GW and Price Rises: An Economic Hypothesis

[eriochrome]

Bell of Lost Souls also just had a post on this topic but they also did not actually look at the data. GW has been raising prices faster than inflation for the last 4 years. First year there was a good boost in revenue. After that it has essentially been pretty flat at the mid 120 Millions. So the further price raises are not really helping with more revenue unless you already feel that your turnover is going to fall regardless of what you do. The price increases certainly hurt your customer loyalty which is pretty vital when your customers are your number 1 recruitment tool.

[Vos]

I suppose at the end of the day, they'll make rational (profit boosting) decisions. When they reach the point where they feel they could make more money by freezing or dropping prices, they'll do it!

Until then. Either pay or don't pay i.e. vote with your wallet!

Vos

[Sean_OBrien]

I suppose at the end of the day, they'll make rational (profit boosting) decisions. When they reach the point where they feel they could make more money by freezing or dropping prices, they'll do it!

I guess it all depends on how you define "rational (profit boosting) decisions." Again, if you look at the historical data I posted above, there is effectively no increase in sales revenue since 2001. If you compare the actual end of year profits it is the same story - and the current business includes a large chunk of royalties profit which they didn't have in 2001 (which, yes it does add to the bottom line, but it doesn't actually reflect on the side of GW business which we are concerned with).

You can invest in bonds and keep up with inflation, a company should do a bit better than that - even more so if you want to call them profit boosting, rational decisions.

[Reinholt]

I suppose at the end of the day, they'll make rational (profit boosting) decisions. When they reach the point where they feel they could make more money by freezing or dropping prices, they'll do it!

Until then. Either pay or don't pay i.e. vote with your wallet!

Vos

Given GW's poor track record from a management perspective, I don't think you can assume that. Just as plausible would be "I suppose, at the end of the day, they'll make wrong (uninformed) decisions".

It's entirely possible that, instead of being a corporation attempting to extract maximum profit and presenting a greedy face to their customers, they are a corporation shooting themselves in the foot, and incompetence is being mistaken for a shadowy, evil plan.

Bell of Lost Souls also just had a post on this topic but they also did not actually look at the data.

Color me shocked. Too many people speak without doing their homework on this one. If you really tear apart the data, the story is clear.

[paddyalexander]

GW has been raising prices faster than inflation for the last 4 years. First year there was a good boost in revenue. After that it has essentially been pretty flat at the mid 120 Millions.

That was also the year (2008) they made massive cuts to their staff and stores to reduce overhead which was a big factor in the boost in revenue.

[6sided]

Personally, I don't really understand the obsession with GW's financing some people have. Do people concern themselves with other manufacturers in the same way? If they struggle they will just shut the stores and go online only. Simples.

[Omniassiah]

Problem is that they have shown no interest in doing that 6sided. Most of us actively have encouraged that they cut stores that are unprofitable and to use the saving there to freeze prices for a while. Instead they continue to raise prices to cover their large retail expenses which causes a reduced sales volume. Now we would look at other companies finances but non of them have the particular set of issues that GW does like a single brand retail chain that eats up almost 2/3rds their income.

[dtjunkie19]

Personally, I don't really understand the obsession with GW's financing some people have. Do people concern themselves with other manufacturers in the same way? If they struggle they will just shut the stores and go online only. Simples.

I'd say its less obsession and more disenchantment over GW current pricing policies. A number of people believe these policies are ruining their personal experience with the hobby and are negative for the hobby as a whole. Its natural then, to try to discern why this trend is happening, and what the future will be like if these trends continue.

As to your second point: if they lose significant portions of their customer base, closing stores may not be enough by itself to make the company increase its revenue. Also, considering how important GW affirms that its stores are in regards to the hobby, if they do change their opinion and shut down those stores, it would say quite a lot about how drastic of a situation they have found themselves in.

[simonr1978]

I'd add that the majority of the other companies are not PLCs so their financials are not in the public domain like GW's. With GW for those who know what they're reading the reports are published regularly, for Privateer Press or Mantic AFAIK we can do nothing more than just guess.

[eriochrome]

That was also the year (2008) they made massive cuts to their staff and stores to reduce overhead which was a big factor in the boost in revenue.

I think you mean profit. It probably had a negative affect on revenue but that cost cutting turned their losses back into profits.

Color me shocked. Too many people speak without doing their homework on this one. If you really tear apart the data, the story is clear.

It was a more general article about pricing decisions and why they might be doing it. It did make the assumption that GW has a good understanding of the price elasticity of their product which I do not think is the case. They do not really experiment much with different pricing and the slow network affects make this a product very different from Coke which changes prices all the time with sales and specials to get the data.

