The Economics of Mini\'s

[Kaine]

I wanted to post this separate to the GW price increase thread, please keep things on topic and constructive.

Pretty much every mini company has raised prices in the last year due to increased raw material and transport costs. But only GW seem to get the hate threads about it...

Lets compare some things.

1. GW have give a huge margin to resellers (i think its around 35%), so the actual GW margin is much lower than people think.

2. Lets compare a few random prices

Hordes - 6 metal scatter gunners - RRP £28
Hordes - 6 dice pack - RRP £6

GW - 10 metal plague bearers £25
GW - 10 metal war dancers £20
(these are the packs you get from direct)
GW - Dice pack - £6

Wargods - 10 spartans - £18

AT43 - dice tin - £8
AT43 - 6 prepainted solders - £16

GW - 10 unpainted plastic - £12

Avatars of War Heros - approx £7-8
GW Heros - approx £7-8

GW Starter sets - £40

These are just rough price comparisons off various resellers that show that GW prices arent actually that far out from other retailers, in some cases lower.

I mean can you see another company doing 5 cold one knights for £12 ?


3. Starter sets

GW have the best starter sets on the market, look at black reach and skull pass and try and say they arent great value for money.

They introduce people to the hobby and bring in the younger generation.

4. Big company vr Small company

Theres a huge difference between the small mini makers who work out of their home/garage and GW.

GW have a huge production facility in the uk, even the next biggest mini companys like Privateer and Rackham are small in comparison.

The bigger the company, the more back office staff required for HR, health and safety, training, etc.

Your liability on Pensions, holidays, maternity/paternity etc, is also much greater in a larger company.

5. Shareholders

If the company is actually on the stock exchange then theres a huge number of shareholders out there who want a dividend on their shares. BTW i dont think GW actually paid a dividend this year, hence the fact they are actually very tight on finances.

6. Stores

GW have stores in most of the uk cities, and this is huge costs, especially the shoe box sized outlets in shopping malls that you need to get the young gamers in, but cost you high rents and huge staff costs (since the staff are there for the mall opening times, usually 10am-8/9pm)


Conclusion

This isnt meant to be a fanboy rant about GW being god, i\'m as annoyed about the price rise as the rest of you.

I\'m even more annoyed that the petrol price is stupid and my mortage is liable to go up alot once i come off a fixed rate, but like the GW price rise these things are all part of the current state of the economy.

But when GW are producing things like the new Dark Elfs with £12 cold one knights, corsair models at 1.2 each, and the Black Reach set containing £170 of models for £40, it does annoy me to see people unrealistically whine.

GW are not a charity, they are a business, if we want the hobby to survive and bring in new players then we need GW to survive.

Rackham, Privateer, HellDorado all have very little presence (or apparant interest) in the uk market.

 

[Yramrag]

Ok, you do raise some good points there, but i will try to counter on a couple of your arguements.

1) Well GW have been established for 30 odd years and making minis for 25(?) so i would really hope that their costs were lower than most other companies. And they are with most companies struggling to match GW bulk price. However i am guessing that most other companies make metal and GW mostly make plastic now so their costs should be quite a lot lower. It seems from your pricing however, that sometimes GW are higher and sometimes they are lower. This seems to indicate that there isn\'t too much of an even rate to sell minis for. Now the thing that gets me is not by comparing GW to non-GW, but by comparing GW to GW. So they can give us 10 plastic figs for $X (new skeletons corsairs and empire), 16-20 plastic figs for $X (older regiment sets) or 60 plastic figs for $3X (starter set). Does plastic become that much cheaper if you buy in bulk? Or are they either making a loss at the upper end or making a huge profit at the lower end?
2) You make comparisons about smaller companies vs larger companies and the overhead they have to pay to run the company, but really larger companies should find it a lot easier to run than smaller companies. Larger companies can afford to have a full time HR and HSE department which means that they can do these a lot more efficiently. Other than that, the pensions and wages should be roughly the same.
3) Yes, GW do have a lot of small stores that they have used to flood the market with. And this is one of the reasons they are struggling. They have over extended themselves too much and cannot continue to operate in the manner they are currently in and expect to stay solvent. Melbourne has 4 stores and could probably get away with 2 or 3. In cutting those numbers, they could probably save $200,000 a year just in Melbourne. People will probably travel the extra distance to get their minis so they won\'t lose anything in sales.
I don\'t think we need GW to survive for the industry to survive. I am not saying i want them to fail, i am just saying they aren\'t the glue that holds everything together. There was an industry before GW became huge, and i am sure there will still be an industry if they fall. Several smaller companies would probably be able to expand to fill any gaps.
GW seem to have become very arrogant in recent years and in addition to making some stupid business decisions, they seem to be struggling. Older gamers have become disillusioned in the way GW is running their core business and dumbing down to cater for the younger gamers with their \"pester power\". They need to majorly overhaul their practices and put out the quality of products they used to be known for.
Perhaps this is just corporate Darwinism.

