Ramifications of GW's New Dealer Policy

Back in 2011, I wrote an inexcusably long article about GW's business practices (opens in new window). This was actually written for another site, but I moved it here because it died.

At the time, GW was doing its semiannual price hike, and I was really sick of the Internet grousing. I was accused of setting up strawman arguments, but all of my points were culled from the meta. I was fairly defensive of GW's business practices (to a point).

But this week, they did something that I think may actually hurt them. Not in an Internet public relations sort of way, but an actual economic misstep. [read more]
They released this:

Games Workshop 2013 North American Dealer Policy (opens new window)

It's pretty straightforward and will look very familiar if you work in any industry that utilizes a protected dealer network. For dealers, though, there are two major changes.
Section II.A.1.
North American Retailers are not permitted to sell GAMES WORKSHOP products on any website, web-portal, third-party web-portal or other Internet-based platform of any kind. This prohibition includes any form of online shopping cart that would enable a Consumer to order or purchase GAMES WORKSHOP products on-line...
and this doozy:
Section III.C.
North American Retailers are only authorized to resell GAMES WORKSHOP products domestically in their respective countries of origin. Accordingly, United States Retailers are prohibited from exporting GAMES WORKSHOP products for purposes resale to Consumers located outside of the United States. Similarly, Canadian Retailers are prohibited from exporting GAMES WORKSHOP products for purposes resale to Consumers located outside of Canada. Foreign sales of GAMES WORKSHOP products by Retailers can be disruptive to GAMES WORKSHOP.
The result? Well the one result that my Facebook feed is buzzing about is:

Miniwargaming.com is shutting down.

Although I disagree with a few assertions that Matthew is making in the video, I can certainly understand his frustration. MWG has been really trying to up the ante lately with partnerships and content, so this must have been quite the emotional blow.

And now GW is going to try to prohibit the selling of bits by retailers. This will be a boon for ebayers and a hit for many more online retailers.

So now the Interverse is up in arms again about how shortsighted and evil Games Workshop is. I'm not going to debate that again here. But I am going to make some predictions:

Nothing is going to change for Games Workshop. Protected vertical markets are not unique to them. In fact, most manufacturers with dealer networks try to protect their territories.  It's a business decision to prevent your product from becoming a commodity. Is it a good decision? Who knows at this point? We certainly will know at the end of the year or beginning of next year. 

The meta is going to change this year...for the better. This is something I'm sure of, but because "better" is such a relative term, let me explain. With this new super-accelerated release schedule along with allies, the Internet is scrambling to find their footing. Before they can poke holes through one codex, another appears.Minmaxing is hard to do when the elements keep moving and changing. I think this will make for more dynamic games and less monolisting. My wish is to see a bunch of single-god CSM and Daemon lists, but the experts haven't had time to playtest anything, at least as far as I can tell. Look, 40k isn't chess. The rules are NEVER going to be modified to the point where you can play truly balanced games. But a constantly changing game that gives you opportunities for narratives and themes, is compelling to me even if it makes tournaments a bit more chaotic. Also, due to pricing and allies/double FOC, I think the move to 1850, 1750, and even 1500 points by tourneys is going to trickle down to FLGSes. I haven't seen a game under 1500 being played in a store in 18 months.

This may help many FLGSes, but I doubt it. Brick and mortar retailers are being a bit quiet about this. The ONE store left in my area has very little to no 40k play, but I imagine their GW sales are about to increase...a little bit. This is where I agree with MWG Matt; fewer independent stores is really bad for the hobby.

Online sales for GW are not going to change, and a few (very few) online retailers are screwed. Obviously MWG leaned heavily on GW product and sales to the U.S. to keep the rent paid, otherwise this change would not have shut them down as a store. What about Spikey Bits? It depends on how much ManBoyGenius' margins are...I imagine that they are significant. Taking apart a box you bought at wholesale and parting it out is probably lucrative, but the volume you need is most likely the limiting factor. These new policies probably put the finsl nail in the coffin of "professional" bits sales.

What about the WarStore and their ilk? I don't think it changes anything for them. They do not violate any policies in the document except for possibly selling outside the US. I think there might be some trouble for people who sell GW stuff on Amazon, but I bet those folks don't make a significant amount of sales on that platform.
So who is really burned here by these new policies? Consumers are, of course, but I can go onto Ebay or Bartertown today and find sealed boxes for 25-30% off if I'm willing to do the labor. And both my local FLGS and the one I really frequent, a massively stocked, 31 year old shop Northwest of Chicago, have frequent buyer discounts that equate to 10% off. And one of the great things about this hobby is that it's so popular that there is an active used market. This will only make that part of our hobby increase in activity.

