De Minimis is Dead: How Retailers Survive Peak Season

Your retail strategy in 2025 is already out-of-date and out-of-touch with current realities. Think tariffs were painful for everyone before? Try absorbing them during peak season now that the drop-shipment exemption is gone.

The de minimis exemption covered 1.36 billion shipments into the U.S. in 2024. Its suspension in late August hits just as retailers enter the biggest quarter of the year, and the margin for error is gone. For many retailers, peak season represents up to 40 percent of annual revenue.

Brands can try making up those differences from holiday shopping by ramping up ad spend, sure, but the smart ones won’t.

Why De Minimis Matters Now

The de minimis exemption allowed low-value imports to enter the country duty-free. Its removal changes the economics of cross-border e-commerce overnight, and the season’s mechanics magnify this impact:

• USPS, FedEx, and UPS have all implemented temporary surcharges up to $16 per package.
• The National Retail Federation projects $890 billion in annual returns with peak rates from holiday shopping.
• Independent modeling from Yale’s Budget Lab estimates apparel and footwear costs could spike 36 percent to 40 percent in the short term and stay elevated 17 percent to 19 percent in the long term.

Retailers relying on drop-shipping, overseas fulfillment, or slim category margins will feel all of this — even giants like Amazon.com. Fast-fashion platforms like Shein and Temu won’t suffer alone.

How do they all weather this storm while preparing for the next disruption?

4 Moves Retail Leaders Must Make Now

1. Re-balance cross-border and fulfillment economics. This isn’t a blip, so don’t treat it like one. This is the new normal. Re-model SKU-level contribution margins, factoring in duties and holiday surcharges. Re-tier your product catalog accordingly. And where cross-border DTC still makes sense, invest in compliant labeling and clear duty/tax calculations at checkout to protect conversion.
2. Build supply chain resilience with speed in mind. Diversify manufacturing and logistics to reduce risk. Q4 volume is higher than the rest of the year. Flexibility, proximity and throughput are all key considerations, so align your distribution centers, store operations, and carrier partners now.
3. Price and promote with transparency. Consumers are spending, but they’re feeling inflation. Last year, retailers cleared approximately $994 billion in revenue. What can retailers take away for 2025? Consumers reward clarity and reliability more than blanketed discounts.
4. Fix returns now. Returns spike in January, but the damage starts now. Build incentives around exchanges or store credit. Design packaging that supports restock and resale. Encourage in-store returns where recovery rates are higher. The difference between a Q1 cash crunch and a Q1 tailwind often comes down to returns.

Retailers are being forced to implement changes they already should have done thanks to compounding cost shocks (tariffs, surcharges) and operational strain (cutoffs, returns, compliance).

The baseline is being reset and the playbook is simple: re-cost, re-route, re-prioritize, and communicate with customers early so expectations and economics stay aligned. Successful brands plan for the worst, build adaptable systems and processes, and always have a way to measure their success. There’s always another disruption waiting around the corner.

Ben Dutter is the chief strategy officer at Power Digital, a tech-enabled growth firm at the intersection of marketing, consulting and data intelligence. He is also the founder of fusepoint, a data and strategy consultancy designed to deliver enterprise-grade solutions to mid-market brands.