GW sales down

Hardrock Llewynyth wrote:

> I don't recall how 2ed worked, but for the old Necromunda, there was a
> -1 BS penalty when shooting from overwatch that balanced it fairly
> well.

When most gangers are on BS2 or 3 and no fancy kit, then yeah, it works ok.
2nd Ed Long Fangs, as one example, could shoot on overwatch and even with
the -1 penalty they were still hitting on 2+.

Tim
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----------------
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 >> Stay informed about: GW sales down 

In article <44d62993$0$18512$ed2e19e4@ptn-nntp-reader04.plus.net>,
shiny*blue*thing@yahoo.co.uk says...
> Hardrock Llewynyth wrote:
>
> > I don't recall how 2ed worked, but for the old Necromunda, there was a
> > -1 BS penalty when shooting from overwatch that balanced it fairly
> > well.
>
> When most gangers are on BS2 or 3 and no fancy kit, then yeah, it works ok.
> 2nd Ed Long Fangs, as one example, could shoot on overwatch and even with
> the -1 penalty they were still hitting on 2+.
>

Overwatch must mean something different in game terms then in RL. When a
unit is in overwatch they are expecting to shoot at the enemy, therefore
they should be more accurate with their fire and not less so. When in
overwatch the shots are along specifically targeted areas that you
expect to either see enemy movement or enemy fire coming from. So how do
you justify a negative to hit modifier?
 >> Stay informed about: GW sales down 

Jim M wrote:
> In article <44d62993$0$18512$ed2e19e4@ptn-nntp-reader04.plus.net>,
> shiny*blue*thing@yahoo.co.uk says...
>> Hardrock Llewynyth wrote:
>>
>>> I don't recall how 2ed worked, but for the old Necromunda, there
>>> was a -1 BS penalty when shooting from overwatch that balanced it
>>> fairly well.
>>
>> When most gangers are on BS2 or 3 and no fancy kit, then yeah, it
>> works ok. 2nd Ed Long Fangs, as one example, could shoot on
>> overwatch and even with the -1 penalty they were still hitting on 2+.
>>
>
> Overwatch must mean something different in game terms then in RL.
> When a unit is in overwatch they are expecting to shoot at the enemy,
> therefore they should be more accurate with their fire and not less
> so. When in overwatch the shots are along specifically targeted areas
> that you expect to either see enemy movement or enemy fire coming
> from. So how do you justify a negative to hit modifier?

Balance, I guess. If overwatch had a positive modifier it would be even more
dominant than it was in 2nd Ed, you'd get units going onto overwatch when
they had enemy in plain sight ahead of them, just so they could get the
bonus when they fired.

The point about anticipating movement in specific areas is an interesting
one, it brings up thoughts of placing a counter to mark the area that you're
overwatching. Only problem then is that the enemy knows to just avoid the
counter, so maybe when a unit goes onto overwatch they should place 3 dummy
counters and a real one, or something like that?

Tim
--
----------------
I can see why they've outlawed firearms in the UK. People like you wouldn't
have any toes left.
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 >> Stay informed about: GW sales down 

Thus saith Jim M <hnjcomics.RemoveThis@gmail.com> the Unworthy, in the year of
Our Lord, Sun, 06 Aug 2006 18:15:22 GMT:

Typo due to excessive alcohol consumption.

--
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The law protects me from the former. --Karl Kraus
 >> Stay informed about: GW sales down 

"Ty" wrote
> <donovan_borman.RemoveThis@yahoo.com> wrote in message In a sense, GW customers are
> subsidizing this expensive boondoggle. And sales figures imply that they
> are tired of doing so.
>
>> Now, as for why they've taken/taking such a hit:
>
> There's one reason -- sales are dramatically down. As noted before, GW's
> expenses are in line with previous years. Now a dramatic decrease in sales
> volume has one cause -- demand for the product is down. The following
> factors can be expected to lead to a reduction in demand:
>
> 1. Raising prices (while keeping quality constant).
>
> 2. Lowering quality, without a commensurate decrease in prices.
>
> 3. Market enthusiasm evaporating because the product is simply less
> popular than it once was.
>
> 4. Alienation of customers and/or distributors through heavy handed
> tactics, lower dealer margins, etc.
>
> 5. Saturation of the market with product.

