Saturday, May 21, 2011

Games Workshop responds............Sort of

by: Uberdark

Billy has the answer!  Call now!

So I woke up this morning and saw on BOLS that GW has responded to the mass emails, rants and trolling that the fan base and companies have been spamming them with.  The letter follows below:
Dear Anthony,


Thanks for contacting Games Workshop about the change in our trading terms for European accounts. I know this has frustrated you and for that I am truly sorry. As a long standing customer, you deserve to know why we made this decision.


As you know, we introduce people to the Games Workshop hobby of collecting, painting and gaming with Citadel miniatures through our Hobby Centres and local independent trade accounts. Games Workshop Hobby Centres run introductory games and painting sessions, beginner lessons, hobby activities and events. We provide all these services free of charge. We only recover this investment if customers then buy products from us.


Where we don't have a Games Workshop Hobby Centre, we support local independent trade accounts. These businesses provide a convenient place for customers to buy our products close to where they live. We support these businesses with local customer service teams and warehouses to ensure customers have immediate access to our best selling products and new releases. Many customers discover the hobby this way.


In addition we invest millions of pounds every year in our design studio and factory to ensure that each month we release more new products. This makes the Games Workshop Hobby more exciting for existing customers, helping them stay in the hobby longer. We can only afford to do this because of the volume of customers we have recruited and developed through our local Hobby Centres and trade accounts.


It is for this reason that we have changed our European Trade terms. Over recent years, a number of currencies have moved a long way from their historical relative values, and this has opened the door for some traders to try to take advantage of these currency movements and offer deep discounts to overseas hobbyists. This has been the case with European internet traders selling to some of our customers overseas.


While this may seem great in the short term, the simple fact is that European internet traders will not invest any money in growing the hobby in your country. Their model is to minimise their costs and free-ride on the investment of Games Workshop and local independent shops in creating a customer base.


We on the other hand have to keep paying our Australian staff, rents and utilities in Australian dollars. While some customers have suggested we halve our prices, the only way we could do that is if we halve our Australian staff's salaries, default on our rents and not pay our suppliers until exchange rates move back into alignment. That's the reality of what a price reduction of this scale means. And we both know that customers who are motivated by price are not going to change their behaviour if it was any less than that.


The inevitable consequence if this was allowed to continue is that Games Workshop would not be able to operate Hobby Centres, nor to support local trade accounts. And if this happened in more territories outside Europe, the loss of volume would leave Games Workshop no choice but to scale back our investment in new product development, further eroding our customer base. Not something that we or our customers would want us to do.


That is why we took the decision to take legitimate action to restrict European trade accounts from selling the goods they purchase from Games Workshop outside Europe. None of the other alternatives were viable.


While I understand that you may still be unhappy with our decision, it was taken to ensure we can continue to support the Games Workshop hobby communities around the world through our Games Workshop Hobby Centres and local trade accounts. And to ensure we continue to invest in developing the best possible new product releases every month. I hope therefore that over time you will see the benefits of this decision for you and your hobby.


Yours sincerely,


Mark Wells

Chief Executive

18 May 2011


So there you have it.  A response.  Something I don't generally see from them.  First let me say, good on them for actually responding and not looking more like a huge soulless company.  Now lets get onto the juicy bits.  In his letter, Mr. Wells responds with distinct and valid arguments.  He goes into length on how the exchange rates have caused them to raise prices.  Mr. Wells also goes into detail about how they spend all of this time trying to garner new players with painting clinics, gaming advice and how they even support the hobby by giving prize support to tourneys.

