So, what is the price hike going to look like?

[Scribe]

You've seen the news I'm sure. How bad will this jack up what is already an excessively marked up hobby?

[Wormwoods]

Hope you Americans are ready to really, intimately understand what it's like to be Australian!

[templargdt]

3 minutes ago, Wormwoods said:

Hope you Americans are ready to really, intimately understand what it's like to be Australian!

I don't like drinking and fighting that much (kidding I loved serving with the aussies they're great.)

[Lord_Ikka]

My guess would be basically a complete pass-on of the tariff cost from GW to customers. We might get lucky if they decide to take a 5/10% hit, but doubtful.

[darkhorse0607]

2 hours ago, Scribe said:

You've seen the news I'm sure. How bad will this jack up what is already an excessively marked up hobby?

 

I'm hoping for an announcement on their financial page on what their plan is to prep their investors. Ironically, this is also about the time that their annual increase always happens as well.

 

Can't see FLGS get to keep selling at 10-15% off GW msrp of all of this goes through. But then they risk losing stockists. If they crank the price they risk losing sales in the largest market due to the price increases having to compete with everything else going up and possibly (probably) a recession

 

It's really a lose lose for everyone

 

I'm waiting for N1SB to write a post and make me feel better 

 

[Inquisitor_Lensoven]

I’m just glad I got my redeemer yesterday 

[N1SB]

Thank you all for asking.  I'll keep this as short & (bitter)sweet as I can.  As always, non-political.

 

Summary - yeah...I agree it'll be 10% tax just passed on to Hobbyists in the US, but it'll also be all the knock-on effects.

 

 

+++ Why 10% tariff across the world? +++

 

 

Why even target UK exports like Warhammer?  What has Warhammer ever done except bring both joy (& misery every price hike)?

 

It's because if one country was to raise tariffs at another country...you can always circumvent by going thru a 3rd.

 

For example, as you know I'm like a dodgy Hong Kong hustler.  Former British colony.  If it was only China getting hit by a tariff, I'd help a Chinese company set up some sort of dummy trading company in a Commonwealth nation to appear British, go around those rules, and I'd have a small take.  Happens all the time.  This would make such a loophole even costlier, like it wouldn't even be worth me doing it anymore (if I had wanted to, I admit nothing).

 

So it's NOT targeted at Warhammer, nor even the UK.  It's just this general baseline thing to make a tariff policy work.

 

In Warhammer terms, it's if we had to use a Force Organisation Chart, there'd be, some HQ + Troops Tax, otherwise there's no point.

 

So even if we get the US and UK governments negotiating...this 10% that affects them will stay, because it's NOT about the UK at all.

 

What it's going to mean in practice is that it'll be very, extra hard to get this particular price hike lifted.  There MIGHT be one solution...

 

 

+++ There ARE "carve-outs" for select things +++

 

 

In situations like this, there ARE exemptions on a case-by-case basis...and you want to get your name on that list.

 

It's going to take someone close to the policy makers with, how do I put this, a DOG in the fight who just so happens to really like games and tabletop and stuff to say, "Um, I actually play this game from a British company called WARHAMMER and so do my 14 kids, so could you please do a carve out for Games Workshop?"

 

Alternatively, it'll be a very influential American company who sits squarely behind policy makers with, y'know, AMAZONIAN strength to lobby against the policy like, "You keep the tariffs...unless the sales go through US.  We get an exception, because we'll help you enforce the policy via other means we have at our disposal."

 

(You will see stuff like a Taiwanese chipmaker getting an exemption for their chips IF it's inside a US-made PC, etc.)

 

 

+++ How will GW react? +++

 

 

It's not so much how it will affect GW (unless you're one of our Frateri GW shareholders, you care and rightly so).

 

It's more about how GW, being a publicly listed company responsible to shareholders, react?  That affects us all.

