Games Workshop is Not Ripping Us Off on Prices

[MangoPunch]

On these forums and others people often complain about the little value you get with your GW purchases "Only 10 Minis for $60!!", but just how unreasonable are these prices? The below image is Games Workshops income statement for the years ending June 30th 2012 and 2013. The company made GBP 21.8m on GBP 134.6m of sales. Only GBP 16.3m of after tax profit! That gives GW a 12% profit margin on sales. That is a profit margin below* retailers like Burburry (13%) and games maker Hasbro (14%) [I don't cover retail so just looked into the first two companies that came to mind as comps].



Game's workshop's business strategy is to grow their top line via sales volume growth (not price inflation). This means adding stores, and developing new products, both of which cost money and advance the hobby. I guess you can complain that they keep on "making you" buy new models and books, but let's be honest: once you have an army, the ongoing investment to stay current on the hobby (on rules and get new not previously released troop types) isn't that much (and they are only making 12% on your incremental purchase). Most of the older hobbiests don't need to spend lots of money on new witch elves, they choose to because the models are badass.

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*GW doesn't have any long term debt; on an unleveraged basis their margin might actually be more attractive than BRBY and HAS (I didn't do the math out), but my point is that 12% doesn't seem particularly egregious.

[Dyvim tvar]

Game's workshop's business strategy is to grow their top line via sales volume growth (not price inflation).

I have to disagree.

1) GW has been raising prices on existing kits (like Cold One Knights, for example) on which they probably recovered the costs of development long ago. This is consistent with a strategy of trying to grow revenue through price inflation.

2) GW expanding its own footprint through GW stores is not necessarily a means of increasing sales volume. Instead, it can be a strategy to increase the revenue GW receives to the detriment of independent retailers. GW will make more money if it sells at retail price through its own stores than if it sells wholesale to independent retailers.

Give me some numbers that show GW is selling more models year over year and then maybe you'll have some numbers to support your thesis.

The comparison to Burburry actually shows that GW IS gouging on price. High end retailers are widely know for gouging customers, and the fact that GW's profit margin is comparable is quite telling.

[MangoPunch]

1) Alternative explanations: a) this is exactly my point most increased revenue goes to future product development, b) they pass on increased cost such as electicity, materials, VAT etc.

2) a) Coke has a profit margin of 19%, are they gouging prices? b) totally true that their store expansion is likely at the expense of independent retailers.

I am not saying that GW isn't out to make money off of us, they are a business after all. I am just saying that compared to all the talk, they actually put a heck of a lot of revenue back into the game. A heck of a lot more than I initially thought.

[Dyvim tvar]

But do we really know that? You can't tell anything from these numbers about how much is going to product development.

And yes, Coke is gouging prices.

[MangoPunch]

Cash expenditure classified as "product development" was GBP 3.5m - so I suppose I miss-wrote that price increases necissarily go into "future product development". My basic point though is that in aggregate 12% of revenue ends up on the bottom line and ultimately go to shareholders. I don't find this out of line from a consumer perspective.

[Dyvim tvar]

I did not realize at first that clicking on the picture in your top post linked to the full P&L.

Regardless of profit margin, as long as they keep charging $50 for an army book I will consider them to be gouging ...

[Liquidedust]

Give me some numbers that show GW is selling more models year over year and then maybe you'll have some numbers to support your thesis.

Last time I looked the numbers from GW, since they are a public company anyone can do this, they have moved marginally less and less product every year for the last 4 years or so but at a higher margin which has increased profits.

From a business point of view this is actually makes sense, and is the sign of a helthy company in most markets.

Though, it doesn't make their prices hurt any less for the end-consumer.

[Daeron]

The production price of a book, and the cost of making it are two different things. I don't want to wave a GW banner here, but if I order a print book in full colour, I'm easily up in 25-30 euros for 25 pages. And that's assuming I make the content, layout and everything.

When reading the "program" that G.W. tries to sell to its investors, it seems to focus on increasing the quality of its models… to stay among the top as far as the quality of the plastic models goes. According to its own market studies, this is what drives people to buy their new models. And considering they're still making profit, it looks like they are managing with exactly that strategy.
Now, I do find the Witch Elves really expensive. But I'm also immensely impressed with the quality of the models. Dear Lord! What a change compared to the 6th edition Warriors. They even took it up a step from the 7th edition Corsairs whom already managed to impress me.

