Experts on the local and national retail market have voiced concerns over the impact of tariffs on the construction of new retail spaces and the price of consumer goods. This, they say, is putting additional pressure on an industry already affected by rising labor costs.

“To this point, the industry has largely been working to internalize the impact of tariffs, but given the potential of further increases, companies will need to develop more clear strategies for pricing changes and sourcing strategies to ensure profitability meets their goals,” Chris Randall, managing director at L.E.K. Consulting, told the Business Journal.

Tariffs on steel and other materials used for the construction of new retail spaces have slowed down delivery timeframes of those materials and have increased the cost of creating new retail centers, Burnham USA Equities Executive Vice President Stephen Thorp noted. “It’s an impact we’re all seeing in the construction world,” Thorp said. Burnham USA Equities, Inc. and Burnham-Ward Properties LLC, where Thorp is a partner, are the developers behind the new Long Beach Exchange retail center.

Retail Space For Rent In Belmont Shore
The Belmont Shore Business Association’s executive director, Dede Rossi, said she’s not concerned about the impact of the new 2nd & PCH shopping center currently under construction. “I know that we’ll be fine,” she said. (Photograph by Brandon Richardson)

Especially in the short term, retailers will have to anticipate impacts from current trade tensions and “geopolitical posturing,” said Tony Shooshani, managing member of Shooshani Developers and owner of The Streets retail center in Downtown Long Beach. “The key will be maintaining consumer confidence while going into the back-to-school season, the holidays, the new election cycle,” Shooshani said.

Beyond tariffs, Randall noted, retailers would be well advised to take stock of the successes from promotional activity. “It is critical retailers invest to understand [which] promotions drive real, incremental profit lift and which are just eroding the bottom line,” he explained.

In the long term, the cost of labor along with related benefits will continue to impact profit margins for retailers, Thorp said. In addition to other factors, such as tariffs, labor costs are likely to make it less attractive for retailers to open additional locations, he noted. “Overall, [retail] tenants are slower to pull the trigger on opening new locations, due to the unknowns created by these varying elements,” Thorp explained.

The most successful endeavors, according to Thorp and other local experts, are those that create an experience for the customer, rather than just a space for transactions. “The true opportunity lies within creating new and exciting environments for the community to shop, eat, play,” he pointed out.

Blair Cohn, executive director of the Bixby Knolls Business Improvement Association, agreed, adding that the opportunity for real life experiences is what sets brick-and-mortar retailers apart from their online competitors. “As easy and convenient [as] it is to have on your computer screen and click away, ordering everything you can imagine, that does not compare with the human experience of touch, taste, smell of being in a shop and actually interacting with a human being proprietor,” Cohn said.

Tokyo Guild General Manager Val Lee
Tokyo Guild, a restaurant serving Japanese comfort food, recently opened on Atlantic Avenue in Bixby Knolls. General Manager Val Lee told the Business Journal what made the neighborhood especially attractive was its “up-and-coming” feel. (Photograph by Brandon Richardson)

In an effort to encourage the community to seek out those real-life experiences in retail, the association hosts regular events showcasing local retail offerings. “We remind our locals that they must also invest in the health and vitality of the business corridors,” Cohn said. “This is a course we will continue on.” To support those efforts, Cohn said, it is crucial for small businesses to be social media savvy and engage with their customers in the digital sphere.

In Belmont Shore, many businesses are already using their digital opportunities, with notable success, according to Dede Rossi, executive director of the Belmont Shore Business Association. “Our smaller businesses do well. They’ve been here 20, 25 years,” Rossi said. “They have their clientele, they work their social media, a lot of them have an online presence.”

It’s big, corporate retailers, like the recently closed White House Black Market store, that are leaving the area, said Rossi. With several retail spaces in the neighborhood’s main shopping district, 2nd Street, inhabited by retail chains like GAP and Banana Republic, Rossi is foreseeing change in the area’s retail profile as their leases come up. The challenge, she noted, will be repurposing those large spaces for a different use.

For example, she pointed out, “you can’t turn retail into a restaurant, not with the parking restrictions. You can only put a restaurant where a restaurant was.” But still, Rossi said, she’s not worried. “I know that we’ll be fine,” she said. “We will always be a mix of retail, services and restaurants.”

A lack of available parking has been the main factor impeding an otherwise successful cluster of retailers at Shoreline Village, General Manager Debra Fixen noted. “We are hoping that the local car culture will shift,” Fixen said. “There are other choices than park and drive.” Fixen pointed out the positive impact of increased housing options in close distance to the waterfront shopping center and the growing popularity of bikeshare and scooter programs. “If this trend continues, Shoreline Village should have its sixth year in a positive growth curve,” she said.

Shooshani also pointed to the boom of residential development in Downtown Long Beach as a driving force for growth in the local retail sector. “There are a number of new residential projects opening soon in the downtown area that will create more density and population growth, that will require increased services and goods,” Shooshani explained. “New and existing retailers are well-positioned to meet the needs of these new groups of consumers.”