Tariffs: 3 Thoughts, Solutions, and Strategies

29 August 2019 | 11 Comments

If you’re an American company that makes products in China, by the end of 2019 it’s likely that the US government will earn at least a 10% tariff on all products you import from China.

I’m not looking to discuss the problems tariffs present, nor am I looking to start a political discussion. Rather, I’d like to share a few thoughts, solutions, and strategies.

Also, importantly, for many types of products, there currently are no tariffs. So I’m speaking in hypothetical terms that I truly hope will remain that way. Just in case they happen to products you make in China, though, here are a few considerations:

  1. Nathan’s insights on the Pandasaurus Games blog. Nathan recently wrote a brilliant and comprehensive post about tariffs that I would highly recommend. I can’t even begin to recap it, but if I had to pick a few sentences about what they’re considering, it’s these: “How would we react to a 10% tariff as an established company?  We would likely do what almost every established company is doing.  We would eat it.  We would eat the 10% tariff and not pass it along to you.  We would eat the additional risk in hopes that it’s temporary…. We’re talking to producers in Vietnam, and the US, and Europe, and Taiwan, and Malaysia.”
  2. We already ship a significant number of games not through the US. Combining direct orders from distributors, games we produce for localization partners, and new products we ship to fulfillment centers in Canada, Australia, and the UK, I would say that around 40% of our inventory never even enters the US. Thus it’s not subject to a US import tax. It would be imperative for us to continue this strategy.
  3. We would need to find a compromise with distributors. Publishers sell to distributors at a 60% discount, distributors sell to retailers, and retailers sell to consumers. My hope would be to find a solution with distributors that may involve a slight reduction in that discount–enough to maintain sustainability for both Stonemaier and the distributors. Most importantly, it would be a small enough adjustment that it would not impact consumers at all.

I understand that these solutions vary vastly depending on the size of the company and their strategies. For example, if a company has successfully managed to be sustainable without traditional distribution (using Kickstarter, Amazon, and other direct-sale methods), they may have considerably more flexibility than a company like Stonemaier. It really depends.

If you have any solution-driven thoughts about this topic, I’d love to hear them in the comments!

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11 Comments on “Tariffs: 3 Thoughts, Solutions, and Strategies

  1. Manufacturers are already opening US branches for printing of your games. Move your printing to the USA. No import. No tariff.

    If Tarriffs do go through, the quantity of US producers will increase (hence the end-goal of the tariffs). Then you’ll have even more options to produce in the USA. This will eventually drive down prices for said US manufacturing. This is a 5-10 year plan, but it’s a good plan.

    1. I don’t know the numbers, but I can’t imagine a US-based manufacturing plant is able to compete on price in the near term.

      1. It’s not even about price.

        It’s also about the printer’s capacity to produce x amount, and whether the printer can actually print said products.

        China for example has a monopoly or near-monopoly on plastic injection molding (if your game requires such components).

        For US printers, Cartamundi does printing for some notable game publishers, but it’s impossible for them to service everyone.

  2. In related thoughts, but separate: You can eat it (but can the small-medium sized publishers really??) or you can increase your MSRPs by a small related margin to cover it (like most will).

    I don’t really think most will eat it like you said. It’s just not realistic. I think they’ll say they will, but they won’t long term. It’s just not reasonable, especially with the distribution curve.

    Why should we ask distributors to eat it? Why would they? – It’d be great if they did, but they won’t. They’re already bottle-necked and over stuffed right now. Companies that ask them to eat it might be the ones they start thinning out of their catalog.

  3. There may be a consideration of fulfilling out of Canada. Need to look at import duties and such, but with a 25% exchange rate in your favour, it bears examining.

      1. So that’s about 2% of MRSP? I see why Pandasaurus think they can eat it, for a while at least anyway. But ultimately if this level is the new normal, then MRSP is going to have to climb to accommodate it. Given this is a cost that only features on the manufacturing price, does that mean the 5x Manufacturing/MRSP ratio can change to accommodate it, or eventually is it going to become a 10% on the shelf as well?

  4. I could see an increased demand in the games that are on store shelves (warehouses) with pre-tariff pricing. Some consumers will wait for the tariffs to be repealed or wait for the trade war to be settled. This could also coincide with a surge of 2nd hand or used games being exchanged among gamers or though forward thinking FLGS (consignment shelves, buy/sell used games, etc.)

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