Saturday, May 21, 2011

GW's Side of the Story

Tony Perkins is a gamer from Melbourne, Australia. I first met Tony at the Australian GT in 2004 and we've been friendly ever since. Tony played in the first Battle of the Ditch 40k international at that event and we had a Grudge Match at Liber Animus II in 2005.

So Tony has been around the hobby a long time. After the news of GW's embargo on UK internet retailers broke he sent the company an email. Here's the response he got:

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 the GW side of the story.

Thoughts?

11 comments:

  1. "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."

    This doesn't seem right to me. If they simply reduced the wholesale prices in Oz/NZ, they could lower the prices across the board and keep the same margins on sales so that the stores could still be self sufficient?

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  3. Doesn't come close to explaining why the AUD is currently 7 cents stronger than the USD, and stronger than the USD versus the GBP, yet...I can walk into the GW down the block and buy a space marine squad for $22.50 and my friend in AUS has to pay F'n $40.00!! or why the Empire army book I bought in 2007 for $20, is now $33 here and $48.00 in AUS, same book. AFAIK, its got nothing to with import duties as they are on par for all countries..the only answer is stop buying.

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  4. Funny thing is... I'm from Brazil, we have no GW stores around here and still have no possibility now of buying things from Europe, except from GW...

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  5. Sad thing is I suspect you will actually find that dudes in USA / Canada who work in game stores actually get paid very little... which supports much lower prices. I mean what does a guy in a store in the US earn - they would be pretty minimum wage jobs and at least here in Australia I know someone on minimum wage earns a fair bit more comparitively and in AUD terms than someone in the USA...

    There should still be room to discount though and although its good to see that response I am disappointed that they havent passed on some of the benefit of the rise in AUD / NZD to us...

    Pete I am continuing to love your posts they are almost always well thought out and balanced!

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  6. I got the same form email, except that the first paragraph was tuned to try and make me think it was a personal email to me.

    I knew it was a form email as I was complaining about price hikes... IN CANADA!

    They're so out of touch it's not funny.

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  7. 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.
    We don't charge you when we promote our products to you, but charge you later for this free promotion by incorporating these costs in the price of our models.

    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. 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.

    We refuse to admit that most of our advertising is actually from thousands of enthusiastic customers promoting our products FOR FREE via the internet.


    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 (us)to try to take advantage of these currency movements and reap huge profits from overseas hobbyists.

    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

    Internet traders provide sales and promotion of our products globally , while in many cases operate hobby centers for our clients locally, however, as they compromise a small portion of our profitability, we will scape-goat them, claim they are getting a 'free-ride', and continue to gouge their loyal customer base.

    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.

    We expect you to believe that our customer base is being eroded by retailers offering our products at an affordable price. :)

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  8. From the GW annula report, very interesting IMO

    Our continual investment in product quality, using our defendable intellectual property, provides us with a considerable barrier to entry for potential competitors: it is our Fortress Wall. While our 382 Hobby centres which show customers how to collect, paint and play with our miniatures and games provide another barrier to entry: our Fortress Moat. We have been building our Fortress Wall and Moat for many years and the competitive advantage they provide gives us confidence in our ability to grow profitably in the future.

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  9. When he says "The Games Workshop Hobby" is he referring to:

    a) Making money
    b) Ignoring exchange rates
    c) Treating their customers like idiots
    d) wargaming

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  10. I think Mr Wells is entirely correct apart from a couple of minor points that make the whole thing bollocks.

    Firstly, he acknowledges that it's been "...years, [and] a number of currencies have moved a long way from their historical relative values". So GW has not used the gift of time and the years of change to amend it's pricing schedule. Are they waiting for an engraved tablet from God?

    Secondly, and most importantly, they pay all of their costs in the local currency, but as that currency strengthens, they are gaining a bigger profit in British Pound terms. 10 years ago, a NZ$1,000 profit might have gotten them a 300 pound profit. Now it'll be close to 500 pounds. That they haven't amended local prices to reflect this is a sign of the contempt with which they regard us; "Those dumb-arse Kiwis will pay whatever we want".

    They invest a lot in the hobby, and I thank them for it by buying their stuff. I'll continue to do so, once I'm not being screwed just because I'm a New Zealander.

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  11. Yeah, +1 from me as well Tane.

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