Wayland Games' Initial Response to new Games Workshop Regional Trade Policy

Hello readers.

Today I received my newsletter from Wayland Games in which they have made a response to the new Games Workshop trade policy restricting trade by region, creating a trade embargo with Australia.

Here are the contents of the letter.

Hi Everyone,

Before we start, if you'd allow me to present a little background about Wayland before we get into the meat of the issue I'd be grateful.

We laid out our little web store back in August 2008, our beginnings were humble, with my brother and I packing orders in a spare room. It wasn't ideal but it was what we had to start with and we grew and grew through the continued business of our loyal customers through four warehouses to our current location. In thirty three months we have gone from a spare room in Essex, UK with my brother and I packing boxes to a global operation with fourteen full time staff which is now positioned as one of the largest if not the largest independent hobby retailer in the world. We run our business today as we always have done, in a professional and ethical manner both within the letter and the spirit of the law. Almost all suppliers like us, customers enjoy our openness and service-oriented outlook and whilst we're realistic enough to know we're not by any means perfect we will always strive to improve to ensure our central tenet of great prices and better service.

Managing such growth has been far from simple; we have experienced growing pains like any business in any sector that has exploded in market share terms. Our growing pains have also been more painful as we continually seek to adjust to a shifting commercial landscape from our dominant supplier, Games Workshop. Like many of you, I believe that Games Workshop produce a fantastic product which gives endless joy to countless people. I am proud to be associated with them. Unsurprisingly, therefore, I read with real concern the statement by the CEO Mark Wells over the new trade terms which effectively prevents us selling Games Workshop supplied products outside Europe. Mark’s statement can be found here

Mark seems to be clearly of the view that on-line retailers ( and we are not purely that, of course given our bricks and mortar presence) “free ride” on the back of Games Workshop’s bricks and mortar outlets. We have sought over the years, and I thought with some success and recognition, to demonstrate to Games Workshop the value that we provide not just in terms of sales but also in terms of pre and after sales service (not to mention our activities at trade fairs), which is clearly equivalent to the service that is provided on the “ground” by bricks and mortar outlets. Quite aside from the legality of Games Workshop’s actions, we are confused by the commercial attitude of Games Workshop which hampers our ability to sell to hobbyists to the clear disadvantage of both Games Workshop (albeit maybe not their retail arm) and the hobbyists themselves.

I will not air anyone’s dirty laundry in public. Therefore, I am writing to Games Workshop separately (its board, lawyers and their principal shareholders) to share my concerns in greater depth. I hope that commercial common sense will prevail and that we can continue to work with Games Workshop to expand their market and bring a great product to as many people as possible at the best price possible. After all, Games Workshop not only has a clear responsibility to the market but also a clear responsibility to its shareholders (which, after all, could be you and me!).

In the meantime, we believe after the announced terms are implemented we shall be able to continue to offer all of our loyal customers the same product range that we offer today. There may be a small lead time to implement but we've been given a rather short period to react. We will comply fully and completely with the new terms and conditions of sale imposed upon us and will not contravene them in any capacity whatsoever (albeit we would not wish that to be seen as acceptance of their legality), all we seek to achieve is that customers both old and new are able to benefit from our view of the market wherever they are located. We all love our hobby.

Over the next few weeks we'll be providing updates as to how the process of implementing these changes is coming along, the chances are we'll use Facebook to disseminate this information as it is a great platform for customers to interact with us and each other.

We look forward to continue to serve you and we always will.

Keep on Wargaming.

Richard.
Wayland Games

Should you wish to comment on our response, please feel free to do so via our facebook page

Sounds like Wayland is planning something big. Big enough that it will allow them to distribute outside of the EU. Some speculation suggests they would be selling product to a local distribution business and then acting as a middle man. But the more logical step to me is that they would set up their own offices for distrubtion outside of the EU, and through inventory transfer, continue distributing from those new regional offices to the rest of the world.

Either way, it sounds like they intend to continue servicing their customers and are doing their homework now to prevent any major legal roadblocks.

I wish all involved well in this endeavour.

GW Responds to The Uproar

Ok. As you know, this week Games Workshop has been in the sights of the blogosphere and the forums, including my own editorial, and for good reason.

First, because they formally announced a switch from metal miniatures to the system they are calling Finecast, read resin, ostensibly to reduce cost of materials due to market volatility.

