Games Workshop – What Are You Thinking?

January 17, 2014 by warzan

So yesterday had an interesting development, in a sudden slide in the value of Games Workshop stock upon the announcement that they had a sizable drop in turnover and a hefty drop in profits.

Every single one of us in the industry will have an opinion on this, but that has to be tempered with the knowledge that very very few of us will fully understand the implications of yesterdays news (if any), and just what exactly is going on.

This is my riff on the topic…

I have been running small businesses with my brother @lloyd since we were 18 and 16 years old, in that time we have had the good fortune to work with some of the larger companies (and their management) in the world, across quite a wide range of industries.

We have repeatedly seen incompetence, as that just exists everywhere and in everyone of us, as you just can’t get it right all the time, but we have also seen some stellar business people in action.

Something they have all had in common was, they never allowed a knee jerk reaction to influence their strategy for the company.

A strategy for a large corporation could be 10, 20, 50 or even 100 years in terms of its foresight and time to execution. (Look at Google’s recent investments for an example of this)

In that time many factors, hiccups and disasters can strike, but unless you understand the grand strategy it’s very difficult to say what effect these ‘bumps in the road’ have.

GW in their mission statement say they want to do what they are doing forever… and forever is a long time.

Lets have a look at their business and see if we can spot the strategy.

The battle with online retailers.

This was a simple and clear threat to GW, if it wasn’t controlled, it would devalue their product until it became a commodity that would sell in pound shops. You see anyone could sell online, and with the way trade terms were set up, GW would act as their warehouse. No investment was required, and no love for the product necessary. If you succeeded great, most likely you were cheaper and had the gumption to advertise as much as possible to facilitate fast growth, but while GW were acting as your warehouse, your risk and exposure would be very low.

In the mean time the nature of the business would change from one of quality and ‘buying into the hobby’, to one of cut throat discounts to ensure you would come out top of the land grab.

If it continued the cost of product would fall for sure, but the profit margins would become so squeezed that there wouldn’t be enough profit generated to actually continue with the expensive stuff of creating and supporting the product and intellectual property that gives it it’s value.

(If you want evidence look at the areas GW has been cutting over recent years, people from stores (that’s support), the support lines (that’s support too), the more expensive game designers, sculptors and painters (that’s development), Games Day.

GW could have found itself in the position that the bulk of support requests were from those who were buying the products cheaper online, but then requiring the support of their stores and helplines to make sense of their new hobby.

So they are left with the difficult situation of:



Who’s responsible


High Cost

Games Workshop


High Cost

Games Workshop


High Cost

Games Workshop


High Cost

Games Workshop


High Cost

Games Workshop

Selling Online

Medium Cost

Online Retailer / Games Workshop

Selling Instore

High Cost

Games Workshop / Independant Retailer

After Sales (product and hobby information) Support

High Cost

Games Workshop Stores / Games Workshop Phone Support / Independent Retailers

So looking at the above, the party with the lowest risks, were the ones forcing the cost of the products down the most. Yet those with the highest costs were still carrying the burden of creating and supporting the products, with less profits from which to do it.

Of course the landscape has changed somewhat now, trade terms were introduced to try and redistribute the risk around the eco-system that delivers GW products. Margins were reduced for online retailers and trade terms were focused around the aspects of supporting the customer.

Today no retailer outside of Games Workshop carries the full range of GW products, and GW have a policy of the larger your order is, the longer you will have to wait for it to arrive at your warehouse. This is basically saying, if you want to be big, then invest in carrying the range, as we don’t want the cost or burden of acting as your warehouse.

So you buy online, and you could wait anything up to a month for delivery.

Back to the strategy…

So GW want to provide their products forever, however they blindly stumbled into the age of the internet, and the mess they are in today is largely of their own making, and their lack of foresight on these matters is unforgivable… but… to be fair at least understandable. (We all make mistakes – Google missed out on Social!)

The day came when the alarm bells finally went off and they would have seen the writing on the wall, the online retail model, was going to kill Games Workshop. Because GW was not structured in any way whatsoever to support or thrive in an environment where online retail at discounted prices would be the predominant method of supply to the end user.

When the writing’s on the wall, they had two choices.

1) Work with all involved in trying to better structure the eco-system to support the business.

2) Force through changes to try and protect the business immediately.

From my understanding they opted for choice 2. Perhaps they felt they were too big to be bothered working with anyone outside, I know from our experience as Beasts of War, we are looked upon with contempt like we are something stuck to their boot, so it wouldn’t surprise me in the slightest if arrogance ruled more than logic.

However these days, I’m not sure option 1 would have fared any better for them, as even if they wanted to work with those in the eco-system, I’m not convinced the eco-system would have shown any less arrogance.

Coupled with the legislation issues around cartels and price fixing, which I’m not suggesting for a second would have been the purpose of these talks, but you can easily see why GW would be very careful so as not to even give the slightest cause for concern to regulators.

This was not about fixing prices, this was about saving a company and a hobby.


Today, GW have tightened the reins on online retail massively, they have created an environment where if an online retailer wants to be efficient (remember no new ones can join unless they have a physical store), they need to invest up to 1 million pounds in GW stock, and that is unlikely to happen. They have introduced clauses to limit how retailers grow in terms of their own media engines (this was one that directly affected ourselves) ensuring that no competitors grow out of their own eco-system.

They have raised prices to increase the profit margins to try and support the key areas of the business.

They have structured product releases and the availability of products to ensure that those hard core buyers, the ones that are more into their hobby than savings, will buy direct, because that’s where all the products are available (limited editions and direct only stuff), and flow the fastest (in stock and ships next day).

They are gradually turning their stores into lower cost ‘recruitment’ centers, and are pulling more and more of their new recruits online to continue the relationship with them there. The day will come when the recruitment centers will close or become shopping center kiosks.

Strategy again…

The net result of all this is a drop in sales and profit. But when you consider the alternative (boom and bust), perhaps this is all part of the strategy.

Would you do things any differently? … Given the circumstances, I’m not sure I would!

Games Workshop after losing 25% of your stock value you should...

  • Stick to your strategy (3%, 15 Votes)
  • Slightly change your strategy (9%, 47 Votes)
  • Completely change your strategy (35%, 175 Votes)
  • Remove the senior management and start again (48%, 238 Votes)
  • Sell the company now (5%, 25 Votes)

Total Voters: 500 (Log In to Vote Now!)

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"Today no retailer outside of Games Workshop carries the full range of GW products"

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"This was not about fixing prices, this was about saving a company and a hobby"