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Wednesday, August 21, 2013

The Future of Games Days & Games Workshop - Part 3

Does the image stealing never end? Will I post from jail next time?
All depends on whether Bethesda's Legal Department shoots an arrow at my knee.
The Future of Games Days & Games Workshop - Part 3
The plot thickens

A kick to the balls by a fan - parental discretion advised, Rated R for 'Rage'

In my time in UK and the US, I learned that when it comes to criticizing someone it is considered good practice to first complement a person on things they did well. Next you tell them all that's wrong to their face only to build them back up again by talking about the good things, maybe threading in some good advise along the way. You shake hands and make things better.

Today is not yet about shaking hands.

Image stolen here - please buy
to appease legal department!
If you have read part 1 and part 2 of this increasingly epic mini-series about the future of Games Days & Games Workshop, you probably think that GW got away rather unscathed so far. 

As a matter of fact, one might be under the impression that I am quite impressed with what the Tom Kirby & the Gang have achieved so far, especially in the last 5-6 years. And you would be totally right. I am impressed, when it comes to their recent recovery and refined business approach. Spoken as a business person. Not as a fan. Not as a nerd. Not when I apply common sense.

Today the gloves come of a little, as I put on my paintingbuddha shirt and turn into the hero nerd I am. And as a nerd, my verdict is not as pleasant. But maybe more fun. Shit will be hitting the fan, capital letters will be used excessively. 

Yeah, definitely more fun. (^.^*)

Companies that failed to see the power of PCs and the potential of the Internet

#1: IBM 
#2: Microsoft
#3 Games Workshop.

It's all GW's fault.

I am quite old. I have used the Internet before HTML - at a time where it was all white text on black background. But I would dare say that at a very early age I understood the potential of personal computers and the Internet. That was in about 1990. 

Acting CEO Tom Kirby is slightly older than me. Well, about 50% older. In 2013's Annual Financial Report of the Games Workshop Group, he correctly stated that most of GW's customers weren't even born when Atari STs were around (in context, he explained that tabletop games will never be replaced by computer games - a view I subscribe to in part). 

First off all Atari ST? WTF? Commodore Amiga, man! (sorry, had to write that) :D

So who's fault is it? I mean, like, everything?

In today's exciting post I will list some of the major mistakes that Games Workshop has made in the last 14 years - in particular with regards to their sales channels. 14 is 1/3 of 42 and as such by definition a pretty good number. 

As our favorite US President, George Walker Bush, in a rare moment of clarity and enlightenment said during one of his State of the Nation addresses: "Hindsight alone is not wisdom and second guessing is not a strategy." And, for once, he was damn right. 

GW Sales 1991 - 2008, in £m, I started buying massive amounts of GW stuff in 1991 and stopped around 2004.
I hope it's not all my fault! 
Along similar lines, Tom Kirby paraphrased the late Lady Thatcher in GW's 2007 Financial Report by stating that 'The wisdom of hindsight, so useful to analysts and some shareholders, is sadly denied to practicing businessmen.'

What happened? After 13 'lucky' years of incredible sales growth, sales dropped like drop-pods full of angry World-Eaters. What caused the problem? Well, let me just quote Mr. Kirby as I think he explains it quite plainly: 
Is the world turning in such a way that mankind no longer wants or needs hobbies? No. [..] Perhaps it is just collecting, painting and wargaming with miniatures that is passé? The evidence again says no. [..] Have computer games, and especially these new online role-playing games, finally bitten Games Workshop? [No.] Are our overheads killing us? Well, yes, they could have, but they don't stop us selling things. Is it a change in society? No. Demographics? No. World recession? No, no, no. It was us.
We grew fat and lazy on the back of easy success. We forgot about customer service and forgot that hard work is and always has been the route to success. We forgot that we are a company which pursues profit and likes paying surplus cash to its owners. What was not expected was that it would take two poor years and a management reorganization to get the problems taken seriously. Somewhere along the line too many of us thought that selling, sweating and saving were someone else's job. Well they aren't. That's my job and the job of all of us here at Games Workshop.
No-one expects
the customer!
Easy success makes lazy, we all know it. Why work hard, if success is automatic? As I explained in part 1 and 2 of this mini-series, from a financial standpoint GW has absolutely turned that ship around. They are financially healthy, investing in designers and new product lines - in short - they are investing in the future. 

I know that this was a lot of work and for many of GW's staff (or now, sadly, ex-staff) a very hard time: Declining sales and operating losses after 2004 forced GW to enter their self-prescribed '7 lean years'. The grim darkness of the 41st millennium arrived early. There was only reorganization and cost-cutting. And a lot of collateral damage to innocently by-standing customers.

