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Remember, it was hypothertical, and assuming it was minimalist store. I knew I had the numbers wrong, but its still hard, after my badly calculated employment costs, to meet $6000 off of two.... well... I suppose lord of the rings as well, so Three ranges of miniatures. And when you walk into a GW, the shelves don't scream steady supply, A hobby shop is brimming with stuff they forgot they had (and good stuff too) Its also hard to argue for GW's quality because for the same price you can get some really detailled stuff.

More specifically, how much wasted shelving space and floor space is there in a GW? My experience always has a lot of open space around, whereas the independents cram stuff together.

Howard A Treesong wrote:

Kilkrazy wrote:I'm not sure that wargame clubs legally have to take CRB checks.

If they do, a lot of adults are already registered from their childrens' schools.

It costs £10 for a CRB check and usually takes about two weeks to complete.

Not in the UK they aren't. Wife just paid £44 for her last one.

That differs with the cost on the sites I consulted. Possibly the cost depends which agency you apply through.


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Redbeard wrote:I'm not saying they're lying, I'm saying that simply citing the 'Cost of Sales' or margins relative to cost of sales figures, without also considering the Operating Costs is misleading, and not presenting the whole picture.


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I don't think you are saying they are lying. I was just trying to clarify where the 76% margin figure comes from, which is Tom Kirby's mouth.

I don't have a moral objection to a toy company making 76% Margin, like I would if it was the water company.

As a gamer, though, I question the use of the bulk of that margin to support a retail chain that does very little for me, while stuff in which I have a strong interest (properly written rules, balanced codexes, a good release schedule of books and models) is neglected.

Kilkrazy wrote:I don't have a moral objection to a toy company making 76% Margin, like I would if it was the water company.
As a gamer, though, I question the use of the bulk of that margin to support a retail chain that does very little for me, while stuff in which I have a strong interest (properly written rules, balanced codexes, a good release schedule of books and models) is neglected.

If all their sales was through independents then that margin would be drastically reduced (since stores buy the stuff for considerably less than retail).

As I said before, without much more detailed figures we can't work out whether selling through GW stores is more or less efficient than selling through independents.

Kilkrazy wrote:I don't have a moral objection to a toy company making 76% Margin, like I would if it was the water company.

As a gamer, though, I question the use of the bulk of that margin to support a retail chain that does very little for me, while stuff in which I have a strong interest (properly written rules, balanced codexes, a good release schedule of books and models) is neglected.

From what I can tell, I'm not sure that the bulk of the margin is supporting the retail chain - any more than it is supporting FLGS. The prices need to be high enough that a FLGS can make a profit selling the lines, right? And so you can consider that any of that money that goes directly to GW or a GW store is supporting that store, but no more than the MSRP markup would otherwise support a FLGS.

I'm not sure if that's written clearly to get across what I'm thinking.

Let's say that they shut down the GW stores, got rid of their web store and allowed FLGS to carry the whole line. Would prices necessarily go down? I'm not sure they would. Someone has to sell the product, and they're going to want their share for doing so. Whether that's a GW store or Mikhaila's store or thewarstore.com, the end result is that someone is selling the product and taking a cut. One reason that GW can claim a 76% margin is because included in that is the approximately 40% (I could be off here) margin that goes towards whatever consumer-level retailer handles that part of the transaction. And that when a GW store, or GW direct-sales makes that sale, that 40% of the revenue goes to pay the salaries and rent costs of their own storefronts.

I'm sure that some storefronts lose some money. But at that point the question has to be, are they losing so much that it's worth shuttering them and going to more traditional forms of customer recruitment (advertising, for example)? And here, I don't think they are. Reason being, they're still in business. They do shutter really poorly performing stores, and some of their storefronts actually run a profit too. At this point, I have to trust that the guys running the business, with access to their sales numbers and strategic plans do know what they're doing. You don't stay in business making toy soldiers for 30 years without some basic level of business acumen.

We, buyers, might not like higher prices, but when I see their results, I don't see a company trying to gouge me, I see a company facing the same challenges that this economy is posing to many businesses and industries, and still managing to stay afloat. As I've mentioned before, in this thread, or others, my prices are up for everything I buy. Milk, beef, bread, water, natural gas, gasoline, guitar strings, you name it. Rising prices are inevitable.