6. General economic slowdown. The rantings of certain hardcore gamers to
the contrary, minis are a luxury item. If the economy gets tighter, which
it is, then people have less disposable income, particularly the under 18
crowd who are at least partially dependent on the parental purse. GW is an
expensive hobby, and it'll take a hit.

> I don't see any evidence of #5.

Look again, would you? There are only so many gamers out there. More to
the point, GW has gotten to the point where it is effectively competing with
itself; the more lines of miniatures you have, the fewer the volume of each
one. Worse, some of the Codexes are unbalanced or ineffective, and that has
a direct effect on sales of the army in question. For example, who actually
buys Orks these days? Who'd buy Orks if they had a 50/50 chance of winning?

> #3 could be the result of a decline in the target market.

Or of gamers going to collectible card games, D&D or the like.
Interestingly, the new D&D is much more heavily oriented toward a map and
miniatures than the old version was. Wonder how many sales that's cost GW?

> A note about the LOTR license. I think that this is a scapegoat offered to
> excuse GW management's collossal incompetence. No sane executive could
> have possibly expected this license to perform as well in 2005 and 2006 as
> it did in 2004 when the last movie came out.

No duh.


> Indeed, to the extent that online retailing creates a net increase in
> demand, GW benefits. Online retailing does hurt brick and mortar
> retailers, but that is a fact of life in today's economy. Amazon.com did
> not destroy brick and mortar bookstores, but it probably did wipe out less
> efficient ones.

Online retailing is big already, and heading toward colossal. Here's one
example: Have you heard of the Mall of America? It's the largest mall in
the USA - over 500 stores, and it sees as many visitors in a day as
Disneyland and Disneyworld combined. Last year, Amazon.com's *growth* in
gross sales was more than double the Mall of America's *total* gross sales.
Yeah, online is that huge. Like it or not, no company can afford to ignore
internet sales. Deal with it.

> GW sees internet retailing as a threat to GW's retail division, which is
> why they've been so hysterical about trying to stop it. Local hobby store
> owners know that this is GW's true motivation.

Where did you come up with this? If true, GW's management is far more
brain-dead than I dreamed possible. There's no way they can stop internet
from taking a big chunk of retail. See above.

>> -Flesh out the current ranges, and make plastics more variable again
>> for below.
>
> No cash to fund such ambitious development projects.

Really? They found the cash to massively upgrade their moldmaking
equipment. In theory, they should be capable of making everything out of
plastic once they get the new tooling online and cut all the molds.

> But failing these things, I think that the handwriting is on the wall for
> GW and its incompetent management team.

Probably. We'll see. Incompetent management is generally a fast track to
bankruptcy, and the logic of some of GW's recent moves eludes me.
--
- Ward
wardcb at earthlink dot net

All of us could take a lesson from the weather. It pays no attention to
criticism.
 >> Stay informed about: GW sales down 

"Ty" wrote...
> "Ward B." wrote

>> Comparing quality of GW minis to the competition was one of the major
>> reasons I objected to you labeling them a Wal-Mart model. [Admittedly,
>> I'm probably biased on this topic given my own business experience.]
>
> I was talking about the business model, not the specific products.

Are you sure you can separate those two? Product quality is often
intimately tied to the business model.

> Besides the ability to discount prices, a corporate owned game store will
> have no economic advantage over a comparably funded and managed hobby
> store. Indeed, it will be at a serious disadvantage in all likelihood for
> reasons I stated earlier.

This assumes the local hobby store is actually run by people who are
competent in business. Just because someone is skilled in one field doesn't
necessarily mean they are skilled in another. Then again, GW's competence
is rather questionable too... for reasons we've already discussed at length.
Honestly, my money's on the store with the most skilled leader, not the best
model. A corporate store, *if* its a well designed franchise, benefits from
the economy of scale and a stable business model, which can offset the home
field advantage of a local shop.