GW had recognized that it had made mistakes and was willing to fix them. But in my opinion, they made even more, potentially more significant long-term mistakes and the remedies came in hesitantly - and what's worse - in all the wrong places.

Sales Channels: The one ring to rule them all - and in darkness bind them. 

At this point of the post, at 11:42 am, I realize that this post will truly be of epic proportions. The mother of all walls of text. But that's cool ;) 

I'd really like to see the sales channel overview back
in the Shareholder Report, Mr. Kirby! Thank you! :) 
Before we start really going into all the nerd-rage areas (as you see, we are slowly working our rage level up to over 9000), I want to briefly touch on what I consider the biggest mistake Games Workshop has made in the last 14 years. Or maybe ever. And even today we feel the consequences.

The problem was distribution - or in fancy talk - GW's sales channels. 


GW's biggest mistakes

Fueled by enormous sales driven by 'The Lord of the Rings' trilogy, Games Workshop made more sales then ever. At the same time, many distributors discovered that the Internet with store sites, ebay, amazon & co is a pretty cool new sales channel. And so did GW. Everyone wanted miniatures, the target audience got bigger and the market grew like crazy. 

Sales up, all good? No. Games Workshop did not make a profit. In fact, the lost money. For quite some time. That needed to be fixed. And right there it all went terribly wrong. 

As you can see in the Overview of Sales Channel from GW's 2007 Annual Report, back then only 12% of sales were direct sales, which mostly meant 'mail order' back then and today is online sales on their own website. If you remember from Part 1 and 2, direct sales are the best sales for GW, as the profit of these goes 100% into their own pocketsess, my precious. 

The 'second best' sales channel were GW operated Hobby Centers. Again, 100% of profits go to GW, this time 'only' reduced by the increased cost of store, staff and distribution. 

The 'worst' return-on-investment for GW were the independent retailers as those greedy bastards wanted a share of the pie. How dare they!

Quickly opening new stores in times of unexpectedly high sales is difficult, as it requires a lot of organization, investment and - most importantly - manpower. Sorry. Personpower. GW did of course open a few new stores, but, understandably and wisely, not in sync with the sudden surge of sales. 

The Hitchhiker's Guide to the Galaxy describes the times like this: "In those days spirits were brave, the stakes were high, men were real men, women were real women and small furry creatures from Alpha Centauri were real small furry creatures from Alpha Centauri. Men boldly split infinitives that no man had split before. Thus was the Empire forged."

Sales at all cost - working up the rage

Captain Hindsight could have told you!
Before I tell you what GW ended up doing back then, I will tell you what they should have done. And yes, it might sound like 'wisdom through hindsight', but back in the early 2000s I myself - and with me many long-term-fans on Internet forums - voiced our concerns about the long term effects of what GW ended up doing. (I admit that, in part, we are to blame as well, as you will see later). 

See if you draw the same conclusions as I did back then: 
  • You have a business with a very geographically distributed customer base. This customer base has just increased in size significantly (due to the Frodo & friends). You reach a whole new demographic. 
  • You want to provide your product to all of your new customers, but you can't (and shouldn't) build a store next to every single one of them.
  • You have an existing network of independent retailers which you have not yet fully utilized. However, sales to these guys is 'expensive' in terms of lost margin for GW.
  • And there is this new thing called the 'Internet' and people buy stuff on it. Also, it seems to yield the largest possible profit margin for your company, solving all problems caused by the pesky geographically challenged customer who refuses to move into the vicinity of a GW store.
What would YOU have done if you were asked to get back to making profits, increasing sales and cutting cost? You don't even need to have a business degree to be blinded by the obvious: 
  1. You invest heavily in your online store and in product distribution to maximize your margin. 
  2. You pick up the momentum of the growing fan-base and engage the community with a set of community-driven marketing tools to continue growing your customer base , increase customer loyalty and, as a result, increase your sales. 
  3. You support hobby stores with excellent customer service to maximize sales and you FRAKKIN' DRAFT SOME FRAKKIN'  WELL DESIGNED, RELIABLE, LONG-TERM TERMS OF TRADE for them! 
  4. You cut costs.
It's friggin' common sense, for the Emperor's sake! (I told you, I'd use capital letters. You have been warned thusly.)

Let's look at what Games Workshop did.

F stands for FAIL, for Frak's sake. 

Maybe they didn't know how to do it, maybe they did not have enough manpower or maybe they were driven by the crave for cutting cost, but the investment in their own web-store as a solid sales channel should have been the first response of GW - it wasn't, at least not until much later. So item number 1 on our to-do-list gets an F for FAIL. With horrific, far-reaching consequences for everyone involved: GW, retailers, customers and fans. 

