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I was just thinking about the stores vs. the online discounters, and how the percents add up. Most online discounters offer 20% off GW products, as they don't need to pay employees or pay rent. Do they take a 5% profit margin, or 10%? How much does GW make off of each box/model?

While it may have changed somewhat, when I ran a game store the cost of a $30 regiment box was $18. This leaves about 40% profit to the store. Keep in mind GW's profit from sales SHOULD be more since they pay even lower cost, however they have hundreds of stores to pay overhead for as well as store staff costs etc.

Keep in mind this was 7 years ago for me. It's not uncommon for retail prices to be 40% markup. Guitar center prices are generally 30-40% but the deal there is that they have room to bargain. The more you buy the lower that % to a degree.

GW doesn't do this, just as Wal Mart and Target don't grind on prices. Retail is retail and that's what they expect to sell for.

For my money, I'd rather give the 40% to a FLGS instead of a company who has done nothing but raise prices about 40% across the board since I started playing their games back in '00.

For most of my buying I use a guy on bartertown who owns a shop and sells to me at 30% off which is the best deal I'll find since I know he's only making 10% profit but for me he doesn't have to pay rent or do any real work. I email him when I need something, he tells me the total, and it shows up about a week after I pay for it. He doesn't even stock the stuff himself, as he ships direct to me from his wholesale supplier.

Just to add to what aerethan has said.

GW makes and distributes their product for abour 24% (avg) of RRP (from GW reports).

FLGS buy products at 65% (so I understand) of RRP.

Most od the differance between the 24% and 65% covers the cost of GWs retail chain. LEaving a modest sum for actual profit - I want to say 10-12% but am too lazy to look it up atm.

GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

Holy crap... and people scream bloody murder about insurance companies making a 5% margin.

djones520 wrote:

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

Holy crap... and people scream bloody murder about insurance companies making a 5% margin.

COGS is not the end of the line profit though. Generally you need to take R&D, Management, marketing outta that mix. It isn't a surpise the COGS on plastic minis is low.

As for Insurance companies, you never receive a 'product' for your payments (which you essentially pay over the life of the insurance). I'm in banking, so I understand the gov't pressures (& public pressure) on the spread income made by financial institutions (income of lending - cost of FI's borrowing)

micahaphone wrote:I was just thinking about the stores vs. the online discounters, and how the percents add up. Most online discounters offer 20% off GW products, as they don't need to pay employees or pay rent. Do they take a 5% profit margin, or 10%? How much does GW make off of each box/model?

Erm without being rude.. do you really think ecommerce stores operate in some other dimension that doesnt require warehousing and has phantoms packing boxes etc?

rich1231 wrote:

micahaphone wrote:I was just thinking about the stores vs. the online discounters, and how the percents add up. Most online discounters offer 20% off GW products, as they don't need to pay employees or pay rent. Do they take a 5% profit margin, or 10%? How much does GW make off of each box/model?

Erm without being rude.. do you really think ecommerce stores operate in some other dimension that doesnt require warehousing and has phantoms packing boxes etc?

They can run that warehouse from cheaper light industrial space instead of pricey retail space, can order stock as is needed for things that don't sell well, and can generally make do with less employees, as there's no need to worry about coverage for an open store.

The key to discounting is stretching margin elsewhere.

Working in wholesale trade has taught me that there are people who can discount and make money, those who discount because they think they have to, and those who discount and wonder why they cannot make any money but also make life tough for the rest of us.





Automatically Appended Next Post:

rich1231 wrote:

micahaphone wrote:I was just thinking about the stores vs. the online discounters, and how the percents add up. Most online discounters offer 20% off GW products, as they don't need to pay employees or pay rent. Do they take a 5% profit margin, or 10%? How much does GW make off of each box/model?

Erm without being rude.. do you really think ecommerce stores operate in some other dimension that doesnt require warehousing and has phantoms packing boxes etc?

You can get business premises for nothing down and with 18month rent free clauses. If your supllier or manufacturer is good enough and you are competent, you only need to hold onto product for a short while. If stock isn't being turned over very quickly something very wrong is happening.

Sorry but nothing is really free.

Re stock management, If you knew what supply is like in this industry you wouldnt make such remarks. Supply management is very difficult in this industry. It simply isnt like many others. We have a broad mixture of part time manufacturers, to multi million pound internationals. We have suppliers going awol for weeks the day an order is supposed to ship as an example.

Stock management is a very complex process, and you cannot just say that if it sells you dont need to hold much stock as a measure of competence. What happens if you sell out of something, and the restock takes 3 times the amount of time the previous order took, and it hasnt arrived by the time it was expected? As this industry just doesnt work that way (normally). We have approx £425k in stock as I type this, and the majority is in the periphery lines that have poor supply, mainly because we cannot anticipate accurately when we get orders so we increase holding continously. Some suppliers are unable to tell us what they have available and we get a fraction of what is ordered. I have API's i can query in other markets from suppliers and distros that can give me real time availability. That is not going to happen in wargaming.

Regarding costs, to operate in ecommerce there are all sorts of costs you will have that a B&M store doest have. You still have staff to pay, insurance, electric, hosting, web designers, internet, postage, packaging, advertising, marketing in fact the list is huge. Its not like that Field of Dreams film where you just build it and customers magically appear.

jgemrich wrote:

djones520 wrote:

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

Holy crap... and people scream bloody murder about insurance companies making a 5% margin.

COGS is not the end of the line profit though. Generally you need to take R&D, Management, marketing outta that mix. It isn't a surpise the COGS on plastic minis is low.

As for Insurance companies, you never receive a 'product' for your payments (which you essentially pay over the life of the insurance). I'm in banking, so I understand the gov't pressures (& public pressure) on the spread income made by financial institutions (income of lending - cost of FI's borrowing)

GW don't do any marketing.