Then immediately after that announcement, the news that they were putting an embargo on trade between regions was released to the internet, where it was learned that countries like Australia would no longer be able to order from such places like Maelstrom, where they could buy their goods at reasonable prices instead of having to suffer their exorbitant, if not extortionate suggested retail price.

GW then followed up with a very long list of price increases, ranging from 3% to 25%. These are not increases across the board, but they are significantly large where they have been implemented, even on models that were JUST released. You would think that they could have priced those models properly when released. Nah, that would have stifled off the block sales. Better to get the huge volume of splash release sales, then raise the prices as soon as that volume returns to the normal flow of goods.

Well, the internet has spoken, and boy are people mad. Madder than I ever remember them being, to the extent they swamped Games Workshop's Facebook page with negative feedback, and took up letter writing campaigns, with petitions and open letters to Games Workshop.

And GW has heard...and even stirred enough to respond.

Here is a copy of their response.

Dear **********,

Thanks for contacting Games Workshop about the change in our trading terms for European accounts. I know this has frustrated you and for that I am truly sorry. As a long standing customer, you deserve to know why we made this decision.

As you know, we introduce people to the Games Workshop hobby of collecting, painting and gaming with Citadel miniatures through our Hobby Centres and local independent trade accounts. Games Workshop Hobby Centres run introductory games and painting sessions, beginner lessons, hobby activities and events. We provide all these services free of charge. We only recover this investment if customers then buy products from us.

Where we don’t have a Games Workshop Hobby Centre, we support local independent trade accounts. These businesses provide a convenient place for customers to buy our products close to where they live. We support these businesses with local customer service teams and warehouses to ensure customers have immediate access to our best selling products and new releases. Many customers discover the hobby this way.

In addition we invest millions of pounds every year in our design studio and factory to ensure that each month we release more new products. This makes the Games Workshop Hobby more exciting for existing customers, helping them stay in the hobby longer. We can only afford to do this because of the volume of customers we have recruited and developed through our local Hobby Centres and trade accounts.

It is for this reason that we have changed our European Trade terms. Over recent years, a number of currencies have moved a long way from their historical relative values, and this has opened the door for some traders to try to take advantage of these currency movements and offer deep discounts to overseas hobbyists. This has been the case with European internet traders selling to some of our customers overseas.

While this may seem great in the short term, the simple fact is that European internet traders will not invest any money in growing the hobby in your country. Their model is to minimise their costs and free-ride on the investment of Games Workshop and local independent shops in creating a customer base.

The inevitable consequence if this was allowed to continue is that Games Workshop would not be able to operate Hobby Centres, nor to support local trade accounts. And if this happened in more territories outside Europe, the loss of volume would leave Games Workshop no choice but to scale back our investment in new product development, further eroding our customer base. Not something that we or our customers would want us to do.

That is why we took the decision to take legitimate action to restrict European trade accounts from selling the goods they purchase from Games Workshop outside Europe.

While I understand that you may still be unhappy with our decision, it was taken to ensure we can continue to support the Games Workshop hobby communities around the world through our Games Workshop Hobby Centres and local trade accounts. And to ensure we continue to invest in developing the best possible new product releases every month. I hope therefore that over time you will see the benefits of this decision for you and your hobby.

Yours sincerely,

Mark Wells
Chief Executive
18 May 2011

Wow. Not only is it steamy BS, it's canned steamy BS. They may have well just addressed this letter "Dear Sucker".

The logic within this letter does not make sense to me at all. I have gone over it time and again and all I see is the exact same canned response they have been feeding us for years.

There is a quote I would like to remind you of. "The definition of insanity is doing the same thing over and over again and expecting a different result. - Albert Einstein"

Well, Gamesworkshop, it's been years. Years. And you keep coming back with the same message. And every year you do the same thing, and come back with the same message. You have not changed your strategy, that I can see, for price structure, retail distribution, etc, yet you seem to expect that continuous and extreme price increases, and monopolistic manipulation of the free market by locking in regional pricing and preventing business from advertising your product and actually trying to compete and sell your goods. But it's not working. You keep having to come back to this point in the infinite circle you are on, and do the exact same thing, starting another lap of your insanity.

I'm not going to even bother trying to tear this apart. There are many others out there who are doing a fine job of it.

