GW 2014-2015 Half Year Results

[Loken]

The profit margin is around 12% for the store owner while being a huge space hog.

Dude you are clueless. GW standard discount is 47%. I owned a store, I know. You are quoting bull****.

Loken

[Erik Setzer]

Dude you are clueless. GW standard discount is 47%. I owned a store, I know. You are quoting bull****.

Loken

To be fair, the discount might have gone down since you had a store, and they might be including other things in the mix, i.e. the cost of the space taken up by the product, etc. And the store might be offering a discount to try to get more sales, which would also cut into the profit margin, though that seems self-defeating if it's not that great to begin with.

Not saying he's right or anything, but maybe not jump straight to swearing and calling someone a liar, especially when they're repeating second-hand info?

[Mr Mystery]

Mark up isn't the same as profit margin. There's what you pay for it, what you charge for it, and how much it costs you to sell it.

[Erik Setzer]

Some more thoughts on all this (and I'll have yet more when I get home and can see the full report)...

I saw a mention somewhere that their publication (magazine, specifically) sales dropped, at least in the US. To me, that seems like a pretty clear condemnation of the new direction they went. It was, to be blunt, stupid. When your magazine isn't offering enough value to be bought at $10/month, you don't pump it up to $16+/month (with a side magazine that isn't terribly useful that's $12/month). But that can be saved, though it'd need another restructuring. Mercifully, publications are pretty easy to change direction with. My recommendation would be return to monthly White Dwarf, aim at $7 (or the equivalent in other nations), and try to include quality content. Keep the weekly release schedule for models, sure, and list the schedule in WD with a disclaimer that things might change if something comes up (though with less than four weeks out, you'd hope it doesn't). This means you're not telling people stuff too far ahead (even though I still disagree with the extreme secrecy), but you do give them an expectation of what's coming so they can budget for it. You can put brief info about the releases in the magazine, and use the website to further highlight releases on the week they're coming out. (Top recommendation would also be to do a slight shift to the website to allow for posting more information about recent releases, some "marketing pages." But that could require a good bit of work depending on what their setup is.)

They do have a problem with US customers, because US customers mostly go to LGSs, and while GW might not be shutting down LGSs, they don't make it easy for them to sell GW product. They try to act like it's in the stores' best interests to not allow them to order a lot of GW products, when it's really about making sure people have to buy direct from GW. At that point, they're competing with the LGS, and why would a store want to push a product line where a person would have to spend money away from the store to continue with it? That's just stupid. So now you're making the LGSs less likely to be your friends in selling your products, which cuts off ways to sell your product... and you lose sales in the process. That whole concept needs to be reconsidered. If a store wants to order a bunch of stuff and store it on their shelves, taking up their money, so be it. If they want to special-order stuff, let them. You'll get more sales by making friends with the stores, which will bring in more profit than trying to make all the sales direct at the expense of the LGSs. In the UK, that dynamic they have might work fine. In the US? Heck no. Other countries, probably not.

There's no all-at-once collapse, though it is a downward decline, and the new strategies really aren't helping. Heck, they're still trying to blame a lot of the lagging sales on the shift in store strategy and such, and you have to ask why they think that things will get better over time. I don't think their store strategy fits every market. We know other things haven't worked out well for them.

But yeah, they can turn around a lot of it fast. The thing is, they need to do it in a better way than they have. Some of their ideas have actually made a worse situation. So the solutions can't be kneejerk. And frankly, they need to stop with the "Everything is Awesome!" spiel. By the third report with declining sales, it comes off as cheesy at best.

Personally, the top fixes would be:

1. Change White Dwarf to fix its sales.
2. Improve relations with LGSs and don't look at them as "competition."
3. Find a way to lower the barrier of entry for both 40K and WFB.
4. Smooth out some of the spikier prices, and phase out some of the most expensive resin models. (While I like some of those kits, the combination of price and material is a double-blow. I'm talking stuff like Blood Knights, Orc Wyvern Rider, Azhag the Slaughterer, those kits.)
5. Shift everything to plastic ASAP. "Finecast" might be cheap, but when your models warp on the shelf and no one will buy them because, say, a Spellweaver's staff looks like an "S" in the blister, you're just taking up space and wasting money making models that get damaged before they ever reach a customer and will not sell. (Even if this is just a problem in climates like Florida, that's still a serious problem.) Plastic models can also be used in other strategic ways, i.e. making army boxed sets easily.