> Selection is not an issue in this context; GW's catalog contains fewer
> than 1200 items. A hobby store can stock one of every GW product for about
> $17,200. Even stocking 2 of each blister raises the price to only about
> 24,000.

Those products occupy considerable shelf space that could be occupied by
other items. A game store only has so much room - profit margin and rate of
sale are at least as important in adding to the bottom line. However, as
you've pointed out, GW has effectively slashed the profit margin to the
bone, and some of those blisters won't move quickly at all. The
consequences of that should be obvious.

>> Unfortunately, insisting on "well-run" and "reasonably capitalized" drops
>> the selection of local hobby stores quite dramatically. The one
>> advantage a big franchise like GW has is that it provides a proven model.
>
> Well, about the only thing that the "proven model" shows is that GW cannot
> run retail operations profitably. The retail performance is embarrassing
> by any objective measure.

Ah, please allow me to clarify. *If* a big franchise knows what the heck
its doing in the first place, then the proven model is a significant asset.
GW *had* a proven model years ago. However, they changed it recently and
added a bunch of money sucking retail outlets... I certainly didn't mean to
imply that their current model was proven!

> This is in clear contrast to the manufacturing and marketing divisions,
> which are superb. The problem is that retail operations require far more
> people -- including at corporate headquarters. Those who would hold the
> retail division accountable are greatly outnumbered by those with a vested
> interest in retail's continued survival. So, retail continues to drag the
> company down.

Yes, this is one way a well established company can go belly up. Individual
managers try to improve their own situation at cost of the company, and then
wonder why the company (and therefore their job) is in jeopardy! Brilliant,
just freaking brilliant.

> It *is* a very costly blunder. GW's management squandered ~$80m and
> enraged more than half its distribution network to create a bunch of
> inefficient, barely profitable retail stores that, in many cases, only
> replaced profit GW was already earning. Such monumental stupidity deserves
> recognition...

Oh, it'll be recognized all right - by makers of fine, red ink everywhere.


> Maybe, but GW has created serious disincentives for local retailers to
> push its product. And since GW stores are currently losing money, their
> "model" seems unlikely to survive.

A store that consistently loses money *can't* survive. GW is a very big
company by gaming standards - look at how many countries they do business
in - but that doesn't make them exempt from the rules. They have to adapt
or die, just like everyone else.

> This boondoggle is also the reason for the near-constant price increases.
> To fund this cash draining leech, GW has had to constantly increase
> prices. But as any economist would predict, they appear to have gone past
> their customer base's willingness to pay.

Raise prices too much, and profits go down because the drop in sales volume
outweighs the per-item profit. I am amazed that GW, for all its size and
experience, has overlooked such a basic point.

> I wonder how much more successful GW would have been had they poured that
> $80m+ into marketing and dealer support? At the very minimum, prices could
> be 40% lower than now -- and GW would make at least the same profit as
> they did in 2004. Surely that would dramatically increase sales, which
> would drive profits higher.

Cost cutting is often *much* less effective at raising revenue than you
might expect. That said, almost anything would be an improvement over the
current model. A modest price cut, plus expanded marketing and dealer
support, probably would have worked very well indeed. But, evidently
someone at GW wanted direct control over their entire distribution net.
Pity they didn't use that control effectively.
--
- Ward
wardcb at earthlink dot net

All of us could take a lesson from the weather. It pays no attention to
criticism.
 >> Stay informed about: GW sales down 

"Ward B." <wardcb.RemoveThis@NOSPAMearthlink.net> wrote in message
news:BUjCg.1636$Sn3.364@newsread3.news.pas.earthlink.net...
> "Ty" wrote...

>>> Comparing quality of GW minis to the competition was one of the major
>>> reasons I objected to you labeling them a Wal-Mart model. [Admittedly,
>>> I'm probably biased on this topic given my own business experience.]

>> I was talking about the business model, not the specific products.

> Are you sure you can separate those two? Product quality is often
> intimately tied to the business model.

Yes, I can. Besides, Walmart carries a great many products that are sold by
its competors. Seem dubious to assume that these identical products are
somehow inferior if bought from Walmart.

