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FYI, he sent a slightly different version of the letter specifically to Australians who were complaining. It has this bit added:

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.

If I can try to wrap my head around what is being said, I *think* they're trying to say that they built an Australian infrastructure and put that money back into improving their production facility under the idea that sales from the region would be generating a set amount which was based on the relative currency rates on the time. And now if they were to adjust their prices to make them relatively equal, they would not be able to maintain their infrastructure because they would be losing too much money.


That just seems crazy to me. I'm very curious if there are any other international companies out there that have their own retail chain and whether they are forced to do the same thing (keep their prices locked in at a certain exchange rate in order to maintain their business plan)?

I've never heard of it. It seems crazy. If it is the truth it seems terrible and if its not the truth then its terrible.

Waaagh_Gonads wrote:The addition you highlighted is as you pointed out just pain crazy yakface.

If they lowered prices here in Oz, the vast majority of gamers who order from overseas (myself included) would switch back to Australian stores for purchasing product.
There are online discounters here to, offering 20% off GW retail. I'd be buying from them.
The rebound of slaes both GW stores and independents would certainly ensure that GWOZ would be sucking down a hell of alot better return than it currently is.

I don't expect there to be exact price parity with the US or UK, 10% difference to cover transport is entirely justifiable.
But since I got into the hobby in 1990 GW have always charged at least a 30% premium on us poor Australians compared to the UK.


If GW is crazy enough to give Oz the price rises the rest of the world is getting, shenanigans on an epic scale will ensue.

Well obviously GW does make a certain amount of sales from the actual region of Australia, and were they to slash the costs of their current prices to make them closer to their global counterparts they're saying this will result in a massive decline in the amount of money they're making, even if it would result in people stopping purchasing stuff online and getting it shipped.

And I do think that makes sense in that when you lower prices, you're still having to pay the same cost to produce and ship the miniatures so even if your sales increase because you lower prices you're getting less of a margin on those increased sales, so in order to net the same amount of money (or more) you have to dramatically increase sales, and clearly GW doesn't think that slashing the prices would do that (whether that's right or wrong, I have no idea).

The other thing to consider is that all the independent retailers in Australia have paid for their product already. They have them sitting on their shelves and they paid X amount of money for those products to GW under the expectation of being able to sell them for Y. If GW were to suddenly slash their Australian prices, all that stock would instantly devalue in half, putting a gigantic strain on anyone with a decent sized inventory, including the Australian distributors.

Basically, GW seems to have gotten themselves in this predicament by setting Australian prices outrageously high when the currencies were way different and keeping it there when the currencies fluctuated instead of shifting with the fluctuation.

Now to make that change suddenly would be too detrimental to the company to contemplate.


All of this is actually making sense to me, except that what GW *should* be doing, is to announce a SLIGHT price reduction in Australia, with promises that the prices will continue to drop over time until they are closer to the true global exchange rate....but then again, I have no idea how any of this really works!

lord_blackfang wrote:
There are fixed costs associated with running the GW retail chain. Rent, power, salaries. GW has to pay these in AUD. Let's pick a number, say it costs 10.000 AUD to run a small store.

Three years ago, that was £5000. Today, those £5000 only get you 7500 AUD. But GW still needs to pay 10.000 AUD to rent the same store and pay the same wages.

If GW were to adjust prices down based on the new exchange rate, they would essentially reduce their income by 25% relative to their expenses unless, like Mr. Wells said, they also cut wages and somehow avoided paying rent.

Thanks for the explanation, that's basically what I was trying to wrap my head around. But something still seems off. Let me work it out here:


Say GW Australia's division years ago cost $10 million (AUS) a year in expenses (going to use very even numbers here for simplicity regardless of how outrageous they are), but they make $20 million (AUS) in sales a year, for a total profit of $10 million a year.

Now let's say back then the pound was double the AUS dollar. So it costs them £5 million pounds to run each year but they get back £10 million pounds for a profit of £5 million a year.

Of course, they obviously set the price of their product in AUS twice as high as they do in the UK to hit this mark. So if a Land Raider in the UK costs £30, then it costs $60 AUS but everyone is okay with that because it makes sense...if people in AUS were to mail order to the UK and buy a Land Raider, the currency exchange means they would be paying effectively the same price.

But now years later, the AUS dollar is now equal with the pound.

Assuming inflation hasn't changed anything, and they keep their prices 'locked in' regardless of exchange rates, then they're still paying $10 million AUS a year in costs and making $20 million in sales for a profit of $10 million AUS.

But with the change in exchange rates, that's now £10 million pounds in expenses with sales of £20 million pounds for a profit of £10 million pounds.

So doesn't that mean their profits have actually doubled in Australia by the Australian dollar gaining ground (if they keep their prices the same)? Shouldn't they be able to lower their prices and still be able to make the same profit they used to? Or am I screwing something obvious up here?


I just wonder how other companies handle similar situations? Obviously there have to be companies that have stores or factories in foreign countries. I certainly don't recall, for example, hearing about japanese cars made in the US having their prices adjusted because of changing exchange rates (but maybe I wasn't paying attention). Does that happen? Or do companies lock in their prices in foreign countries and then stick to that regardless of exchange rates?

Has the internet and the ease of small scale shipping made this a problem for industries like miniature gaming that don't exist for things that can't be easily shipped (like cars)? Is this part of the reason why electronic devices have region lock-outs built in, to allow companies to lock-in prices in certain regions without worrying about being undercut by themselves via private shipping from another country?


I'm just really curious to know how other companies who sell globally have handled this type of problem if anyone with any actual knowledge knows?




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Kid_Kyoto wrote:Just noticed almost 50 people 'like' this on Facebook.

I think you have to 'like' something on facebook to be able to comment on it (but I could be wrong).