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

Amen

Has it only been 2 years?

Well written post, btw!

"...whose business continues to grow.
Neal"

Too bad you don't know what you're doin' (accordin' to GW's way of thinkin').

A well-written analysis, Neal.

As for this ex-GW customer, I continue to sit on the side-lines and watch as the company continues to put nails in their own coffin. GW needs to learn there is a game market outside the "GW Hobby" and people are discovering that they don't have to mortgage a home in order to have an entertaining game.

For the price of one GW army, I can buy the entire year's worth of D&D Collectable Miniatures games releases or the same with the Star Wars Collectible minis game. I'm also looking forward to the new Axis & Allies minis game this fall. So, who needs GW?

Regards,

V

Did someone call my name?
Thanks again GW for the name!

Well said as always Neal. If your right about GW's new strategy I wonder how long it will be before they come after you in one way or another?

Now that I think about it GW probably already has. Shorting you on Army Deals and some of the other stuff you have talked about it the past. They will slowly push you out thinking if they do they will get your GW customers. I have a feeling they might get some but most will just move on to different games. It will be interesting to see who is still playing GW games in 5 years, thats if there still is a GW.

Well written and hideously true. The only thing I feel you have missed here is that while stated as 'protection for the local store' The real reason for the lock down on internet sales is as an attempt to gobble up all the internet sales to themselves. And interesting play for them but as you say, almost a self crushing blow.

The pricing joke that GW has brought about that ultimately stems from this mistake of a decision is almost beyond incredible. I still play GW but have also moved on to FOW, Confrontation, and war machine. Their attempt to undo the problems, rather than simply allow internet sales, is their renewed efforts in resculpting. While some nice stuff is comeing out, who wants to keep rebuying what they already have???

Neal,
I must say that you have very strong and well spoken words.

Now I must add to this torrid tale of what Linrandir and I like to call, GWhastheirheaduptheirass Syndrome.

I did a stint for GW retail when the new store opened up. I was in heaven or so I thought. But when the teachings of the game went from "awesome hobby" to "just get the parents to buy the core game" I found myself slowly wanting to strangle someone.

GW even made it competitive within the US retail stores, giving away Forgeworld items for the store who sold the most presales for LoTR the TT etc... It is no longer about the hobby in their eyes, it was at one point, long ago. But now, now it is all about what everything is about, money.

With that said I shall leave you all with a letter from GW regarding a concerned citizen about the newest price increase...

"""Dear Customer,

Thank you for taking the time to email us to express your concern about
our recent pricing adjustment.

Games Workshop makes the best toy soldiers in the world, and it's not a
cheap hobby. We give great value for money spent with the fantastic
quality of figures produced, not to mention the fabulous support and
development that the Hobby Centers and mail order offer to hobbyists. It
does cost a bit to become involved in the hobby though. We are the
best, not the cheapest, and most times you have to pay for the best
quality. We know that the quality of figures we make now is higher
than it ever has been and we have to charge the right price to reflect
this. We're not trying to hide this increase; we want our customers to
know in advance so they can buy their models at the lower price now.

We appreciate your concern and your dedication to the hobby, and we will
strive to produce the high quality products our customers have come to
expect.


Hope that helps,

Tim "Fish" Commo""""


Ah, thanks Mr. Fish. I thought something smelled like two day old tuna...

Funny you should mention that Fish guy... While I'm not an insider, my brother was (we're both over 35 years old, not kids.) He was not a retailer but was sales/marketing staff. From the stories I've heard this guy must have been among the most frustrating people he has ever dealt with there.

It's ok they are hunting the $. That's what businesses do. But they do have little to no respect for thier customers and retailers. And yes I agree the quality of their stuff is better than has ever been but it is not necessarily the best on the market. Ya ever looked at a confrontation mini?

No comment

Things are changing locally and have been for some time.

For quite a while, the miniatures wargame market and the GW product market were basically one and the same thing. There were a handful of historical minis players and GW game players.

That just isn't the case any more. The community of GW players has been steadily shrinking for some time. GW's retail presence has declined considerably. There are two game stores and one hobby store that carries minis locally.

The oldest and most successful game store stopped carrying GW product years ago because of dissatisfaction with GW's policies towards retailers.

The hobby store (Hobbytown USA) has steadily cut back on GW stock and now only carries some 40K items and a smattering of other things.

The smaller game store still carries GW but has been having problems with it. Customer interest and sales are way down. They are having lots of trouble mainatining stock levels. Interest is insufficient to warrant devoting time and store space to demos and events for the GW games. Other products like Warmachine or the collectible minis games have taken most of the market.

Stocking levels have gotten to the point that it is effectively impossible to buy a basic, core army for several choices from both Warhammer Fantasy and 40K. There is not enough product on the shelves to get the required units for a basic list even if you go to both stores. More expensive items like the battleforce or battalion boxes are very scarce. No one carries the army boxes any more.

It wasn't that long ago that GW looked unassailable. Games like Clan Wars came with big fanfare, made a bit of a splash for a little while and then vanished. They were fads but there was never the sense that they could really challenge GW's dominance. That isn't the case any more. Games like warmachine of Flames of War are not fads that are going away soon. They are here to stay and their market share is steadily growing.