Because I like to have a good laugh (plus I am easily entertained by random stuff), with a few exceptions I made it a yearly tradition to read the ever-changing GW's terms of trade for independent resellers.

Jolly good read, that.

So with that in mind, let's look at item number 3 on our to-do-list: terms of trade. If you have ever read any of these documents you wonder who comes up with that stuff and what they smoked during writing. 

Back then I actually thought about becoming a retailer myself but when I saw the developments on the Internet (more on that in a moment) and the terms and conditions that were written in the terms of trade, my immediate response was: "Well, FRAK that!". 

From what I read, one could not help but feel inclined to suspect that GW tried to get independent retailers out of business. That, or they clearly did not understand how their customer base interacts with retailers in an evolving market. And they clearly did not see what obviously would happen on the Internet. Or they did not care. Blinded by panic mode: sales at all cost!

Learning from mistakes one step at a time

42% rebate enough? Cool!
If you only have three main sales channels, it's really not so hard to think about what YOUR ideal scenario, your 'dream-state' would be. You sit down with a nice hot cup of tea and after a good 42 minutes of thinking you come up with a plan. Then you implement it. Done.

Not so at GW. They made one mistake after the other, further hurting themselves and the retailers. For a very short while, fans of GW were happy, because prices were doing the limbo-dance:

How low could they go?

What happened? Instead of working on selling product through their own direct channel, GW opened the floodgates by drafting terms of trade that basically directly contradicted the company's goals. Yes, they increased sales, but lowered their margin and drove dozens of independent retailers out of business. The age of discount internet retailers was ushered in.

As we now know, it would take many years and nerdy tears to correct the devastation this caused. And some effects still linger on today (of course, more on that later!) 

42 Shekels for this basing beard?
You must be out of your mind!
The Internet turned into the Wild West where the educated 15-year old bought their daily dose of plastic at massive discounts. MASSIVE. Like in really large. 

20%? Pffft. 30%? Naaah! 40%? OK, I'm listening... GW. You turned fans into bargain hunters, so don't complain now.

Since I learned haggling from educational videos such as "The Life of Brian", I got between 40 - 55% rebate on the MSRP. Life was good. For me, at least.

40%+ cheaper than in stores? You must have be buying cheap recasts from the Ukraine? 
- Nope, there was no such thing back then as there was no money in recasting minis - unlike today. If one sells a product which can be produced cheaper, one should expect copy-cats trying to make a quick quid. Another result of GW's mistakes.

Anywho, discount Internet retailers without a brick-and-mortar store, often times run out of basements or warehouses emerged everywhere. Not only could you get massive discounts shopping online, but one also benefited from prices that were weirdly out of touch with the reality of their underlying exchange rates to the Pound. As mentioned in part 2, I bought my GW stuff cheaper online as a end-consumer than what an independent retailer in Germany had to pay GW for!

It comes at no surprise that independent retailers, who mostly live on Magic and GW were suffering hard for years and years. 

Customer numbers (or at least the number of paying-and-not-just-playing customers) went down - and I personally know many stores that had to forever close their doors just because of the 'Internet Discounts' and the increasingly demanding trade agreements from Games Workshop. 

There is only two possible ways of explaining this: Either Games Workshop did not know what was going on or they simply did not care. Neither of which is very flattering. Sales at all cost. 

Shooting yourself in the foot on several occasions

GW only started caring when they realized that their bottom line didn't really increase by supplying internet dealers with their product. Yes, volume went up, but margin went way down. The direct channel suffered. The GW Hobby Centers suffered (tumbleweed syndrom). The independent retailer suffered (crickets chirping) and were up in arms. 

Instead of working on the obvious, which was the above described focus on the best (Direct Sales), second best (Hobby Centers) and 'third best' (Indep. Retailers) sales channels, they morphed in a cannibalizing, fourth sales-channel-monster in the form of low-margin-mass-volume Internet traders that consistently gnawed on the existing sales channels. 

Well played, GW. NOT. 

And yes, this is your fault - and no, this has nothing to do with hindsight. I could have told you. Others tried to tell you. For Frak's sake, you can just google videos of disgruntled retailers on Youtube - they TOLD you. 

Again, you turned the community into deal-thirsty bargain hunters. And in my nerdy dreams, I was the Alpha Male of the pack. It was a good dream while it lasted.


What do I care about my chitchat from yesterday?

Konrad Adenauer, first German Chancellor after WW2 once said "What do I care about what I said yesterday?" and when it comes to drafting trade term 'agreements', this seems to be the underlying theme for Games Workshop. The amount of substantial changes with far-reaching consequences even for long-time sales accounts is mind-boggling to say the least. 

