Background on Liverpool and its Relevance
Liverpool is one of Mexico’s leading department store chains, with a significant presence in the retail market. The company, under the leadership of Gonzalo Gallegos (Director Financial) and Enrique Güijosa (General Director), is currently evaluating various supply chain options to counteract the effects of tariffs imposed by the Mexican government on imported goods from Asia and countries without existing trade agreements.
Current Situation and Tariff Impact
Approximately 15% of Liverpool’s directly imported merchandise originates from countries without trade agreements with Mexico, with 80% of this volume coming from Asia. Moreover, when considering imports from their suppliers and subsidiaries, these imported products account for 40-50% of their total inventory. Any imposed tariffs could lead to increased costs for Liverpool.
Suburbia’s Specific Challenges
Suburbia, a Liverpool subsidiary specializing in affordable footwear, faces significant challenges due to the minimum reference price of $22 per pair for imported shoes. In September, Mexico implemented “definitive compensatory tariffs” on footwear imports from China, with pairs priced below $22.58 facing additional charges ranging from $0.54 to $22.50 per pair.
Liverpool’s Response and Strategy
Gallegos acknowledged the difficulty in precisely quantifying the tariff impact but emphasized that Liverpool is exploring all available options and closely monitoring the Congressional proceedings. President Claudia Sheinbaum proposed increasing tariffs on Chinese imports, including textiles, by up to 50%, which is expected to be debated in November.
Güijosa confirmed that Liverpool is working diligently to favor local suppliers, but a substantial portion of their merchandise is not produced domestically. As a result, they rely on alternative countries like China, Vietnam, and India for sourcing. The company is currently analyzing various alternatives to determine potential adjustments in their assortment strategy.
Tariff Impact on Product Prices
Güijosa mentioned that product prices, particularly for clothing and footwear, have risen by 10% compared to a year ago due to the implemented tariffs.
Key Questions and Answers
- What is Liverpool’s current situation regarding tariffs? Liverpool imports around 15% of its merchandise from countries without trade agreements with Mexico, 80% of which come from Asia. Tariffs could lead to increased costs for the company.
- Which subsidiary is most affected by recent tariffs? Suburbia, a Liverpool subsidiary specializing in affordable footwear, faces significant challenges due to the minimum reference price of $22 per pair for imported shoes.
- How is Liverpool responding to the tariff challenges? Liverpool is exploring various supply chain options, favoring local suppliers while sourcing from alternative countries like China, Vietnam, and India. They are closely monitoring Congressional proceedings regarding potential tariff adjustments.
- What is the impact of tariffs on product prices? Product prices, especially for clothing and footwear, have increased by 10% compared to a year ago due to implemented tariffs.
