Column by Scott Throne
Posted by Scott Thorne on September 13, 2021 @ 2:33 am CT
Following up on last week’s column on continuing problems in the supply chain, it looks as if the supply chain back-up (see "Conundrum for the Channel") will cause price increases: Luma Imports and Asmodee NA both announced price increases of 10-20% due to shipping price increases (among other reasons, see "Asmodee USA, Luma Imports Announce Price Increases"). This follows John Nephew’s discussion of shipping charges and the need to raise the price of a number of Atlas Games’ products as a result of freight increases as the core Gloom game will increase in price by about 10% as well (see "'Gloom' Games").
Most experts in the field expect the supply chain to take until mid-2022 or later to get back to something resembling normal, but it will get back to normal. In the meantime, the quintupling of shipping container prices, going from just over $2,100 this time last year to over $11,000 this September throws a huge price increase at publishers that they did not anticipate when figuring the production costs. According to Matthew Leacock, designer of Pandemic, it takes about 2 years for one of his designs to go from concept to salable product, meaning production costs for games first developed in 2019 had shipping costs 90% lower than what they currently are. Game companies now have to either take a huge hit to their gross margin or pass the increased costs along to consumers in the form of higher prices.
Another problem, which I really didn’t consider until doing some reading, was the Texas freeze earlier this year. Not only did it knock out power throughout most of the state but it also shut down the Texas petrochemical industry for 30 to 60 days. Given that almost all packaging and resins produced in the U.S. require petrochemicals, this meant no box packaging or resin pieces produced for that period and the industry is still working to catch up, hence the continuing shortage of toploaders and comic bags (see "Accessories Are Scarce"). These have gotten easier to find this summer, albeit with higher prices, and we should see steadier supplies as Texas gets its production capacity back to normal. One possible outcome of this shortage could be increased use of biochemical plastics. Until recently, plastics produced from petrochemicals cost significantly less than those produced from biochemicals, but the recent run-up in prices of petrochemical plastics could make plastic produced from biochemicals more cost effective.
We also saw a huge ramping up of consumer spending this year hitting record setting levels for many stores (see "Best Month Ever"). Two factors primarily account for this boost:
#1 - Stimulus money pumped into the economy by the government in the form of direct payments to everyone in the country and enhanced unemployment benefits.
#2 - An easing of distancing and masking restrictions, perhaps too soon, but relaxing them brought out huge numbers of people who had stayed at home and who had not spent as much as normal over the past year.
People had more money and they wanted to spend it on things like Pokemon, comics, sports cards and bicycles. When you have lots of cash chasing limited amounts of product, you get companies trying to meet that demand by getting as much product as possible into the country. Unfortunately, the U.S. can't quickly expand port facilities to meet the increased demand. It would take a decade or more to build or remodel our West Coast facilities to meet current levels of demand and re-shoring production to the U.S., Canada, or Mexico would take several years as well. For the next year, it looks like we will have to make do the best we can until demand slacks off, likely sometime in early 2022.
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The opinions expressed in this column are solely those of the writer, and do not necessarily reflect the views of the editorial staff of ICv2.com.
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