 

[Kaine]

One interesting point about plastic mini\'s

The high pressure injection moulds GW use are very very expensive, the figure i heard for the baneblade development in plastic was £250,000 and that was from a reliable source.

So GW have a large upfront cost on plastics that takes a long time to get back, now most spru\'s arent as big as the baneblade, but still.

I guess starter boxes recoup their cost quicker due to the huge volumes sold to justify the mould costs.

Starter boxes are also a loss leader i think, i bit like the fact that microsoft sell xbox\'s below the cost of manufacture and then recoup the cost on the games sold.

This year GW closed a number of uk stores and made some staff redundant (voluntary i believe) so that was a fairly large hit on their bottom line this year.

I dont think the mini quality has dropped in recent years, i think the quality of the product has improved greatly, yes some people will think mini X sucks and mini Y is great, but looking back at GW 10 years ago the scultping is much better now and plastics make assembly/conversion so much easier.

I agree some \"mistakes\" may have been made with the rules (high elfs <cough>) but in general the new edition of 40k is really fun and fast to play.

I guess my main point in some of this was, GW prices arent actually off the norm, its just people moan about them more.

 

[Evil Dave]

Back in days of yore, Rouge Trader,1st-2nd edition, all the larger models (with the exception of the Rhino, and I think the Land Raider, but that was hard to get around here in those days.) were metal. The plastic space marine squads were kinda crap as well as the Orc, Dwarf, Skaven fantasy set.
The GW said \"we\'re going to make the new vehicles and dreadnoughts out of plastic.\"
The gamers grumbled and complained. (and given the crappy plastic figs we had before, next to Jess Goodwin\'s nice new metal dread, it was understandable.)
\"Wait, \" GW said. \"The plastics will be just as crisp as the metals and will be cheaper.\"
\"Hmmm,\" said the old gamers. \"Maybe we\'ll give this a go.\"

Myself, a gamer, went to the LFGS, being there\'s no GW shop in my neck of the woods, and lo and behold there they were, the new plastic Space Marine Landspeeder, and space marine dreadnought. Beautiful, Plastic...Priced exactly the same.
\"This can\'t be right.\" I said. \"The local store must\'ve upped the price.\" So I looked at the trusty White Dwarf (back when they had order sheets and prices in \'em) and sure enough the plastic models were priced exactly the same as the metal ones had been.
I\'ve never looked back.

One could argue that their models are comparable. To me it really doesn\'t matter
I find their business model has alienated quite a few of the older gamers as well as loosing the feel of a \"Game Company\" by gamers into mass marketing big business by a board.
Also dropping the great games that needed little support hurt them in my eyes.
Blood Bowl, Space Hulk, Necromunda, Mordenheim, great games that don\'t fit into the massive model buying that their overreaching needs to support it.

 

[Kaine]

I do hope space hulk returns, with 5 termies in the starter box theres no reason they couldnt do a nice Space Hulk box now, maybe even with plastic tiles/walls.

 

[demonherald]

I think alienation has been a big part of GW\'s problem, It\'s easy to loom back with rose tinted glasses but the simple matter is that when I started 22 years ago , there was a great progression / retention thing going on , starting with the bog standard book and moving up through various systems and using the smaller systems to keep the interest , now they have bundled so much into getting big initial hits and not worrying about what people do..
appocalypse is a classic example... it just simply screamed of we\'re struggling how can we get people to buy ore tanks...

40K overhaul and re release before even finishing the army refreshing cycle , new marine codex around the corner, I know it\'s essential for them as a business and I\'m not a GW hater but they continually push away from the hobbyist needs in favour of the big initial hit...

There is probably one thing that stands out as a damaging if not killing blow for Gw .. Lord of the rings..... It created a massive amountof exposure and revenue for them but it has pretty limited appeal as a system and the range of models for it has gone downhill rapidly.. On paper I\'m sure it looked great fantastic initial predictions followed by the continuous revenue as the world is explored but all along they failed to see that Lord of the Rings was a phase while the movies were out and what they saw as doing great was all false figures.. during that time they opened shops left right and centre and filled those shops with staff expanded their whole operation comfortable in the little bubble of revenue that LOTR was bringing , they started spending ridiculous amounts on development of single projects and felt no sweat because it was soon earned back.... I was working with them at the time and through a mixture of poor communication and mixed messages it basically filtered down that unless it was Lord of the Rings it shouldn\'t be supported, Only when it was too late did someone kind of gingerly reach their had up and say... errr shit... we have a problem, then the shop closures , staff layoffs , project suspensions and more came along, the company became demoralised and it is still reeling....