Is it worth the money? Well.. that's a personal question. Is it worth it to you? It proved worth it to me. I'll be buying the models. I love the style, in spite of the odd poses, and love the fact they are such high quality and plastic.

[MangoPunch]

When reading the "program" that G.W. tries to sell to its investors, it seems to focus on increasing the quality of its models… to stay among the top as far as the quality of the plastic models goes. According to its own market studies, this is what drives people to buy their new models. And considering they're still making profit, it looks like they are managing with exactly that strategy.

If I were a shareholder I would be worried that more widespread availability and detail of 3d printing could disrupt this aspect of the strategy. The bariers to entry on creating a detailed, cool mini will be massively reduced... how many 3d designers are there working on computer games right now? I bet a lot.

[Daeron]

I thought they make their plastic models in 3D already. The day 3D printing makes a cheaper and better product (and it may have that chance), they might adjust their production process accordingly without needing to change the creative team behind it. It will be a big change for everyone in the miniature market, no doubt.

[Liquidedust]

I thought they make their plastic models in 3D already. The day 3D printing makes a cheaper and better product (and it may have that chance), they might adjust their production process accordingly without needing to change the creative team behind it. It will be a big change for everyone in the miniature market, no doubt.

3d home printing might be able to match the detail of injection molding, however the cost for such a high resolution printer would be a quite steep investment to start with; and we're not even taking the cost of the printing material into the equation then.

Note btw, I work in proffessional printing and the investment cost for just making slightly better prints than what a $1000 printer can give you and you have to twentyfold the cost of the hardware required. And then to make it fast as well, well we're talking machines in the $50000-75000 range minimum then.

[Daeron]

Aye, quality tends to quickly up the price, which is partly why I tend to accept GW's price
(And because it's the only hobby I tend to invest in atm… and tend to last long in hours of fun per model)

[Liquidedust]

Aye, quality tends to quickly up the price, which is partly why I tend to accept GW's price
(And because it's the only hobby I tend to invest in atm… and tend to last long in hours of fun per model)

Indeed, when I tell people what our large format printers at my job cost they just stare blankly at me.

Though they print 3 meters wide at any length @2800 dpi with a feed speed of up to 25 meters an hour (that is 2800 dpi printing at 75 square meters per hour)

[Dalamar]

3D printing doesn't quite have that quality yet. Heavy duty industrial printers can do it. GW could afford them but it would mean replacing their existing manufacturing.

I'm also pretty sure 3D printing is currently much slower than injection moulding (which is a concern when you're supplying the entire world)

3D printing also has problems with some angles, making current GW designs really hard to reproduce with a 3D printer

But as far as material costs are concerned... ohboy. 3D printing plastic is CHEAP! (and by cheap I mean about $30 for 2 pounds of it. I wonder how many plastic miniatures you'd fit in 2 pounds worth)

[Setomidor]

I think most (but not all) of GWs prices are reasonable as well, and if I didn't I wouldn't be buying them

I usually hear people moan about how much lower the prices was before, when you could get 20 Skeletons for 19£ and today you have to pay £31. To compare this to other things, I actually looked up the prices of other goods from the late 90's and compared to what they cost today, and it turns out that the price of models actually remains largely the same when considering inflation and GDP. (Actually, in my limited survey it turned out that Ice cream is the product where the costs increased the most.) That said, the quality of the product has also increased quite considerably.

[Clockwork]

To be fair, I do remember chocolate bars costing in the region of 30-35 pence. Now they're easily up to 60-70p, so that's a 100% price increase in the last 10-12 years.

[Liquidedust]

To be fair, I do remember chocolate bars costing in the region of 30-35 pence. Now they're easily up to 60-70p, so that's a 100% price increase in the last 10-12 years.

When I started the hobby in the 90's, roughly 20 years ago, I paid £5.99 for a blister of 3 infantry models, today I pay £30 for a box of 10.

So in the 90's I paid roughly £2 per model. (though it was pretty much all metal back then)
Today I pay £3 per model. (for plastic)

[Clockwork]

Sure, so that's a 50% hike per model. Its using a different material but the quality of sculpt is arguably superior. Considering inflation, when you look ut it like that it's not too bad.

I think the problem is one of perception where you don't see the per model price but only the headline price per box.

