GW and Price Rises: An Economic Hypothesis

[Rogue]

I can actually half see them in their late night board room meetings doing that as well. Though, I would guess it is a Risk game board as Axis and Allies would complicate their economic strategy too much.

LOL. Seeing your company strategy on a Risk game board should be a clear sign as any to start working on your resume.

[mingnz]

you have my support my friend, however GW is likely to change their business model, and moving to more video/ computer game/ movie based company as they have huge amount of background story, and the sucess of "space marine" game may lead them to develop new business model. After all, a large proportion of DOW/ space marine players are not minature war gamers

[Sean_OBrien]

you have my support my friend, however GW is likely to change their business model, and moving to more video/ computer game/ movie based company as they have huge amount of background story, and the sucess of "space marine" game may lead them to develop new business model. After all, a large proportion of DOW/ space marine players are not minature war gamers

Pretty sure they won't be so foolish as to attempt to develop a game on their own again. Back in 2000 or 2001 they bought a controlling share of a game studio in the UK (70-75% or so) for about £1.5 million. The plan was to create a Warhammer based MMORPG. After 4 years or so, and another £5-6 million down the tube - they had nothing to show for it and pulled the plug. Was during the same time period that they were trying to chase other carrots too like with Sabretooth Games and their CCGs (also pulled the plug on that).

In general though, they have shifted their focus towards licensing (and ultimately I believe selling) their IP to Daddy Warbucks. It removes the risk from their side of the ledger book.

[Col. Tartleton]

I just figure they're English and thus obviously don't understand economics. If they were Scottish this wouldn't be an issue.

"We need more revenue."
"We should raise prices."
"But..."
"It worked for Richard the Lion Heart when he raised taxes through the roof. Financed a whole Crusade and nothing bad happened."
"Richard the Lion Heart was an incompetent warmonger who all but destroyed the Kingdom of England."
"Pfff... Didn't you see Robin Hood? Everyone loved the guy. "
"HE WAS FRENCH!"

[lanrak]

The following information is from GW plc own financial report.

GW plc has a gross margin of 76%.
So from an £20 box of minatures ,£4.80 covers ALL costs apart from logistic and retail.(Moving the box to the shops and the cost of the shops.)
But GW plc only show a net profit of 13%(£2.60.)

So what happens to the otther £12.60.
Well using average logistic costs , about £1.00 covers the cost of moving the box around.
And £11.60 is spent keeping the own brand shops open.

So if GW plc just used the internet and independant reatialers.
£4.80 + £1.00 = £5.80, so sale price could be just £10 and they would make £4.20 profit.

So if GW plc dropped thier chain of own brand B&M stores they could half retail prices and make more profit!

Now people argue that without the B&M stores ,GW plc would loose it main method of recruitment.
MY point is if GW plc halves its prices it could compete in the open market more favorably and attract customers throught the internet.
(Like other GROWING games companies do.)

[Jezbot]

Hi Jezbot.
15 to 20 years ago ,a chain B&M stores was the ONLY way to pomote products and grow your market share.

If we assume GW plc are targetting 11 to 25 year olds from middle incomes TODAY.(Who have easy acess to the internet.)
They are much more likely to look up 'wargames' in the internet ...along with everything else thay may want to know about.

Yeah, that's definitely a possibility. There are problems with a purely internet focus as a business model, though, first and foremost of which is that if there's a GW store in town you know you've always got a place to play games and people to play against. With some stuff bought off the internet you can't know if there's a local wargaming community.

Now, whether that's enough of an advantage that their stores continue to be a competitive advantage and not an albatross around their neck is something we'll have to learn as it plays out in the next 10 years or so.

[Jezbot]

I disagree with your picture of the market, but I'm too tired to fully argue it at the moment.

I really, really don't think it's a sensible thing to argue with, to be perfectly honest. The whole wargaming market exists in the shadow of GW.

I mean, read the infamous page 5 in Warmachine, put out by the most serious rival to GW today. We might all be impressed with the tone of the thing, but ultimately the complaints it is making only really make sense if you come from a GW background.