I think ultimately, GW will also be hurt. They are fairly cavalier about their user base, and it will eventually bite them. I think they have the notion that they have decades of momentum to counteract the negative repercussions of any drastic changes they make, but they are running out of steam in that regard. They are also testing too many variables at once, and that strikes of desperation. If you accelerate your release schedule, lock down online sales, eliminate bits, and restrict international sales simultaneously, how are changes in sales revenue going to be attributed to the right factor? I work for a major international retail holding company, and we are absolutely militant about our online testing and the need for controls and single variable tests to determine what's working. This is the only thing I'm surprised about in this document. What exactly does GW hope to achieve with this suite of fuckovers? And how will they track its success?

And for me personally? I think it's a shame. GW has the power at this point to really do right by this community AND shareholders at the same time. Or they at least have the opportunity to be more transparent. Their justifications in that document above are too bland and lawyerly. Just tell us what you intend to do, GW.


  1. Their intent is pretty clear.

    They're making moves to boost their revenue. They don't care about single variable tests because their goal isn't to see what works and what doesn't. Their expectation is that all of their changes will increase sales, even if some do better than others.

    The end result is that between 6th edition and their increased release schedule they will see a dramatic increase of sales this year.

    If you look over their financial reports for the past few years you'll notice that they have increased their prices to ensure a consistent increase in profits even though they annually sell less kits.

    This works out as a double benefit for them since they reduce production costs while still increasing profits.

    This year, and potentially next year, is their last hurrah.

    So like I said: their intent is clear. They're improving their books to make more money from sale.

    - XV

  2. Sale of the company I should say.*

  3. That's actually an interesting angle. Are they gearing up for acquisition? Is FFG big enough to buy them? WoC? Mattel/Hasbro? Do you have any insider info on this?

  4. FFG would be very interesting as an owner of GW for me at least living near them. FFG hasn't really been historically a model company though, so I don't know that it would ever happen. They probably aren't big enough either.

  5. Yes, as big as GW is, I bet a medium size VC firm could buy them easily...except for the LOTR license. THAT probably breaks the bank. I need to read last year's annual report again...

  6. Interesting take... Here in Champaign-Urbana we are pretty lucky to have an excellent local store, but without that... Well, eliminating online stores would limit us to Bartertown or e-bay... Seems questionable that the manufacturer, who is also the distributor AND a competitor could via policy simply eliminate potential competition like this? Guess the fact that it is such a small industry and no one is "officially" complaining makes it OK... For me it is mostly the enforced "buy only from us" policy for the new stuff is the most annoying thing... I go out of my way to support the local store, and locally 40K is pretty much it for mini gaming... For now. Last time there was a change like this about 10 years ago we got into Warmachine, so maybe in the long run we start seeing alternate games take the market share 40K enjoys here...

  7. Well, there's a different model that places like Miniature Market and the Warstore use, which is to supply an order form and have you email or call in the order. Many of these types of retailers do 20-30% off of retail without violating these policies, which is why I wrote that there is a relatively small impact to MOST online sellers that have a B&M presence.

    And I agree, C-U has one of the best run FLGSes.

  8. What Anonymous suggests is a fairly common theory. GW works very hard to keep its stock prices up and its revenue steady or growing. Which a lot of companies do, but GW’s leadership appears willing to sacrifice goodwill and potentially the long-term viability of the company to keep the books looking good. Does that mean that they’re trying to maximize profits from a buy-out? That’s one explanation. I don’t think its conclusive. However, I do agree that it’s strange that GW seems utterly unconcerned about declining sales volume so long as it can maintain net revenue. Of course, this could also be a defensive posture in the face of a weak global economy. Keep the company healthy by doubling down on loyal and affluent customers, and then when the economic climate improves change policies in order to start bring in new customers.

    I reject the ‘buy-out’ theory for one simple reason: wargaming is a very time-consuming, highly skilled hobby. No mainstream company wants to deal with selling glue, and paint, and flock; and no hobby company has the financial resources to acquire GW. If GW thought is was possibly to move their products into the mainstream and sell them at Wal-Mart they would simply have done so themselves.

    What do I think? GW knows it’s on the downward side of its products lifecycle. This doesn’t mean GW is going to cease to exist, but it’s unlikely the company will ever return to the heights it enjoyed during the mid-2000’s LotR boom. They’re counting on the fact that they have a solid core of players—some might call them fanboys—who seem willing to buy anything GW puts out. So, they’re raising prices, tightening control, and hoping to milk all they can from their fan base before the company starts slowing serious external signs of decline. I make no claim to special insight, but I find that scenario makes the most sense.

  9. Actually, I wonder if a mainstream toy company might see the Hobbit gaming license as enough of a draw to buy the company out. Maybe not.