I'm not saying it isn't expensive because some things like monster kits, tanks and booka are without a doubt. But it does seem consistent.

[Liquidedust]

Sure, so that's a 50% hike per model. Its using a different material but the quality of sculpt is arguably superior. Considering inflation, when you look ut it like that it's not too bad.

I think the problem is one of perception where you don't see the per model price but only the headline price per box.

I'm not saying it isn't expensive because some things like monster kits, tanks and booka are without a doubt. But it does seem consistent.

Though it is a little worse if we compare my metal Executioners compared to my finecast executioners.

Same mold so same model in diffrent materials.

3 metal Executioners £6.99 in the beginning of the 2000's.
5 finecast Executioners £20.50 2 months ago (before they become OOP).

beginning of 2000 ~£2.33 per model (metal)
2 months ago ~£4.10 per model (finecast)

When models moved from metal to finecast you did get a fairly major price hike of ~75% from one year to another :/

[Clockwork]

Oh yeah, by and large Finecast was a huge exercise in price gauging. There's a reason I haven't bought a single finecast model.

I'm not denying the existence of price gauging as you can find plenty of examples like yours which support it. But, especially for infantry, its not as excessive as it may appear. We're now back to £3.50 per executioner for instance.

Where GW does have a problem is in seeking quality over quantity and blanket price brackets that don't reflect points costs.

[Setomidor]

beginning of 2000 ~£2.33 per model (metal)
2 months ago ~£4.10 per model (finecast)

When models moved from metal to finecast you did get a fairly major price hike of ~75% from one year to another :/

Well yeah, but when they were released in early 2000 the price per model (£2.33) was probably pretty close to the cost for fine cast (£4.10) considering GDP and inflation. When the new models are released a week from now the price will be £3 pounds per model for gorgeous new plastic sculpts.

[Liquidedust]

beginning of 2000 ~£2.33 per model (metal)
2 months ago ~£4.10 per model (finecast)

When models moved from metal to finecast you did get a fairly major price hike of ~75% from one year to another :/

Well yeah, but when they were released in early 2000 the price per model (£2.33) was probably pretty close to the cost for fine cast (£4.10) considering GDP and inflation. When the new models are released a week from now the price will be £3 pounds per model for gorgeous new plastic sculpts.

Suppose so, but it is technically a little worse for me in Sweden since I pay the "live outside of the UK and Ireland" -tax that is slapped on everything that comes from GW. Back in the day we got the actual pound prices in a direct conversion, these days GW overvalue the pound by 25% when converting to SEK (swedish currency).

[MangoPunch]

While 3D printing might not make a huge difference for GW's production methods, I am more thinking about the disruptive impact of smaller manufactureres being able to make miniatures cost effectivley in smaller runs. Designers being able to design a bunch of minis and render them to order / easily scalable and low cost of additional designs (someday they might be able to just sell the CADs and you could print your own miniatures at home!). At ~$2k the cost of personal 3D printing machines is probably already there, it is a matter of the level of detail and as Dalamar pointed out issues with sharp angles.

[Setomidor]

Suppose so, but it is technically a little worse for me in Sweden since I pay the "live outside of the UK and Ireland" -tax that is slapped on everything that comes from GW. Back in the day we got the actual pound prices in a direct conversion, these days GW overvalue the pound by 25% when converting to SEK (swedish currency).

Worse for you, no. Worse for us, yes.

Its probably due to the GBP losing so much in value compared to the Swedish Krona. It used to be about 15 kronor to a pound, and now that's down to about 10. On the up side, just order stuff from the UK instead!

[MangoPunch]

Suppose so, but it is technically a little worse for me in Sweden since I pay the "live outside of the UK and Ireland" -tax that is slapped on everything that comes from GW. Back in the day we got the actual pound prices in a direct conversion, these days GW overvalue the pound by 25% when converting to SEK (swedish currency).

Worse for you, no. Worse for us, yes.

Its probably due to the GBP losing so much in value compared to the Swedish Krona. It used to be about 15 kronor to a pound, and now that's down to about 10. On the up side, just order stuff from the UK instead!

GW passes on taxes, which is probably what Liquidedust is referring to by "overvalue the pound by 25%". Although, maybe GW is also practicing some price discrimination if they think the Swedes are willing to bear higher prices.

@Liquidedust, have you tried ordering from non-GW UK distributors?