Someone could argue that GW's market dominance isn't going to last forever (and my own recent reading on Market Disruption lends me to that view, with GW pricing themselves higher and higher up in the margins, inevitable ceding the mainstream ground to other competitors), but to just state it isn't the state of the industry right now is to replace what is with what you would like to be true.

[Jezbot]

This may be true in the UK, though the internet renders it less true by the day. It is definitely false in the EU, and however false it is in the EU, it's about 50 times as false in the US.

This, I think, is one of GW's problems; they think their entire business is like the UK. It is very much not, and that's why they are getting hit much harder by competition outside the UK than inside it.

For instance, I used to live in Minneapolis. Closest GW was over 400 miles away, or basically the entire size of England north to south. You can't credibly say kids are learning about the wargaming hobby primarily through GW stores when you have to travel a full England to even find a GW store.

GW made the mistake of trying to transplant their business model direct to the US, setting up their own stores wherever possible. They retreated from that model in the US about five years ago (which was another time the internet experts declared GW circling the drain and about to collapse), and that's why you GW stores are so much lighter on the ground than elsewhere.

And yes, I can still credibly state most kid's first contact with wargmaing is through GW, and much of that through wargaming stores. It's just a thing that is true for a very large percentage of consumers in most markets around the world. It may be a thing some people don't like to think is true, but it remains true none the less.

[Jezbot]

Moving away from that though, in the US, Canada and Australia - there is still a significant rural population.

Actually, there isn't a significant rural population in Australia, we have the greatest percentage of our population in our capital cities than any other country on Earth.

Just to illustrate that point, I did a similar search for Australia as above:

http://www.games-workshop.com/gws/st...Retailers=true

Uh, there's maybe about 350,000 people living in the area in that circle. The centre of Australia is empty in a way Americans think they can understand, but simply do not. Consider the state I live in, Western Australia, which is about 50% bigger than Texas, has a population of about 2 million, of which about 1.8 million are living in 10% of the land in the south west corner of the state.

Anywho - GW's High Street philosophy probably was sound...20 years ago...in the UK. Now, everywhere else - it hurts them more than they could ever imagine.

And I'll just repeat my point from earlier, you cannot know this. No-one in this thread can possibly know half the things they've claimed. That doesn't make you or anyone else wrong, but it does certainly leave the thread with a big smell of armchair quarterbacking.

[Sean_OBrien]

Actually, there isn't a significant rural population in Australia, we have the greatest percentage of our population in our capital cities than any other country on Earth.

Significant is a market worth noting - not necessarily a large percentage. I think the non-urban population in Australia is around 2 million people. 2 million is a market worth noting. Remember, the point of the rural population is that things like the embargo have impacted their ability to get GW products.

Uh, there's maybe about 350,000 people living in the area in that circle. The centre of Australia is empty in a way Americans think they can understand, but simply do not. Consider the state I live in, Western Australia, which is about 50% bigger than Texas, has a population of about 2 million, of which about 1.8 million are living in 10% of the land in the south west corner of the state.

I actually do understand. I was stationed at Alice Springs for a couple years in the 1980s. I go back that direction every few years to visit friends (and I also go to a couple coastal areas to visit friends who have moved). If you prefer though - adjust the radius to 3000 miles. The point remains the same, there are a good 2 million people in an area which has almost no access to a game store, let alone a GW store. When I was there it was before the internet was a big deal and I would catch a Space-A flight up to Japan with shopping lists from a few of the locals for things they wanted but couldn't get easily every few months. The round trip flight in the back of military transports was more convenient than driving to Darwin.

And I'll just repeat my point from earlier, you cannot know this. No-one in this thread can possibly know half the things they've claimed. That doesn't make you or anyone else wrong, but it does certainly leave the thread with a big smell of armchair quarterbacking.

I can actually have a good handle on it based on the actions which are publicly known as well as general demographic information. Even in Australia - while the urban population is quite large, large portions of that are suburban. They don't live in cities which have a traditional high-street. There isn't a particular area which the people congregate. That was an old concept before GW was founded and most of the three countries which were mentioned most specifically had moved away from it decades ago.

