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Why Does GW Need to Charge So Much?
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Old 24 May 2006, 12:40   #1 (permalink)
Shas'La
 
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Default Why Does GW Need to Charge So Much?

The short answer is, they don't.

I've become relatively good friends with all the employees at the local GW here and in the course of a couple of conversations, have learned that GW employees get a 60% discount on anything from the shelves. Furthermore, the GW employees get 80% off any order from the books! Yes, the entire book! That means any single model, bitz order, whatever, costs them a fifth of what it would cost us. We can't even get a 20% discount from the War Store for that kind of thing!

An employee attempted to justify it by saying they make no profit off of what they sell their employees. So what I infer from that is, for every box we buy from the shelves, every dollar we spend on it, GW makes 60 cents. 60 cents profit for every dollar sold. Now I have to assume this includes things like shrink and salaries, or else they probably wouldn't sell to their employees for so cheap. If they can't sell to us for any less than what they do, why would they want to lose money in any form?

I'm in the grocery business, where our profits are a one cent to the dollar after all expenses. We have to sell 100 dollars worth of items to make a dollar back - GW gets 60 dollars for the same 100 dollars worth of items sold.

Has this game always cost this much? I can't believe the original idea was "let's make a great game that we can overcharge on!" It was probably more like "let's make a great game that people can really appreciate!" I was talking to a good friend of mine the other day and he expressed how cool he thought the game sounded. After I told him a Hive Tyrant was 45 USD he laughed and said there's no way he'd ever play the game for that cost.

Even if GW only made 30% net profit, I bet you that they would have twice as many players and you know what that means? A lot of happier people with no money lost.

Bah.
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Old 24 May 2006, 14:56   #2 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

It is rediculous. More than anything else it is the cost that seems to drive people away. The cost is rediculous and every time I bother to think of how much Ive spent a chill runs down my spine. But its supply and demand GW knows the loyal gamers will pay so they charge. If they stopped to think they might realize that cutting the cost some would bring in more players.
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Old 24 May 2006, 15:10   #3 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

you realise upwards of 85p in every pound you spend on petrol goes towards the government in tax?

GW prices are high, but look at any hobby. prices are high.
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Old 24 May 2006, 15:12   #4 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

GW failed 6th grade math. According to them $25 x 1.1 = $40 >


Thats why they claim their not making much money, they just didnt multiply properly
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Old 24 May 2006, 15:21   #5 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

Well, give anybody a spreedsheet full of figures and tell them to maximise profits and you'll get GW syndrome . But it seems like their currently making MORE money since their laying off most of the staff since they'd don't have to pay two teams of staff by merging the WD team and the Web team.
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Old 24 May 2006, 18:39   #6 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

GW are a Monopoly, and have none gaming majority share holders.

What else do you expect?

them to minimise the amount of money they can get off everyone just so the gamers are happy? hell no, they dont care for us, they just want to make lots and lots of money.

Maybe we should all start a cheaper hobby? like collecting diamond or something?
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Old 24 May 2006, 18:54   #7 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

Quote:
Originally Posted by akthomas89
An employee attempted to justify it by saying they make no profit off of what they sell their employees. So what I infer from that is, for every box we buy from the shelves, every dollar we spend on it, GW makes 60 cents. 60 cents profit for every dollar sold. Now I have to assume this includes things like shrink and salaries, or else they probably wouldn't sell to their employees for so cheap. If they can't sell to us for any less than what they do, why would they want to lose money in any form?

I'm in the grocery business, where our profits are a one cent to the dollar after all expenses. We have to sell 100 dollars worth of items to make a dollar back - GW gets 60 dollars for the same 100 dollars worth of items sold.
You show a basic lack of understanding of economics.

A grocery store can survive with 1% margins because they do a lot of volume. If you figure that one week's groceries cost $100, and that the grocery store is making 1% per customer, that means they're making $1 profit per customer per week. When was the last time you went to the grocery store and didn't see a full parking lot? The grocery store near my house has 10 lanes open at any given time, and usually 2 people in any given lane at any given time. Turnaround on a cart of groceries is about 5 minutes. So, that's 12 customers per hour per lane, at $1 profit each. Grocery store is pulling $120/hour. The one by my house is open 14 hours a day, so that's $1680/day, $10,000+ profit/week.

See what volume does for you?

On the other hand, the GW store by my house is lucky to actually make one sale per hour.

Ok, so ignore volume.