Dear GW. If there is one thing I learned about building successful relationships with partners, this is NOT how you do it. 

It's the exact opposite.

You have to establish long-term relationships with reliable and lasting terms. You have to EARN trust. You need to design a contractual framework that retailers can plan and build their own business strategies - and often times their livelihoods - on. 

Don't call me stupid!

Don't call me stupid!
The dumbest thing I possibly ever heard in a business context was that independent retailers were no longer allowed to use product photos from GW to advertise THEIR products. 

This is so mindbogglingly stupid that even years after I heard it I am still in disbelief. The only sensible explanation is that you want to make life as hard as possible for your retailers - all in the name of 'servicing the customer' and 'protecting our IP'. If this was really a viable way to protect your IP, why do you think companies with much larger legal departments than you still allow their partners to advertise and sell their product? Are they stupid?

Every high-school student can read the true intention between the lines of the 'explanations' GW provides to their retailers. 

If you don't want retailers to sell your stuff, be honest and say so. Close the accounts and see what happens. If you do want them to sell your stuff, wake the Frak up. Support them. Ask them how YOU can help them sell more. Stop making their job harder than it already is. I won't elaborate further, I am sure you can google all of this up yourself. 

Miniwargaming.com was among the more prominent 
victims of GW's trade agreements. 
Every year the rules for independent retailers changed drastically. I know sales reps that don't even agree with these strange decision by HQ - and yet have to sell it as if it were the best invention since sliced bread.

The Internet is full with colorful language describing your latest trade agreements - from retailers. I personally don't know any other company where retailers feel it's necessary to address you in an 'open letter' video, complaining about your practices. 

Doesn't this strike you as odd?

You can't constantly change the rules! We can't do this mid-game, either! If a retailer tells me: "I don't know if we can still sell GW products next year, we have not received the new terms yet!" somewhere in your apparently KPI-driven company alarm bells should whistle and lights should be flashing. 

Unless of course, that is exactly what you want, in which case you are doing a great job and I apologize for my lack of comprehension! 

The first cut is the deepest, the first loss is the cheapest

I said earlier that GW is slowly learning from its mistakes one-step-at-a-time. The problem is, that over the last 14 years they have actually made these mistakes one-step-at-a-time as well. And they try to micro-solve them one-year-at-a-time.

As stated above, drafting your ideal configuration of your sales channels is not really that hard. It takes knowledge of the business (which GW clearly has), a reliable cooperation with partners (nope, not cool, GW), knowledge of the customer (I think, they think they know - but by now, I think they know I think they don't), a vision, a cup of tea and good-old common sense. And than you frakkin' just do it. Hey, you even get some really tasty KPIs out of the whole exercise! 

Games Workshop has created this distribution and sales channel mess themselves. This nightmare on distribution street hurt and still hurts everyone: GW's margin, independent retailers - and as you will see in the next part - us consumers. A few guys made a quick buck on the Internet. One or two of them are still in business today. 

All of this is in fact Games Workshop's fault - and their's alone. You can't blame the consumer to buy at the cheapest seller, nor the Internet seller who tries to make a quick profit - how ever 'morally questionable' this may be.

Sister Mercy of the Sisters of Silcence

The old trade-agreement was a gammy leg no-one could really stand on. And I do blame the GW Management for not cutting it off in one big cut. Instead they chose to continually take off slices - with no anesthetics and an absolute lack of beside-manner. After all, it was mostly the brick-and-mortar store's screaming, so who cares.

Maybe Tom Kirby plays Dark Eldar. The signs are there... :P 

Oh, shut up, already!

OK, I just realized that this post is already far to long and I haven't even started talking about us fans yet :P There was not enough nerd-rage in this yet, either!

Therefore, I guess we will have to extend this mini series to 5 parts now. By popular demand, of course. Or by my inability to summarize all of this in 42 words. You choose. :D

Read more in part 4 tomorrow in our next exciting installment of "The Future of Games Days and Games Workshop when you read about: 

- GW pulls the breaks
- The Spanish Inquisition and other incredibly stupid ideas
- Honesty shall reign, because snow is black
- Bubble Boy: Me, myself and I
- It's all our fault. 
- 42! All ur bases are belong to me

...and, I fear, much more ^^

I will continue to talk a little bit about independent retailers tomorrow, before I start diving into how GW's decisions over the last 10 years have hurt us fans and where I hope (and see) things will be going from here.

I will also talk about the fact that, as of now, GW has solved many of the above mentioned issues and what I would do, if I was CEO of Games Workshop. Hey, GW, free advise or at least 'food-for-thought'!