>> Besides the ability to discount prices, a corporate owned game store will
>> have no economic advantage over a comparably funded and managed hobby
>> store. Indeed, it will be at a serious disadvantage in all likelihood for
>> reasons I stated earlier.

> This assumes the local hobby store is actually run by people who are
> competent in business.

I find that assumption to be at least as reasonable as assuming that a GW
store is run by a competent manager. In general, I find that accountability
leads to competence. The local store owner will lose his livelihood if his
store fails. The typical chain retail store manager will often be
re-assigned.

>> Selection is not an issue in this context; GW's catalog contains fewer
>> than 1200 items. A hobby store can stock one of every GW product for
>> about $17,200. Even stocking 2 of each blister raises the price to only
>> about 24,000.

> Those products occupy considerable shelf space that could be occupied by
> other items. A game store only has so much room - profit margin and rate
> of sale are at least as important in adding to the bottom line. However,
> as you've pointed out, GW has effectively slashed the profit margin to the
> bone, and some of those blisters won't move quickly at all. The
> consequences of that should be obvious.

Well, my point is that product selection should not be a GW store advantage,
since the entire GW product line can be stocked at a relatively small cost.

>> Well, about the only thing that the "proven model" shows is that GW
>> cannot run retail operations profitably. The retail performance is
>> embarrassing by any objective measure.

> Ah, please allow me to clarify. *If* a big franchise knows what the heck
> its doing in the first place, then the proven model is a significant
> asset. GW *had* a proven model years ago. However, they changed it
> recently and added a bunch of money sucking retail outlets... I certainly
> didn't mean to imply that their current model was proven!

That's where we disagree. I do not think that GW ever had a "proven model".
All they really did was spend lots of money to (in effect) replace profits
that they were already getting. They failed to recognize that vertically
integrated businesses are seldom very efficient in market economies. There's
a reason that Nabisco (for instance) does not own a retail chain devoted to
the sale of Nabisco products. The costs paid by distributors and local
retailers would have to be paid by GW stores. So unless GW had some gigantic
edge in sales expertise, this was doomed from the start. Arrogance and greed
drove the diversions of staggering amounts of capital into retail division.
And in a really obvious case of what philosophers call "poetic justice", the
retail division will likely prevent them from recovering.

Personally, I think that GW's management embodied the Peter Principal pretty
early on. Their gross incompetence was effectively concealed by a superb
product (and a near-complete lack of competition) and overwhelming demand.
While they still have a superb product and little competition, their pricing
has dramatically reduced demand.

>> This is in clear contrast to the manufacturing and marketing divisions,
>> which are superb. The problem is that retail operations require far more
>> people -- including at corporate headquarters. Those who would hold the
>> retail division accountable are greatly outnumbered by those with a
>> vested interest in retail's continued survival. So, retail continues to
>> drag the company down.

> Yes, this is one way a well established company can go belly up.
> Individual managers try to improve their own situation at cost of the
> company, and then wonder why the company (and therefore their job) is in
> jeopardy! Brilliant, just freaking brilliant.

Yep. Individuals respond to the incentives that exist around them. To the
extent that these incentives reward company success, their efforts will be
expended to achieve that goal. To the extent that these incentives reward
personal success, the same is true.

>> It *is* a very costly blunder. GW's management squandered ~$80m and
>> enraged more than half its distribution network to create a bunch of
>> inefficient, barely profitable retail stores that, in many cases, only
>> replaced profit GW was already earning. Such monumental stupidity
>> deserves recognition...

> Oh, it'll be recognized all right - by makers of fine, red ink everywhere.
>

Well, it is certainly deserving of such. It would make a very good business
school case study.

>> Maybe, but GW has created serious disincentives for local retailers to
>> push its product. And since GW stores are currently losing money, their
>> "model" seems unlikely to survive.

> A store that consistently loses money *can't* survive. GW is a very big
> company by gaming standards - look at how many countries they do business
> in - but that doesn't make them exempt from the rules. They have to adapt
> or die, just like everyone else.

I predict death, followed by rebirth. GW's intellectual property is
valuable, as is their manufacturing operation. Someone will pay serious
money for that.

