This handbag company is grappling with a new tariff reality

Oct 8, 2018

My Economy tells the story of the new economic normal through the eyes of people trying to make it, because we know the only numbers that really matter are the ones in your economy.

Secretary of State Mike Pompeo exchanged blunt words with the Chinese foreign minister, Wang Yi in Beijing yesterday. He said the two countries had a "fundamental disagreement" on trade issues and Taiwan. With U.S.-China relations looking frosty and no sign of either side backing down in their trade standoff, U.S. businesses and the people running them are forced to deal with a new, higher tariff reality.

For the latest installment in the series, we hear from Deepa Gandhi, co-founder and COO of Dagne Dover, a handbag and accessories company that launched in 2013. Tariffs on over $250 billion in Chinese goods including a swath of consumer products like handbags, bicycle helmets, and deodorant are already in effect. 

My name is Deepa Gandhi and I am co-founder and COO of Dagne Dover. Dagne Dover is a handbag and accessories brand.

We make a variety of products to really help a woman get from day to night. Everything is under $500. So, if you compare our mid-$200 price tags to a Coach bag for example, they would sell that probably at double. For me, I never felt a reason to buy a thousand dollar plus handbag, because I didn't feel that they were functional. I said, if I'm spending money, I want to make sure that this actually deals with my day to day. So, we started with a product that has a place for your laptop, your water bottle, a key strap so you never lose your keys.

When we first launched, we manufactured in New York locally, but we very, very quickly outgrew their capacity. Overall handbag manufacturing in the U.S. is limited. You know, our average handbag is over like a hundred patterned pieces, it's kind of crazy how complex they are. You have to have multiple stitches, multiple edge paint and you know, things that just take a lot of time and you need the labor force that actually is able to do that, and that labor force isn't trained in the U.S. And that's where Asia was really important.

We are a small, yet high growth business so adding an additional tariff, we have to redo our cash flow planning and we have to rethink about, how are we going to grow? If manufacturing was in the U.S., we could support the U.S. economy by bringing manufacturing here, but that's not an option for us. Our only option is to move to other countries in Southeast Asia and we have actually been in the process of doing that, but it's still a matter of time because to properly shift a supply chain takes 18 to 24 months.

These tariffs in the end will not just hurt us as a small business but also the customer because, we have to start to think about is this something that we pass along to our customers? And that's not something we want to do because it is still mid-price point. We are confident we'll be able to weather it, but it definitely has us making some tough decisions.

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