Keen’s Strategic Approach Amid U.S. Tariff Challenges
The recent imposition of steep tariffs on imports by the U.S. government has sent shockwaves through various industries, particularly in the realm of footwear. Businesses are grappling with the implications of these tariffs, leading many to contemplate price hikes. However, Portland-based footwear company Keen has taken a different approach, pledging to maintain its current pricing structure despite potential cost increases.
Preparedness and Supply Chain Diversification
Keen’s resilience is not a matter of mere chance; it is rooted in proactive planning. Chief Operating Officer Hari Perumal explained, “We have been preparing for this for over a decade.” Early recognition of the risks associated with overdependence on any single country prompted Keen to diversify its supply chain, thereby reducing its reliance on Chinese manufacturing.
With 650 employees in the U.S., Keen, now owned by Fuerst Group, has strategically expanded its operational footprint beyond China. This diversification is critical as the company moves to mitigate the impact of trade fluctuations and geopolitical uncertainties.
Impact of Tariffs on the Footwear Industry
The tariffs introduced during President Trump’s administration have significantly affected the footwear sector, where approximately 36% of imported shoes sold in the U.S. originate from China. According to a TD Cowen analysis, this trade disruption is expected to severely impact prices for both apparel and footwear consumers.
Jason Judd, an expert in global supply chains at Cornell University’s Global Labor Institute, anticipates that the average annual household expenditure on footwear and apparel—currently around $1,700—could spike by as much as 70%, potentially reaching $2,800 in the short term. The rise in costs may persist, leading to an ongoing burden of approximately $425 per family each year as tariff repercussions linger.
Adapting to New Trade Realities
As the footwear industry adjusts to the new tariff landscape, notable players are already signaling forthcoming price increases. Adidas, for instance, has warned customers that rising tariffs will inevitably result in higher retail prices. This shift is not limited to footwear; retailers across various markets are implementing “tariff surcharges” to alleviate the financial strain of increased import duties.
Keen’s Multi-Country Production Strategy
Currently, Keen boasts manufacturing plants in Shepherdsville, Kentucky, the Dominican Republic, and Thailand. This locations strategy has allowed the company to spread a significant portion of its global production. In addition, Keen collaborates with manufacturers in Cambodia, India, and Vietnam, all of which face new tariffs ranging from 27% to 49% based on country-specific rates.
Perumal noted, “We do have 10% exposure in those countries, but the 10% tariff we’re dealing with is significantly lower than what other companies are facing on products that would come out of China.” This thoughtful approach ensures that Keen can absorb some of the cost impacts while keeping prices stable for customers.
A Collaborative Approach to Cost Management
Amid rising costs, Keen’s leadership has committed to not increasing prices, a decision supported by its partners in the supply chain. Perumal emphasized the collaborative nature of this effort, where costs are shared across different tiers of suppliers. The proactive measures Keen has taken over the years appear to position the company favorably in a shifting market landscape, highlighting its strategic foresight and adaptability in challenging economic conditions.