Thanks for your many comments which drive the content and volume of this mini-series in previously unplanned directions! So much for pro-active planning on my part.

Part 4 is one click away

It took me about 6 hours to research and write this article, It would be very hoopy of you if you let me know what you think :) 

Keep commenting and don't forget to 

SHARE & ENJOY!

35 comments:

  1. My opinion is that Painting Buddha should buy Games Workshop and you should be CEO. Our world would be much better. That's it. :)

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  2. Good job m8, I hope You are ready for drop of the inquisition ;)

    PS: You should maybe use that famous Zaphod's tactic. First, became CEO of GW, and You would run over those bastards on one of those landriders hidden under warhammer world in the case of nerd apocalypse ;)

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    1. I would have them build a working 1:1 scale Thunderhawk and then steal it and buzz around the Galaxy :D

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    2. I'm on it, I think it will fit in my garage :)

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  3. So far this has been very enlightening to me. I also agree with Rafael. Can't wait for more. Thank you for your time writing this Z!!!

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  4. Replies
    1. That is the best summary I read so far :D

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  5. I will out me as a cheap shopper!
    I buy at Wayland and co. Sorry but that so, many buy online rather their GW minis, as on the GW page or in a hobby store or at a brick -and- mortar store, now is the time to reason that humans are economical foxes. Even the mid 80s bleated about the extinction of many corner shops , the discounters Aldi and co. but eradicate these establishments of gossip and meeting.
    Same will apply to the brick -and- mortar stores. If I for example, for a Land Raider at GW € 59 ( internet or hobby store) , a discount store like Wayland about 44 € and a brick -and- mortar store (for Fantasy Warehouse) € 53.10 pay , I buy the more likely the discounter or stop the brick -and- mortar store ( but only if I need to immediately or would be more expensive with the shipping costs by Wayland ) than GW itself. If the manufacturer of the goods sold at prices higher than the "secondary dealers" then he must not wonder about burglaries in the finances. I expect even a lot about it from my point of view but my English is so bad that I will translate it by Babelfish , - . > So I stop. As a nerd that every cent prevailed i will always buy at a discount.

    My two cents;->
    Last Words:
    "Mr. President! Make it so!;->"

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  6. OKAY

    This will be a bit longer so i split in 2 parts :D

    I must say something again. I didnt spend words on part 2 but NOW i must talk again my Brother.

    The Main Fail GW did was to give the Lord of the Rings Range to a Collectors Magazin called DeAgostini. With that everybody in the world was able to collect GW miniatures and buy them weekly at their Book Stores, Supermarkets with Newspaper Section, Gasoline Stations etc. That was the Point that you can call the biggest Fail cause ppl they are not the classical Hobbyists were pushed in and they eat it like hungry Wales. As this DeAgostini Thing was thought as a Long term with Standing order GW thought it will give a constant income, but the shot took the wrong way. Customers of DeAgostini bought the first few magazines and the instead of doing a Standing Order they run to Retailers and GW stores to get more of their LotR Drug in much higher Amounts in very shorter time. So the Sales of the Core Game Boxes shot up over ( and i know that as i saw that on a Manager Meeting several times ) 1200% for that Core Game Box. To give them more drugs GW splittet first the Starter Boxes in three parts as the movies were splittet and the books were written. After the last Movie has gone out of Cinema GW changed over to ONE Starter Box including everything you Need with the 11th Frog in shitting pose, Gandalf jerking dick Version 17 and sam no. 16 finding new dirt in his nose and the LotR Community bought and bought and bought. A real LotR Fan Needs all 11 Frodos, 8 Sarumans etc etc. The Main Problem is that they were collectors and no Hobbyists. That means, after all those Fans had every Character Miniatures and some Specials they were happy and stopped buying things and never bought all those Unit boxes, neither they played. So the Golden Cow was melked heavyly until every Fanboy of LotR had enough. But as saif before there were massive Investments in the LotR Range to produce Units, Books etc etc. and from every Thing sold, the Tolkin Family and WarnerBros got a big amount of the margin which meant to bring it to the Point: GW had more costs with LotR than Income and so the Margin was not Zero but Minus with that Range. To cath that up new Rulebooks and Ideas were planned and done and finally with the next 4 years of Investment in that range, wich meant Close to 4 Mio Pound per year they established LotR as the third Core Game.
    So what Tommy Kirby said in his statemanet is nothing else than telling that GW made in 2 Years so much Money with the LotR Hype that they thought they can hold that income for years and so they didnt saw it come that only real collectors have bought like Hell and not the Gamers were interested as the Game was so untypically in ist Rules....i dont know anybody who Plays LotR personally ;)

    So to catch up the losses in the 4 Years after the Hype GW invested simultanly in a new Producing Street. They bought a big ground beside the HQ and builded up an enormus Pastik Producing street with over 30 Mashines, plus a new Packing street with nearly 150 packing stations. That funny Investment had cost nearly 12 Mio Pounds. So in the times as they made minus on Profit they invested Money to grow and that was for sure no fail but widesight. With that new Fabrik they were suddenly in the Position to produce much more in shorter time, we as customers ( okay me as GW Ex Manager ) wondered those days about the high Output on new miniatures. The Wood Elve Range completely New, The Empire Range completely New and many other new Ranges were build up.
    ....

