LAS VEGAS — A general freak-out among retailers is taking place and, no, it’s not about digital disruption.
As executives waxed poetic about the intersection of retail and technology across a number of conferences taking place in Las Vegas this week — Shoptalk, IBM Amplify and Adobe Summit — another conversation, or continued concern, is the tax reform bill in the U.S. House of Representatives that includes a border adjustment tax. In its simplest form, the BAT would mean a 20 percent tax across the board on all imported goods.
This is not to be confused with President Trump’s comments about a border tax that would have tax implications on the imported goods of companies that move offshore.
“If we think we’ve seen disruption through the change in the digital world and the traditional retail world, you don’t have any idea,” said Matthew E. Rubel, a Hudson’s Bay and HSN Inc. board member, during a Shoptalk panel.
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“It’s a very real threat,” said Brian Dodge, senior executive vice president of public affairs at the Retail Industry Leaders Association, during the same panel.
Chief executive officers of eight retailers were among a group of industry executives who met with Trump and Vice President Mike Pence in February to discuss the differences between BAT and Trump’s own comments about a border tax. Dodge called the meeting “productive” and said the President was “thoughtful and inquisitive.” The press was admitted to the meeting for opening remarks but were excused once the roundtable began.
Other retailers sounded off on their own concerns throughout Shoptalk’s four-day run.
Nick Green, cofounder and co-ceo of on-demand organic food delivery service Thrive Market, said BAT would no doubt impact his business, which sources its products across the globe so it can provide value pricing to customers who may not necessarily have access to an organic grocer or the wallet to justify the premium pricing.
“If we can’t deliver value to our members, our business model doesn’t work as well. I think we’ll end up being the ones locked out,” Green said.
“I probably look at this oversimplified maybe because I can’t quite process all of the nuances of this, but at the end of the day in my mind, to tell American consumers that they ought to pay 20 percent more for things like clothing and footwear and home goods doesn’t make any sense to me,” said Kohl’s chairman and ceo Kevin Mansell. “I don’t think that’s a good path at all….”
Target ceo Brian Cornell, was one of the executives who met with Trump in February and said he’s been to 27 meetings around corporate tax reform.
“I think what people now understand is if this goes forward as currently proposed, it’s the consumer in the U.S. that’s going to pay for it,” he said.
“In the new change that’s gone on, a bazooka has gone off when in fact we really need rifle shots into the specific area. So if the objective is to create jobs and unencumbered business, those are good objectives,” Rubel said before going on to add, “It’s not being articulated in a way that works for each industry.”
And if the goal is job creation in the U.S., the economics of it don’t seem to pencil out, Rubel said. He pointed specifically to cut-and-sew as an example.
“You can’t make it in America today at a cost that is commercial to many,” he said, adding such a move toward U.S. manufacturing would unwind “the democratization of goods to the American consumer that has happened across the past 35, 40 years.”
It also becomes a question of a skilled workforce and if there is one in the U.S. to accommodate such a shift, the panel agreed.
“How do you get the people to make the products? Are there the manufacturing capabilities?” asked Financo LLC chairman Gilbert Harrison.
Harrison cited the example of being approached by Oprah Winfrey’s team in the past to establish a domestic towel line specifically produced in the South rather than overseas. “And we searched high and low and we could not find any factories that would be able to produce any quality that was needed,” Harrison said.
He went on to ask if the technology is there to build factories run by robots so that manufacturing can be done cost effectively in the U.S., to which Rubel swiftly responded: “You can’t sew a shoe that way.”
For More on the Border Adjustment Tax in WWD:
Retail CEOs Talk Border Tax, Regulations With Trump
U.S. Manufacturers Urge Congress to Pass Tax Reform, Including Border Adjustability