But I will take a moment to remind Games Workshop that they made this bed by not going to a universal price list for their goods, and then let exchange rates actually be reflected in the true price. GW, you claim that the cost of goods are higher in other regions due to shipping costs etc., to which I say BULLSHIT. If that were true Games Workshop would not feel they have to impose an embargo and restrict sales by region because those stores in other regions where prices are cheaper would not benefit from the sale to other regions which would require the goods to be shipped. Yet those stores did, and successfully, for years. They shipped goods at discounted prices and succeeded, even after those added costs were factored in. Why? Because Games Workshop has kept regional prices artificially high, allowing for that opportunity.

Games Workshop is not a government. They should stop trying to act like it in this case, and let the free WORLD Market actually work. Switch to a single price structure and let the market adjust and grow.

Editorial: On Games Workshop's Recent News - Finecast, Price Increase, and Trade Restriction

Many of you will know, over the last few weeks, there has been much speculation and many rumours surrounding Games Workshop's sudden pulling of almost their whole line of metal miniatures from their own retail stores and independent retailers. Naturally, a move this drastic was sure to generate a lot of speculation, especially when you consider just how much of the product line from Games Workshop was made in metal.


Much of the speculation revolved around the possibility that Games Workshop would be re-releasing the miniatures in some form or another. Some suggested that such models would be strictly direct only, others that they were dropping metals for all new plastic kits, and then there was a growing surge of speculation that production of metal models would be converted to a resin production process.


The obvious reasons for such a move would be to eliminate the volatility of cost of metal, specifically tin, ergo reducing production costs and allowing a price reduction across the metal product line.  Tin, the basic metal used by Games Workshop since their change from lead in the 90s for health and safety reasons, is a commodity material, and has seen drastic price swings over the last two years. So drastic were these commodity price swings that many casting companies, and their industrial customers, are seeking methods to control those price swings, such as making massive orders at reduced costs, and demanding locked raw material prices from their suppliers. Countered by those same suppliers tacking on commodity fees to cover their costs in excess of the agreed base price, especially for fabricated goods. Ending in ever increasing and out of control price increases for a raw material.


Obviously, since profit is determined by the simple formula Profit = Price - Cost, and costs were arguably increasing out of control, this had to eventually come to a head. 


That moment obviously came for Games Workshop recently, as they set in motion plans to change their production process in a most dramatic fashion. This change first becoming part of the public consciousness when they pulled their metal lines, without a word to their customers. So, after weeks of speculation, that flame only fanned by Games Workshop's relative silence on the matter, Games Workshop have finally officially announced today that they are indeed re-releasing much of the removed metal product line as resin models with the new process brand called Citadel Finecast.

"Games Workshop's quest to create the best quality miniatures in the world is about to take a huge step forward...

On 28th May we are launching Citadel Finecast miniatures to the world.
Don't miss the full announcement on games-workshop.com on the 23rd May to find out more." 

Though this press release was sparse in detail, it definitely ties in with the speculation that Games Workshop has converted production for this model line from tin, to resin... I will refrain from pointing out the potential health hazards with resin, except the pointed reminder that Games Workshop deliberately moved away from lead miniatures in the 90s due to fears of lead poisoning...

This announcement was made at the same time that Maelstrom Games, a UK based brick and mortar games and hobby store with a strong internet store, issued a press release on their website that Games Workshop was imposing new trade conditions prohibiting them from conducting sales outside of the European Union.


That same press release also substantiated the speculation of the new material for the Finecast range to be resin.

"Finecast 

Onto other Games Workshop news. We'll shortly be stocking their superb Finecast range, which - if you didn't know already - is most of their deleted metal models, re-released in resin but somewhat more expensive than the original. Those will be on general sale on the 28th of May, for Games Workshop do not wish us to put them up for sale until then so they can keep up with demand." 

This was followed by a list of Finecast pricing, as well as another list of much of the rest of the range, of forthcoming price changes. Admittedly, a couple of prices appear to have dropped, but the vast majority of models have gone up. Increases which range from about 3% to a whopping 25% increase across the range.




25%


Wow!


We all know that hobbies like ours are not cheap. In fact, we also mostly know that our specific hobby is not high in the realm of expensive hobbies, after all, once you have your basic army, that's all the expense you really need to worry about, at least initially. The fact we are collectors and want new stuff, or need to get a couple new things once in a while is what gets us, ultimately, to spend more money on the hobby.