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  7. Part 2....

    To tell you all what a new release of ONE Miniature means a forecast of 2 Years and an Investment all in all roundabout 500.000 Pound. A Mold for a Plastic sprue cost till his final Version ( they are overworked several times. I tell you how you find out: on every sprue is an X and some dots. The dots are the overworking stages and the X then the Final Version. ) So that means a Mold is that expensive as GW always had an eye on the Quality of the sprues.

    So they invested more Money than income wich means they bought Money for a few years from the Banks and dindt give out anything to their shareholders. That is what you can see in the graphics. You see a big Fall down after the LotR Hype but it was well invested and the shareholders accepted that they didnt get somthing for 5 Years...the 5 Year Plan No1 began with End of the Lotr Hype. Then the 5 Year Plan no. 2 started wich is what Mark Wells did then. After 5 years of no Pay Out to shareholders , then began the second Phase with 5 years big provit making and paying every Cent to the shareholders to come out of the minus in the Zero Zero Zone. Now Begins 5 Year Plan No. 3 again with Mr. Kirby which hopefully means that the growth Mark established can be hold and maybe pushed with a higher Network of One man stores and better Service for the Brick Stores.

    So final words:

    The losses didnt come from the INet sales or the bad customer Service. They had come from the high rate of Investment in the future.
    Finally all we Long time Hobby nerds always flame about the gone Service for us but thats a very incomplete look about things. We only see our personal Point of view. But GW has an other Point of view: Long time nerds dont buy every miniature and of course not every miniature and for sure not every new Starter Box etc. we collect very ver specific. But the main income for GW are the Hobby Newbies as they Need loads of things to get completely involved in the Hobby. Thats GWs Core market, the Kids between 10 and 14. They spend the Money and not we Long time nerds with our few buys. Every sold Starter Game means 2 new Hobbyist as you Need a friend to Play with. So the potential of the Starter Sets is imense. Each month ( i took the german/austrian Targets ) in the german Group roundabout 700 Starter Packs are sold wich means a potential of 1400 new Hobbyist that start with the Hobby and every one of those beginners spends round about 500-1400 euros in the first year. Then comes the split, lose to 40 % dont do the Hobby further in the next 5-8 years. the Rest of 60% are splitted in organised gaming Groups and home hobbyists. here we have 25 % organised Gamers and the rest unorganised so this rest is the part no one sees in Forums, Blogs, hanging around in the Shops etc.
    So what WE Longe time Nerds only see is the small Group of new Gamers and lets be serious we hate them as they dont have the expirience we have after we do this Hobby for 20 years or longer now. for US These newbies are the enemy as they have no hunch of that Hobby and so WE Long time Nerds have a very limited Point of view about all what happens in the Hobby Scene.
    So Finally for GW not WE are the Hobbyists who Needs products en mass and the Support WE miss, but all the newbies get all they want coz they gain a big income and so a bigger margin and Profit.

    So wwe should stop flaming against GW. We should take a step back, taking a seat and think back the times we started with the Hobby. We have been like them, collecting and buying everything just of the brandmarc GW & Citadel. We have been the Junkies and GW was our Drug Dealer. Now WE dont Need heavy amounts of drugs anymore, bute all the newbies Need it.

    just my 2 Cents
    greets
    JayCan

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    1. With all due respect, it does not cost half a million pounds to bring a single model in to production.

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  8. I thought that the beginning was loosing me as was very "technical" and well researched but lacking the "nerd rage" that you have promised. BUT at the end I got the impression that all that effort had prepared the scene for a good "bashing" so...bring it on!!

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    1. Heheh... Rage contained. All systems operational :D

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  9. Wow, that really was a wall of text, but one that is well worth the time spent to read it! I've been in the hobby sine '97 often wondered about the horrible web presence that GW had back then. But then I took a few years off to work in the mid-east for a bit.