A grocery store is purely a retail operation. They're not producing anything. They may only make a 1% profit themselves, but they're paying a 2% margin (probably more) to their distributor, who's paying a 5% markup to their distributor, who's paying another 5% markup to the producer.

GW is the producer. You're right, a 60% markup on shelf space is ridiculous. But, that's not what's really going on.

Ok, what else? Guess what - the 60% discount to employees is part of what we call "total compensation". I'd put money on the fact that the checkout lady at the supermarket is making more per hour than the redshirt at GW. GW could not afford to staff their shops if they paid a standard rate to their employees. They don't do enough business - at least not in the US. I don't know what it's like in the UK.

In the US, GW Stores are not expected to make a profit. They're seen as a cost of getting people into the hobby. They're both advertising, and instruction. You get a place to play with people, and things like painting lessons. When you're making one or two sales an hour, paying to staff the store is a bit expensive. So, they cut corners, they don't pay their employees much, and they give them a large discount on merchandize to make up for that. I'm willing to put money on the idea that they actually sell to their employees at a loss.

If I had to guess, I'd guess that the markup on GW products is closer to 40%. Why? Because they sell to independent retailers at about 30%. Some, like thewarstore try to make up margins with volume, and pass a substantial discount to customers. But, if Neal's selling at 20% off, then it has to cost him less than that or he'd make no money.

And, in an industry where they're not doing the sort of volume that, say a supermarket does, 40% markup over cost really isn't that much. Remember that the retailer has to pay rent and staffing out of that 40%.


That said - talk to any of the GW insiders at Games Day or the like, and you'll find that they do care about the gamers. They're well aware of the risk of pricing out customers. And, (again, in the US at least) they're doing some things to address this. They're lowering the prices of all their battleforce boxes over here. Significantly in some cases.

But, they're also facing rising costs themselves. Have you seen the prices of gasoline lately. I'm a homeowner. My natural gas bill jumped over 100% this last winter. There are significantly more alarming price increases in the world than the cost of toy soldiers.
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Old 24 May 2006, 19:41   #8 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

I take it plastic models are less expensive than metal models... so the cost of metal fluctuates on supply and demand as well, another pricing point for GW to consider
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Old 24 May 2006, 20:02   #9 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

Plastic models and metal models aren't considerably different in final prices - it's where the costs fall that are different.

Metal molds are considerably easier (read as cheaper) to make. But, you can't make nearly as large parts with them. And, metal molds wear out much much faster than plastic molds.

Plastics are much more expensive upfront. The cost of a plastic mold is an order of magnitude greater than that of a metal mold. But, they're more long-lasting, and can make larger parts.

There's other stuff too - Plastic, for instance, can only make raised details on one half of the mold. Plastic is easier for converters to work with.

When I had the chance to sit and talk with Jes Goodwin, I believe he said that GWs goal is to make 80% of the major lines in plastics. I think this is more because plastics allow them to leverage a lot more of their new sculpting technology for faster releases than because either one is more or less expensive (overall) than the other. For character models with a lot of details, they're going to stick with metal. For rank&file troopers, plastic is the way of the future.
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Old 25 May 2006, 00:41   #10 (permalink)
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Default Re: Why Does GW Need to Charge So Much?

Quote:
Originally Posted by akthomas89
The short answer is, they don't.

I've become relatively good friends with all the employees at the local GW here and in the course of a couple of conversations, have learned that GW employees get a 60% discount on anything from the shelves. Furthermore, the GW employees get 80% off any order from the books! Yes, the entire book! That means any single model, bitz order, whatever, costs them a fifth of what it would cost us. We can't even get a 20% discount from the War Store for that kind of thing!

An employee attempted to justify it by saying they make no profit off of what they sell their employees. So what I infer from that is, for every box we buy from the shelves, every dollar we spend on it, GW makes 60 cents. 60 cents profit for every dollar sold. Now I have to assume this includes things like shrink and salaries, or else they probably wouldn't sell to their employees for so cheap. If they can't sell to us for any less than what they do, why would they want to lose money in any form?

I'm in the grocery business, where our profits are a one cent to the dollar after all expenses. We have to sell 100 dollars worth of items to make a dollar back - GW gets 60 dollars for the same 100 dollars worth of items sold.

Has this game always cost this much? I can't believe the original idea was "let's make a great game that we can overcharge on!" It was probably more like "let's make a great game that people can really appreciate!" I was talking to a good friend of mine the other day and he expressed how cool he thought the game sounded. After I told him a Hive Tyrant was 45 USD he laughed and said there's no way he'd ever play the game for that cost.