The real issue, as I see it, is not the actual expense of the hobby, but the sheer audacity of the price increases. Ostensibly GW is going to resin to help reduce the cost of production. It's the ONLY reason they would make such a drastic and dramatic change to their production process on such a large scale, because the dollars involved are big. As a requirement of my own job, I have a fundamental understanding of this kind of fundamental process change, and the only reason to undertake such a massive change is for cost savings, and a big savings. Therefore, to turn around and increase prices so dramatically, far beyond any price increase they have ever done by as much as 25% in many cases, is purely and simply a gouge the customer cash grab play.

Not. Cool.

Couple this with the HUGE disparity in regional pricing (Compare Canadian and Australian prices at the Games Workshop Online Store to the US and UK for a shocking eye opener), and the lack of equivalence to the international exchange rates, where customers of some countries are paying nearly DOUBLE what customers from other countries are paying, though neither the exchange rates, nor the duties and shipping costs can justify that price (hence the prevalence in international web stores), and it is clear there is a lot of room for profit margin in the price of the product already. Especially when combined with the newest tactic GW is using to prevent international web store sales to those same higher priced regions, ostensibly to "protect" the local brick and mortar independent retailers from unfair competition. I have nothing against web stores or brick and mortar stores competing and discounting, etc. This is a standard retail tactic, and works, when it's on a fair foundation for competition.... But it's not! And it hasn't been for over a decade.

Well, GW, shame on you. Shame! Because you are the ones who created the environment of unfair competition by creating regional price structures that do not account for low cost shipping, and deep discounts available in other regions because they receive better whole sale pricing. 

This environment of unfair competition is not the fault of the businesses who are competing and succeeding. It is entirely a result of GW not responding appropriately to changing economic climate, and fluctuating currency exchange rates. They banked on those rates returning to previous levels, but I have news for them. They aren't. In Canada's situation, it's been about 5 years, roughly stable at par with the US dollar, yet they still mark up Canadian prices by 20%, when there is no valid reason to do so.

It is that misguided and blatantly exorbitant abuse of pricing that has people so upset, and it's something many of us in the hobby, and who have had the ear of GW higher ups, have been saying will happen for the last several years. Unfortunately, this most recent price reaction is exactly the opposite of the advice they have been freely getting from seasoned and experienced economic and business veterans, who are also hobbyists... and far exceeds smacking of pure greed.

Those who know me, know I rarely speak so negatively about GW. So know that I'm not just echoing the crowd and jumping on the "Oh no, prices are up again" band wagon. This is something that has concerned me for many years, even as a former employee, then hobby rep. Forever have they spun the same story that "prices will soon be realigned, and there will be price drops". But with this newest production process change, and the ongoing exorbitant price increases, they have put the truth of light to their own lies....something they have been warned about for years. 

Will this stop me from participating in the hobby? No. It won't stop me from buying the models I need/love for my army, either. Though I will be far more judicious in my spending and it will impact how much I can actually buy, because my hobby budget is shrinking as inflation continues, though salaries do not seem to increase accordingly. I am fortunate that I have an abundance of models to build and paint, so will only see the pricing impact when I finally need to purchase new models. But others are not so fortunate. The youth of the hobby will be hit hardest, as it becomes more costly to even enter the hobby, let alone build a new army. There is only so much money to go around, and when dealing with an economy slow to recover, and set for increased inflation rates, this is not likely to change as necessities edge out luxuries.

In the end, despite what GW believe and claim, this move will not help local retailers as their sales will continue to decrease. It will only harm the hobby because it makes the product less accessible. It forces people to buy less product, therefore reducing their sales further. And looking back at that simple formula I posted earlier, reduced sales equals reduced profit. And it can quickly spiral out of control as prices continue to rise in a desperate grab to maintain their profit, not just grow them.

GW needs to remember the simple precepts of macro-economics, and start thinking these things through more carefully. They also need to start remembering that the hobby can only be sustained if your customers don't flee, as it's really a very niche and grass roots type of hobby. And it's those grass roots hobbyists who will keep the hobby alive, but only if it's something they can afford.

And they need to remember it fast. Before they doom the hobby.