I see what you are saying, but I've also been around long enough to remember when they were making a profit selling 30 marines for $20. Sure there has been inflation and the r&d plus design and development of the new miniatures costs more because they are more detailed. This is of course offset by volume though. GW probably sells hundreds of times more miniatures than they did back in the early 90's, this would actually bring the price per piece down, probably below what production costs were back then.

This money is going somewhere. The major change since then organizational wise has got to be the stores. I admit, I've never been to one, I've never needed one. From what I hear though they are not the kind of place I would like anyway. I move around quite a bit in the US and I have found games and hobbyists all over the place, most of these people haven't been to a GW store. Now maybe they are great at getting young customers that play for a little while and spend enough to buy an army or two. I certainly don't know any vets that have been playing for more than a few years that will touch a GW store with a 10 foot pole.

I play at GW regularly. There aren't any non-GW stores within an hour of where I live, and I'm in a major city.

The Chicago Bunker has been nothing but supportive of the AWC tournament series. We have been given access to a dedicated tournament room once a month and varying degrees of prize support. They do the same for many other clubs and groups in the area too. The only reason we don't do all our gaming at the bunker is because we're old and like a beer while playing sometimes, so to the basement it is.

Redbeard wrote:I play at GW regularly. There aren't any non-GW stores within an hour of where I live, and I'm in a major city.

The Chicago Bunker has been nothing but supportive of the AWC tournament series. We have been given access to a dedicated tournament room once a month and varying degrees of prize support. They do the same for many other clubs and groups in the area too. The only reason we don't do all our gaming at the bunker is because we're old and like a beer while playing sometimes, so to the basement it is.

Really, thats wierd? Because I looked at google and there sure seams to be a lot of game stores there. Now maybe they are small and have no room for tables, normal major metropolitan problem, I would have to think the suburbs would be full of them. I could be wrong though. I just know every other city I've visited you could always find a good FLGS.

a good FLGS with tables to play at is hard to find. the FLGS needs to not cater to just one thing, but cater to all kinds of gamers. If your FLGS has board games, table top games, card games, party games and still more on top of that, odds are, more than likely, it also has a dedicated gaming area.

Redbeard wrote:I don't know how to interpret any of this. Mikhaila, is 3-5k/week good in this industry?

that translates to maybe 20k a month. Honestly, is 20k a month for a store with multiple employees good in *any* industry? Especially in western countries, the answer is no.

20k a month PER EMPLOYEE maybe. Still, thats a pretty abyssal number.

(This is assuming USD. If you are talking GBP, then cut that number by about 1.5 for a rough estimate. Still, I don't think its doing very well.

20k per month is doing amiably, assuming that you still have anything left after costs. I speak with regard to the current economic circumstance, otherwise, I agree, it is on the low side, but even then, a generic clothing store, like a Jeans and T-shirt retailler will earn more by virtue of the fact that that is something EVERYONE will buy, whereas hobbies are specialties and see less traffic than the "necessity" stores

Andrew1975 wrote:

Redbeard wrote:I play at GW regularly. There aren't any non-GW stores within an hour of where I live, and I'm in a major city.

The Chicago Bunker has been nothing but supportive of the AWC tournament series. We have been given access to a dedicated tournament room once a month and varying degrees of prize support. They do the same for many other clubs and groups in the area too. The only reason we don't do all our gaming at the bunker is because we're old and like a beer while playing sometimes, so to the basement it is.

Really, thats wierd? Because I looked at google and there sure seams to be a lot of game stores there. Now maybe they are small and have no room for tables, normal major metropolitan problem, I would have to think the suburbs would be full of them. I could be wrong though. I just know every other city I've visited you could always find a good FLGS.

Just to continue this line of thought, the metro Atlanta area used to have two different GW stores. Both of them were placed way out in the suburbs and have since been closed. The same metro area has a half dozen FLGS that have all been open multiple years and seem to be doing well enough to survive, even in the current economic climate. I can honestly say I don't recall ever going into a GW store; both the ones we had in Atlanta were 40+ minute drives for me, while I have 2-3 different FLGS half that distance from me.

