Why is FP&A critical for U.S retail businesses in a Tariff environment?

As both digital and traditional retailers in the U.S grapple with the impact of shifting tariffs and try to anticipate their short- and long-term implications, we spoke with Kajri Sheth to explore how FP&A, utilised and implemented properly, can help businesses navigate the uncertainty.

Kajri is a highly regarded Finance Executive, based in the U.S with more than 10 years of experience, and has spent the last five years turning around distressed assets in the e-commerce and retail sectors. Her work has focused on rebuilding data foundations and implementing modern FP&A processes, reporting frameworks and enabling technologies.

Why FP&A is critical in e-commerce and retail - especially in a tariff environment

In an environment where tariff shifts and trade policy can upend sourcing, pricing, and profitability in a matter of days, the role of FP&A in e-commerce and retail has become nothing short of mission-critical. What was once a function focused on backward-looking reports and annual budgets has evolved into the strategic command center for navigating real-time complexity. Tariff pressure doesn’t just increase the cost of goods - it forces a company-wide recalibration of how demand is forecasted, prices are set, marketing dollars are spent, inventory is moved and capital is allocated.

Tariffs: a shock to the system

In 2024 alone, U.S. import tariffs across consumer categories accounted for over $70 billion in additional costs for retailers. These shocks demand more than cost controls - they require cross-functional agility and precision planning. The first line of defense is visibility: SKU-level understanding of where costs sit, how products move through global sourcing networks, and which categories are most sensitive to trade actions. Leading organizations are investing in cost-to-serve analysis, country-of-origin risk scoring and tariff exposure mapping. These tools allow FP&A to simulate cost inflation under different policy regimes and focus mitigation efforts where both risk and margin contribution are highest.

Planning with speed and precision

That level of granularity must be matched by speed. Traditional monthly reporting cycles are too slow for a tariff-driven world. Modern FP&A teams operate on dynamic planning cadences, using integrated tools and connected data architecture to update forecasts in near real time. These systems unify inputs from procurement, logistics, marketing and sales, enabling continuous scenario modeling. For example: what if tariffs on Tier 1 sourcing markets rise by 10%? How would that affect the cash conversion cycle, gross-to-net margins or EBITDA drag? According to Gartner, 78% of finance leaders identified rolling scenario planning as a top 2025 priority to handle external volatility.

Navigating elasticity and pricing dynamics

Tariffs also challenge demand elasticity. Whether to absorb additional costs, pass them on to the customer, or adjust pricing strategies depends on a detailed understanding of contribution margin, customer lifetime value and price sensitivity. E-commerce brands have an advantage here. Through A/B testing, conversion funnel analysis and live pricing experiments, they can identify where customers will accept higher prices and where increases risk cannibalizing demand. Retailers that implemented elasticity modeling during the 2023–2024 cost shocks saw category - level contribution margins improve by 12–18%.

To support pricing and margin decisions, FP&A increasingly tracks metrics such as SKU-level PPC efficiency, regional cost of goods sold (adjusted for landed duty), and net revenue per channel per promotional dollar. Gross margin return on ad spend (GMROAS) is replacing traditional ROAS as a more meaningful measure - reflecting bottom-line efficiency, not just top-line lift.

Finance and marketing: a unified strategy

The role of FP&A is now deeply cross-functional. Marketing is no longer just a spend line - it’s an investment portfolio that must be optimized under constraints. Leading organizations are creating shared dashboards across finance and marketing to monitor blended customer acquisition cost by segment, incremental revenue per campaign and customer retention ROI. A 2024 study found that organizations aligning finance and marketing around shared KPIs were 2.3 times more likely to sustain profitable growth through periods of margin pressure.

Managing marketplace complexity

Marketplaces introduce added complexity. While they expand reach, they often dilute pricing power and increase exposure to platform economics - including fees, promotional dependencies and returns. FP&A must model SKU- and channel-level profitability in these environments, factoring in take rate variances, advertising efficiency loss and return-adjusted margins. Amazon’s algorithmic pricing system, for instance, requires constant recalibration of forecast assumptions.

Cash flow planning must also account for differences in payout timing across direct-to-consumer, wholesale, and marketplace channels. Variance in days sales outstanding and unearned revenue recognition further complicates liquidity tracking.

Evolving capital allocation strategies

Capital strategy is shifting in response to trade risk. Many companies are accelerating nearshoring, pre-buying inventory, or deferring capital-intensive projects in favor of more flexible, variable-cost options. FP&A leads these decisions by modeling the net present value of sourcing changes, payback periods on 3PL implementations and the impact of inventory pre-purchasing on working capital efficiency - tracking metrics like days inventory outstanding (DIO), days payable outstanding (DPO), and cash conversion cycle (CCC). SaaS-based planning tools, now used by over 60% of enterprise FP&A teams, make it possible to link these models directly to integrated forecasts.

A new approach to performance metrics

What brings all of this together is a modernized system of metrics and strategic targets. FP&A teams are moving away from traditional financial ratios and toward cross-functional indicators. These include landed margin per fulfillment node, contribution margin by digital campaign, tariff-adjusted SKU-level profitability, and cash conversion efficiency under simulated supply scenarios. Other emerging metrics include the EBITDA-to-marketing spend ratio by customer cohort, cost per retained customer versus acquired, and margin-at-risk exposure under trade policy changes.

OKRs are being reframed with resilience and adaptability in mind - objectives like reducing reliance on tariff-prone sourcing by 25%, increasing the margin resiliency index by 15%, or rebalancing marketing mix to meet a target GMROAS by quarter-end.

From cost center to growth architect

In a landscape shaped by cost pressure, policy uncertainty, and platform-driven disruption, FP&A has become the connective tissue linking marketing, sourcing, operations, and strategic leadership. The modern finance leader no longer just reports on the past-they actively shape what happens next. With the right data foundation, cross-functional visibility, and dynamic modelling capabilities, FP&A is evolving from a cost center into a growth architect.

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Endnotes

1. Estimate based on aggregated import tariff impacts reported across U.S. retail trade publications in 2024.

2. Gartner, 2025 CFO Priorities and Finance Transformation Survey.

3. Elasticity metrics based on category benchmarks from leading retail analytics platforms (2023–2024).

4. LinkedIn and Gartner, Finance-Marketing Efficiency Study, Q3 2024.

5. Planful & FP&A Trends, State of Modern Planning Survey 2024.

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