Of course, my opinions don't really matter, but it's fun to think, "What if they did this?"

[Mr Mystery]

I'm always reticent when it comes to reports of their treatment of FLGS.

Some say they don't have any issues with GW. They order the stock, the stock comes in, and they accept returns on defunct stock (like old Codecies)

Some say they're worse than TurboHitlerSatan.

Issue there? We never get GW's side of it. I have no doubt the truth lies in between, but how many FLGS have run into supply issues due to payment issues? We don't know, and we'll never know.

[Erik Setzer]

I'm always reticent when it comes to reports of their treatment of FLGS.

Some say they don't have any issues with GW. They order the stock, the stock comes in, and they accept returns on defunct stock (like old Codecies)

Some say they're worse than TurboHitlerSatan.

Issue there? We never get GW's side of it. I have no doubt the truth lies in between, but how many FLGS have run into supply issues due to payment issues? We don't know, and we'll never know.

Well, I'm just going by what GW does that we *know* they do, and that's limiting the availability of a lot of their line, which they have some positive line about to make it sound like it's to help the FLGS's, but it's really to make sure people have to come to them to purchase a lot of the stuff that makes up an army. If someone gets into WFB or 40K these days, they can't make all their purchases through their FLGS, they have to order some stuff direct from GW, which then takes money away from the FLGS. That's not a healthy relationship. It means that the FLGS won't really want to encourage GW games over other games, because the other games aren't taking money out of their shop. I think the lagging sales in the US are likely a result of this, and they'd make more profit if they fixed that relationship. They might not make as much profit on some individual product sales, but they'd be able to sell more and have a better reputation with the stores that might be frosty on them right now. Everyone wins.

[Mr Mystery]

I'm sure I've read other posts saying FLGS can order special stuff in?

[clively]

Notables for me in the report:

Mail Order
Sales in our new online shop were broadly in line with comparable period in the prior year.

Spent how many millions on an updated "web store" and sales are approximately the same as prior year? fail.

Looking at the segment breakout:

Retail(their stores): £22.5m in revenue, £1.3m in losses
Trade(FLGS): £22.1m in revenue, £4.2m in profit
Mail Order (web site): £11.8 in revenue, £5.3 in profit.

Looking at that, GW should drop the retail stores - they are losing money - and bend over backwards to help the FLGS. Looking at those numbers it's apparent why they are blaming store managers for lousy sales. If I had no clue what the difference was between a GW store and a FLGS then I'd be blaming the store managers too.

[Erik Setzer]

Oh, two other things I'd do, if I was running GW, that I think would help:

1. Sell the licensed products through their own stores and website. It's unlikely these would impact the sales of their regular products, but it would certainly add more variety of products and give them more opportunities to get money from customers. Some people might come in, thinking, "I've got everything for my army, don't really need anything," but then they see Warhammer 40,000: Conquest, and pick that up, and then the next week its expansions, and boom, that's some sales GW's made. It also keeps people from going elsewhere to find those products (where they might see actual competing products), and could build a bit of goodwill with the companies making the licensed products.

2. Not as easy to pull off as the others, but I think it would be brilliant to do 40K Skirmish and Warhammer Skirmish rules, for small battles involving a dozen or so models, and then throw together rules for using existing models, maybe make new settings or campaigns or something as newer stuff comes out. It'd be a "stepping stone" for new hobbyist (customers), or a new way for existing hobbyists to use their models. Wouldn't be too hard, and improves the sales potential of the existing models. Some people might even buy models for an army they don't play in 40K/WFB, in order to build a Skirmish warband. It's like Mordheim's relationship with Warhammer, only with the "Skirmish" rules tying in to the main games more, and pushing those games' lines in various ways. Relatively inexpensive way to push more product and bring in more people. (And, as noted by GW, once a person starts playing games, if the games are enjoyable, they get hooked and want to add more.)

Maybe a crazy idea, but I think it could fly.

[Mr Mystery]

Looking at that, GW should drop the retail stores - they are losing money - and bend over backwards to help the FLGS. Looking at those numbers it's apparent why they are blaming store managers for lousy sales. If I had no clue what the difference was between a GW store and a FLGS then I'd be blaming them too.

I'm guessing the concept of loss leader isn't something you're familiar with? No stores - reduced recruitment. Reduced recruitment, fewer people buying.

£1.3m losses in a retail chain isn't all that terrible, especially when you compare to the state of the average high street.