Haha...one of the FLGS wants to get a beer/wine license, but apparently they're really expensive....

When I started the hobby, some of my friends played LOTR, and I had just watched the films, so I asked them where they got the stuff from.

If they had said games-workshop.com, I probably wouldn't have bothered, as it was, I walked past the local GW "Brick and Mortar" shop whilst shopping with my mum and dad, and asked if I could go inside and have a look at the models.

And so began 7 years of a large proportion of my pocket money going towards models.

That is why they have brick and mortar shops, so that if people hear "oh, I got it from games workshop" they can think "ooh, thats that shop with the red and yellow name above the door, next to the hairdressers!"

I agree with you goliath, the trouble is, after a year or two is up, you start trying to see if theres a way you can get more for less, and you find it pretty quickly. Initial loyalty drops off fairly quickly and only the hard-core GW fanboys are left. Beyond that though, once someone enters the miniatures hobby, theres oodles more stuff out there which GW doesn't carry.

Then some of us others were already building miniatures, and wished they could actually do something with them. I used to do 1/35 scale, and got bored because I couldn't do anything with it apart from have it sit and make pretty. That was the initial GW attraction for me, but from there its seeing theres a wider world out there.

Back of an envelop calculation.

120 million revenue per year.

Gross margin on the goods is 90 million.

Let's be generous and say another 30 million goes in general expenses such as the HQs, factories, distribution costs, staffing in those areas, utilities, insurance, running digital services, investor relations, and so on.

There's 60 million left.

How much realistically do people think GW spend on research, design and development? How much does it cost to write a new codex or design a new model?

Dividend.

Deduct that, and what's left is the costs of operating the retail chain.

You don't need to try and ballpark it like that, as these numbers are in the financial reports.

2010:

Hobby center leases: 10,361,000 (GBP)

# of employees in sales: (though this probably includes direct-sales and trade sales, but maybe not)
Full time: 1,133
Part time: 275

Operating Expenses by location, Sales:
Northern Europe, 17.5
Continental Europe, 19.5
North America, 16.8
Australia, 5.5
Emerging Markets & Japan: 1.7
All other sales businesses: 2.8
(totalled: 63.8 million)

So, 63.8 million in sales expenses, 10.3 of which is the leases on the properties, leaving 53.5 in salaries and other sales expenses. Working with the number of employees stated above, that actually works out fairly reasonably, though you do need to make a guess on the other sales expenses.

They also tell you what the R&D costs are;

Admin expenses: 29.7
Design&development: 2.5 amortised + .8 (not capitalised)

(That's some odd numbers. Design&Development cannot include wages, as they claim 82 design/development staff, and that would work out to only 30k/year as an average salary. You know they've got designers who have been there 10+ years and have to be making more than that. I wonder if those salaries end up counting in the admin expenses category.

There's all sorts of data in the financial statements. Interpreting it all is another matter.

It's fair to say thatb in the UK, GW are often the only gaming shop in town. If they pulled their chain of shops, their UK sales would collapse. I think part of the problem is that they've taken their UK model (where they are often the only gaming presence in a given locale) and tried to do that in countries where they simply cannot saturate the market like that. And of course the risse of the interweb means that retail struggles more than it did when GW started and grew fastest.

When I ran a (non-gaming) shop that had (including me) 4 full time staff equivalents, we had to take £9000/week to break even.

So by the detailed figures, nearly 50% of the revenue is consumed in the costs of running the retail chain.

I wouldn't be surprised if al lot of the "designers" were on much less than £30,000 per year.

So if all you have in the UK is GW stores, then where do you get your other gaming stuff?

Andrew1975 wrote:So if all you have in the UK is GW stores, then where do you get your other gaming stuff?

Well, I´m going to assume the sitaution in the UK is similar to the one here in Germany:

Withing an 30 minute by car I have...
... 4 GWs
... 1 98% GW stuff independent store (the only hobby store in that particular city)
... 1 FLGS that has a wider variety of other games and only a minimal stock of GW merchandise

So it´s not that there are NO FLGSs, but it´s that GW stores outnumber them and/or lead to the FLGS stocking small amounts of GW stuff.

