GW's 2-year anniversary...By Neal Catapano @ WarStore

[Linrandir]

I asked Neal for permission to repost his very well-thought-out article on the 2nd anniversary of GW's infamous "no more internet sales" policy. He granted it on the provision that I not label it a rant. So, here it is:

July 15 2005 is the 2nd anniversary of the Games Workshop 'no internet' policy. It is a good time to look back - what has happened in the past 2 years?


Let me start off by saying I do think Games Workshop tried to put themselves squarely behind local stores with their 'no internet' policy in July 2003. Certainly for their own gain as well as they continued to set up company owned retail stores and improve their online presence. But at the time the focus was still on US Trade Sales (sales to stores) combined with lower production costs in their new US factory. The idea was that the money lost by eliminating internet 'free riders' would be offset by increases in their own retail and in sales to local stores. This new policy also set a precedent for protectionist 'local store friendly' internet policies in our industry and other companies soon followed suit with restrictive internet policies of their own.

With all this free protection from the big bad wolves of the internet it seems logical that the local gamestores should be experiencing a rennaissance of sales and profits. Unfortunately the opposite is the case and sales trends since July 2003 have been significantly down. Slowly at first, but now gaining momentum. 2005 industry sales have been poor. Many local stores are closing or treading water and confusion reigns. In many stores there are no longer enough players or interest to warrant the tournys, demo nights, and play space that used to be so plentiful. As sales slow store owners are having trouble maintaining stock levels, which in turn creates customer dissatisfaction and reduced interest. What happened?

In my opinion the failure of these restrictive policies stems from a fact that few in this industry care to contemplate, and if they contemplate it at all it is quickly dismissed as nonsense. But I will dare to speak the heretical - here in the 21st Century the internet is the driving force behind sales growth, not the local game store. With the completely mistaken sentiment of killing off internet 'free riders' with their new policy GWUS succeeded in switching off the engine of their own sales growth. And they simultaneously allowed a market share foothold to other, more 'internet friendly' start up companies. By following Games Workshop's lead other companies have adversely affected their sales as well.

I will state the completely heretical corollary as well. By damaging their online community in the name of holding the line on prices and protecting local stores these companies have actually hastened the destruction of many local stores. Simple market economics - when prices go up sales go down. Some customers dont join the game, some dont make second armies, some play something else. Soon 'critical mass' is reached and face to face gaming is no longer viable and customers turn to other hobbies and interests. By disallowing below msrp pricing these manufacturers have completely shaken the markets they built on that pricing. Markets that fed local game stores by building excitement, as well as primary and secondary sales. I am not sure these markets can be rebuilt simply because a company says their product is worth $XX.XX. The market is speaking.

It is my opinion that in light of these results the Games Workshop US strategy has now changed, and the proof of it is in their semi-annual reports. GW feels no one can sell their products like they can and are aggressively opening company owned stores across the US. In this scenario it doesnt matter what the retail price of the product is, the customer going in to their store has no other lines to compare with. They just recruit them, squeeze them and move on to the next.

Of course changing focus from Trade Sales to retail will drastically affect overall sales numbers BUT, if they keep raising retail prices and they sell the majority of the product themselves the all important bottom line profit will still look fine. This is the effect I have seen in the reports - declining sales, and yet profits remain the same.

The real trick in the meantime is to make sure the product never goes below 'critical mass', the point in which the game doesnt have enough players/buyers to retain sales volume. The changeover from wholesale focus to retail focus has to be swift enough that they keep enough people buying until their sales become entirely self-sufficent. Upon self-sufficiency Trade Sales becomes irrelevant. It can be continued as is, or store minimums raised, discount percentages lowered, self distribution terminated -- whatever makes most sense to the bottom line.

I think it is obvious the restrictive internet policies are an abject failure. By shifting focus GW may remain viable but in my opinion it will not work. I also know GW leaks like a sieve and when I saw the dramatic drop in stock price in April it makes me think someone saw the preliminary year end reports (finished in May/June, reported in July/August). I remain interested in the future.

In the end my conclusions remain the same as I had when I first heard of the internet policy in April 2003. I see the problem, I dont know all of the solution, but I do know that betting against the free market is for suckers. There has to be a better way.

I have some ideas, maybe one day a corporate suit will want to know what I think.

Till then I remain your opinionated obedient servant, whose business continues to grow.
Neal

[insidius]

Thank you for posting this. Neal's really a great guy. What he's done for the gaming community is stellar.

And he's right.

What's sad is that thanks to GW, I bet Bartertown easily does more GW business in a day than most local gaming stores do in a week. This won't last much longer, I'm afraid.

With another GW price hike in July, soon gaming stores will be forced out of business due to GW's greed. Then no one will have a place to play. It's already happening to two different stores in my area. I already have to drive 40 minutes to find a game, what happens when that store closes? 2 hour drive? Conventions?