That all sounds fair and good.  I'll give them the fact that exchange rates can cause profits to take a nose dive, but that's not the real reason according to them.  The real reason is online companies that can offer GW product at a lower price, which in turn garners GW less profit.  So what can they do to change this issue.  What they are doing is basically bullying the interwebs with the same tactics they used a few years ago.  This causes a huge issue.  In the earlier part of the century GW made things so companies could not show the models and you would have to "call" to order, and also limited brick and mortar stores in how they sold GW product online.  This actually is counter productive.  What happens is you have less companies that sell GW product, which in the short term allows GW to make mass profits.  The long term effects make it so that LESS PEOPLE SEE GW ON THE INTERNET AND IN THE REAL WORLD.  With less companies being able to support GW due to their policies, this cuts off the market and gives them a monopoly on their product.  The last I saw GW was a public company. 

What one must realize, which I feel GW has not, is that brick and mortar stores are packing up shop and closing down in droves.  The ones that are left have learned how to work the internet to their own advantage.  Go into almost any local gaming store and you will find that 75-80% of their business comes from online sales.  These stores have found a way to work with the internet and work it too their advantage.

A SOLUTION:  First and foremost, if GW allows the ability to open up markets and internet policy changes to allow stores to sell online, this will start to help them.  In the beginning, GW will take a tumble, and they will lose money, but if they actually allow the internet to become flooded more than they are now, then profits will start to occur.  This will not happen over night, but will eventually make them profit.  The LGS does the same thing, they offer tons of products at 30% off and beat out the other competition which in turn starts out with less profit, but as more time goes on they start to make more profit because of mass sales.  Its like Billy Mays, who sold oxi-clean and other products.  They based their company on selling TONS OF PRODUCT AT CHEAP PRICES, and believe it or not it worked.  Simple answer for a huge company.

Price increases are apparent as well.  Many times you have to raise prices to adjust with the cost of living, but lets look at the fact kids:  In this market and current economy, your dollar is not worth what it was 10 years ago.  Most businesses have lowered pay to wokers, laid off people and other things like raising insurance by 40% to the public.  This means we have less disposable income.  So how is a person like me who has had no cost of living increase and a reduction in pay in 5 years, and insurance premiums raised by 60% able to afford GW product when it goes up?
      Plain answer: I can't. 
I pretty much get most of my product from tourney winnings now, and I don't see that changing anytime soon.

So not only does GW need to change internet policy, they need to lower prices a small bit, and as we all can agree, get involved with the independent shops a hell of a lot more.  I urge you to continue emailing GW (and their investors) throughout the year and have actually sent them two letters this week.  This is the only way to illicit change.  The higher ups have heard the rumblings and have responded slightly.  Imagine what happens if we keep it up?  Your less than loyal GW fan boy,

Uberdark

p.s.  And for the love of Mork and Gork, please allow your IP to be used in a big hollywood movie.  Just look at Marvel.  Stock was $5 a share before Spiderman, it is now closing at, 54.10!  allow a bit of help to that and watch the hobby explode.

9 comments:

  1. Hey UD...

    As an owner of an LGS, I can tell you with complete confidence that the bulk (65%+) of our sales come from walk-in traffic, and not internet sales as you claim. I also know of several other retailers for whom this is true.

    In fact, I know of very few true LFGS for whom the bulk of their sales comes in via internet sales. The stores I do know of that fall into the category you describe are almost always stores that began as an online site, then transitioned into a storfront when distributors (Alliance, ACD, and others) and companies (WotC, GW, et. al.) refused to sell them any product unless they had a brick and mortar presence.

    I understand you're upset at GW. I don't blame you. However, it is better to approach this whole situation with facts and a level head, than with unsupported data.

    peace... GopherDave

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  2. Figuring these things out are to say the least tricky. GW might be totally right, we don't know yet. Reminds me of the mobile phone industry in the past. The model was selling tons of phones with little profit per unit and rake in the cash in volume. Turned out this was a mistake and Nokia is now a joke being played by Microsoft while Apple rakes in all the cash (or at least more than half of all profits!).

    I do agree that GW has a problem. It's real expensive stuff. All gaming is these days. They need their user base to grow and that's something we players wants as well. Can that be done with the prices they have now? PPs starter boxes is the smartest thing they ever did. Two boxes and two people can play. GW's variation is AoBR. Does it work as well?