The cost of the whole retail operation is a massive massive weight on GW and a lot of stores are making a loss yet they have always insisted keeping them for the recruitment potential and the on the street familiarity but for me that is just bad business sense.. A loss is a loss simple as..
They need to (at least) half the retail operation and instead work on their online service.. but a clear statement of GW\'s poor attitude is some respects was closing their forums because they were tired of hearing people complain about rules changes or prices....

???

 

[demonherald]

at the end of the day they are the market leaders in what they do , they are the biggest impact on this hobby in general for initial etry level and the hobby would be different without them and I know I personally wouldn\'t be doing what I do now if it wasn\'t for them.

 

[Evil Dave]

Originally posted by demonherald

There is probably one thing that stands out as a damaging if not killing blow for Gw .. Lord of the rings.....

I think the Dawn of War series is actually going to hurt them in the long run.

I can justify $50.00 for a game vs. the $250+/time invested just for the army alone. Plus I never have to search for an opponent, which in this area is dwindling fast, I don\'t have to put up with beardy army lists, annoying kids, etc...
I love wargaming, but I\'m finding the PC version to be giving me my fix.
So while I think DoW may give them a good initial revenue, and some advertisement. I really don\'t see them drawing in a lot of kids with disposable cash, when I\'m an avid gamer with much more disposable income and the urge is stilled by the PC game.

 

[Chern Ann]

Just a quick comment. 35% margin is not huge for a retailer. High street or big chain stores typically expect 40% or more. In the US, you\'ll also get charged shelving fees at bigger stores (e.g. Best Buy) for them to feature your product.

Doing away with the brick and mortar stores and competing with them directly in the 90s was a huge mistake, and now GW is harvesting the bitter fruit of that horrible decision. It would be unimaginable for Marvel to open a \"Marvel only\" comics store.

The expectation at that time must have been that without GW products the little independants would have died and gone away, but the only thing that did was open the door to new blood and new competition to exploit a retail network that GW had discarded.

 

[demonherald]

I agree with both there, as Chern says the decision back in the day to move out on their own stores is ultimately their biggest crush now... it can be said of just about any niche business store, Logal GS\'s offer a wide range of different titles. They bear the business costs and put the product out into the public, GW foots the costs and tries to do what could have been done for them. They have also treat a lot of their outpost and independent accounts pretty shit as well. They are the only ones that have done it and when things like fuel prices tax and all the other issues come into play like now they get hit right across the board....

Computer Games and the internet are also a massive hit that they will always struggl to compee with.That\'s just the nature of the world really.. If an industry as big as the music industry can be affected and forced to change it\'s only natural that a smaller business such as in this hobby will be impacted, I still find their whole online business poor compared to many. The internet has also opened the floodgates for smaller companies to bloom and spread the spending pool out even more thinly. I know I only used to buy GW products until I started online shopping now I pick up sculpts from all over the place.

 

[Legacy Account]

GW pricing has an effect on the whole industry. Companies have seen GW charging through the nose and have responded likewise.

GW is built on an outdated business model. A vast, creaking chain of retail stores is no way to sell an incredibly niche product these days. That infrastructure is effectively what is forcing up their prices by such massive margins.

Business decisions that increased revenue in the past are coming back to bite their arses too. Reducing the amount of figures in blisters means more packaging, more space needed for storage and transport and all the associated costs that goes with that. I\'m sure they could reduce the amount of packaging they use as well...

Continual \'updates\' just get on your nerves after a while. They end up breaking more stuff than they fix!

Their miniatures no longer set the standard. Some of them don\'t even set THEIR standard - their orc and goblin update has been a bit lame.

They should make their mind up about whether they want to sell toys to kids or a hobby to enthusiasts. If it\'s toys, then they need to change their ways. If it\'s a serious hobby, they need to change their ways....

 

[freakinacage]

Originally posted by Kaine

I dont think the mini quality has dropped in recent years, i think the quality of the product has improved greatly, yes some people will think mini X sucks and mini Y is great, but looking back at GW 10 years ago the scultping is much better now and plastics make assembly/conversion so much easier.

i agree partly with this. the can churn out so effing lovely stuff (see the new mounted guys on the other thread) . it\'s just that a lot of it appears rushed. they need to stop just bringing out tons of stuff just for novelty value. i know some stuff needs to be done in bulk but i feel that they could strike a better balance between quality and quantity

 

[darklord]

the thing is most of GW\'s customers will continue to buy their stuff regardless of price increases. as for the numerous updates, well its another way to sell more stuff. if you notice when they update the armies now they dont redo the whole range, why bother, kids will start the new army buy the new models but also buy the other stuff that wasnt revamped, so it keeps the older stock turning over without having to cost for more sculpting tooling etc. GW are pushing independant stockists more these days and relaxed the rules on it, just look at how many are selling it on ebay now.
the stores are loss leaders to get people into the hobby, most of their sales will be repeat business and that is what the look for - retention. supermarkets make a loss on petrol just to get customers to the stores and this is a similar, the question is how long can they afford to continue to do it?