 

You know how I used to harp on about maybe GW's Factory 4 could be built in the US?  It would actually only help with trying to get on that list of carve-outs exempt from tariffs.  Because even in a scenario where GW did build a factory in the U.S., I had imagined GW'd only make the most common model kits there, like the starter sets.  Everything else made in the UK would technically be subject to tariffs, UNLESS they use another loophole and did something like having the sprues produced in Nottingham, shipped over to the U.S., and packaged in the U.S., just put in the cardboard boxes there.  This used to happen in Hong Kong, things were made in China, shipped to Hong Kong then we'd package them to ship out, now it's Made In Hong Kong.  But my main argument was lower energy costs.

 

(The automotive industry is like this.  Components made worldwide, final assembly in the U.S., now Made in the U.S.A.)

 

I'm really gaming out how GW is reacting.  Here's what comes to mind.

 

 

+++ Will GW delay or even rethink its pricing update? +++

 

 

I anticipated GW was going to do a pricing update like around May.  This has to give them pause, at least.

 

North America, which of course includes the U.S., has long been its fastest growing region, to the point that...

 

North America, probably the U.S. in particular, is actually GW's single biggest market now.  GW DOES care.

(I'll look up how much North America makes up GW's overall business, like compared to its home in the UK, later.)

 

On the other hand, this gives GW a built-in excuse.  GW can blame their performance on tariffs in their biggest market.

 

But they're having trouble keeping supply up demand anyway.  [TEMPORARILY NOT AVAILABLE] is synonymous with almost every search I do on their website nowadays, like when I'm just brainstorming new projects.  Again, it's the same 3 factories producing while GW's revenue is 5 times what it was 10 years ago.

 

However, GW IS looking ahead, that's why they talk about Factory 4 (as well they should imho).  GW might say, let's not burn this bridge before we even cross it.  Maybe they'll hold off on a price hike until things shake out a bit, or do some weird thing where price increases for the rest of the world EXCEPT for the U.S.

 

There are unsung heroes who will push back on GW with this.  They'll be the central figures in this saga: the U.S.-based FLGSes.

 

 

+++ How will U.S. FLGSes react? +++

 

 

Your Friendly Local Gaming Stores in the U.S. will be the ones central to this fight.  We can game things out by how they react.

 

(Reminder: GW uses their own jargon for FLGSes, they're their "Trade" channel.)

 

I've been listening to FLGSes, whom I greatly respect.  They're unhappy with their GW representatives NOT because the Hobby sucks, in fact the Hobby's selling well, TOO well, the FLGSes are mad at GW because they can't stock what they want, driving their customers to online retailers.

 

You're going to have U.S. Hobbyists drive to Canada to buy minis, throw away the cardboard boxes so it's just the sprues so it's not like a whole product, bring them back home.  They're going to organise which friend will be the one to drive north after every balance update for a new batch of orders.

 

(I used to live in New Jersey.  We'd drive to Toronto because a lot of our Hong Kong friends were there.  Then in Wisconsin when I was in uni.  We'd drive just north of the border to buy alcohol then bring it back.  I now realise that my so-called "friends" took me because I was going to be the fall guy.)

 

FLGSes will have to look for alternatives.  Within the miniatures space, it'll be Atomic Mass Games, who make Marvel Crisis Protocol (my friend Timperial Guard used to play this before Legiones Imperialis brought him home) and now Star Wars Legions (I know there's a fiddly thing with that, I'm not getting into it).

 

(Modiphius, which makes the Fallout miniatures games is also a U.K. company, actually i.e. same boat.)

 

Beyond miniatures, in the U.S. tabletop space, there's also Dungeons & Dragons, which traditionally did around £100 million/year.  To compare, GW was around that 10 years ago, now it's £500 million/year.  It's still dwarfed by D&D's younger sibling, Magic the Gathering, which is £1 BILLION/year.

 

FLGSes can flock to Wizards of the Coast, owners of both D&D and MtG.  I know what's happening with D&D, I won't talk about it here.

