To respond to President Donald Trump’s ever-evolving tariffs, retailers might be tempted to cover the cost of the import tax by charging higher prices, but even considering doing so could possibly draw the White House’s ire.
When Amazon reportedly was contemplating displaying how much tariffs contributed to products’ prices, for example, Trump called Amazon founder Jeff Bezos to complain. An Amazon spokesperson subsequently told CNN that the company had never considered the move for its main site and would not be implementing it for any outfits.
Similarly, when Walmart CFO John David Rainey told CNBC in May that the retailer might have to raise prices because of tariffs, Trump responded on social media that “Walmart should STOP trying to blame Tariffs as the reason for raising prices” and should “‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING.”
Michael Klein, head of retail, travel, and hospitality product marketing for Talkdesk, disagrees.
“I sometimes shake my head when I hear from the White House that manufacturers and brands are going to ‘eat the tariffs,’ which is bullshit,” Klein told Retail Brew. “If their cost of goods is going to increase for any particular reason, and tariffs in particular, then they are going to have to find ways to” cover increasing costs by “increasing prices” or else finding “a way of making my product at a lower cost.”
There’s a new term gaining traction that may shed light on the practice of covering tariff costs without causing a stir: “sneakflation.” It refers to companies passing along higher costs but not hiking prices conspicuously, through such measures as introducing restocking fees when returns had been free, and either raising purchase thresholds to get free shipping or eliminating free shipping altogether.
Internet searches for “sneakflation” peaked in August, according to Google Trends, whose data goes back to 2004.
Sneakflation can apply to raising prices if it’s done incrementally rather than all at once, Klein said.
“We’re not going to see these 5%, 10% increases,” Klein said. “We’re going to see a 2% increase, then a few months later, we’re going to see another 2% increase, and before you know it, that retailer has actually…preserved their margin over the course of time.”
It’s a way some retailers have raised prices without “sticker shock,” Klein said. “They didn’t have that, ‘Oh, last week I paid $4.99 and now I have to pay $5.99.”
As Erin Cabrey reported in Retail Brew recently, social media users identifying as store associates at Walmart and Target have for months been tearing from hang tags the perforated portions with prices, allegedly at the behest of the management so higher prices can be affixed more subtly.
Retail news that keeps industry pros in the know
Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.
Portman-toehold: Sneakflation is one of a handful of inflation portmanteaus that have gained currency in recent inflationary years.
The best known is shrinkflation, the term for manufacturers reducing the size of their products, often imperceptibly, without lowering the price. The word got so much footing that Merriam-Webster added it to its dictionary in 2022, the same year Retail Brew named it retail word of the year.
Another neologism, “tipflation,” refers to tipping becoming not only more generous but more widespread. As we reported in 2023, the phenomenon was fueled, at least when it comes to the generosity aspect, during the height of the Covid-19 pandemic, when housebound consumers gave better tips to restaurant and delivery workers who still worked in-person.
Tipflation is becoming more widespread due to the pandemic-related growth of contactless point-of-sale systems, specifically tipscreens, which shoppers are increasingly presented with in non-restaurant settings.
“Skimpflation,” a term that like shrinkflation was popularized by consumer advocate Edgar Dworsky, refers to when a product stays the same size but is reformulated to be made more cheaply. Such appeared to be the case in 2022, when Smart Balance reformulated its buttery spread, which went from having vegetable oils constitute 64% of the product to just 39%, and where water became the first listed (read: most plentiful) ingredient, when it had previously been the second, after vegetable oil.
Following a torrent of online backlash from consumers, Smart Balance returned to the original formulation.
Sneak nation: Sneakflation, the relative newcomer on the scene, is a term that does not describe a new phenomenon so much as serve as an umbrella term for those other inflation portmanteaus.
Whether companies are slightly shrinking their products, skimping on ingredients, or encouraging tipping their employees instead of paying higher wages, to beleaguered consumers it can all feel sneaky.
“Sneakflation is multifaceted,” Klein said.
After both Amazon and Walmart enraged Trump for even raising the specter of linking price hikes to tariffs—not to mention wanting to avoid causing sticker shock among consumers—Klein predicts retailers will step carefully when it comes to offsetting tariffs.
“Retailers are going to be cautious,” Klein said. “They’re going to do what they can to maintain loyalty while not pissing off their customers.”