By Stephen Brown, COO of LedgerGurus
As we approach 2025, the landscape for product-based businesses stands on the cusp of transformation. The coming year promises a dynamic blend of technological innovation, shifting consumer behaviors, and economic recalibration that will provide challenges and opportunities alike for small businesses. In this blog we’ll do a dive deep into the most significant trends that are set to reshape the product-based business ecosystem, offering insights and strategic perspectives for small business owners looking to thrive in this rapidly changing environment.
Here are five trends consumer product businesses should look for in 2025:
2025 brings a new US Presidency for Donald Trump. With that comes his renewed commitment to tariffs. His proposed tariffs include:
The increased costs of importing finished goods and supplies could have a significant impact on consumer product businesses. The reality may be very different than the proposals, but businesses need to consider moderate to significant increases in their cost of goods starting next year.
Options to adjust to tariffs could include:
There are still many supply chain issues facing anyone importing products. These include:
There have been numerous attacks on ships by Houthi rebels, leading to increased security concerns and disruptions in maritime traffic. These attacks have caused many shipping companies to divert their routes away from the Red Sea and the Suez Canal.
This rerouting is causing the most impact between Europe and Asia, but what affects one region cascades to others.
Businesses should continue to avoid shipments through this area via targeted ships for the foreseeable future to avoid potential losses.
The International Longshoremen’s Association (ILA) held a strike on United States East and Gulf Ports in October 2024. It lasted 3 days, but was suspended until January 15, 2025, to allow more time for contract negotiations.
A new contract will likely increase imports through those ports. A strike will impair imports and create bottlenecks in redirected imports going through the West Coast.
To avoid disruption, businesses should determine if delayed receipt of upcoming shipments will impact business operations. If so, here are a few mitigation strategies:
Air freight demand has been high in 2024, particularly from China to the United States, due to the de minimis rule exploitation by Temu and Shein (see below). Air freight demand is projected to grow by 4 to 6% in 2025. Businesses should expect rates to increase in 2025, but not as much as 2024.
The de minimis rule refers to a threshold below which certain transactions or benefits are considered too minor to warrant taxation. The de minimis rule applies to international shipping and customs. It sets a value threshold below which goods can enter a country without incurring duties or taxes. In the United States the de minimis threshold is $800, meaning shipments valued below this amount can enter duty-free
Temu and Shein have exploited the de minimis rule to ship low-cost items directly to consumers circumventing the duties and taxes a domestic distributor or seller would pay.
There is legislation and executive action that is being explored to eliminate the ability to exploit this rule. This started with the Biden administration and will likely be supported and even expanded by the Trump administration.
For businesses using the de minimis rule, this will mean an increase in costs. For those who don’t use this loophole, there will be reduced competition from foreign sellers whose main advantage is price.
2024 saw the end of interest rate increases and the beginning of a lowering of rates in September and November. This is the beginning of what is projected to be additional rate cuts in 2025. The Federal Reserve is anticipated to implement multiple interest rate cuts throughout 2025, potentially reducing the federal funds rate to around 4.0% or lower by the end of the year.
Lower rates will result in lower costs of borrowing which tend to be much higher than the federal funds rate. For consumer product businesses, lending to purchase inventory is often a necessity. Lower rates will be a relief to the expense borrowing costs of the last few years.
Keys to lower rates will be job growth or decline and continued decreases in inflation. Should unemployment increase, expect greater rate cuts. While not expected, should inflation hold or increase again, expect rates to be hold or even increase. Businesses who want to plan conservatively should assume current costs of capital with limited improvements over the year.
Inflation is still here. As of October 2024, the Consumer Price Index was at 2.6% and core inflation was 3.3%. Granted it is much better than the peaks the US experienced in 2022, but still much higher than the averages seen in previous years.
With inflation still higher than desirable, businesses need to be deliberate about pricing strategies and price increases. The costs of labor and goods will erode profitability otherwise.
Some best practices for pricing, especially in an inflationary environment include:
It’s been a wild few years for selling products, and 2025 looks to continue the pattern. Some trends appear to be beneficial while others will have a negative impact. What’s most important is to prepare for likely outcomes and adjust as they become reality.
Staying on top of these trends requires solid financial management and a clear understanding of their implications. With expert guidance and tools, businesses can navigate these challenges, protect profitability, and position themselves for growth in an ever-changing landscape.
LedgerGurus provides the financial expertise and support needed to manage complexities and build resilience for whatever lies ahead.
Stephen Brown is the COO for LedgerGurus, a client accounting services firm specializing in ecommerce businesses. Stephen has an MBA, an engineering degree, and nearly two decades of experience in various technology companies before LedgerGurus.