    I totally agree on a movie. GW really need to do that. Super high budget and make it accessible (NOT focused on Space Marines, go for the inquisition and maybe a SM can show up). Avatar style.

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  3. I see a lot of hate for GW going around. I agree the price increases are getting out of hand. However I think there are things to look at. Say for example every trade account can easily get over $1000 a year in free product. If your store isn't putting that prize support back into the community I would start pointing fingers there. Now let’s look at Partner level stores like all the Game Preserves they easily qualify for over $2K a year in free product support. Take a look at all the stores listed in White Dwarf and then do the math to see how much GW gives back to the community. I would like to compare numbers with these other gaming systems that people have said have great community support and see if they give as much support back to the community as GW. Like I said the price increases seem to be getting out of hand but I don't like the idea that GW doesn't do enough for the community as I feel they actually do more than probably every other gaming company out there. In all honesty this company is about making money and most people would do the same thing if they were in GW's shoes because people do it all the time. People want what they want and want to have it for as little as possible giving them the most money in their pocket. Companies do the same thing and GW in no exception to that. I will say the price increases have me ready to stop buying even at my cost on product. I love the game and will probably never quit playing and within my play group we have nearly every book put out for 40k going back to RT and enough models and armies to represent anything we would want to run for fun games. The only thing that makes me want to buy new stuff is to stay current and competitive in tournament play and the increased cost no longer seems justified. I will simply play to play and enjoy the game for what it has always been. If GW folds it would not hurt me at all in fact it would probably make me happier as I would no longer feel the need to buy new stuff. All in all I agree their business model seems to heading in the wrong direction but that’s from my point of view and limited knowledge of their expenses. I feel like if people want to complain about prices feel free it is upsetting but I don’t like the idea of people acting like GW doesn’t do enough for the community when as I see it they actually do more. The ball gets dropped by the store owners and gaming groups who have all they need to organize and fail to do so. Don’t blame others for your failures.

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  4. While Mark has a fair point about AU dollar commitments (AU minimum wage is 3 times that in the US and higher than what US redshirts get), the local cost of the product being sold has gone down so the company can either put the advantage into lowering prices to increase business or try to pocket it.

    A standard store might double the wholesale price they pay for a product, so if that gets cut in half then you can decrease the final price by 25% and still have just the same for over head per unit. But AU is also getting a price increase not a decrease. GW probably could have turned this bad press into at least neutral press with some scaled price decreases like 10% a couple of times before telling no internet sales from UK to AU.

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  5. gopher dave: hey man, just wanted to take a chance and reply to your response and please know i respect you and am not trying to put down brick and mortar stores. the information i have goes back to myself and the money i was looking to invest in my own gaming store. I did a lot of looking at stores that had business models that directly changed many of their marketing to deal with online business trade. i think the thing is that in many areas a brick and mortar CAN survive solely on customer loyalty based upon a few factors. 1st. location, location, location. lol. if you are in say a college town where the gaming community is generally decent sized then you can do this easily enough by providing a great place with great service. but look at a store like gamer dmz in kokomo. a great store, but with a population of 44k, and not enough gamers due to the fact that many like to watch NASCAR (lol) the ability to make money and have a place is directly derived by using online sales of things like magic, and what not. This way the store can still keep with the customer base, but at the same time make enough money to keep a brick and mortar store front for others to go to. Look at places like the war store and blue moon that rely heavily on online sales. i dont think this would actually put an FLGS out of business, but i think the fact is that now a days the world is turning closer to the web to sell everything, and if many stores dont do this, then they will falter. i dont think yours will, because come on man, the armored gopher is known all around as one of the best places to go in the midwest. the thing is, not as many stores have people like you that can sell themselves on customer loyalty, i hear nothing but good things about you and your store, and i think YOU are one of the reasons why brick and mortar do so well where you live. :)

    in the end, what im saying is, gw needs to allow mass marketing on the internet and even lowering prices on a few key things, could actually garner them more followers in the end. why? cause billy mays says so. lol. have a good one man. :D

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  6. Okay, so this is actually the first I've heard of GW blocking orders to the Aussies... but here's the thing.