The last store that really stocks GW in the local area is considering dropping it. The owner told me that he would have dropped it a while ago because he is sick of dealing with GW except for a sense of obligation he feels to his existing GW customers. They are steadily dissapearing or moving to other products so that may not last forever.

Sounds like the Dallas/Fort Worth area to me in many way. I know I haven't bought any GW stuff in quite awhile. The only thing that might get me to buy would be new Warmaster armies (or the Warmaster Ancients rules).

Martin

Hellya that sounds like Dallas/Fort Worth area. I used to work at the Big LGS - Lone Star Comics, 9 locations. WE stopped carrying GW due to the price increases, high stocking requirements and the dying customer base (due to price increases). Do I miss WH40k. Yup, but I dont miss the horrible Rogue Trader tournies (ever had a kid score you 0 on sportsmanship because you killed him?!) or the horrible GW rep. I wish GW get thier heads out thier butts and wisen up...

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Replying to:

Sounds like the Dallas/Fort Worth area to me in many way. I know I haven't bought any GW stuff in quite awhile. The only thing that might get me to buy would be new Warmaster armies (or the Warmaster Ancients rules).

Martin

Too true, Neal.

I remember when they first enacted this policy, I was truly mad. I supported my LGS with purchases of GW stuff and lots of other things, but would make occasional purchases online (from the Warstore, of course) when I started a new army and the retail pricing would have limited the army's make-up.

That was the first move that really made me question the gaming hobby. I spent a lot of money on their games, but it really seemed like GW didn't care about customer satisfaction. So, I cut way back on purchases of GW's stuff. I still spent as much money at the LGS, just not on GW's stuff.

In the last two years I have tried other games, many of them were better than GW's and found my love of this hobby again. I am now firmly entreched in Warmachine. The model quality is excellent, the compnay, while growing, maintains a real connection with its customers and the rules are relatively clean and balanced. Needeless to say, I haven't even had any sort of urge to return to GW. Good riddance, as far as I'm concerned.

Thanks for everything Neal.

Larry

Interesting

The market can be a funny thing. Guiding a customer is an art that should never be underestimated. Unfortunantely, GW thinks that they can "bully" the customer into their way of thinking and price hikes. Good luck.

The LGS and internet stores are not going to actively sell GW anymore. Sure, if someone comes in a wants to buy GW, then the stores will sell it. When was the last time you entered a LGS and found people actually doing 40K demos? Most people are being steered to Warmachine, Flames of War or Starship Troopers.

Can GW open enough stores fast enough to stop the blood letting? Can GW re-train the consumer to buy from their stores and foresake the LGS? I don't think so.

I feel bad about this whole mess. GW has brought us some beautiful minis and great games over the years. I hope GW can get someone in charge that understands the value of a customer and can reverse this trend.

Just my .02

For large sections of the country, there is no GW store. The GW product market is entirely served by local retailers and their own internet sales. There isn't a single GW store between the SF Bay Area and the LA area.

I guess they never heard this -

A rising sea raises all ships. (or something like that...)

Pretty much applies for the internet. The internet is the gateway that many players discover the hobby through. I discovered it through looking into the LOTR minis online, and then stumbling upon the many excellent warhammer fan sites out there. Before I knew it, I found a yahoo gaming group for my area that introduced me to players. Now I'm part of an avid gaming group that not only plays warhammer, but also dabbles in role playing and other board games like Settlers and Puerto Rico.

I bought about half of my first army through my local GW and non-gw stores. I frequently go back for quick purchases, but my big purchases are done via Neal or Ebay. Note that this probably would not be the case if I thought the stuff was reasonably priced. I've only been in the hobby for 2.5 years and have seen regiment box prices go up $10 bucks as of July.

The internet is not some niche or techie domain like it was 10 years ago. It's as much a part of our lives now as cell phones and TV. Ignore it at your own peril

Neal - when you mentioned that your business continues to grow, do you mean your GW business, or overall?

I'm betting your GW business has continued to grow. Saving 20% is worth having to make a simple phone call Especially if Britney Spears is answering the phone

So that's who answered the phone the other day!!? Oh yeah, surrrreeee.....HEY, she sounded BETTER than Britney!!

I do hope Neal's Warstore is growing in $$$$$s as well as expanding in NON-gw products.

IMHO, the suits at GW are assuming that todays newbies (and their parents) don't know squat about price comparing. PC games versus GW products. Non-GW minies versus GW's. GW's making their products the most expensive isn't increasing the number of newbies or helping to keep us established customers buying. Not the way GW's suits had projected.

Hear that sound.....GW's shot itself in the foot again.

I haven't purchased any GW miniatures for at least a couple of years. Even then, I've used second hand sources.

I've been thinking about a massive liquidation of my collected stuff (since 1989 - yeah '89) because there's just no-one in the area that plays GW games anymore. And quite honestly, there are better uses of my quite limited personal time anyway. (Sorry Neal - I've become quite addicted to Eve-Online.)

Somewhere along the way GW forgot what made their company a success. Tragic, that a company with their kind of product has such very short sighted idiots at the controls.

Oh well, their loss in profits will fund my retirement.