[Trasvi]

I think GW has anecdotal evidence of individual products. I remember at some point (possibly the price rise last year?) Wells said that when they brought out the Chaos Knights and Cold One Knights in plastic they did not see a noticeable increase in sales volume over the previous, significantly more expensive metals. He then used this as a reason why they didn't make cheap stuff/decrease prices.
I think the conclusion is flawed because you can only have so many Chaos Knights in your army. Because of the network effect of players and the need to buy in 'armies' rather than individual boxes, I think the entire range would need to be decreased in price to see a noticeable increase. However the converse of this is that if sections of the range are increased a few at a time (as happens now), sales volume won't significantly decrease except when the cost of entry materials increases. (just a hypothesis)

[Jezbot]

So...lets go back a bit then.

http://web.archive.org/web/200212240...2/fiveyear.htm

If you look at the 2001 (before LotR was released) numbers you will see that the year ended with £92,634,000 in total revenue. If you go over here:

http://www.bankofengland.co.uk/educa...h/default.aspx

You can drop that in to the official UK inflation calculator and see that that same sales revenue is the equivalent of £125,706,925 today. That is a net loss over inflation of £2 million or so.

Which ends with a decline in sales of about 2%. Considering lanrak said volumes fell by 50% and I said the truth was a much less exaggerated version of the same, I guess you'd have to agree I was right on the money.

That said, 2% is well under what the real sales volume decrease is likely to be, as GW haven't increased unit prices by inflation, but by about double that. Assuming about 5% pa, then from 2001 to 2011, assuming consistent unit sales, you'd expect to see total sales grow to around £150 million pounds. Which means, by a rough measure, sales volumes have dropped about 17% in a decade.

Which is a third of the decline lanrak claimed, and all told a much more sensible figure. All that said, it is still complete speculation, just a couple of numbers thrown into excel drawn from the most shallow reading of the annual report. Because we simply do not have access to the figures to do a proper analysis of the company.

You can invest in bonds and keep up with inflation, a company should do a bit better than that - even more so if you want to call them profit boosting, rational decisions.

Beating inflation is only useful in measuring return on assets. Measuring sales growth doesn't work like that.

Color me shocked. Too many people speak without doing their homework on this one. If you really tear apart the data, the story is clear.

Poppycock. We do not have the numbers to actually 'tear apart the data'. We have an annual report, and the willingness of people on the internet to make wild speculation.

Personally, I don't really understand the obsession with GW's financing some people have. Do people concern themselves with other manufacturers in the same way? If they struggle they will just shut the stores and go online only. Simples.

It's tied up in the fan entitlement mentality. People think because they are a consumer of a product, they have a say in how it should operate. They invent reasoning and rational, but it all ultimately comes down to 'this is how this product should work (in terms of rules & release dates) and this is the price I think I should pay for this product'. When the company deviates from this, they tell the company it's wrong, and then invent reasons to do so.

Now I'm not saying people ought to accept the quality of GW products, or that they ought to pay whatever price GW pays. But they should simply accept their place as a person who can choose to be their customer or not. Either they like the product enough for the given price, or they do not.

It was a more general article about pricing decisions and why they might be doing it. It did make the assumption that GW has a good understanding of the price elasticity of their product which I do not think is the case. They do not really experiment much with different pricing and the slow network affects make this a product very different from Coke which changes prices all the time with sales and specials to get the data.

Of course they experiment with different pricing. Ever wondered why Australia has prices about 50% greater than other markets? Because we're the 'how much can we really charge for moulded plastic?' test market.

And in case you're wondering, sales in Australia declined a tick over 10% last year. So GW likely has its answer about how high prices can really go.

[eriochrome]

Of course they experiment with different pricing. Ever wondered why Australia has prices about 50% greater than other markets? Because we're the 'how much can we really charge for moulded plastic?' test market.

And in case you're wondering, sales in Australia declined a tick over 10% last year. So GW likely has its answer about how high prices can really go.

Not sure where you are getting your numbers. Au decline considerably less than 10% in pounds last year. Think it was closer to 1.5% but you have to worry about currency issues to convert that to turnover. Average change between the two periods appears about 14% so turnover would be down more than 15% but the problem with determining turnover is that they stop breaking down sales channels a few years ago since they were going the wrong way. For example last year company revenue was down by 3M but supply revenue was up by 2M. This probably means like 4% sales transfer to independents compared to GW stores which is probably very much about price with the standard 20% off that many independents offer.

[Scaryscarymushroom]

Of course they experiment with different pricing. Ever wondered why Australia has prices about 50% greater than other markets? Because we're the 'how much can we really charge for moulded plastic?' test market.

And in case you're wondering, sales in Australia declined a tick over 10% last year. So GW likely has its answer about how high prices can really go.

At the risk of having not done my homework...