Even if GW only made 30% net profit, I bet you that they would have twice as many players and you know what that means? A lot of happier people with no money lost.

Bah.
Your completely, utterly wrong about most of the stuff you've said. First off, yeah GW employees get insane discounts. Do you know how much they get paid? Next to nothing. Unless your a high ranking employee, GW is a crappy place to work for. Furthermore, how is GW not making any profit off of the sales to its employees? The employees get their money from GW, and then they essentially just give it back, they play off the fact that most employees will use the discount, and thus their payroll overcost lessens.

If you look at GW and how it wworks as a buisness they definitly dont' make 60 cents on the dollar profit. Lets look at GW's overhead costs...

Game developers
playtesters
fluff writers
mniature designers
'eavy metal paint team
molds for the models
raw material for the models
machinery expenses (buying it, keeping it up and running)
store overhead (renting store space, keeping it up and running)
various low level employee pay

And you honestly think they are making that kind of profit? The truth is GW makes pennies on the dollar, they have a suprisingly low profit margin per model sold. Heres how it goes down, a couple things have really screwed GW through every fault of their own...

1. During the 90's their games enjoyed a surge in popularity. GW foolishly thought this would continue, and therefore expanded massivly, creating their own store line and becoming more than a distributer and creator. This was stupid as ****, the gaming market has a cap limit, only so many people in the world are going to buy these games, they are definitly not a mainstream thing.

Furthermore it gave them alot of overhead. By taking control of their own retail, they had to take over the costs previously held by independent retailers like model promotion, store events, shelf space, store upkeep, etc etc. THis was a huge mistake, as it is now the market is hardly expanding and GW is stuck with tons of stores they don't need, they have saturated the market so to speak, and are stuck with uneccesary expenses. The sad thing is GW still doesn't seem to realize their mistake.

2. LOTR, another incredibly bad businees venture. GW went through hell to get LOTR rights, some of the clauses in the contract were insane, GW was not allowed to let people mix LOTR models with warhammer models (hence the different scale), in any infringment of the contract GW had to pay 100% of the legal fees involved in the opposing party suing them, etc etc. GW again seemed to think that the surge in popularity with LOTR would continue to grow and taper off into a new steady customer supply. What they didn't seem to realize is that the LOTR craze was a fad. And as a fad, people had alot of initial interest in the game, and as soon as the movies ended, suddenly sales dropped tremedously. Yet again, GW seemed to have no clue how its customers operated (which is true of them in general, they barely know how to play their own game, just read the tacticas they put out and some of the gimped units out there which they are clueless about). Since the die down in LOTR popularity, which is here to stay, GW has repeatedly reported quarterly losses, and that doesnt bode well for shareholder confidence.

3. Most importantly, GW's CEO is an absolute idiot who runs the company like a greedy business instead of a gaming industry. He doesn't seem to realize that without the quality in rules and such things, nobody will buy the product; he views it like any other product, people will buy it if you market it the right way and make it worth buying in terms of quality of the product/cheapness of the product. The sad thing is, his "golden parachute" means that if he was fired by the board of directors, his severance pay would bankrupt the company. For those of you who don't know much about finances, that kind of executive appeasement is a hallmark of a weak board of directors. If you're ever wanting to buy stocks, look at the CEO's pay. Chances are the more over the top his salary and benifits are, the less money you'll make off the stocks. Strong boards of directors make for successful companies, and they don't treat the CEOs like such royalty.

Now, do I think the price hikes are outrageous? Yes, I do. I think GW has made alot of idiotic business mistakes and is paying for them at our expense. I remember when I got an entire blood angels army (1.5k points) for about 200 dollars back in the day. Transports like rhinos used to cost 20$, regiment boxes 25$, and blisters came with 3 troops per pack. Its obvious to everyone that GW needs to get its act together and listen to what its customer base is telling it, getting their heads out of their butts.

However, the price hikes ARE caused by GW's failing profits. Like I said, they didnt used to have such high overhead costs, therefore the models could be cheaper. Also, inflation has been an issue (realistically 20$ today would be much different than 20$ 6 years ago). Petrolium costs and the rising cost of said resource, along with the various troubles in the main suppliers of oil, have also played a roll in the price hikes. Plastic requires petrolium to produce. Anyone who thinks gas prices could rise more than 300% over the last 6 years and plastic miniatures could remain stable is wrong.

Bottom line: the price hikes are insane, but they are hardly a cause of GW being needlessly greedy.
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