>> This boondoggle is also the reason for the near-constant price increases.
>> To fund this cash draining leech, GW has had to constantly increase
>> prices. But as any economist would predict, they appear to have gone past
>> their customer base's willingness to pay.

> Raise prices too much, and profits go down because the drop in sales
> volume outweighs the per-item profit. I am amazed that GW, for all its
> size and experience, has overlooked such a basic point.

They had no choice. By the time it became inarguable that the retail
division was an albatross, prices had to be continually raised to keep the
stock price propped up. Too many executives and board members have their
credibility staked on that division, so they couldn't eliminate the division
(the obvious solution).

The LOTR license bought them a couple of years. And since anything can
happen, it's often a viable strategy just to buy time and stay in business.

>> I wonder how much more successful GW would have been had they poured that
>> $80m+ into marketing and dealer support? At the very minimum, prices
>> could be 40% lower than now -- and GW would make at least the same profit
>> as they did in 2004. Surely that would dramatically increase sales, which
>> would drive profits higher.

> Cost cutting is often *much* less effective at raising revenue than you
> might expect.

Obviously, you can sell things too cheaply -- dollar bills for 95 cents. But
lowering prices increases demand (all else equal). Ideally, prices should be
set at the point that the demand is exactly the same as the amount of
product that can be supplied.

And the fact is that GW could have made far more money had it stayed with
manufacturing and provided its product at lower prices.

> That said, almost anything would be an improvement over the current model.
> A modest price cut, plus expanded marketing and dealer support, probably
> would have worked very well indeed. But, evidently someone at GW wanted
> direct control over their entire distribution net. Pity they didn't use
> that control effectively.

They couldn't, nor was there any reason to do so. Usually, it's economically
desirable to vertically integrate is only when there is no market for the
products. Even then, the market can usually be developed by letting others
distribute the product. The problem with GW was that the market already
existed. In many cases, they spent lots of money to put a local store out of
business and replace it with a GW store that produced the same or less net
profit. Idiots.

--Ty
 >> Stay informed about: GW sales down 

In article <gvBDg.3250$Sn3.2918@newsread3.news.pas.earthlink.net>,
wardcb.DeleteThis@NOSPAMearthlink.net says...
> First, many local shops are operated by people who aren't competent enough,
> despite their obvious incentive for performing. The sad fact is that 80% of
> new businesses fail within five years. (This isn't hobby shops, this is
> overall.) The most common reasons for doing so are lack of capital or lack
> of experience. For a chain store, presumably these aren't issues, which
> gives a chain or franchise much better odds. After setting up the first few
> stores in a chain, the business model, and capital required should be well
> known.
> Second, if a chain store fails and the manager is re-assigned instead of
> given the boot, that may well be a bad decision by upper management. The
> leader is by definition responsible; either he was personally incompetent,
> or he assigned key people to positions they weren't qualified to fill.
>
>
While more often then not what you are saying is true, sometimes the
location simply will no longer support the business. I watched a
convenience store go under, and the management and employees moved
intact to a new location, at the new location they tripled their
business in less then two years.
--
Jim M

In the grim darkness of the present, there is only September...
 >> Stay informed about: GW sales down 

"Graham Thurlwell" <nospam.TakeThisOut@jades.org> wrote in message
news:449bb9544e.jades@d.thurlwell.btopenworld.com...
> On the 9 Aug 2006, "Ty" <tybeardSPAAAM.TakeThisOut@sbcglobal.net> wrote:

>> Certainly, the continued existence of brick and mortar stores is some
>> indication that not everyone wants to purchase over the internet.

> I'm not really convinced by your argument against GW stores, TBH. The
> main reason is that where I live the only store selling the full GW
> range is the actual GW. There has never been a FLGS and the only shop
> that sold a reasonable quantity of stuff was pretty much a toyshop.
> They only stocked a few things and it was pretty much pot luck whether
> you'd get what you came for. They did stock the whole paint range,
> though.

I wonder if this would be the situation if GW had not opened a store in your
area?

In any case, it is certain that some may benefit from GW stores. I'm just
skeptical that GW and its consumers overall have benefitted.

