NAVIGATING TARIFFS

Here at TRR we have been monitoring the tariff "wars" and, quite frankly, it's to fluid to truly put a "how we are affected by tariff" report. However, because the truth is they are not going anywhere for awhile, we thought about WHAT we can do to navigate the tariffs.

Take a look, have a read, and let us know what YOU think!

1. Performance Forecasting: Modeling Tariff Impact

To plan effectively, build a simple forecast showing how tariffs affect your margins.

Step 1: Identify Affected Costs

• Machines & equipment: Arcade, crane, and redemption units (7.5–25% tariffed).

• Prizes & supplies: Plush toys, electronics, novelty items (2–10% higher).

• Freight & logistics: Possible indirect increases from port tariffs (up to 100% on certain handling equipment).

  
  

Step 2: Adjust Your Projections

• Example:

  • Pre-tariff cost for a new crane: $8,000

  • Tariff @ 15%: +$1,200

  • New cost: $9,200

If you buy 5 machines, that’s an extra $6,000—which you can recoup through gameplay pricing adjustments or incremental prize value changes.

Step 3: Translate to Revenue Needs

• If your crane machine earns $250/week:

  • $6,000 in additional cost requires 24 weeks of extra play at current rates to break even.

  • Increasing play cost from $1.00 → $1.25 cuts this recovery period by ~25%.

    
    

2. Markdown & Absorption Strategies

To absorb or offset these costs without alienating guests, use a combination of pricing, perceived value, and operational efficiency.

A. Adjust Play Pricing Strategically

• Incremental increases: Raise pricing by $0.25–$0.50 on high-demand machines (cranes, pushers).

• Bundle pricing: Offer “Play Cards” (e.g., $25 for $30 value) to offset individual play price perception.

• Tiered redemption: Increase ticket requirements for higher-end prizes instead of raising play cost across all games.

  
  

B. Prize & Redemption Optimization

• Adjust prize mix: Source more domestically produced or tariff-exempt items (e.g., licensed U.S.-made plush, regional novelty items).

• Revalue redemption items: Move top-tier prizes up slightly in ticket value instead of cutting variety.

• Introduce exclusive prizes: Branded or unique prizes justify higher perceived value at minimal extra cost.

  
  

C. Diversify Supplier Base

• Source from Vietnam, Indonesia, Mexico, or domestic manufacturers where tariff exposure is lower.

• Negotiate bulk orders with suppliers to absorb part of the tariff cost.

  
  

D. Operational Efficiency

• Maintenance & longevity: Extend the life of existing machines through preventive service, delaying new tariffed purchases.

• Game placement optimization: Relocate high-earning games to maximize revenue per square foot.

  
  

3. Communication & Value Perception

• Frame pricing as added value: “New prizes & game upgrades are here!” instead of “Prices increased.”

• Highlight loyalty programs: Offer members double points or bonus plays to soften price changes.

  
  

Example: Blended Strategy

• Raise crane machine cost: $1 → $1.25/play (+25%)

• Adjust top prize ticket cost: 500 → 575 tickets (+15%)

• Add $30 card for $25 promo to encourage bulk spending.

• Replace 20% of imported plush with U.S.-sourced mid-tier prizes.

  
  

This combination can cover 75–85% of the tariff impact without a single jarring price jump.