    After living in the mid-east for a few years I was stoked to move to Germany and start getting in some games again. (I mean how diffuclt could it be, the Horus Heresy is a key term in the game... oops I mean Big Brother War, and learning German somewhere long the way.). I couldn't believe how expensive it was here, and immediately turned to all the online discount stores to get my fix. As you said, I wouldn't even consider a website unless I was getting a 30% discount.

    naja, to make a long story short. Looking forward to the next part.

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    1. Thanks Marshal. I'll talk more about how the price development for us junkies is from a pure customer perspective.

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  10. Hey JayCan :)

    First of all thank you for your first-person-perspective insight on this subject!

    However, your stealing some of my thunder for tomorrow!

    Maybe I am gonna drop the whole LotR/DeAgostini stuff now, you said it all ;)

    I disagree with your view on investments/no profits. I think the order here is important. What we saw in the early 2000s is skyrocketing sales and still no profit (or even loss). Cutting cost was the only way to go as an emergency measure! And by streamlining their manufacturing process and investing in new machinery they did just that. Cutting cost in these kind of situations often requires heavy investments.

    Since ALDI was referenced in another comment to the post (and I can offer 1st person inside into that company) I want to point out where I see the difference between how GW and ALDI handle their business (or for how GW handled back then).

    In times of great sales and great profits, ALDI proactively worked on streamlining EVERYTHING. Cutting cost and overhead while providing unparalleled customer service is an every-day activity. This way, if shit really hits the fan (as it did with GW around 2004ish), you don't have problems AND no money to solve them.

    Having said that, I assure you that shareholders were not OK with not receiving dividends at all. Just look at the share price development in those years! Believe me that raising capital for investments in that situation was extremely difficult and most likely not cheap.

    Therefore, I hold my position (and I seem to echo Mr. Kirby's own words) that GW had gotten 'fat and lazy' because of automatic success. And pushing the online retailers (this started even before 2004!) - even if that was clearly not desired or 'planned' - has caused massive problems for GW, the retailers and now (as you will see tomorrow) the consumers to.

    On a separate note, as this is not really subject of my post: Although I agree with 'starter boxes' and new kids becoming fans of GW being a big part of GW's business plan, I strongly disagree with your assessment that long-term customers buy less. I know I am probably not the 'average' customer, but I spend a good 4-digit-€/year on the hobby. And I have done this for over 21 years now. Compare THAT to some kids buying a starter set. Again, I'll talk more about this tomorrow.

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  11. Part 2:

    I don't really know where you get the idea from that these new fans of our hobby are 'our enemies'. And I don't know anyone who 'hates' them. Why would we? I talked to so many kids during GD Germany and US (even though there were VERY VERY FEW compared to other years) and I played dozens of games vs gamers of all ages over the years - without discrimination or prejudice. Hell, I'm a kid in a grown up's body :D

    I also don't think I am flaming against GW. Especially not after Part 1 and 2. If Tom Kirby said: "Everything we do is perfect, we make no mistakes!" then I would flame. But if you read all of the Financial Reports you know that he is in fact recognizing GW's management's responsibility for what happened before and after 2004.

    The whole thing is a very complex subject and discussing every nuance of it in detail would probably take a post a day for a year. But that's besides the point. GW has made some decisions which a) led to a financially stable company (which is good) but b) caused massive problems that might be a great risk to GW and our hobby in the future (which kinda sucks). I just point these out - from my own personal experience and assessment of the situation.

    I am not under the delusion that anyone at GW reads this. I'm just this guy, you know? I just use the Internet as designed: Post something and see if someone else responds :D

    In summary, I stay on my point that what I wrote in this article - which, to remind everyone - is about sales channels - the misunderstanding of the role and impact of the Internet, the rise of discount-internet-dealers and the way GW worked with independent retailers (+ all the things about us consumers that follow tomorrow) has created years of problems for GW.

    And just the fact that GW has finally arrived at a point where most (not all) of these areas are addressed in one way or the other, seems to prove my point. If all was perfect, there would have been no necessity for all the changes.

    BTW: I might be a long-term, incurable junkie: I still need 'my stuff'. Just received my GD FW order today, and the next big one is already on the way ;)

    Thanks again for your very interesting position :)

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    1. Where can I sign under this statement?
      "In summary, I stay on my point that what I wrote in this article - which, to remind everyone - is about sales channels - the misunderstanding of the role and impact of the Internet, the rise of discount-internet-dealers and the way GW worked with independent retailers (+ all the things about us consumers that follow tomorrow) has created years of problems for GW."