A better model would have been for GW to finance promising independents. A
number of US wholesalers have done that for decades, and it generally works.
It creates a market for the products, but does not alienate other retailers.

--Ty
 >> Stay informed about: GW sales down 

On the 13 Aug 2006, "Ty" <tybeardSPAAAM DeleteThis @sbcglobal.net> wrote:

> "Graham Thurlwell" <nospam DeleteThis @jades.org> wrote in message
> news:449bb9544e.jades@d.thurlwell.btopenworld.com...
>> On the 9 Aug 2006, "Ty" <tybeardSPAAAM DeleteThis @sbcglobal.net> wrote:
>
>>> Certainly, the continued existence of brick and mortar stores is some
>>> indication that not everyone wants to purchase over the internet.
>
>> I'm not really convinced by your argument against GW stores, TBH. The
>> main reason is that where I live the only store selling the full GW
>> range is the actual GW. There has never been a FLGS and the only shop
>> that sold a reasonable quantity of stuff was pretty much a toyshop.
>> They only stocked a few things and it was pretty much pot luck whether
>> you'd get what you came for. They did stock the whole paint range,
>> though.
>
> I wonder if this would be the situation if GW had not opened a store in your
> area?

Nope, there's never been a proper FLGS in Durham and I've lived here
all my life. I'm actually quite surprised as it's a big student area
and you'd think they'd be the sort of people to blow their 'free'
money on things like miniatures.

GW Durham has only been open for about two years, before that the
closest GW was Sunderland, IIRC. My brother used to get his stuff from
GW Newcastle or mail-order. Since the online store got up and running
he gets almost everything from there.

> In any case, it is certain that some may benefit from GW stores. I'm just
> skeptical that GW and its consumers overall have benefitted.

I find the stores very handy.

> A better model would have been for GW to finance promising independents.

You can't fund what doesn't exist.

> A number of US wholesalers have done that for decades, and it
> generally works. It creates a market for the products, but does not
> alienate other retailers.

Sometimes what works in the US doesn't work over here. I did think you
were from there.

Just a thought, but have you considered that UK accounting practice is
that sales from retail outlets are generally quoted on a
'like-for-like' (ie excluding sales from stores that opened in the
Financial Year in question) basis?

--
Jades' First Encounters Site - http://www.jades.org/ffe.htm
The best Frontier: First Encounters site on the Web.

nospam DeleteThis @jades.org /is/ a real email address!
 >> Stay informed about: GW sales down 

Thus saith "Ward B." <wardcb DeleteThis @NOSPAMearthlink.net> the Unworthy, in
the year of Our Lord, Sun, 13 Aug 2006 08:35:24 GMT:


>No argument here. They're too big a brand to simply vanish... there's just
>too much demand for the product. In fact, a similar scenario has already
>played itself out - look at Dungeons and Dragons. After many years, the
>company that developed D&D, TSR, went belly-up. However, there is more D&D
>stuff on the shelves now than ever bceause Wizards of the Coast bought the
>brand and is marketing the bejeezus out of it. I also note that WotC does
>*not* have their own dedicated stores - they sell in hobby shops and,
>surprisingly, through mainline bookstores. They are the only game on
>display in Barnes & Noble, and the local Borders has a good selection too.

WotC used to have their own shops a few years back, including a huge
(and I do mean HUGE) flagship store in Seattle, in the heart of what
should have been their primary market district. They eventually
realized that it was just far too expensive to maintain their shops;
even with their comparitively diverse product lines, and eventually
closed them all. They took a huge hit in the process, however, and
still haven't entirely recovered.

I can't see GW doing any better, particularly since they have much
less product diversity, lower-demand products, and a much more
expensive business model for their shops than WotC did. Combine that
with the number of online retailers offering discounts to the same
products, it's just not a sustainable business.

>I beg to differ. GW has missed the boat on the internet, but that doesn't
>mean that everyone else has. Amazon, and a few other internet sites, are
>running a lot of volume, and the percentage growth of e-commerce is *much*
>higher than that of the economy as a whole. For example, last year the
>overall economy in the US grew 3%. However, internet sales were up 24%.

