Tuesday, May 28, 2019

Effect of Tariffs on Canadian Magic 2

To follow up on yesterday's post (you can read it here), the 10% tariff imposed by Canada on playing cards meant that Wizard's Tower cost for a pack of Magic increased by 10% cutting into already thin profit margins. Remember Canadian stores have to import most of their Magic from the US and often the exchange rate between the Canadian and US dollar is not that favorable. This means that , in order to stay in business (remember that Wizards Tower does 90% of its business in Magic), the store had to raise the price of a pack of Magic from $3.99 to $4.99. Needless to say, the store's customers did not like this.

So, in order to cushion the price increase, Wizard's Tower tried to spread the price increase around by increasing the price of tournaments. Charging an extra dollar for tournaments means the store could afford to absorb some of the increase in costs from the tariff. However, players started deserting the tournaments for stores that offered cheaper entry fees. Apparently the store also had a lackluster response to Ravnica Alligences or War of the Spark, the podcast does not indicate which, meaning the store did not see its typical inventory turnover, leaving unsold inventory in stock.

The store managed to hold on and Canada removed the tariff earlier this month, meaning WT could again buy Magic at its old price. Unfortunately, that also means the store still has a significant amount of Magic it had purchased during the time of the tariff that it will have to sell at the regular, not tariff price, or alienate its customers, cutting into store margins probably for the rest of the summer.

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