The UK is similar-ish

Pretty much every major town has a GW store. Then a few towns have flgs, many of them have no tables, they just sell the models. These are often comics shops/model shops that stock GW for extra profit. And finally there are towns like Bristol who have a 'mega flgs' which has tables and food and a place to paint as well as stocking the full range. But these are seriously rare. There's one in london I think, "Playin' Games". One actual flgs with tables in the capital city of the UK.


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Oh no, Playin' Games has shut down. Hmm, then I don't know any independents with gaming boards in london.

There are other game shops, boardgame shops, craft shops and model shops in the UK, just fewer of them than in the 1980s.

Part of this is due to the ridiculous cost of retail space in the UK. The reason why GW has predominated is partly because of their ability to charge very high prices and subsidise the retail chain, which works for them as their main form of marketing an recruitment.

I think most wargamers get most of their stuff mail order from web sites. I know I do.

Living in west London my nearest good model shops are Hannants in Colindale and the Dorking Model Shop in Dorking. Either is quite a trek and not somewhere you just pop into.




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The second thing to mention is that UK gaming is a lot more based around clubs, church halls, and people's houses, than seems to be the case in the USA.

But other companies are charging as much (on a per-model basis), so that indicates that either that is the fair price (what it takes to get the product to the consumer minus a bit of profit), or that they're piggybacking on GWs high prices to make even higher profits as they're not subsidizing a retail chain.

Somehow, I don't think the later is true. Someone is making that final markup. Independent game stores depend on their margin just as much as GW does.

You might claim that GW is clinging to an outdated sales model since the advent of internet sales. Certainly they could shutter all their stores and drop their prices. But I think their volume would drop off entirely. I think that having a visible presence is important in recruiting new gamers. Without that, this hobby would slowly disappear. Internet sales aren't going to build a hobby. And unlike trains or military modelling, wargaming does require opponents.

I think that physical stores where people can meet and game, or even just look at the models and see what its about, are important to niche hobbies like this, whether they're run by GW or not. And even if GW got out of that side of the business, I think they'd still need to set their MSRP high enough that the independent stockists can make a living selling their product. I'd imagine any savings they'd see would need to be balanced against an increased need to advertise and market their product against their competition.

Kilkrazy wrote:
The second thing to mention is that UK gaming is a lot more based around clubs, church halls, and people's houses, than seems to be the case in the USA.

Really church halls? Looks like i'd have to watch my cursing when happens

GW stores exist to extend sales and deny retail space to the competition. As other posters have pointed out, the status of GW stores in the UK and the density they have achieved which when I last took a hard look at it was something like 1 GW store for every 300,000 people in the UK (of course going by GW’s artificial operating divisions of Northern Europe, Continental Europe, etc. it’s technically 1 GW store for every ~638,000 in Northern Europe). Given that kind of market saturation, GW’s stores play a very important part in supporting the GW’s business goals, at least in the UK. Outside of Northern Europe **cough*UK*cough** it’s a different story and where I think GW’s strategy of having stores can be questioned more. Based on their 2010 AR, the breakdown looks something like this;

Northern Europe Population: 91,285,426 # of Stores: 133 Per capita: 686,357 # of stores needed for parity with UK: 0
Continental Europe Population: 267,206,640 # of Stores: 117 Per capita: 2,283,817 # of stores needed for parity with UK: 389
North America Population: 340,746,450 # of Stores: 84 Per capita: 4,056,505 # of stores needed for parity with UK: 496
Australia Population: 21,874,900 # of Stores: 36 Per capita: 607,636 # of stores needed for parity with UK: -4