Internet growth is driven primary by a few key companies doing
business exclusively or predominantly on the internet, however; with
the majority using the 'net to supplement brick and mortar stores,
and/or replace old-fashioned mail-order. Many many more companies
have tried to use the internet, and failed completely. There's a
dynamic to internet sales that is dramatically different from brick
and mortar; and it requires, among other things, a substantial drop in
cost compared to other venues.

>There's a difference between gross sales and net sales. Amazon's gross is
>very impressive, but their net sales have been quite poor. Much of the
>problem is that internet retailers lack the infrastructure (the warehouses,
>fleets of trucks, and workers that actually get the product to the customer)
>that the old brick and mortar stores already have.

That's not entirely true. Amazon has one of the best warehouse and
distribution systems in the US, and and *the* best in several other
countries. Several other major online retailers also have excellent
W&D systems (Netflix jumps immediately to mind) for a more limited
product range.

Attempts by estabished brick and mortar stores to go online have met
with success/failure rates roughly equal to those of internet-only
startups.

As for Amazon's low net profits, that isn't really related to their
actual sales as much as it is the results of massive investments in
new products, and recovering from several disastrous partnerships with
both internet-only retailers, such as pets.com, and more traditional
brick and mortar stores, like the rapidly failing Toys R Us.

>They're making a bunch of money off affiliate programs, too.

Plus, there are a growing number of businesses who ostensibly running
their own storefronts; but whose actual logistics are operated
entirely by Amazon.

Hardrock, who does most of his non-perishable shopping online
--
Many desire to kill me, and many wish to spend an hour chatting with me.
The law protects me from the former. --Karl Kraus
 >> Stay informed about: GW sales down 

"Hardrock Llewynyth" proclaimed thus:
> Thus saith "Ward B." the Unworthy, in

> WotC used to have their own shops a few years back, including a huge
> (and I do mean HUGE) flagship store in Seattle, in the heart of what
> should have been their primary market district. They eventually
> realized that it was just far too expensive to maintain their shops;
> even with their comparitively diverse product lines, and eventually
> closed them all. They took a huge hit in the process, however, and
> still haven't entirely recovered.

Didn't understand that whole "overhead" concept, huh? Still, given the
amount of WotC stuff I see in mainline bookstores, they can't be doing too
badly. WotC has a pile of new releases in terms of books, and I notice
they're also doing miniatures (the prepainted, preassembled sort, mind you).

> I can't see GW doing any better, particularly since they have much
> less product diversity, lower-demand products, and a much more
> expensive business model for their shops than WotC did. Combine that
> with the number of online retailers offering discounts to the same
> products, it's just not a sustainable business.

Sad, but probably true. I think we've all established that the one thing GW
does very well is make minis. How well they *don't* do their business model
has already been discussed in this thread, at length.

> Internet growth is driven primary by a few key companies doing
> business exclusively or predominantly on the internet, however; with
> the majority using the 'net to supplement brick and mortar stores,
> and/or replace old-fashioned mail-order. Many many more companies
> have tried to use the internet, and failed completely. There's a
> dynamic to internet sales that is dramatically different from brick
> and mortar; and it requires, among other things, a substantial drop in
> cost compared to other venues.

And why does this surprise you? In any industry or market, a few big
companies end up dominating. What I'm seeing now is a pile of companies
offering affiliate or referral programs to create a "virtual mall". Most of
the brick and mortar stores are much better off affiliating themselves with
an existing, and popular, site than trying to build and maintain their own
website. For example, I recently had an economist friend tell me that
Amazon is losing money on every book sale. It costs them $17 to $20 to
generate $10 in book sales... but they're making up all the difference, and
staying afloat as a company, by all the referral fees they're collecting
from their affiliates. A lot of big names are partnering with Amazon, or
with other virtual malls...

>>Much of the
>>problem is that internet retailers lack the infrastructure (the
>>warehouses,
>>fleets of trucks, and workers that actually get the product to the
>>customer)
>>that the old brick and mortar stores already have.
>
> That's not entirely true. Amazon has one of the best warehouse and
> distribution systems in the US, and and *the* best in several other
> countries. Several other major online retailers also have excellent
> W&D systems (Netflix jumps immediately to mind) for a more limited
> product range.

