Mayday & Sleeve Kings With The Tariffs
The US Tariffs
As all of you who aren't living in a cave somewhere know, the US government has been steadily increasing tariffs on all products coming in from China to the USA. About 70% of our business is in the USA and roughly 100% (ok exactly 100%) of our production is done in China. Since the beginning of the year the tariffs on our board games, card sleeves and other accessories has gone from 0% in December 2024 to 10% in January 2025 to 20% in February 2025 to 54% just a couple of weeks ago to 104% earlier this week to 125% yesterday to 145% today!
If we get a shipment in from China to the USA for say $50,000 USD we now have to pay $72,500 in tariffs at the port. This is a payment we have to make to the US Federal Government from our company in order to get the product out of port and to our warehouse. As you can image, more than doubling the direct cost of our products is NOT something we EVER anticipated and we have tried hard to keep our prices low since we started the company way back in 2018.
Our Pricing Problem
Let me explain with a simple example as to the pricing problem we are facing. Let's assume we sell a board game for $50 retail price in the USA and that game costs us $10 from the factory, a pretty typical case in our industry. That game we can sell to customers at $50 and we make a nice profit on it, although we have to pay shipping from the factory to our warehouse in Utah of around $2/copy and of course we have the overhead cost of running our warehouse, paying our employees, advertising, attending conventions, game development, artwork, licensing, insurance, other taxes and a host of other expenses.
(Our warehouse in Spanish Fork Utah)
The major issue is that we sell to distributors at 60% off MSRP and those distributors turn around and sell to stores at 50% off MSRP. So this $50 game we sell to distributors for $20 and they sell it for $25 to stores who then sell it to consumers for $50. Everyone takes a little chunk and as you can imagine we only get a very small profit as we have to pay for the shipping from our warehouse to the distributor and often wait 4-6 weeks to get paid by the distributor. Pretty narrow margins already.
Now throw in a 145% tariff on this $10 game. It suddenly went from $10 to $24.50 in direct cost. For a customer buying directly from us we could probably just eat that extra $14.50 in tariffs ourselves and still make a profit, or we could pass that $14.50 on to the customer and mark our game up from $50 to $64.50, an increase of 25% on the MSRP. But the distributor will only pay us $25.80 (60% off $62.50) for the game now and we buy it for $24.50 now, so we have less than $1.50 to get it shipped from China to us, from us to the distributor AND cover all our overhead.
For the vast majority of board game publishers about 75% of sales come from selling to distributors/stores and not directly to customers. I'd venture to say it is even higher than that in most cases. For us to make the same percentage from the distributor then we need them to pay double our direct cost. In other words, that $10 direct cost for a $50 game means with a $24.50 direct cost we need that game to be $122.50. Then the distributor will pay $49.00 per copy (60% off). Of course we don't need $24.50 per game to make enough profit to stay open.
So what if we want to make the same $8 difference from the $20 we used to get from the distributor and the $12 ($10 direct cost + $2 shipping from China to the USA) we used to get? Then our cost + profit would need to be $24.50 (cost + tariff) + $8 (profit) = $32.50. So our MSRP would need to be $81.25 to get a 60% off price of $32.50. We would then need to raise our prices by 62.5% (from $50 to $81.25) to keep the same margin on the distributor price.
Still, raising the price by 62.5% to cover a 145% tariff isn't too bad right? But you retailers and distributors do not want to see that $50 game for sale for $81.25, and neither do we.
Our Path Forward
We have been fortunate enough to have purchased our own building in 2023 and we have renters coming into 2/3 of the building. They will shortly be paying us enough in rent to cover the entire mortgage so we are happily using our warehouse basically rent free. Our cash reserves are pretty healthy and we believe this trade war won't be a long-term thing. We also have a several month supply of our products on hand and none of those came in at a more than 20% tariff. For now we are going to do business as usual and continue to sell to stores and distributors just as we have always done and at the same prices as always.
We actually see this tariff situation as an opportunity to gain trust with pur distribution channel and maybe even gain some marketshare as other publishers raise their prices or are forced out of business. We are willing to cover the costs even as these tariffs come into play for us in a few months, so that you all can still get our products at the same prices as always. We actualy hope to gain marketshare compared to other card sleeve lines as we hold our prices even in the face of the tariffs. We hope things will go back to normal but we feel we can continue to offer our products at these prices to stores and distributors for the near-term, foreseeable future as long as we continue to offset the loss in profit from distribution sales with direct from customer orders and crowdfunding. We have always run a tight ship and fight tooth and nail to keep our costs down, and that is hopefully going to pay dividends in the face of these tariffs.
What Can Stores/Distributors Do?
So what can you do? Contact your elected representatives and let them know you aren't happy about having to pay much more for everything you buy that isn't make exclusively in the USA. The American consumer is going to face this across all facets of life in the very near future, make your voices heard.
But for the short term the best thing you can do for both yourself and for us is to buy a decent supply of sleeves and any of our games you have been thinking about buying, because if the trade war goes on for too long we may eventually get to a point where we have to adjust prices. We aren't shipping ANYTHING from our factories to the USA for now as we have a good supply on hand and we hope our inventory will outlast the trade war. Please consider putting in an order!
Crowdfunding
Both Sleeve Kings / Imperial Publishing and Mayday Games have run a LOT of kickstarters and other crowdfunding projects over the years and we intend to continue to do so. We have a Kickstarter scheduled for May 1 and we are hoping to launch Lifeboats on time AND offer it on this Kickstarter at a reasonable price. The final retail price may need to be more than we anticipated but since the margins on direct-to-customer crowdfunding is better than to distributors, we are going to price the game at $45 for the retail version, pretty crazy if you consider the tariffs. We also have both the standard and limited edition versions available for order for individual stores with a small deposit per copy here.
Lifeboats is a "grail game" in many ways and it has a huge following. We anticipate releasing it at GenCon 2025 if all goes well and would love to have your support by buying a few copies! Please note we cannot ship this game outside of the USA after the Kickstarter campaign due to our licensing agreement.