 

[demonherald]

Originally posted by darklord
GW are pushing independant stockists more these days and relaxed the rules on it, just look at how many are selling it on ebay now.
the stores are loss leaders to get people into the hobby, most of their sales will be repeat business and that is what the look for - retention. supermarkets make a loss on petrol just to get customers to the stores and this is a similar, the question is how long can they afford to continue to do it?

The independents are rapidly vanishing , sure there are loads on ebay but only a certain range of GW products are available to them and local GS\'s only get the option of carrying plastic kit boxes , That and the fact that GW are constantly trying to garner control of the pricing of their products all add to the problems independents face and many just give it up.

Loss leaders are generally a cut price product sold at a loss to get additional spend while the customer is there...
petrol at supermarkets makes sense , but your talking pennies off a litre compared to filling a trolley with £100 plus in groceries a week....

GW have loss leading products the boxed starters for example , but a store as a loss leader is pure business suicide. no matter how many customers they may think they will gain the amount of loss versus gain is just bad business.

They would be better with a few selectively placed Flagship stores that they OWN, than the massive amount of dust gathering outlets they have currently.and are paying silly amounts of rent and running costs to keep.

 

[darklord]

i wonder if some of it is paranoia about losing their visible prescence on the high street. they are so used to being number one that perhaps they are overprotective of their position to the point that it can overide sound business sense? they are losing money on the stores but would they lose more without them?

 

[Gilvan Blight]

Not sure if this is just locally but one trend I see lately is GW pissing off the FLGS to the point they stop carrying GW product.

I know of two stores Locally (well one is two hours away) that got so frustrated by GW that they stopped dealing with them.

The complaint from one store was that GW was substituting models when they would place an order. I don\'t have the specifics, but the store would order a 1234-F box of Demonettes and get a 1234-G box of Demonettes. The difference between these two was sometimes different scultps and in the worse cases even contained a different number of models. When GW was contacted about this they basically said \"too bad, you ordered 1234 you got 1234\". This company now features Privateer Press products.

The other store is pretty much the only game in town except for the GW store at the mall. This shop owned by a friend of mine got frustrated by GW upping the minimum required order each month. It\'s a small shop that cators to a smallish city. He just couldn\'t keep up with the increasing amount of product that HAD to be orderd just to be able to sell GW stuff. This was a shop that actually renovated so they would have a gaming area so they could sell GW and now they got screwed out of the deal because they don\'t buy enough stuff. I just got a call from the owner last night, and he\'s replacing his GW wall with Warmachine and Hordes.

 

[Jarrett]

Yeah, Warmachine and Hordes are definitely making strong games at local shops with their more-friendly business practices.

And their games are really, really fun.

Thing is - if GW stores closed, how would they retain visibility and recruit new players into the hobby? If it was purely an online affair, I think they\'d see a massive plunge in business in the long run.

 

[demonherald]

Originally posted by Jarrett
Yeah, Warmachine and Hordes are definitely making strong games at local shops with their more-friendly business practices.

And their games are really, really fun.

Thing is - if GW stores closed, how would they retain visibility and recruit new players into the hobby? If it was purely an online affair, I think they\'d see a massive plunge in business in the long run.

I guess that\'s the big problem ,, They don\'t really know themselves as it\'s the way they\'ve always done it , but one way is to support local GS and stores more and have a regular run of events at the se places... companies like PP although big are nowhere near the scale of GW and I guess in the long run it\'s a case of a reality check to downsize what has become a pretty uncontrollable beast in the interests of becoming a more financially stable business..

don\'t get me wrong they ain\'t struggling to pay the bills but at the same time they keep disappointing share holders as well as their customer base and that can only develop further and further problems...

I guess there are decisions already being talked about by those wit h the access to all the details and the power to influence those moves .. I just feel that GW\'s own self indulgent pride sometimes blinkers any real opportunities they do have...

 

[Jarrett]

I just feel that GW\'s own self indulgent pride sometimes blinkers any real opportunities they do have...

Yes, I imagine that\'s true for sure.

 

[Aliengod3]

GW probably has the largest market share in the mini industry meaning that there are more people who buy their minis therefore more people that could potentially complain about it.