Let me clarify - the brick and mortar stores have W&D systems that are
already paid off. Amazon may have built a nice system, but they are paying
for it, with interest!

> As for Amazon's low net profits, that isn't really related to their
> actual sales as much as it is the results of massive investments in
> new products, and recovering from several disastrous partnerships with
> both internet-only retailers, such as pets.com, and more traditional
> brick and mortar stores, like the rapidly failing Toys R Us.

See above for how much its costing them to sell each book. They're making a
pile off affiliate programs, but investments and overhead are sucking it all
down.

> Plus, there are a growing number of businesses who ostensibly running
> their own storefronts; but whose actual logistics are operated
> entirely by Amazon.

Or by Amazon's competitors... they're the biggest virtual mall, but not the
only one.

> Hardrock, who does most of his non-perishable shopping online

So do I. Very, very convenient, and its actually less expensive than
driving to a retail store. (Yes, even with shipping costs factored in, and
driving to the store burns both gas and time.)
--
- Ward
wardcb at earthlink dot net

All of us could take a lesson from the weather. It pays no attention to
criticism.
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Thus saith "Ward B." <wardcb.RemoveThis@NOSPAMearthlink.net> the Unworthy, in
the year of Our Lord, Mon, 25 Sep 2006 08:25:49 GMT:


>Didn't understand that whole "overhead" concept, huh? Still, given the
>amount of WotC stuff I see in mainline bookstores, they can't be doing too
>badly. WotC has a pile of new releases in terms of books, and I notice
>they're also doing miniatures (the prepainted, preassembled sort, mind you).

But in the process, they had to sell off one of their two biggest
aquired product lines; neither one of which they were developing
effectively (and one of which they pretty much killed, despite the
fact that it was one of their more popular lines).

>website. For example, I recently had an economist friend tell me that
>Amazon is losing money on every book sale. It costs them $17 to $20 to
>generate $10 in book sales... but they're making up all the difference, and
>staying afloat as a company, by all the referral fees they're collecting
>from their affiliates. A lot of big names are partnering with Amazon, or
>with other virtual malls...

Your friend doesn't quite know what he's talking about. Though they
are not making large amounts of money on book/music/vid sales; they
are not losing substantially either.

And because of it's size and volume of sales, it's able to negotiate
discounts that are not availble to more traditional venues.

Being an employee, I'm not really allowed to talk about it any further
than that; but his numbers are definitely off. The only other thing I
can say is that part of the equation is that Amazon has the lowest
rate of non-recoverable debt (aka, fraud) by almost an order of
magnitude compared to many competitors, which greatly reduces the
cost-per-item.

>Let me clarify - the brick and mortar stores have W&D systems that are
>already paid off. Amazon may have built a nice system, but they are paying
>for it, with interest!

Only because they are continuing to expand their distribution system,
much of which is already paid off, both here and abroad; while the b&m
stores have reached their maximum growth, or ceased to invest in
infrastucture expansion. Which is why some erstwile competitors look
like they may soon become partners.

>See above for how much its costing them to sell each book. They're making a
>pile off affiliate programs, but investments and overhead are sucking it all
>down.

Overhead is among the lowest in the industry. It's investments that
are sucking up the net profits. Not all of them are well-thought out
or become profitable (*cough*pets.com*cough*); but there are a number
that most people won't even be aware of, some of which are poised to
make quite a bundle, long-term. Sacrificing short-term profits for
long-term growth. Precisely the opposite of most other business
plans, at least for US corps, and the reason that most other dotcoms,
and many traditional businesses, have ceased to exist in the last 5
years or so (including one of the oldest toy stores in the US).

>So do I. Very, very convenient, and its actually less expensive than
>driving to a retail store. (Yes, even with shipping costs factored in, and
>driving to the store burns both gas and time.)

Particularly with gas costs rising exhorbitantly, at least in the US.

Hardrock, who hates driving to the shops.
--
Many desire to kill me, and many wish to spend an hour chatting with me.
The law protects me from the former. --Karl Kraus
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