Some small businesses in B.C. are rethinking their strategies to shield themselves from ongoing global challenges.
Loulou Lollipop, a Vancouver-based baby products brand, has recently diversified its supply chain and expanded into more international markets, as U.S. tariff threats and supply-chain disruptions linger.
One of the company’s key moves has been shifting part of its production from China, where its products were historically manufactured, to Vietnam—an emerging manufacturing hub.
“We expect to have our first [Vietnam-made] inventory land into Vancouver mid-October,” said James Connell, COO of Loulou Lollipop.
The average tariff rate for U.S. apparel imports from China surged earlier this year, reaching an unprecedented 69.1 per cent in May. Meanwhile, U.S. tariffs on apparel imports from Vietnam rose more modestly, to 20 per cent as of July 2.
This means moving production to Vietnam will substantially reduce the company’s tariff costs.
Connell said the company’s shift in production began late last year, even before U.S. tariffs started to change.
“We want to provide the best quality product for our customer at the best price, and it’s always good to reevaluate different manufacturing practices throughout the world,” Connell said.
“Now, with the U.S. tariffs, we’re just accelerating the process.”
He added that the company has been able to secure more competitive pricing in Vietnam than in China, with equal or even higher product quality.
One factor is lower labour costs—Vietnam ‘s average hourly labour cost was US$3 compared to US$6.5 in China, according to Boston Consulting Group’s 2020 statistics.
Loulou Lollipop is also cutting costs by rethinking its packaging to maximize logistics, and scaling up production of popular items to gain more negotiating power, according to Connell.
However, Connell noted that minimum order quantities in Vietnam are generally higher than in China, so the company will continue to manufacture some products from China for smaller, quick-turnaround orders.
“Most likely we will always have some foothold in both markets, just to make sure we have the diversification that we can benefit from,” he said.
Vancouver-based apparel company Aritzia Inc. (TSX:ATZ) announced in May that it will move some of its production from China to Vietnam amid the U.S. tariff threat. Another major B.C.-based apparel brand, Lululemon Athletica Inc. (Nasdaq: LULU), started shifting production to Vietnam from China back in 2016.
Focusing on non-U.S. markets growth
For Debbie Etsell, owner of Singletree Winery, recent tariff disputes with the U.S. have brought great opportunities for the family-run Abbotsford vineyard, which has seen a surge in local demand.
In March, Canada imposed a 25 per cent retaliatory tariff on all U.S. wine and spirits in response to American duties on Canadian goods. B.C. went further, removing U.S. alcohol from liquor store shelves.
“One of the key things we’ve been working on—even more than before—is pushing Canadian products grown and sold in your own backyard,” said Etsell, who added a Canadian flag to the winery’s roadside sign.
Singletree has focused on attracting and engaging local customers by introducing new experiences such as “wine cabanas” and vineyard concerts featuring rising country music stars, to turn the winery into a destination people want to visit more often.
The winery is also working to absorb higher costs for supplies such as labels and bottles so they aren’t fully passed on to consumers. At the same time, it is eyeing expansion into other provinces, as talks to ease interprovincial trade barriers progress, Etsell said.
“It’s always about pivoting when these challenges come—you have to be able to keep moving,” she said.
For Loulou Lollipop, this is a time for a “renewed focus” on markets outside North America, according to Connell.
The company has scaled back some U.S. marketing and promotions while exploring opportunities in new markets over the past few months. It has already received orders from distributors in Southeast Asia and seen interest from the UK and Mexico.
“We’re encouraged by the early appetite for orders,” Connell said.
“Now it’s just a matter of figuring out the logistics and supply chain to ensure we’re doing this in the most economical way possible.”
