaction during these periods is to minimize unnecessary transfers and ensure that each customer is connected to the most suitable agent from the start. Advanced call routing, powered by interactive voice response (IVR) systems, can help identify caller intent and direct calls to the correct agent or department. This not only reduces transfer rates but also improves first contact resolution, ensuring that customer issues are addressed efficiently and accurately.
Warm call transfers are another valuable strategy. When the initial agent introduces the customer to the new agent, it creates a seamless handoff, reducing the need for customers to repeat their issues and improving overall customer satisfaction metrics. This approach is especially important for complex customer queries or VIP call routing, where a personal touch can make all the difference in customer engagement and loyalty.
To further reduce call transfers, contact centers should invest in comprehensive agent training and provide agents with the right tools and relevant information. Empowering agents with product knowledge and access to customer information enables them to resolve a wider range of customer issues independently, streamlining processes and reducing average handling time. System integration also plays a crucial role, allowing agents to quickly access the data they need to provide accurate and timely solutions.
Self service channels, such as well-designed IVR voice menu systems and online support, can also help direct calls to the most relevant agent or even resolve simple customer queries without the need for agent intervention. Campaign-based routing and multilingual support ensure that customers are always connected to the appropriate agent, further minimizing unnecessary transfers and improving service quality.
By focusing on reducing call transfers and optimizing call routing, contact centers can maintain operational efficiency even during periods of increased customer inquiries. This not only reduces customer dissatisfaction and frustration but also enhances customer satisfaction and loyalty. Ultimately, providing agents with the right training, tools, and support is essential for delivering exceptional customer experiences, even in the face of tariff-induced challenges.
AI can help
For brands looking for long-term cost reduction without sacrificing customer service, this potential crisis could be an opportunity to invest in AI. Being able to use AI to answer common or mundane customer service questions will allow you to answer more tickets with fewer staff.
AI can also help reduce the call transfer rate by accurately routing queries to the right agent or resolving them automatically, which improves customer satisfaction and reduces call handling times. Additionally, AI-driven solutions can improve first call resolution by providing agents with real-time information and support, minimizing the need for multiple interactions and transfers. AI-powered virtual agents can communicate in multiple languages, enabling brands to efficiently serve a diverse, global customer base and further reduce unnecessary call transfers.
AI can also help analyse the queries that do come in, looking for negative sentiment and other patterns. For example, if there is a common complaint about a model of shoes that is made in one particular factory, then you can use this data to step in and fix the problem at source.
Plus, being able to review past ticket data and project forward will help customers to be as efficient as possible with planning their CX costs for the year. This is especially important for rapidly growing ecommerce brands looking to scale, and it’s another way that AI can help.
Having round-the-clock support can also mean elevating your customer experience even further. At a time when prices are increasing, brands need to be showing value, so being able to offer 24/7 support, fast answers, and automatic ticket resolutions is one way of doing it.
For more information on how AI can help your team weather this storm, speak to our team today.