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    2. hehe my brother

      to part one... i still have the Management black book here in my Hands ( dont Forget i WAS a GW Manager ) and therin all what i wrote is written exactly how GW and their shareholders work together. so for sure you can believe me when i say that this really happened...15 year Plan splitted in 3 parts....

      to part 2
      i didnt want to blame YOU but the parts of the community i know....just look how many flaming threads are around in the Forums, how badly they are welcomed to Clubs.
      Yess you, me, and a handfull of others have no prob with These beginners as I call them normally, but a great Mob is blaming them for using mom & dads Money without borders....in vienna i had Kids who spend 500 each week for over a year just to get Hands on every FW and GW model arround....and when you see that and have to work hard for your Money then you know where the blaming Comes from.
      And finally ( or maybe not finally :P ) there are just a handfull of guys like you and me who have 400 Tactical Marines and think about to make the complete order of 1000 Marines beside the thought of a second and a third full chapter :D We are a dieing species Bro

      Hugs
      Micha :)

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  12. Here here. A great artcile and a great response above. I often wonder how much support I actually give to GW (forgeworld excepted!).

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    1. You know it's a good subject when the responses to a wall of text are an even more epic wall of text :D

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  13. Michael, after walls of text of my own on the last few, I'll be short today - promise ;) - very good points, and this has been going on a lot longer than 2004, and some of their employees WERE telling them that in 1999-2002 - but they just kept going. (As I said, one of the first big internet stores that I am aware of was New Wave Mail Order. Like Maelstrom, that ended BADLY for everyone except him....as he now is Cool Mini Or Not...) "Fat and lazy" indeed. Very interested to read the next few parts, to see how closely our views are. And the retailer terms have been zonkers at times for sure. Though always amazing to me how much worse they are when people have not read them....I'm willing to bet if it was legal, that GW would go back in time and disallow all the discounters - esecially the online only ones. But price fixing laws, you know? Really interesting to see if your conclusions on the affect and participation of the consumers...will be reading! Also interested to see what your views on the future are....because really that is what truly concerns us older guys who have so much of this stuff...;)

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    1. See, I learned something! I did not know about the connection between New Wave Mail Order and CMON. Thanks for that insight!

      As far as 'price fixing laws' are concerned: Amazingly, in the US, GW basically forbade all resellers to sell on the Internet. For everone else, they make it as hard as possible to sell online (not allowing to us GW pictures, AUDITING THE STORES (!!!) to see how much % they have in online sales - and if it is too high, down goes the margin by up to 30%. Of course, in Europe they can't do the same as in US for legal reasons.

      I actually think that today's trade terms are - as restrictive as they are - are pretty good. If they had thought about these back then, all of the problems would not have occured. But if you keep taking away from retailers and customers (that is how it is perceived), you are always in a vulnerable position.

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    2. Sorry so late of a reply - and yes - check out the maelstrom Games ending on DakkaDakka (http://www.dakkadakka.com/dakkaforum/posts/list/0/464643.page). Its long and sad, but if you want to do some research on it, you can find out all about New Wave through to Maelstrom, and the implosions that tend to happen in the discount war scene.....and it is not good for end-users.

      Totally agree that if GW had put in place everything they have back in 1997, there would be less problems, and retailers would probably be a lot happier now... But they have been feeling their way along, and were a few steps behind all the way.

      By the way, having been there, I can tell you that it is not really that GW does not understand the internet is important, nor can't figure out how to sell on it. They have tried things to increase sales, and they were not willing to put continuing resources into those things because they were not seeing a huge increase for the outlay. The problem when it came to discounters (at least in US) was the management team in trade sales was "new" and they went for the easy money they saw coming in. It wasn't until months later that they figured out what some were doing, and it wasn't until they started hearing the pains for retailers across the country that I think they figured out this would be a problem.....and by then their targets were based on those big orders from the discounters. Having been in management, I'm sure you have seen someone ignore something bad as long as the numbers keep coming in.....even if it means a bigger fall later.

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  14. This series is excellent!!!
    Can't wait for the next part.

    Well done!

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  15. This is a great Series, thank you for that.
    It reflects many of my thoughts

    very good !!

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  16. This series is great. You put words to many of my own thoughts, and enlighten me about how a company runs, with your knowledge/education of business.
    I hope these writings somehow find their way to the management of GW...
    I can't believe that such a succesful company as GW can make so many bad business decisions and get away with it.
    NERDRAAAAAGEEEE!!!!

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  17. A very good article, with a lot of "insight" (lol).

    I shared it on FB.

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  18. Thank you very much, I really enjoy reading these reports you are writing, they are well documented, informative and, as far as I can see, right on the spot.

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  19. Excellent series of articles. Looking forward to reading the next few installments.

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  20. "First off all Atari ST? WTF? Commodore Amiga, man! (sorry, had to write that) :D"
    Lol, All ST users had their puter bought for them by parents who did not know better.

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