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Cashmere ready-to-wear brand Lisa Yang entered 2025 with strong finances, no debt and steady growth. All of its yarn is sourced exclusively from Inner Mongolia, China, where, CEO and co-founder Samuel Stenberg says, the highest-grade cashmere is produced. (It’s also close to where co-founder Lisa Yang grew up.) Now, tariff increases are eating into the brand’s margins, taking 30 to 40 per cent.
The US is Lisa Yang’s largest market, so scaling back isn’t an option. Neither is sourcing anywhere but China. To mitigate, the team is working on opening a US distribution centre, which Stenberg expects will be operational in June.
The 145 per cent China tariffs, plus existing duties, mean Sweden-based Lisa Yang is now paying approximately 155 per cent tariffs on its imported cashmere. “Without a registered company in the US, this means we could increase our prices a million times, but still make a loss,” Stenberg says. By establishing a US warehouse, Lisa Yang will be charged tariffs on a garment’s cost price, rather than retail price, which means the company will pay less tariffs than they would if they were shipping orders from outside the US.
Lisa Yang isn’t the only brand in the process of setting up US distribution. The Band-Aid solution is generating chatter amongst industry players in search of strategies to mitigate major tariff impact. Ten brands confirmed to Vogue Business that they are exploring this option – and that their peers are, too.
Canada-based intimates brand Knix, which produces in China and other parts of Asia, has been considering starting up a US distribution centre for the past two years, but the tariff announcement drove them to action. “The announcement of the tariffs shifted the economics significantly in favor of having a distribution centre in the US,” says chief commercial officer Nicole Tapscott. “We’ve had so many of our international clients hurriedly start looking into US-based warehousing since the tariff increases,” says Julia Chalmers, founder of LA-based PR agency Lucky Chalm that represents many Australian brands.
As well as saving brands money on the logistics side, distributing goods from the US also ensures that import duties won’t fall on the consumer. At a time of high uncertainty, this guarantee holds weight. It’s a main reason Australian brand With Jéan set up its US distribution centre late last year. “Over the years, we’ve seen firsthand how high import duties and taxes can impact potential sales and limit our reach,” says co-founder Evangeline Titilas. The US is now the brand’s largest market, accounting for around 70 per cent of total sales, making a US distribution point “absolutely imperative”, she says. “This ensures our customers aren’t burdened with unexpected duties or shipping delays, and allows for a much smoother and more accessible shopping experience.” The brand managed to get all of its current stock into the US just a few weeks ago, and distribution is set to go live this week. Once it’s up and running, they’ll notify consumers via the With Jéan website and social media.
Australian ready-to-wear brand Matteau sent an email blast assuring shoppers that it now ships from within the United States, and that they’ll receive complimentary ground shipping with no minimum spend required and no additional duty charges at check out or upon delivery. The brand set up distribution with a 3PL centre in October 2023, and let consumers know at the time. “The reduced freight fees and removal of international duties was a huge benefit to our customers,” says co-founder and director Peta Heinsen. “It is something we continue to communicate to them, with a renewed need to reinforce this message at the current time.”
Rose Colcord, founder of Cou Cou intimates, also got in early. “We were lucky in beating the rush,” she says. Cou Cou manufactures in Portugal, and is preparing for 20 per cent tariffs once the current 90-day pause ends. Cou Cou’s buying and operations director Meg McDonald began exploring US distribution in October of last year. Eighty per cent of Cou Cou’s sales are in the US, so the brand first contemplated investing in a US warehouse upon former President Joe Biden’s talk of closing the de minimis loophole. Under the de minimis exemption, brands were able to ship goods valued at under $800 into the US duty free. Independent brands relied on this to get their products into the US. Cou Cou’s average price point is under $100, so consumers were rarely spending over the $800 mark. For Knix, too, the de minimis loophole closing is a key driver for US distribution, as the brand relied on this to ship its goods from Canada without tariffs.
Weighing options
Brands considering US distribution centres are looking at third-party logistics (3PL) warehouses, meaning a third-party provider handles warehousing, inventory management and order fulfillment. In 2024, the number of leases signed by 3PL warehouses in the US was up 16 per cent on 2023, in anticipation of increased tariff-driven demand, according to CBRE.
Some 3PLs double as bonded warehouses. These facilities enable brands to hold merchandise in the US for up to five years, without paying tariffs until the product is sold (or moved to a non-bonded facility). Karl Siebrecht, CEO of Seattle-based warehouse startup Flexe, says the company has seen a sixfold increase in the level of interest in bonded warehouses year-to-date.
International retailers are spooked and domestic multi-brands are shifting budgets. Production and material costs are already spiking. Initial tariff impact has been major, and it’s hitting indie brands the hardest.
Traditionally, fashion brands haven’t been high users of bonded warehouses. “Fashion brands simply didn’t need [them] before,” says Maggie Barnett, CEO at LVK Logistics. These facilities were used to support industries with high-value goods that are less seasonal (like spirits, some luxury goods and electronics). Many fashion brands relied on de minimis instead, she says, “But that is going away”. Now, Siebrecht is seeing “very significant interest” from fashion companies looking to reduce risk and save costs.
But investing in US distribution centres – bonded or otherwise – means spending money to save money. Distribution from US 3PLs can cost two to five times higher than fulfillment costs in many countries, like Mexico, China or Vietnam, Barnett says.
