Wednesday, July 30, 2014

Games Workshop Turn Around Plan

GW clearly needs a turn around after flat and declining sales for like 6 years and decreasing market share.  They have raised prices and cut costs multiple times and while that maintained profitability it appears to have hit the limit.  They have trimmed the sales side so much that their is now a single manager between the retail managers in a region(NA, UK, Europe) and the CEO.  While this might seem like a great idea at first as fewer layers make you more dynamic, I think that is incorrect.  With each of the region managers in charge of monitoring 100-150 stores how much time can the devote to any of the stores or the managers ideas.  Even if the store managers have great ideas why would you share them as you are in an essentially dead end job for internal hiring.  You would keep it close to the vest to protect your performance vs other managers to keep your bonus up.  Another thing I heard recently was that someone was trying to call the mail order team down under and never could get in touch with anyone after more than a week of trying.

Luckily they are going to be getting new leadership in the next year so that does offer hope for them to return to their glory as the undisputed go to company for games in the miniature wargames arena. This discussion will focus on 2 words: Games and Customers.  I took these two key words and searched the recent financial release to see what the company is thinking about these two concepts.

The companies name is Games Workshop so "Games" comes up quite often but "games" is pretty rare.  The first reference is to peoples past claims that the computer games industry could be damaging GWs sales.  Next reference is that GW sells miniatures and games as a general description.  Then a reference to Tom Kirby working selling fantasy games for 6 years before joining GW.  Another reference to GW selling games.  That is it, 4 mentions of games and zero of any importance.  Pretty strange for a company called Games Workshop.  Ofcourse we all know that they are really about the miniatures since that is where the money is but the games are also important.  The are a number of people interested in purely collecting and modeling with the miniatures but there is also a large group of people who are interested in the games.  These two groups are the real core of the business as people move back and forth but the gamer side is the one that actually brings in the customers as they introduce new people to the game to try to recruit fellow players from their friends.  Game quality here is very important and is something that needs to be addressed.

GW currently really has only 2 games on offer right now as the Hobbit did not really take off in anyway compared to the previous LOTR.  There are more GW themed digital games available or coming out than GW games directly.  Warhammer Quest on the phones, one or more Space Hulk games, a new Blood Bowl game coming, plus other stuff I am not even aware off.  The first thing to notice about that list is that the games I mention directly are not even available from GW currently.  This seems incredibly stupid to me.  The interface with these games should be going 2 ways.  Currently GW is allowing these companies to monetize their fanbase with an additional product but is not allowing the reverse channel where people exposed to the game through the digital product can go and buy the physical version to get them into the GW main business line.

When you walk into a games workshop store currently you are essentially only offered one question: Unit based battles in either Traditional Fantasy or Sci Fi Fantasy.  It is hard to think of another type of store that is so limiting.  Maybe a single carrier cell phone store but they will have lots of different tiers of phones to appeal to different types of customers.  The current god of companies, Apple, has desktops, laptops, ipods, iphones, and ipads all available covering a whole range of digital interests.  You might claim that GW has all these different armies but those are more like optional colors or memory amount not real choices to the product as a game.  Too much focus on miniatures and not enough on games.  You do want to have a product that could appeal to anyone who will venture into a store called games workshop with little plastic figures and posters of space orks in the window.  Sure not every game will have the same sales levels or margins, but it will keep bring people into your universes and away from your competitors which you have many now compared to the past.

This leads into second word customers.  The first place it appears is in describing their customer base a niche who want quality miniatures and are interested more in quality than price.  There is a point here.  If I am going to buy a miniature and then spend hours and hours assembling and painting it to display it on a shelf and show it off to people quality is very important.  On the other hand if I am using it in place of a free paper cut out in a game, just to make the game a little cooler to look at but functionally no different, the price is going to matter.  The next mention is again about niche customer being thin on the ground and that they are expanding regionally to find more customers.  Ofcourse you could try to expand your niche as a another option.  You moved twice as many units a decade ago before you narrowed your niche with price rises and neglect of the games.

The next mention is about the stores attracting customers but then they go on about how the stores are cheap by being off the beaten track (hard to find, low foot traffic) and one man (closed 2 days a week and only open limited times and closed due to unexpected issues) which seems to totally undermine the claim about the stores attracting customers.  The last part is best read directly:

Our market is a niche market made up of people who want to collect our miniatures. They tend to be male, middle-class, discerning teenagers and adults. We do no demographic research, we have no focus groups, we do not ask the market what it wants. These things are otiose in a niche.

That is the GW customer problem in a nut shell.  Let we will break that down this way.  Our market is people who want to collect our miniatures but we do not care in anyway about who they are and what motivates them to buy our miniatures.  Hence we have no idea how to encourage them to buy more miniatures or get more people interested in our miniatures.  Knowing who your customers are allows you to see similar groups which you might be able to recruit into your niche.  Knowing what your customers want in the niche allows you to do better as a market share of the niche.  Right now nerd culture and gaming are big news.  Comic books and fantasy have huge recent success in the movies and TV.  GW should not be struggling in this environment, they should be trying to push more into the market right now.  Sure that costs money but you spent 4.5 million pounds firing people this year while the cost of production and supply (which includes design) can be pegged at 38 million.  So you could have but that money into new product types of a volume of 10 percent of the rest of production to see what sticks and brings in new customers.

You can see in GW numbers directly why their market focus is wrong.  Last year they spent 39 M to produce 67 M worth of goods for sale by the sales channels.  This year they spent 38 M to produce 57 M worth of goods for sales channels.  I doubt that the difference of that it cost them that much more to make each item.  The issue is that GW production being dominated by plastic injection molding has high fixed costs and low marginal costs.  IE Once the machine is set up making that next model costs you essentially nothing.  Limited edition plastic models are exactly opposed to how your manufacturing process actually works.  GW wants to be a boutique brand but it uses mainstream production methods and already has its own boutique brand (Forge World).  It is the only company in its niche that really has the scale to take advantage of this mainstream production without having to outsource ( and thus give people outside control of what happens and their own profit margins) but they squander it constantly with narrow mindedness.

Most companies know that it costs a lot of money to find a customer and it is usually more profitable to keep an existing customer than find a new one.  GW used to run a core of dedicated life long players to which it added its churn customers some of which converted to core.  Now the core is disintegrating and the churn is decaying since they have lost the top of mind level/single major player level leaving them with little headed in a positive direction.  The most recent release of 7th edition is a great case study.  Maybe they did fix some rules but as far as I can tell other than the psychic phase overhaul very little of the changes could not have be made as a pure free download.  It was totally about extracting just a little more money out of their customers in May to help the numbers than trying to build and improve the games.  They need to start efforts on holding their customers and finding new ones not cut staff who actually provide the real links between the customers and management.  GW webstore efforts are also totally off target as they are essentially fighting with their retail and trade arms over the same customers as opposed to working with them to find new customers.

Sorry for the long rant.  As one of these former customer with a 25+ year history with GW, I would really like them to succeed and give me a reason to buy their products and pick up their mantle again but they have to show me something.


  1. thanks for the thoughts. I agree pretty much with everything you have said- the admittance that they do no customer research is shocking, but somehow not surprising. Slapdash is the word that really describes everything they do from lack of proof-reading and playtesting to boxy miniatures.

    It is so sad, I will be upset when they are gone, I have such history with the brand. GW act as if they are in a vacuum when competition is stronger than ever, from games that sell themselves like X-wing to direct competitors like Mantic. They need to shape up. I really hope Kirby's replacement is more sensible. Could anyone be worse?

    1. You can always find some one worse.

  2. btw your subscribe link (Atom) under the comments seems to be broken.