 

I'll put it back into Warhammer terms.  You know how we react to a balance update?  Like GW will always increase the unit I really like, like my C'tans.  And even though Necrons have been top tier throughout 10th ed, I completely overreact, like a small points increase to C'tan makes me give up and burn my army.

 

This sort of thing happens irl.  In supply chains, it's called a Bullwhip Effect, a tiny flick leads to a huge slash down the line.

 

 

+++ Conclusions +++

 

 

GW is going to take a time-out to a.) re-evaluate things, b.) SHOW they're re-evaluating things and c.) talk to people like FLGSes.

 

It'll be "in light of recent events" and/or "due to circumstances out of our control" by their next annual report, year ends in May, report in July.

 

(They may or may not issue a statement to investors beforehand.  They probably won't, the CEO isn't one of those headline seekers.)

 

They're going to say they're either delaying their "pricing update" or do some weird carve out for the U.S.  Don't turn your envy against our U.S. Frateri, they'll be hit with 10%, while we are usually hit like around 5%, they'll still be worse off, and they might be helping us all hold off on a pricing update altogether.

 

They've already committed to Factory 4.  They might say they're evaluating Factory 5, 6 or 7 in the U.S., something like that.  There has been a case for that in lieu of energy prices in the UK, particularly in the case of Nottingham, which I found out recently.  So it's not just some political lobbying thing tbh.

 

They'll have to have some sort of special thing dealing with FLGSes (a.k.a. "Trade"), as well they should.

In conclusion, having played this out as a result of writing this post, there will be a calm before the storm.

 

 

+++ Now, a practical, personal note +++

 

 

Remember, the Hobby is only part of your life.  The most important part, sure!  But everything else, things you take for granted, things you never really think of, will go up way more than Warhammer.  As a barometer, just keep an eye out for even gas prices, which should NOT be affected much, but will be.  Canary in the coal mine.

 

I did not work in Equities (I was Mergers & Acquisitions, yes, I know I'm a total bastard), so even now I was trained never to comment on buying or selling stocks.  If you hold GW stock, remember you're STILL getting good dividends.  But if you ever thought of being a GW part-owner, a GW shareholder, wait and see.

 

I hold no GW stock, have no financial relationship with GW aside from being a Warhammer player.  But things drop, then drop again, then rebound.

Edit - I just thought of something, it's a zero-cost thing you can do:

 

U.S. Frateri, maybe ask your American FLGS, "How can we support you?"

 

You probably have to do NOTHING extra.  You're just asking, not committing to anything, if they give reply.  They'll just think, "Huh, Warhammer CUSTOMERS have always supported us."  They might ask their GW reps, how are they supporting their customers in this time.

 

My closest Warhammer/D&D friends and I kept a bar open by just going there once a week during the pandemic era.  It wasn't simply that we drank like a fish (even though we did).  It's that by being regulars at that time, we gave the bar's manager an excuse to tell his boss to keep it open.

 

For a FLGS owner, it's not just a tax or more expensive minis, it's their business, it's livelihood.  Just 1 question, "Are you okay?"

Edited yesterday at 07:40 AM by N1SB

[AenarIT]

I fear @N1SB is a bit too optimistic on this, and that GW's response will be much simpler.

"Well, there's a 10% tariff on the US, so we'll have to raise US prices by [insert value here]% to offset that, alongside Canadian prices since our NA logistic hub is in the US. Sorry", but said in the usual corporate jargon. 
As for how much, my guess is 15%+, certainly not less. 

I also think that they'll jump at the opportunity to raise prices globally by at least 5%.

As N1SB said, they already can't stock up on many kits without having them fly off the shelves. I'm sure they know they'll keep selling whatever they produce even in face of just another price hike. 

 

I also do not think they won't use the end of their fiscal year (end of May) to do it, as they always raise prices during this time of the year. We'll know soon enough.

 

I certainly hope to be wrong, but I'm not really holding my breath.

 

EDIT: one thing to add. How many of the currently sold books in the US are printed in China? How much of the random hobby accessories (dice, etc) are made there? Because the new tariff on China is not just 10%...