So, yes - the high street philosophy doesn't work in the US, Canada or Australia. And yes, it probably does hurt them more than they could ever imagine. The vast majority of people who I knew from Australia who played 40K were buying from Wayland or other internet dealers previously. Now, the vast majority of them have just stopped buying GW all together. They can get paints from an Australian company that doesn't penalize them (Derivan). They can buy miniatures from any number of other companies who don't penalize them. Or some have just stopped gaming entirely.

Many of these were people who I played games with in the 1980s before GW was really that big. I introduced them to the game. They introduced it to their children. Some of them have even introduced it to their grandchildren (makes me sound old - I know). However, now - you know how many people I introduce to GW? Not a one. Why help support a company who is so intent on crapping on its customer base.

[lanrak]

Hi Jezbot.
If GW has focused internet sales , BUT ALSO , supported schools and colledges etc, with 'outriders' , suplying and helping set up gaming.(Promoting the associated skills and social interaction.)
Then the students could simply move into home gaming groups.

Especialy in countries like Austrailia and America where the population is so spread out..
And the half current retail price would realy help it get more popular!

[Jezbot]

[QUOTE=lanrak;6257377]Hi Jezbot.
If GW has focused internet sales , BUT ALSO , supported schools and colledges etc, with 'outriders' , suplying and helping set up gaming.(Promoting the associated skills and social interaction.)
Then the students could simply move into home gaming groups.

Yeah, I'd be the first one to agree that GW has really, really failed when it comes to making good use of the internet. They should be making their website a place to go regularly. I know they've had problems with hosting forums, given the general bitterness among a certain core of fans, and in the end agree that's probably going to cause more harm than good. But their answer to that is to basically run away from the internet and end up with little more than an on-line store. Interviews with game designers could be a regular thing, rather than the thing we sometimes get in the build up to a release (and they should be a hell of a lot better than the superficial hype we get). They could be hosting fan written articles on tacticas and painting guides. Every week they could showcase a player's army.

Instead we get a mediocre website, and the focus put on driving sales through bricks and mortar stores. Ultimately I think the two things aren't mutually exclusive. GW should be looking to drive sales through both avenues.

Especialy in countries like Austrailia and America where the population is so spread out..

Nah, like I said above, the idea of Australia as a rural place is a complete myth. No country on Earth has as much of its population in its capital cities. Take my home state, Western Australia as an example. There's two GW stores and a bunch of independants stocking GW stuff all in Perth, and between them that means about 85% of the population of the state has access to GW within about a 30 minute drive.

I do agree that America needs a different model. So does GW, as they tried the bricks and mortar approach, and realised it did not work and stopped doing it about five years ago. There's an issue that they haven't really managed to build up an effective alternate plan, but that's a different point entirely.

And the half current retail price would realy help it get more popular!

I'm actually not completely convinced that's true. I know everyone's situation is different, but I know for myself and my friends the biggest constraint on new and bigger armies is having the time to paint them. But then we're in our early 30s and starting families, it isn't the same for other people. I get that for a teenager or someone in their 20s the ratio is not the same, so I'm not trying to say my situation defines the market.

However, I'd also ask you to have a look at the pricing difference between GW in the USA and in Australia. Just go to the website, write down the prices in US dollars then on the main page switch the country select to Australia, and look at the prices for the same products. The price is about 50% greater in Australia, or box set costing $100USD will be about $150AUD - and one US dollar trades for about Australian dollar. Despite this ridiculous overpricing in Australia, we still keep buying GW stuff. Half the people I know buy from the US or UK site and ship it over here (GW sites won't ship outside their country, you have to have it sent to a friend in that country for them to ship it) but the other half don't, and pay the Australian price.

So there's at least some evidence that the market will tolerate another 50% price hike.

[Jezbot]

Significant is a market worth noting - not necessarily a large percentage. I think the non-urban population in Australia is around 2 million people. 2 million is a market worth noting. Remember, the point of the rural population is that things like the embargo have impacted their ability to get GW products.

Having lived in the country, and lived there when I was at my nerdiest, most wargaming mad stage in my life, I can tell you that the numbers of wargamers per capita in the Australian country is pretty slight. When you then add in the size of Australian country towns and the distances between them, the practicality of having a gaming society up and running is pretty unlikely. I really just cannot see how GW failing to access this market could conceivably be seen as costing more than a handful of consumers, at best.