As you can see, the number of GW stores in other operating areas with the notable exception of Australia (touted as one of their best performing regions), the # of GW stores do not approach the saturation that they do in GW’s home market. As a result these markets are under performing (GW’s words, not mine) and GW faces much more significant competition from non-GW games and churn, which is vitally important when brand loyalty is key. given the purpose for GW stores is to extend sales and deny retail space to the competition (which as a byproduct extends sales further), One can come to a conclusion that GW has a long way to go before they reach the critical mass necessary to achieve the results consistent with what GW sees with their UK and Australian stores. From an investor’s perspective, I would be very skeptical of GW being able to successfully pursue this strategy given the immense amount of capital and time required to execute, especially in the North America. So if you can’t achieve success and the stores are a drain on earnings, then GW would be best served by closing the majority of their North American Stores, leaving at most maybe one “feature” store in the most significant markets (an analogue is Lego Stores). This should be followed up by a reduction in their wholesale price to indie stockists (cost savings from closing their retails stores should support this) which would attract more indie stockists and give them the flexibility to develop and pursue innovative marketing strategies to increase their retails sales which in turn would increase GW’s sales and profits.

Instead it seems GW is fatalistically committed to a strategy of “eating their own” and what’s worse have taken steps to do the same to Australia given their inflexibility to adjust their pricing in the face of long term trends in exchange rates.

Kilkrazy wrote:So by the detailed figures, nearly 50% of the revenue is consumed in the costs of running the retail chain.

The point which Redbeard is trying to make is that closing their retails and letting independent retail stores handle the sales would not mean the company saves 50 million £. Theoretically, it would not save a penny! (assuming that GW's own stores and independent stores have similar efficiency as they ideally would - in reality, this is probably not the case so it would result to some savings).

If they spend 50 million on running their own stores, then closing all their stores would result in a cost saving of 50 million.

I think what Redbeard means is that their revenue would drop too, since their sales through independents are worth less due to the retailer discount. Independents and the web site might not be able to serve the same amount of product on a weekly basis.

There would be also the unknown effect of the lack of "marketing".

The unanswerable question is whether their revenues would drop by more or less than 50 million. A drop of 40 million would make the company as a whole much more profitable.

Plenty of retail companies are vertically integrated, e.g. L.K Bennet shoes, Zara fashion, American Apparel, and Uniqlo.) Some chains operate on a franchise basis.

Plenty of other retail companies are not vertically integrated. It isn't an automatic way to success.

When you look at the raw figures, it seems as if GW isn't a wargames company but a retail company.

McDonalds is largely a property company these days.

Some other considerations...

If they were to drop their retail shops, would they also drop their web sales? It'd make the remaining independent stockists happier, but you have to figure web sales and direct-only stuff nets them a fair amount without the storefront overhead.

It's hard to justify losing 50mil in revenue, even if it increases your profit, of which there is no guarantee. What's more, would they lose more than that, as people who have become used to thinking that GW is the only game in town now switch systems when shown there is more?

Based on past success, I don't think maintaining storefronts, even if they're subsidized to some extent, is bad for the company, or the hobby ("GW hobby", or even wargaming in general. How many people started with GW games and then branched out?).

Kilkrazy wrote:If they spend 50 million on running their own stores, then closing all their stores would result in a cost saving of 50 million.

I think what Redbeard means is that their revenue would drop too, since their sales through independents are worth less due to the retailer discount. Independents and the web site might not be able to serve the same amount of product on a weekly basis.

There would be also the unknown effect of the lack of "marketing".

The unanswerable question is whether their revenues would drop by more or less than 50 million. A drop of 40 million would make the company as a whole much more profitable.

No, not necessarily. Relative production and shipping costs increase if the total sales go down. And even if it did, the effect on pricing would be barely noticeable (if at all) from customers viewpoint.

I think there are probably much better ways to market than owning your own stores. They should have spent that money on a major movie instead of releasing a mediocre fan flick that only current customers would have any interest in. It'll be interesting to see if the new space marine video game does anything for their sales.

Redbeard wrote: I think that having a visible presence is important in recruiting new gamers.

I know that space crusade and hero quest had a huge boost in recruiting for GW. Does dawn of war successfully serve the same purpose? I'm not convinced it does.

(for the younger amongst you, SC and HQ were pretty decent boxed board games with plastic minis designed by GW and manufactured by MB. They were advertised nationally and sold in retail chains - e.g. Argos, ToysRUs, etc).