[atacam]

Doesn't suprise me really. GW's gred stratagy has always been the same.
What other company has a company rule of world domination, get a copy of fantasy/40K under every kids bed in the UK, next the world

Do what have done. Dump GW play Rackham games.

[OmniJackal]

I think one of their biggest problems is new customers/players. By raising their prices every year they are scaring off the parents of fledgling players who do not have jobs and as such have to squeeze it out of the parents who are smart enough to know that the prices are ridiculous. We arent paying for the amount of material we purchase....we are paying for what GW knows will sell more. We need more Core Units/Troops choices in our armies, GW jacks up the price of those another 5 bucks. Without new players and n00bs to whup up on us veterans lose interest and the game suffers. Then GW suffers. But ultimately we are the ones suffering and GW is inclined to not give a s#@t.

How do we repay this Benedict like behavior? I say let em fall. Lets all play the exhorbitantly priced Flames of War game. At least its historically accurate.

[darkjedilaw]

What is wrong with wanting a copy of your game under every kids bed? You mean to tell me you are going to develop and market a game and then stop short of trying to get everyone to buy your product?

Hell, if I was going to pick up a game, I would think I would want to pick up the game that has the greatest chance of being played. Rackham makes a fine game. Warzone wasn't too bad several years ago either, when was the last time you saw that being played? Decipher had a great SW:CCG....now I use rares as bookmarks.

As much as people rail on GW as the bane of brick and mortar stores and GW pricing as the root of all evil, the fact is there are a thousand other products out there competing for the same dollar that needs to buy a box of skaven or space marines.

The average "gamer" is either in a low paying job or begging mommy and daddy for allowance. The money an average gamer has for disposible income has to compete with $2.30 gas, 5 buck smokes, $50-$60 xbox/playstation2/computer games, $15 buck a month MMORPG dues, and $10 movie tickets. Even if you get them in the store, you have $30+ RPG books, $3+ a pack CCG, warmachine/rackham, and now price hike GW (the hike, by the way was mostly focused on fantasy, which escaped the last hike, 40K is largely untouched but you don't hear that in the ranting.)

The gamers that already had the scratch to buy a new army at retail are still going to do so. Sure, they might bitch and moan, but they are already sold on it.

[PzMkV]

Wow darkjedilaw I thought I was the only one left with SW ccg rare book marks. My friends and I still play one night a month it is still a great game too bad the "new" one is such a bomb.

I am sorry back to the subject. I agree that GW shot themselves in the foot with all the price hikes and lack of store options to buy from. We have a game store here but the owner refuses to purchase their minimum every week so he can have the honor of stocking GW games. Not to mention there are several beter choises for paints for the gaming community, that dont dry out in a month and are fair priced. But hey that's just my opinion.

BTW darkjedilaw 5 bucks for a pack of smokes? Mabey its time to quit then you can buy more GW product.

[Suicide-Goblin]

They've done it to themselves again. Prepare for another price hike everyone....

Less people = Need more money....

Time to build a resin kit while I still can....

[orcdom]

i think they are just trying to run a major percentage of the independent market out then maybe lower thier prices or freeze the hikes.
with them selling from mostly or only through online & thier stores, they get all of the profit, not the 53 or so percent they get from the indipendents.
Steve

[OmniJackal]

GW will NEVER lower their prices. They know there are still many of us willing to send their kids to college. If they lower the prices once they know we will demand it more often. No matter what they come out looking like the bad guy. But they are. They should have thought of that back when Rhino's were still $20 and the game was thriving. How many have you all spent on their products? Since 1993 I have spent well over $20,000. I fear that figure is low compared to some more hardcore gamers. And come on, $3 for a tiny bottle of paint???? Crack is cheaper than this game is and less addicting. They know it too.

[insidius]

In their credit, the price of tin has gone up dramatically since China stopped exporting it (they are, or were our major supplier of tin in the world), so i can undertsand the price hike on metals, but plastics, too?

I say go play Warmachine. That company at least has a sense of loyalty to the customer.

[OmniJackal]

But havnt you noticed their trends of late? More and more of their models are being made in plastic. Frankly I dont know why they use metals at all anymore since their plastics come out looking nicer anyway.

[insidius]

Plastic moulds are more expensive and the detail typically isn't as good.

Perhaps they've switched a more detailed set of moulds lately, but they're still more expensive and don't last as long as metal moulds.

[OmniJackal]

The moulds may be expensive but the plastic is not. They pay for the moulds in the first week after releasing a new model.

[insidius]

Unless you're GW corporate, or pay to have access to their fiscal reports, I doubt you know that for sure.

In any event, GW will figure it out soon enough.

[orcdom]

the molds for plastics last the longest of any molds.

and for warmachine being loyal? of course they are a new product, wait 20 yrs and see if they are loyal
Steve