I can actually have a good handle on it based on the actions which are publicly known as well as general demographic information. Even in Australia - while the urban population is quite large, large portions of that are suburban. They don't live in cities which have a traditional high-street. There isn't a particular area which the people congregate. That was an old concept before GW was founded and most of the three countries which were mentioned most specifically had moved away from it decades ago.

I don't think you do get it. Australian cities have little high or medium density housing, instead you have a central city area, a business hub with surrounding retail, and then a great expanse of suburbia. As a result, heading into the city to shop is not something unusual for Australians.

Now, the vast majority of them have just stopped buying GW all together. They can get paints from an Australian company that doesn't penalize them (Derivan). They can buy miniatures from any number of other companies who don't penalize them. Or some have just stopped gaming entirely.

Much like I mentioned after my anecdote to lanrak, you have to be very careful about relying on personal stories to speculate about a whole market. And besides, to the extent that GW might have poor sales in Australia (they may or may not, I honestly don't know), it'd be entirely down to the pricing, which is about 50% greater than the US.

[Trasvi]

Approximate population distribution of Australia:


Distribution of GW/Independent stockists in Australia:
http://www.games-workshop.com/gws/st...Retailers=true
They match the population distribution fairly well.
As Jezbot says: we have huge suburban areas which feed into a central CBD and distributed retail areas. Most people think absolutely nothing of driving for 15 minutes to get to their local shopping mall; and a large number of people travel an hour every day from other towns to get to the capital CBD for work. GW's stores are actually pretty well distributed to be in reach of 90% of the population. GW used to have a relationship with a boardgames/puzzle retailer who has a store in every single medium-large shopping centre, but in the last year this retailer has stopped carrying GW products due to low sales volumes.

[lanrak]

When I said the population is spread out, I meant compared to the UK!

This is the thing about promoting and supporting games in schools an coledges/universities.As this is where GW plc primary demoghraphic hang out .
So it makes far more marketing sense than paying rent to get a small amout of passing footfall trade in poor locations...

[Jezbot]

When I said the population is spread out, I meant compared to the UK!

This is the thing about promoting and supporting games in schools an coledges/universities.As this is where GW plc primary demoghraphic hang out .
So it makes far more marketing sense than paying rent to get a small amout of passing footfall trade in poor locations...

Maybe it would be an objectively superior strategy. But here's the thing, GW dominate the wargaming market. They are a large, profitable company in an industry that has historically been filled with companies struggling to survive month to month, existing largely on the owner's passion for the company. We have to recognise that something GW is doing allows them to perform significantly better than other companies in the market.

It isn't as though GW's general dominance comes from having a superior product. Nostalgia lets people pretend otherwise, but WHFB has always had problems with army balance, and generally devolved into herohammer. 40K was a very different game in 2nd ed, but I was there and I can tell you it wasn't a better game, the rules were a mess of bizarre hyper-detail and high level abstraction (much like they still are today, really). The move to 3rd ed produced what is probably the worst out of the box miniatures game I've ever played (thought that might be Confrontation). Today both games are considerably improved over earlier editions, and yet both are still broadly disliked by the community. So we know GW hasn't built their success on the strength of superior games to their competition.

So maybe it's just been all about the miniatures. There is an argument for that, because GW miniatures have always been among the best available, but there have always been companies producing miniatures at least as nice, and often for a lot less money.

So to explain why GW has remained the profitable, market dominating company for two decades, you have to look at the one thing GW has had that other companies have not - bricks and mortar stores. Now there might be a case today with increasing internet presence that other companies can be the first point of contact for kids interested in the hobby simply by having a website. Or that a company that focussed on direct relationships with gaming groups through travelling salesmen might be a superior model (though I've got big doubts about that - afterall by the time they're in a gaming club they've already committed to their first game, the salesman has missed first crack at the player). But we have to recognise those things as speculation about what might change, while at the same time recognising that we do know what has worked for the last two decades.