Plus, there will be an initial strain on US 3PL capacity, Barnett adds, which could bump prices and make it difficult to find the right partner. Already, US warehousing costs surged 8.4 per cent from 2022 to 2024, according to a recent report. (The average cost per-square-foot increased from $7.96 in 2022 to $8.31 in 2024.) But Barnett expects the 3PL provider industry will catch up to the surge in interest in the next eight to 12 months. Plus, 46.7 per cent of warehouses enforce minimum monthly requirements, which can be difficult for brands who operate seasonally and only want to distribute US orders from US facilities to meet.
Bonded warehouses: The cash crunch fix
Bonded warehouses are being heralded as a saving grace for bands. Barnett likens them to “margin time machines for your inventory” because they let brands hit pause on tariffs and rethink their financial strategies without losing momentum. “They’re quickly becoming an unexpected breakout trend with benefits like cash flow management, financial flexibility, and inventory storage solutions to avoid premature liquidation,” she says.
They don’t come cheap. Storage prices for bonded warehouses are generally 40 to 60 per cent higher than non-bonded warehouses, per Flexe. But they enable increased flexibility amid fast-changing tariff policies, Siebrecht says. “If the 90-day pause on European tariff increases is actually going to expire, brands can quickly move product out of the bonded facility and pay the current lower tariff before the higher rates go into effect,” he says.
Cou Cou’s 3PL is a bonded facility. It alleviates the cash crunch the brand had anticipated from the high duties they expected to face when moving tons of units into the US, McDonald says. “It can be a savior in terms of cashflow.”
But even non-bonded warehouses will still help brands save. Brand founders and execs agree that the biggest bonus of US-based distribution is that, by storing goods in a US facility – bonded or not – imported products will be taxed on cost, or buy-in, price, rather than retail value (as they would if they were shipped to consumers from an international warehouse). This means brands only have to pay duties on the cost to make the garment, before operating costs and profits are factored in.
3PL vs bonded
If there are savings on both 3PL and bonded facilities, is the latter worth the extra investment? It depends on a brand’s needs – and where they want to put their money.
Bonded warehouses come at a higher cost than non-bonded facilities. But the costs of either pale in comparison to the actual tariffs, Siebrecht flags. “Storing product [at bonded warehouses] is around 1 per cent of revenue or even lower for premium luxury goods, while tariffs are 10 to 50 times this, depending on the country of origin,” he says.
The price of bonded warehouses may rise as heightened interest clashes with limited space. But it’s still a small fraction of tariff costs. “If bonded facilities can help brands be more agile in responding to changing conditions and high uncertainty, then the ROI is very compelling,” Siebrecht says.
That said, making a high fixed investment a brand wasn’t otherwise planning for is risky, experts say. There’s a lot of red tape that’s hard to navigate, McDonald has found. Moving goods between bonded and non-bonded zones can also be tricky, Barnett adds, as it activates customs, financial, and compliance obligations. As soon as goods exit the facility, the brand must pay the deferred duties immediately (with all of the necessary documents and proof of valuations); movement to a non-bonded facility triggers a formal customs entry (not an internal transfer, so goods may be checked by customs); and bonded warehouses face intensive regulatory oversight. Plus, for brands that operate seasonally (or faster), it won’t be much help. “Because you can park inventory in them for years, that could be less than ideal for trend-driven SKUs with six-week shelf lives,” Barnett flags.
The same goes for brands with smaller amounts of inventory. Knix has decided to open a 3PL US distribution centre, but is still tossing up whether to take the extra step to invest in a bonded warehouse. “While there are potential financial benefits, it depends on how much inventory we are carrying and holding in the US to determine whether the benefit is significant enough to justify the extra investment,” Tapscott says. This is why With Jéan didn’t opt for a bonded warehouse. The brand is direct-to-consumer, and only fulfills its US orders from the States, so there isn’t a need, Titilas says. (The rest of With Jéan’s orders are still sent from its Australian distribution point.)
Lisa Yang’s Stenberg sees no need to seek out a bonded warehouse option. “We have strong finances and are able to handle a more strained cashflow short term if this means we can secure a sustainable business in the long run,” he says, noting that the brand is entering this next phase with healthy finances and no debts. “To have a bonded warehouse is not a necessity.”
The long game
For many brands, the tariffs kicked off what was a longer-view brand plan.
“This is a natural step for Cou Cou to have better customer service and make sure that our customers can get their packages quickly, in a couple of days, at a really affordable rate,” McDonald says. Colcord agrees, noting that the brand sees a drop off when customers see the current seven to ten day delivery window. “As much as it was driven by the tariffs and all of the Trump stuff, it’s also a better experience for our customer.”
Stenberg sees similar upsides for Lisa Yang. “We think it’s a good thing that we have to establish ourselves faster than planned in the US,” he says. “To be closer to our US customers and able to offer them an even better service is something we are truly excited about.” That said, he believes China tariffs need to be cut by at least half for the brand to maintain a sustainable business model with relevant and competitive pricing for the US.
The uptick in interest in both traditional and bonded 3PLs signals a more significant shift to come in supply chain operations, Barnett says. Brands are exploring more fluid and hybrid operations, splitting distribution by country and warehouse type. “This gives them breathing room to recalibrate or stabilise cash flow and rethink how inventory works under pressure, economic curveballs, and geopolitical whiplash,” she says, which places emphasis on optionality over pure hyper-optimisation. “Brands need to shift their mindset from reacting to tariffs to reimagining their entire financial relationship with inventory. Those who get it first will be the ones who come out ahead.”
Despite the current chaos, brands need to be playing the long game, Barnett says. “Every decision should now be viewed through the lens of resilience rather than efficiency.”
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