Monday, May 23, 2011
Freakshow On the Way and A Lesson In Economics
Although I like the idea of them moving to totally plastic and resin minatures, how can they really justify raising the prices. The reason given for the switch is of course due to the rising price of tin which is the base of the pewter type metal GW uses. I can understand from a business perspective. They want to recoup mold costs and the like with the change over from metal to resin. Different machines and such are used so they want to maintain their profit levels while at the same time investing into this new direction they are taking the company. The only real problem I see is that this is kind of a "have you cake and eat it to" kind of reasoning. You generally forgo huge profits when investing heavily back into the company so that future gains are higher.
GW is almost to the point where they may price themselves out of the niche market they created. I have joked about it in the past with several different bloggers and old GW coworkers of mine. There has been a steady increase in prices. Thats to be expected in any market. Inflation and the rise of labor and material costs dictate an increase in prices. The market can only bear so much though. GW has been pushing the envelope when it comes to their pricing. The markup and gross margin on their products is huge. Their per unit cost very small. The change to resin is in response to rising material costs. The switch means their per unit cost remains the same, and even improves because the molds last longer and resin can be cast more quickly, and they are able to possible improve their gross profit.
A big mistake it to use a cheaper material, like resin, and then increase the price to a higher one than it would be for the product made from the more expensive material. Sure the gross margin is better, but it really kind of gives the middle finger to your customers. People expect more when you raise the price of a product, especially when you raise it by a good measure. People will go with lower cost alternatives. Supply and demand.
GW does have the advantage as its army of lawyers squash any third party trying to make miniatures for their games. They also ban any non GW miniatures form their tournaments. They may see a drop in their numbers after this increase though and we will see an explosion in the used market.
Ok rant over. The strategy GW uses in its business do make it money, a good chunk if you look at their financial report from last year. They need a more sound release schedule though. The codex rant can wait though.
Next time the Webway list gets some tweaks and we will talk about the 6th Foundation of Vengeance: Kindness.
Blood Runs, Anger Rises, Death Wakes, War Calls!!!!!!!!!!!!!!