Edited yesterday at 08:54 AM by AenarIT

[Captain Idaho]

@N1SB

 

What you say is spot on except this one aspect I'd like to raise in contention - greed. GW will not waste an opportunity to put prices up world wide when they can hand wave the excuse "it's the US tariffs affecting everything."

 

In the UK, the Labour government has introduced increased costs to employers through National insurance rises, business rates rises, rent increases due to various new requirements and the ever present energy price rises. April is seeing many of these things coming into effect, those that didn't since the budget last year.

 

GW are maintaining their above average, profit margin by quite a large margin and will continue for as long as they can get away with.

 

I'll bet 10 bolter shells that by May, June at the latest, there will be price rises and GW won't wait and see.

Edited yesterday at 09:32 AM by Captain Idaho

[Emperor Ming]

GwHQ: excellent time for reciprocal reciprocal price hikes!

 

[templargdt]

Looks like I finally might get around to ebaying my huge pile of shame for a good profit!

[darkhorse0607]

2 hours ago, Captain Idaho said:

@N1SB

 

What you say is spot on except this one aspect I'd like to raise in contention - greed. GW will not waste an opportunity to put prices up world wide when they can hand wave the excuse "it's the US tariffs affecting everything."

 

 

So I fully expect that the hand-waving could be their response. It's just more that I'm hoping their cost/benefit analysis steers them away a little bit (or gives them at least more caution) because I don't know if this can be viewed (but I'm no finance wizard so it doesn't really count for a lot) as a simple hand wave and "people will get over it"

 

On one hand, yes, they can say that "we have so much confidence in our consumers that YOLO raise prices by 5+% (I can honestly see it going up to 15% once the normal price rises are taken in)." We already know that GW strategy revolves around recruiting new hobbyists, and while yes they want to retain the old ones, they bank on getting new ones for growth.

 

That's kind of the issue though I think. During the pandemic, sure, people were looking for stuff to do and that led to GW doing well

 

But will they do as well if they raise prices by 5-15%, with this current situation, possibly alienating the consumers they already have (contrary to what they might think, consumer sentiment is a real thing, and even if some people understand why the prices are going up, I believe it's more likely it rubs some salt in an already fresh wound), and not making it as palatable for new folks?

 

Again, during the pandemic I get it, makes total sense that GW did well, even with raising prices. But this is different.

 

Other option is to finagle it somehow (lowering the rates that FLGS can sell at a discount for example, increase shipping prices, etc), and just have the normal yearly increase

 

I dunno, like I said up top, I fully expect "YOLO 15%" to be the answer. This is a massive corporation after all. But I also think that could be shortsighted if this situation (to try to use a non-profane and non-political phrase) doesn't resolve itself fairly quickly

 

At the bare minimum though, I do wonder if this might cause them to rethink the "every new release has to be a several hundred dollar massive box" strategy though

[Vassakov]

2 hours ago, Captain Idaho said:

@N1SB

 

What you say is spot on except this one aspect I'd like to raise in contention - greed. GW will not waste an opportunity to put prices up world wide when they can hand wave the excuse "it's the US tariffs affecting everything."

 

In the UK, the Labour government has introduced increased costs to employers through National insurance rises, business rates rises, rent increases due to various new requirements and the ever present energy price rises. April is seeing many of these things coming into effect, those that didn't since the budget last year.

 

GW are maintaining their above average, profit margin by quite a large margin and will continue for as long as they can get away with.

 

I'll bet 10 bolter shells that by May, June at the latest, there will be price rises and GW won't wait and see.

 

I actually fundamentally disagree with the first bit. Both the UK and US Governments are taking actions which impose substantial additional costs on businesses, either native or foreign. Those costs will, inevitably be passed on to the consumer. I'm afraid that's just how it is - there is absolutely no moral or fiduciary duty on businesses to simply ignore or absorb these costs and the likely impact of them was very, very obvious to anyone paying attention.

