Geopolitical dynamics have been a hot topic in the last few years, peaking even more over the last few weeks when it comes to tariffs.
WWD’s latest webinar, titled “Piloting Tariff Turmoil: Executive Strategies for Apparel, Luxury, Beauty and Accessories,” explores a recent executive sentiment survey with industry experts from Kearney. Nora Kleinewillinghoefer, partner at Kearney and America’s lead of fashion and luxury, and Drew DeLong, global lead of Kearney’s geopolitical dynamics team, shared insights into today’s landscape.
The findings of the company’s survey focus on the impact of foreign policy — specifically tariffs — on apparel, luxury goods, footwear, beauty and accessories. The report uncovers how customer behaviors and industry uncertainties are influencing decision-making and dives into the strategies executives are employing to navigate these market shifts.
“This is an incredibly evolving topic and something that’s really been at the forefront of our partners and the people that we’ve been working with,” Kleinewillinghoefer said regarding Kearney’s recent report on tariffs.
Kearney’s survey polled more than 700 executives on the top topics that are being addressed by leaders and the concerns they are feeling, to better understand what is shaping the next era.
When prompted about their biggest challenges, 54 percent of respondents cited the tariff restrictions as the number one “unknown” that they’re facing in terms of how they’re thinking about it, where they see opportunities and where they see challenges. Another 64 percent highlighted rising production and supply chain costs as one of the most pressing challenges at the moment, looking at how they can potentially navigate this from wage, freight, material and energy. At the same time, the third challenge facing these executives is customer response to pricing and ethics.
As she discussed the survey’s full results, Kleinewillinghoefer said what is clear is executives’ response to the question: How are tariffs on clothing goods affecting my company’s supply chain and overall cost structure? Results found that penetration in key geographies is a major driver for most brands, indicating the need for geopolitical strategy management.
While Kearney, the global management consulting firm, is coming up on its 100th anniversary working across most geographies in the world, its geopolitical dynamics team is a newer addition to the company, which covers the full spectrum of consumer and retail opportunities.
“We cover everything from supply chain topics strategy to the go-to market for various brands,” Kleinewillinghoefer said. “Any topic that would be at the forefront for an executive would be something that we would support. As you can naturally imagine, geopolitical dynamics has been a top topic. The geopolitical dynamics team evolved out of coming out of COVID-19, where there were already conversations about the single country of origin, and we really realized that there were much broader implications for this.”
In practice, Kearney’s geopolitical dynamics team takes an end-to-end view of what is happening globally, helps anticipate, prioritize and respond to the impacts of what’s happening in the market. Kleinewillinghoefer and DeLong said that recently things had been “extremely dynamic” with lots of briefings and conversations for materials being updated to the last minute.
Moving from the retroactive to predictions of what is coming next, DeLong said there are some actions that executive teams can take more broadly. This starts, he said, by understanding what is driving global disruption as a whole. Three drivers include geopolitical conflict, a shift toward multipolarity in thinking through the rise of multilateral institutions beyond a U.S.-led global order, and the U.S. policy environment.
Importantly, with so many factors impacting business, DeLong advised executives to consider the “next order” impact beyond today’s news cycle.
“To the degree that your executive teams have one cohesive plan, offensive and defensive, for how to navigate this that needs to be coordinated,” DeLong said. “Elevated, consistent uncertainty is going to be a common theme here in the next at minimum, four years, likely longer. How you do that as a business is a really critical point, because if you’re not planning for that, you’re going to consistently be reactive.”
Moreover, he advised that leaders “fight the tendency to firefight week by week,” acknowledging that in today’s environment, it was an easy trap to fall into. Today, businesses can think about having a strategic response to ongoing disruption as a core approach. Geopolitical management helps businesses tackle global challenges faster because ultimately to win in today’s environment executive teams need to get started building a geopolitical muscle.
[To watch the webinar,CLICK HERE].