Small Colorado retailers juggle tariffs, skittish consumers as holidays approach

Last Christmas Eve, when sisters Hannah Cox and Jessie Gingrich signed a lease to open a store on Broadway in Denver’s Baker neighborhood, they were excited but also nervous because they weren’t sure what incoming President Donald Trump’s pledge to raise tariffs might mean for business.

Almost a year later, as the co-owners celebrated the grand opening of Mountain Standard Goods, a clothing and gift shop, they’re excited about the new venture but unsure what the holiday season will bring in the wake of higher prices because of tariffs and lingering inflation. They’ve been dealing throughout the year with the changing trade environment at their original store in Colorado Springs.

“We did get a little bit scared when this store wasn’t open yet and all these tariffs started coming down,” Gingrich said. “It definitely made us think a little, like did we make the right decision?”

Analysts expect the unpredictable environment that businesses are struggling with will spill over to consumers and lead them to rein in spending this year. A survey by Deloitte of Denver-area shoppers projected that the average amount spent this holiday season will drop by about 14% from $1,782 per household in 2024 to $1,526.

The national average is expected to be $1,595, a 10% decrease from $1,778 the previous year.

The survey of 424 people in metro Denver found that 81% of the respondents anticipate paying more this year for gifts and 67% believe the economy will slump in the year ahead, compared with 34% in 2024.

While the survey didn’t delve into the reasons behind people’s plans to not open their wallets quite as far this year, Deloitte noted that this season is “unfolding against a backdrop of economic uncertainty.”

“Most people expected higher prices. And furthermore, when they looked further out, they expected the economy to weaken,” said Robert Ried,a principal at Deloitte who focuses on consumers and the retail industry.

Roughly 49% of the Denver-area respondents said they’ll shop at more affordable retailers over preferred ones. Experiential gifts, such as outings to restaurants, events or spa visits, are on the shopping lists of 53% of those surveyed.

The survey found that 40% will look for items online first and 35% expect to spend most of their money at big-box stores. About 19% said they’ll shop at specialty retailers.

“If I was a local marketer or local retailer, I would really look to put my best foot forward this holiday,” Ried said. “I would make sure that I remind folks that we’re local.”

And Ried believes local businesses should make shopping as easy as possible. One way, he said, is to have a strong online presence so people have a sense of what the store has.

Despite the uncertainty, the National Retail Federation is upbeat about the holiday shopping season, saying the economy continues to show “surprising resilience.” The trade association predicts that retail sales in November and December will rise as much as 4.2% over 2024, with total spending surpassing $1 trillion for the first time ever.

“As tariffs have induced an uptick in consumer prices, retailers have tried to hold the line on prices given the uncertainty about trade policies,” Mark Mathews, the federation’s chief economist and executive director of research, said in a statement.

However, retailers are hiring fewer seasonal workers, in line with a slower-paced labor market, Matthews said. The federation believes fallout from the federal government shutdown and the loss of income in the private sector could affect consumer demand.

The holidays: ‘It’s our Super Bowl’

“Christmas is our biggest time of the year. October, November, December are really great for us,” said Luke Johnson, founder and CEO of Luke & Co. pet store on Broadway in Denver.

This holiday season, Johnson predicts a similar boost in business — a 10% to 20% rise in sales. The increase, though, would come after some rough going in the first quarter and part of the second as tariffs were announced, put on hold and imposed.

“It feels like for the most part the volatility is sort of baked into the price of the product now. We anticipate we’ll see some prices continue to go up,” Johnson said.

One thing he doesn’t expect to see is costs going down, even if tariffs are lowered or rescinded. Much of the pet food is produced in the U.S. But some of the ingredients, such as rabbit, beef and lamb, come from other countries. Many of the toys are imported from China. Most of the cat-food cans and cat food come from Thailand. Pet-food bags are largely made in Asia.

Even the printed paper bags that Luke & Co. customers carry their items home in are made in China. Johnson said he couldn’t find any U.S.-produced replacements for anywhere near the same price. Just finding U.S. companies with the same kind of equipment and expertise as overseas suppliers has been a common dilemma for business owners trying to find alternatives to the higher tariffs.

Johnson, in business since 2016, has raised prices as his suppliers have increased theirs.

“We did try to eat increases as much as we could the first couple of months. Our net profit is roughly 8% a year, so we can’t afford to indefinitely eat the mark-ups,” Johnson said. “If a price goes up, we only raise it the same amount as the increase.”

Small businesses in Colorado and across the country are heading into the holiday season bracing for less-than-typical spending, Hunter Nelson said. She is the director of the Colorado office of the Small Business Majority, a national organization.

“We’ve heard in Colorado as well in our other states that seasonal hiring is being impacted. Tariffs and other sources of inflation have raised prices, which has consumer confidence down,” Nelson said.

As a result, she added, smaller businesses, especially retailers, are holding off on hiring seasonal workers. In addition, uncertainty about how freely people will spend this holiday season has business owners unsure about how much to stock up.

“So some are just biting the bullet and spending their cash, while others are simply just buying fewer items right now,” Nelson said.

A national survey by the Small Business Majority found that 60% of the respondents have paid higher costs for imported goods because of tariffs. More than half of the 228 businesses said their costs have risen 10%-25% and nearly one quarter reported increases of 26%-50%.

“Along with everyone else, tariffs have definitely affected us,” Gingrich said of Mountain Standard Goods.

Cox described the business as a curated mix of vintage men and women’s apparel and gift items.

“We’re really trying to get away from fast fashion, finding pieces that are going to last a lot longer,” Cox said. “They’re more ethically produced and are better for the planet and are better for the people who produce them.”

Gingrich said she and Cox also try to work with smaller and local brands as much as possible. The smaller companies might have to source materials from countries tariffed by the U.S.

“Those costs are passed onto us, which are passed onto the consumer,” Gingrich said.

The sisters aren’t selling a men’s shaving care brand from Canada this year because the tariff on it is 25%. They decided against stocking a shirt that sells well because the price jumped $20.

“Certain brands that were already at the top tier of what we felt comfortable with are pushing through to a different level that we’re just not comfortable with,” Gingrich said.