    I'm no economizer, but it actually makes sense to me.

    If I'm sellin' my delicious man-cookies around town (and yes you dirty minded fools, I do mean actual cookies) for a set price, cool, I'm makin' me some dollar bills. If I decide to open shop somewhere that costs me twice (or three times) as much to do so, I'm going to have to either charge more to make up for it, or not set up shop.

    If people just order cookies from here, I'm not actually making enough to pay for that shop, and it's going to go under.

    If there are some big details I'm missing, please let me know... but honestly, right now it sounds like a 2 + 2 = 4 type of problem to me.

    And I will also say, to blocking internet sales in general.

    I understand that they think "Hey, people order from these guys at 20% off, so no one wants to buy from us". I would also say that this is relatively countered by people buying more product because it *is* at a lower price (40k is, as recent price hikes-in-the-making have shown, a very elastic product... meaning if it's a little cheaper, you're liable to buy more, even disproportionate to the decrease in price... same if it goes up in cost).

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  7. However.

    "showing the world" GW product online... while in general, to most companies, this is a great idea... GW does not do standard advertising. At all.

    They don't run commercials. I've never seen a billboard. The computer game and movie got some buzz, but they were both also done for their own selves, with said buzz as a pleasant side effect.

    GW has always relied on people seeing the game in stores, word of mouth, and pretty much any other manner of free advertising you can think of. Barring the cons that they bother to show up to these days, that is.

    Don't get me wrong, I'm not agreeing with every choice, but a lot of what they're doing now continues to follow what they've always done, and been more or less successful with. I'm also not going to say that the "if it ain't broke don't fix it" policy won't one day leave you alone in the dark (you have to evolve to survive), but some things simply work for them.

    If I put up a poll to see where you first saw/heard of 40k, the majority would be from friends, and the next up was "at the FLGS". Not internet searches or other more traditional methods.

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  8. Now, all this said, there is still the bottom line of "can we still afford this hobby?"

    For myself? I'm lucky to say that I pretty much have everything I need. If I want to drop $50 to pick up a new model or two, I can do that. I'm a single dude with little to no actual responsibility. Life is good.

    But even I'd think twice about starting up a new army, if I really got the hankering for it. And the more prices go up, the more I'm looking for those 20-30% off places.

    Decrease in sales *and* looking to buy from your competition? That, friends, is not a good sign.

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  9. But what if the price increases drive people away? I live in South Africa and here it is already considered an expensive hobby, and one only supportable by somebody earning a salary.

    In the images of games days in the UK I see droves of under 18's playing (who I suspect are the reason that demonettes now cover up so demurely), whereas in SA I almost fall over backwards when I see a single junior player at a get-together or tournament. And these are the buyers who have the free time to paint and game regularly.

    I think that Games Workshops arguments are valid - to a point. But it works both ways: Spend more money on marketing = gain more attention, but also lose more people due to cost restraints (eg: 20 people interested, but only 5 take up the hobby). Spend less money on marketing = less attention gained, but more of those attracted start playing (eg: 10 people interested, but 5 of them take up the hobby).

    It's a tricky balance to keep. What also needs to be remembered is that this is a hobby that is also expensive in terms of time. I'm fortunate in that my husband also plays and that we still have a certain amount of disposable income and free time. However, we are planning to have kids soon. It may well be that when a hobby that already takes up enough time to make you feel guilty, starts taking up a ridiculous amount of money as well, it will be abandoned in favour of one's family. And since most people placed in this position sell off all their stuff in disgust (don't laugh, my husband and I have already inherited two armies from two of his friends that have gained kids), the kids are never really exposed to the hobby.

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