Increase Margins, Not Prices

How Furniture Retailers Are Navigating Tariffs — and a Better Way Through 

Furniture retailers on nearly every continent are contending with the same math: landed costs are rising and something has to give. In the United States, Section 301 and Section 232 tariffs stacked on base import duties have pushed the landed cost of a single imported sofa above 30 to 35 percent of its base price, according to the Home Furnishings Association.

In Canada, challenging trade talks, tariffs and rising fuel costs are compounding the same pressure on cross-border sourcing. In Australia, it isn't a tariff schedule at all — Red Sea and Suez Canal shipping disruptions have pushed China-to-Australia freight rates up more than 40 percent year over year, with analysts estimating the hit to one major retailer's pre-tax profit could reach 7 percent.

Different causes, same outcome: for an industry that has historically run on razor thin margins, rising costs force a decision — pass costs to the customer, absorb them, or find another way to protect the bottom line.

Across the industry, most retailers are choosing some combination of all three. But the order in which they reach for each option says a great deal about how disciplined — and how durable — their margin strategy really is.

The Industry Playbook

Four responses show up again and again, regardless of which market the pressure exists.

Selective, not sweeping, price adjustments

Rather than repricing the entire floor, most retailers are raising prices only where cost exposure is real and unavoidable. IKEA — a global retailer operating in more than 60 markets — raised prices specifically in the U.S. once tariffs hit, while holding steady elsewhere. Lovesac, a manufacturer and retailer of customizable couches has a four-step tariff response that places price increases third, after vendor negotiations and supply chain diversification in categories where competitive benchmarking has room to move. For months, Walmart promoted that they were holding prices before announcing increases on more than 4,200 items, including furniture, once it said tariff scale could no longer be absorbed.

Selective, not sweeping, price adjustments

In the U.S., a recent British Standards Institution (BSI) survey found that roughly a quarter of companies plan to shrink their product ranges within six months. The logic isn't confined to one country: fewer SKUs mean fewer supplier relationships, fewer shipments to classify and duty, and less complexity to manage, wherever the cost pressure originates. The on-again and off-again tariffs imposed on U.S. retailers has created a paperwork nightmare requiring proof of product origin to be eligible for potential refunds of previously paid tariffs declared by courts to be invalid.

Evaluating supply chain operations

Retailers are modeling true landed cost — not just headline tariff rates — and shifting production accordingly. Bob's Discount Furniture says it no longer sources any production from China, and Lovesac has been shifting output toward Vietnam, Malaysia, and Indonesia, though those countries' tariffs have “pretty much doubled” as well, according to Lovesac's Mary Fox. IKEA is doing the reverse in some categories, reshoring manufacturing closer to its largest markets to shorten shipping costs altogether. In Australia, where the pressure is freight rather than tariffs, retailers are re-routing and re-timing shipments around the Red Sea detour rather than absorbing the full rate spike. There's no single playbook — only the same discipline, applied to whatever the local cost driver happens to be.

Working with vendors

This is where some of the most creative margin protection is happening. Bob's Discount Furniture, which sells exclusively private-label product, leans on its direct supplier relationships to “uncover solutions and offset costs,” according to COO Ramesh Murthy. Lovesac's very first response step wasn't sourcing or pricing at all — it was renegotiating terms with long-standing vendors.

Increased pricing as the last resort

Nobody has put the industry's underlying instinct more plainly than Mike Walsh, President and CEO of LFL Group, which operates Leon's and The Brick. Interviewed by BNN Bloomberg on the fallout from stalled Canada–U.S. trade talks, Walsh described the “playbook” his company built during the 2025 tariff period: working with manufacturers to mitigate tariff exposure, temporarily pausing business with vendors unwilling to participate, and adjusting assortment where necessary — then redeploying that same playbook this year.

But raising prices, he was clear, only comes after every other option has been exhausted:

“We're looking under every rock… before you have to start doing mass price increases. And I just believe that [increasing prices is] just the wrong thing… So that's our last resort — to raise prices. Our mission is to stay laser focused on providing Canadians with value,” Walsh said, “and we'll do everything we can to avoid raising prices.”

It's a mission built on strong financial footing — Walsh points to LFL's “pristine balance sheet” and strong cash position — but it's also a statement about discipline and priorities. Price increases sit at the bottom of the list, not the top.