I'm not sure about R&D. All the plastic moulding experience can be bought off the shelf and factored into the cost of the models. We know they spend very little on rules development.

The great bulk of the money goes in management and retail overheads.

Killkrazy Wrote:

I'm not sure about R&D. All the plastic moulding experience can be bought off the shelf and factored into the cost of the models. We know they spend very little on rules development.

Laughed so hard I gave myself a nose bleed.

Jesting aside I agree with this comment since R&D IMHO is almost as bad vaporware.

Kilkrazy wrote:

jgemrich wrote:

djones520 wrote:

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

Holy crap... and people scream bloody murder about insurance companies making a 5% margin.

COGS is not the end of the line profit though. Generally you need to take R&D, Management, marketing outta that mix. It isn't a surpise the COGS on plastic minis is low.

As for Insurance companies, you never receive a 'product' for your payments (which you essentially pay over the life of the insurance). I'm in banking, so I understand the gov't pressures (& public pressure) on the spread income made by financial institutions (income of lending - cost of FI's borrowing)

GW don't do any marketing.

I'm not sure about R&D. All the plastic moulding experience can be bought off the shelf and factored into the cost of the models. We know they spend very little on rules development.

The great bulk of the money goes in management and retail overheads.

R&D is a generic term that will be defined by the business. GW through quite a bit of the LOTR profits into setting up the new CAD design and molding systems for the new plastic models. That's not something you can just grab off the shelf. Setting up the equipment and process, training people to use it, salalaries of the people doing the sculpting, whether by green stuff or computer, etc.

GW does have marketing costs, advertising, and other costs like any other business. COGS is just that: Cost of Goods Sold. Gross Sales - COGS = Gross profit. Gross profit minus all other expense = Net profits. Many businesses can have a high GProfit and small or nonexistant Nprofit.

I always find these threads sort of ironic. We have threads accusing them of making a ton of profit, and threads saying they are heading for bankruptcy.)

I agree with Mikhaila - We're all doomed!

That was the point you were making wasn't it?

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

TLDR, but remember children, Markup does not Profit make.

Why not look at the GW financial statements on the Investor Relations page, and not actually speculate wildly when by law, as a Public Company, such information is freely and readily accessible?

Probably for the same reason you didn't just post the info yourself?

Because they're sat outside a Pasty shop hijacking interwebs?

Linky linky!

http://investor.games-workshop.com/downloads/results/results2011/2010-11_FinalHalfYearReport.pdf

Mr Mystery wrote:

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

TLDR, but remember children, Markup does not Profit make.


Why not look at the GW financial statements on the Investor Relations page, and not actually speculate wildly when by law, as a Public Company, such information is freely and readily accessible?

But that would confuse the "GW has a ridiculous profit" thread with the bi-annual "Look at this report! These guys don't know what they are doing!" threads.

Mr Mystery wrote:Because they're sat outside a Pasty shop hijacking interwebs?

Close, actually!

mikhaila wrote:

Mr Mystery wrote:

Kilkrazy wrote:GW's margin on Cost of Goods Sold is about 76%, according to their last financial report.

TLDR, but remember children, Markup does not Profit make.


Why not look at the GW financial statements on the Investor Relations page, and not actually speculate wildly when by law, as a Public Company, such information is freely and readily accessible?

But that would confuse the "GW has a ridiculous profit" thread with the bi-annual "Look at this report! These guys don't know what they are doing!" threads.

Well, there is that too...

mikhaila wrote:But that would confuse the "GW has a ridiculous profit" thread with the bi-annual "Look at this report! These guys don't know what they are doing!" threads.

Meh. Increased profit per unit could be counterbalanced by a decrease in overall sales volumes - making both those statements true

The difference comes in between GW's cost of product and cost of operations, too lazy to find the report again, but they spend 20 something million pounds on product, and ~80 million pounds on other things. So its a massive gross profit per box of plastic, but the net profit is marginal.

Kilkrazy wrote:
GW don't do any marketing.

The great bulk of the money goes in management and retail overheads.

The retail store IS their marketing.

Exactly.

It's not working too well.

Kilkrazy wrote:Exactly.

It's not working too well.

Lots of storefronts close because they cannot sustain their niche business. Most become online retailers, wholesalers, or shutter entirely.

GW could exist online only if it really wanted.

They would probably lose a lot of sales because many new customers are introduced through the retail chain.

Rock and hard place then for GW, as everyone in the retail biz seems to be taking a hit one way or the other. Merchant Bankers being what they are don't even notice what note they are using to pay for stuff (or the colour of their credit card).

A indies best prices are 80% - 90% profit margin from retail. Got the cost prices here for the different price levels for indies.

Kilkrazy wrote:They would probably lose a lot of sales because many new customers are introduced through the retail chain.

The things are eating into their profit margin so much that I'm not sure it wouldn't increase profits.

I suspect however, that the real purpose of the retail chain is to prevent FLGS from coming into play that will sell competitor products.

That is probably part of it, but I honestly wonder if all GW stores are, in fact, monely losers. The closest GW store to me (Springfield, VA) is always busy whenever I go into it, so I think it and stores like it at least have a shot at moving enough product to pay their own way. It also seems like most of the mall stores have gone, too. I remember there used to be a GW store in the Potomac Mills mall in Woodbridge, VA, which was just across the street from a FLGS (Game Parlor).

Not all of them are losers. GW often tinker with the mix to try and maximise the profits. They just aren't very good at it, apparently.

GW's bad results for the second half of 2010 were ascribed to not having enough trained staff in shops. That was following the many shuttings and sackings of the previous 2-3 years, and the build-up of the one man store policy.

That a company with 30 years of retail experience can get itself into such a bad state is a matter for concern.