I really doubt that they're just treating Australia as a big pricing experiment. And the 10+% that sales have declined aren't necessarily indicative of the price hikes in the first place. There are plenty of plausible explanations for that decline, some of which aren't directly related to pricing in the area.

[Trasvi]

Sales
Reported sales decreased by 2.7% to £123.1 million for the year. However, on a constant currency basis, sales were down by 2.9% from
£126.5 million to £122.8 million; progress was achieved in Emerging Markets and Japan (+2.1%) and in the Other business units (+7%) while
sales in Continental Europe (+0.6%) were flat. UK (-6.3%), North America (-4.8%) and Australia (-11.8%) were in decline.

Australia in particular:

	2011	2010
Revenue	10630	10795
Operating Expenses	6081	5517
Profit	(406)	654

Taking note that in July 2010, 1 GBP = 1.74 AUD, but in July 2011, 1 GBP = 1.51 AUD; indicating a decrease in sales in AUD is compensated for by the move valuable AUD. The change in expenses is also likely to be majorly from exchange rates.

Australia is not a 'testing ground' for price hikes. GW like the majority of businesses are operating under the old exchange rates; and they can't change the prices because they couldn't support the high Australian overhead costs. It adversely affects Australians because plastic miniatures are in a perfect category for importing, as are books and clothing which are also both suffering in Australia. No sinister motives here.

[Iron Puritan]

Aren't those figures pre-embargo?

[Reinholt]

Poppycock. We do not have the numbers to actually 'tear apart the data'. We have an annual report, and the willingness of people on the internet to make wild speculation.

Are you just trolling now, Jezbot?

I'm curious because your statement is factually false; you have many annual reports, which actually provide quite good data in some cases. You have pricing data back years that can be found / researched / utilized. There's plenty of info on store locations. There are third party trade reports. Several indies are willing to discuss what is selling and what is not.

There's much more out there if people are willing to do a little legwork, and it's not "wild speculation" for those of us who have done their homework. This does seem to be a sensitive point for you, though. Do you work for GW?

The bottom line is that they are definitely losing sales volumes (that's simply factual), they've been running price increases significantly above inflation, and from a shareholder perspective they've left a lot of money on the table and failed to grow the value of the chain. Do you really disagree with any of that?

[Omniassiah]

Poppycock. We do not have the numbers to actually 'tear apart the data'. We have an annual report, and the willingness of people on the internet to make wild speculation.

Which if the numbers in the annual report are incorrect/falsified/not-relevant then GW is in violation of several British and International Reporting laws. So those numbers have to be usable to determine the health of the company or else there should be massive fines on GW management and possible jail time.

[Sean_OBrien]

Aren't those figures pre-embargo?

The embargo went into play at the tail end of the 2011 FY (May/June time period). Quite likely, the grand high pubba at GW figured that the reason for the decline in sales wasn't due to the exceptionally high prices that GW was charging, but was rather a result of Australian customers purchasing from Wayland and others (which would get reported as sales data for their territories as opposed to Australia).

That is one of the reasons why I am not too sure that Australia being skipped on this years price hikes is entirely permanent. More likely, they are still trying to wrap their heads around the sales data (I saw GW were hiring a market analyst a few months ago on one of the job hunt sites). Once they come to the same conclusion they had in the past (just need to raise prices to compensate for lost sales) they will implement those hikes mid year (perhaps a New Year's surprise to help drive Christmas sales).

[Trasvi]

The embargo went into play at the tail end of the 2011 FY (May/June time period). Quite likely, the grand high pubba at GW figured that the reason for the decline in sales wasn't due to the exceptionally high prices that GW was charging, but was rather a result of Australian customers purchasing from Wayland and others (which would get reported as sales data for their territories as opposed to Australia).

That is one of the reasons why I am not too sure that Australia being skipped on this years price hikes is entirely permanent. More likely, they are still trying to wrap their heads around the sales data (I saw GW were hiring a market analyst a few months ago on one of the job hunt sites). Once they come to the same conclusion they had in the past (just need to raise prices to compensate for lost sales) they will implement those hikes mid year (perhaps a New Year's surprise to help drive Christmas sales).

The sales figures for 2010-2011 don't take into account the embargo (came into effect only a few weeks before) and much finecast (again, only 2 months or so before). At the time, most Australians were buying from Wayland/Maelstrom, but the report also shows UK figures dropping by 6.3%.

The mid year figures for 2011-2012 show the same kind of thing. Their 'other sales' (forge world, black library) business is booming; North America is up significantly; Australia and UK are down. However there is so much shuffling of Asia, Japan, Scandinavia and Royalties that I can't quite keep track of what they did there; it seems to be just re-arrangement to make more of the books look positive.