A New Playbook: Defense VS Growth

Vendor renegotiation, sourcing diversification, and assortment trimming are built to keep margin from eroding further under an external shock. While these are solid defensive measures, none of them are built to grow margin on their own. When margin pressure eases, as it eventually will, the strategies that protected margin during the storm have little left to offer once the storm passes.

A new industry playbook, The Margin + Plus Method™, identifies how to reverse margin-squeezing pressures.  Where the industry's current response starts with cost and works backward, the book's margin-building methods start with the transaction itself and works forward — independent of what any government, shipping burden, vendor or trade negotiation is doing to impact landed cost.

The playbook also recognizes the importance of assortment trimming to reduce tariff and supply-chain complexity by recommending much the same discipline — curating fewer SKUs with stronger Gross Margin Return on Inventory Investment (GMROII).

However, the book approaches this tactic from a different perspective: a crowded floor invites comparison shopping and slows customer decisions, whether or not a tariff is in effect. By working with a supplier who can provide a private-label assortment or exclusive collection of SKUs, a Retailer can provide a permanent way to eliminate price comparison altogether. After all, “when Google can't find it, customers assume it must be special.”

Some Retailers are known to raise prices indiscriminately simply because they believe it’s the only way to preserve margins. The book suggests that many stores don't have a pricing problem — they have a pricing discipline problem that predates the current economic challenges. Raising prices and then offering cash discounts not only reduces margin – it perpetuates a selling practice that sees dollars walking out the door for reasons that have nothing to do with trade policy. The book offers alternatives to discounting that still wins the business while enhancing and preserving margins.

Smart retailers are closely monitoring landed costs and operational expenses in order to survive this period of tighter margins. They’re applying rigor to auditing product returns, documenting and processing damage claims with vendors; optimizing delivery routes and carefully watching aging inventory. These well-defined processes, together with engaged, knowledgeable sales teams can do more to drive success than any impact caused by tariffs or other external costs. 

The Two Levers No Tariffs Can Touch

There's a category of margin that no customs levy, freight surcharge, or trade negotiation can touch: it’s what happens when an associate and a customer interact on the showroom floor.

Timing couldn’t be more relevant as The Margin + Plus Method™ argues that margin is “most often protected — or lost — in the conversation,” not in the pricing sheet or the buying plan.

A solid selling process — greeting, discovery, solution presentation, value reinforcement, close — keeps every associate telling the same story instead of freelancing into a discount discussion at the first sign of hesitation. Retailers who slow the conversation down, coach associates to defend price with confidence, and pay commission on margin rather than gross volume routinely outsell stores selling identical products at identical list prices, simply because fewer dollars leak out through improvised negotiation.

Product protection plans also make the same case even more directly. Extended coverage on furniture, appliances, and bedding requires no floor space and almost no cash investment, and retailers typically keep 50 to 60 percent or more of the retail plan price before commission. Yet attachment rates vary enormously by store — the book puts a disciplined target at 30 to 45 percent, with the strongest performers reaching 80 to 90 percent, purely on how consistently the plan gets mentioned. One example: a retailer who required every associate to raise protection early in the conversation, rather than at checkout, doubled attachment rates simply by changing where in the conversation the discussion showed up.

Both levers share the same appeal in the current environment. A better-trained sales floor and a stronger protection attachment rate doesn’t depend on a tariff schedule, an increase in shipping costs, or what any government decides about duties in the next quarter. They're available now, in any market, to any retailer willing to build the discipline.

The Real Lesson

Tariffs and freight spikes will ease, shift, or get renegotiated — Walsh himself expects the current Canadian pressure to last 12 to 18 months, not forever. Retailers who only played defense will have protected margin until conditions changed, then be right back where they started. Retailers who used the same window to build pricing discipline, curate their assortment, close operational leaks, train their sales floor, and grow protection attachment will come out the other side with a stronger business than the one the pressure found — regardless of which country's trade policy, or which layered shipping cost, caused the disruption in the first place.

That's the real difference between a defensive playbook and a forward-looking margin strategy: one holds ground until conditions improve. The other keeps building, wherever in the world you sell home furnishings, regardless of what the next headline says about trade policy.

As the title of this brief suggests, it’s more than just adopting a defensive strategy against external threats and trade wars. It invites retailers to focus on what can be controlled – finding innovative ways to increase margins without resorting to raising prices.

Join the Margin + Plus Method™ playbook’s waitlist & receive a  FREE chapter now!

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