The future of Games Workshop & Games Days - Part 2
You have not read part one yet? Quickly now!
When I thought about how to summarize my Games experiences with the new 'limited availability' format, I soon realized I had to look at a much broader picture. During Games Day (and the weeks and months leading up to it), there was a lot of angry talk pretty much everywhere - and I thought I needed to put things into perspective.
I was surprised to see that Part 1 of this little mini-series (which now will probably turn into three or even four parts) has stirred so much interest - it is actually on its way to being one of the most read articles on this blog! So thank you all for your comments and most of all - for SHARING & ENJOYING our posts! :)
Part 1 was subtitled "How bad does GW's Management really suck?" and, let's say Tom Kirby or any of the other top GW managers read that post - at the end of reading it, they probably felt pretty good about what they have achieved. Well, let's tighten the screws a little bit, shall we :P
Today I want to focus a little bit on the relationship between Games Workshop and independent retailers, why - in my opinion - Mark Wells left the company after five enormously successful years and whether the many rumors about Games Workshop being sold to someone make sense or not.
Please note that - to some extend - we are leaving the 'research-able facts' area and we are entering the personal opinion phase ;) Feel free to disagree! (And comment below!)
|Colonel Straken would be proud.|
Among his margin-increasing ideas was to restrict European trade accounts from selling outside the EU. If you think GW products are expensive, I invite you to visit Japan or Australia. I purchased a Black Reach starter box for around 165€ in Japan (I really only wanted the Japanese 40k rulebook ^^). I know from our Austrialian friends that Australia has similarly nightmarish prices.
And of course, GW did not want Wayland & Co to sell their product overseas. So they shut them down.
|I got three of these - best retirement plan ever!|
Space Marine Company Box, German retail at 400€ - buy online in UK for 210€? No problem! Best investment ever. But I can see how brick-and-mortar stores could not possibly compete with that!
Mark Wells communicated this restriction as a protective measure for GW and independent brick-and-mortar stores to fight the evil Internet traders. And, I for one, can see his point.
In reality, of course, most independent stores today can't even buy their product from GW any more (mail order only + monthly quota) and have to send their customers to the GW Online store. Year after year, the trading agreement got more-and-more restricitve. In short, Internet sellers are on their way out, brick-and-mortar stores can stay. What this means is: All - or as much as possible - online sales for GW, rest for the brick-and-mortar stores. Margin increased, mission accomplished.
But there is one important point in there, that many forget to see. In vigorously restricting discount-retailers on the Internet, Games Workshop actually helps brick-and-mortar stores to survive. These stores are the ones most threatened by these online-sellers. For GW it's just margin, for the stores it's their business that is at stake.
Even though I support the goal to restrict online traders in favor of independent brick-and-mortar retailers, at the end of the day this meant that the hobby got more expensive and less accessible for many of us. And - from what I hear from the brick-and-mortar stores - Games Workshop does not exactly make their lives easier, either - quite the opposite actually. I personally don't know a single independent store owner (and I know many!) who likes the way GW does business with them.
End of Cake - Wells sets sails
|GW releases the Straken Kraken - Wells sets sails|
It's time to talk about stock price and shareholders again.
In part 1 we talked about cut costs, increased prices and margins, great profits and a healthy company. Cash in the stash. A picture perfect performance.
Or is it? Well, yes - but if I was Mark Wells, I would recognize that this is the proverbial 'end of cake'. What do you do after you have cut all the cost, increased the prices to the point it hurts the customers and sold as many minis to the customers directly, maximizing your profit margin? You could sell the whole company for big bucks - but that didn't happen...
So, what do you do? That is actually a very good question! Even more so, once you recognize that you have lost customers and long-time loyal fans along the way!
Stock prices & Fantasy
|Puff, the magic dragon consumes the consumer|
Has GW built it's success on short-term sand?
Now let's add 1 and 1 and 1 together (and I know this is tea-leaf reading, but, hey, tea is a good, Bri'ish tradition!).
In part 1 we have seen how GW has maximized profits by running a tight ship. And very successfully so, hats off. But was GW just generating short term cash like many observers stated? How will Games Workshop increase sales and profits in the next five years? Let's have a look at the obvious areas.
Future growth for GW
I'll make this short as this post is already of epic length (again). But these are the obvious areas where I see significant potential for GW following their current strategy:
- organic growth: GW can literally open hundreds of stores, especially in the US. It's kinda the same way of growing that we at ALDI Süd had done in the past. Very solid plan, comes at quite a cost though (stores, rent, staff). Really, the sky is the limit here, growth will be slow but steady. GW has the distribution, procedures and governance in place to paste-and-copy new stores.
- Royalties: Expand on GW's current IP with partners such as FFG, and in particular in the area of computer games and movies. I could see a 25-50% increase in overall profits for the company in the next five years - if they do it right.
- margin: unlike cost and price - which may be marginally improved with regards to profits, I think GW can still significantly increase their margin by getting more customers to buy from GW directly. It won't be as much as in the last 5 years, but there is still a lot of potential, I think. And it will come at a cost. (More about that later)
- Diversification, new releases: We can already see that GW diversifies its assortment, e.g., by the recent re-introduction of limited products (codices, collector's boxes, FW Horus Heresy, Black Library etc.) The fact that GW has hired so many new talented designers makes me very hopeful for the future.
By the way - good news! I see the end of massive price increases! No more growth by sucking the hobbyist dry! Let's hope I'm correct! The entry cost into the hobby is already stretching it - and GW would run the danger of pricing themselves out of the hobby market.
I agree with Tom Kirby's assessment that computer games and the internet are NOT in competition with tabletop- and board-games. However, GW is in competition with other tabletop-systems and - increasingly so - with high-quality, low cost start-ups and 'kickstarters'.
Nevertheless, I am convinced that GW is currently missing some of the most significant areas of growth completely - and this could be the biggest chance for future growth for them. I will talk more about this in Part 3, I guess. Maybe I'll call that 'the forgotten customer'. Sounds fancy enough.
I want to close today's part 2 with all those rumors about GW being sold. Until recently - especially following the 2012 financial report, I was 95.8% convinced that Games Workshop will be bought by a big player like Hasbro.
Why Hasbro? They are a big fluffy company! The got Wizards of the Coast and all of their awesome IP and I am sure they would make awesome products with GW's IP.
|There is no intention to build a wall!|
|2012: 50.3% shares in the hands of three investors. That was Hasbro's chance.|
|2013: Shareholdings are spread out again - much harder to buy the company.|
Will Hasbro be all
"Smiles UND Sunshine"
and buy GW?
Part 3 on Wednesday
This concludes the business part of my little 'Games Day US/Germany review' :P LOL, what have I done? I haven't even talked about Games Days yet! :D
In part 3 I will finally look at us nerds and what the real problems and risks for GW are in my opinion. You will finally find some nerd-rage as well, so stay tuned - and don't forget to:
SHARE & ENJOY!
Please leave your comments below! I love to hear what you think!
And here is part 3
And here is part 3