[Sean_OBrien]

So to explain why GW has remained the profitable, market dominating company for two decades, you have to look at the one thing GW has had that other companies have not - bricks and mortar stores. Now there might be a case today with increasing internet presence that other companies can be the first point of contact for kids interested in the hobby simply by having a website. Or that a company that focussed on direct relationships with gaming groups through travelling salesmen might be a superior model (though I've got big doubts about that - afterall by the time they're in a gaming club they've already committed to their first game, the salesman has missed first crack at the player). But we have to recognise those things as speculation about what might change, while at the same time recognising that we do know what has worked for the last two decades.

Actually - I would say early adoption of plastics. It really wasn't until plastics that GW really became a big money company. It allowed them to mass produce at very, very low costs. It also cut the weight of their product by a huge margin that allowed them to not only sell in the UK, but also ship their goods around the world for reasonable fees. Other metal companies of the period (even GW/Citadel) either licensed molds or used contract casters when they wanted to say sell in the US from the UK or vice versa.

The brick and mortar stores might have helped within the UK, however I don't think they did much in terms of making GW a global company.

[Reinholt]

Actually - I would say early adoption of plastics. It really wasn't until plastics that GW really became a big money company. It allowed them to mass produce at very, very low costs. It also cut the weight of their product by a huge margin that allowed them to not only sell in the UK, but also ship their goods around the world for reasonable fees. Other metal companies of the period (even GW/Citadel) either licensed molds or used contract casters when they wanted to say sell in the US from the UK or vice versa.

The brick and mortar stores might have helped within the UK, however I don't think they did much in terms of making GW a global company.

They definitely helped in the UK. A density strategy is possible there, and GW executed it. The B&M strategy does deserve credit there, and GW should preserve it.

In the US, not so much; the claim that GW has ever had much of a street presence in the US is just false. You can look at the data on where all their stores were located over time and they never cover a significant portion of the country. Even now, they are re-positioning but will never get there. I mean, there are massive US states where GW has no stores, and where there aren't even that many good locations for them in the first place. The country is just huge. We have states the size of the UK, after all. It's like trying to cover a country the size of China, but with 1/5th of the population, with meaningful retail stores.

Not going to happen.

Similar issues in Europe (though less so) and Australia. GW had a variety of factors that worked for them: timing, the UK dominance, plastics, lack of credible competition during their growth phase in the late 90s, and so on. They were lucky and also good at the time. Now they are less lucky and less good, hence the sputtering in terms of player base.

[lanrak]

The B&M strore was the ONLY way to sell product back in the early 1990s.
Moving to plasics eased the expansion into other countries.
And the period of greatest expansion was driven by game development and support.GW HAD to build new B&M stores to keep up with the demand.
(Becuse the internet was not an established method of retail, prefered by those on middle incomes.)

Unfortunatley , IMO, some one thought that a large chain of B&M stores selling toy soldier to children, could replace the inspiration ,drive and retension of good game development ...

As Rienholt said , GW were doing the right thing at the right time, 1987 to1997.

But now they are doing the wrong thing , at the wrong time ,(2005 to 2012)

[Torga_DW]

The B&M strore was the ONLY way to sell product back in the early 1990s.

Just thought i'd chime in here. In the early 1990s, i was faxing orders to america to get GW stuff.

And the period of greatest expansion was driven by game development and support.GW HAD to build new B&M stores to keep up with the demand.
(Becuse the internet was not an established method of retail, prefered by those on middle incomes.)

Again, we've never had a gw here and its unlikely we will in the near future. Yet we had a GW games community that i became aware of before 2nd edition was released. I don't see why it was necessary for them to build official gw stores, maybe its a cultural thing, but for us it was and is completely unnecessary.

Unfortunatley , IMO, some one thought that a large chain of B&M stores selling toy soldier to children, could replace the inspiration ,drive and retension of good game development ...

Targeting the child market is a valid strategy. I'm unhappy it happened to a game i play/ed, but thems the breaks. The child part of child marketing is what makes it successful, no matter how crappy or expensive the product is. The child is lead to believe that they absolutely want/need the item, they focus and obsess on it, and the parents get it for them to make them happy. Its no longer about good game development, if it ever was.