 

There are plenty of reasons to be annoyed and angry at corporate greed, but when governments decide to impose additional costs on businesses... point the anger your elected representatives. Especially when the consequences are this clear cut.

 

[Captain Idaho]

Games workshop operates a higher proportion profit per item than even average for highly successful businesses. They could absorb their costs from any tariff rises, the increase in UK issues including National Insurance rises and energy costs, yet still make profit above and beyond the average.

 

Seriously, look it up! Average profit margins for companies is 5-10%. Now check out Games Workshop's...

 

The problem we have is the culture of the consumer base puts up with it. Nay, not just puts up with it, but defends and excuses it. This isn't directed at anyone specifically in this conversation, rather the usual staunch defenders you'll get on any forum or Facebook group.

 

It's not the fault of just recent tariffs imposed. Indeed, the move to "green energy" in the UK has seen massive price increases so should we blame the UK government too?

 

Nothing exists in a vacuum but all of these additional costs can be absorbed by Games Workshop and they'd still make above average profits.

 

***

 

Moving on - been thinking about GW future events and operations...

 

If the US market is it's fastest growing market or largest, beyond even the UK, then a corporation with responsibility to shareholders would logically be better off building production facilities in the USA.

 

Energy costs are 6 times lower in the US compared to the UK, so logically even at 10% tariffs Games Workshop would save money importing TO the UK from the USA over the current methods.

 

What's more, with such a focus on production and Amazon deals... doesn't it make sense to be based in the USA anyway? At least on a medium to longer term basis?

 

I seriously think this is a future consideration. If I was a shareholder who cared about the bottom line and didn't even know what a Warhammers was, I'd want my investment to maximised for minimal cost.

 

Interesting times forward. If we get an announcement of a US factory we'll definitely see this move happen in time.

Edited yesterday at 01:53 PM by Captain Idaho

[phandaal]

15 hours ago, Wormwoods said:

Hope you Americans are ready to really, intimately understand what it's like to be Australian!

 

Question - how can you paint while holding on to the bottom of the Earth? Is it like a koala on a tree branch?

[ZeroWolf]

46 minutes ago, Captain Idaho said:

Games workshop operates a higher proportion profit per item than even average for highly successful businesses. They could absorb their costs from any tariff rises, the increase in UK issues including National Insurance rises and energy costs, yet still make profit above and beyond the average.

 

Seriously, look it up! Average profit margins for companies is 5-10%. Now check out Games Workshop's...

 

The problem we have is the culture of the consumer base puts up with it. Nay, not just puts up with it, but defends and excuses it. This isn't directed at anyone specifically in this conversation, rather the usual staunch defenders you'll get on any forum or Facebook group.

 

It's not the fault of just recent tariffs imposed. Indeed, the move to "green energy" in the UK has seen massive price increases so should we blame the UK government too?

 

Nothing exists in a vacuum but all of these additional costs can be absorbed by Games Workshop and they'd still make above average profits.

 

***

 

Moving on - been thinking about GW future events and operations...

 

If the US market is it's fastest growing market or largest, beyond even the UK, then a corporation with responsibility to shareholders would logically be better off building production facilities in the USA.

 

Energy costs are 6 times lower in the US compared to the UK, so logically even at 10% tariffs Games Workshop would save money importing TO the UK from the USA over the current methods.

 

What's more, with such a focus on production and Amazon deals... doesn't it make sense to be based in the USA anyway? At least on a medium to longer term basis?

 

I seriously think this is a future consideration. If I was a shareholder who cared about the bottom line and didn't even know what a Warhammers was, I'd want my investment to maximised for minimal cost.

 

Interesting times forward. If we get an announcement of a US factory we'll definitely see this move happen in time.

Worth pointing out that GW have stated why they like their profit margins that high, so they have that 3 month worth safety cushion should things take a wobble. For those 3 months, everything is paid for. Plus GW like paying out everything in cash apparently, and don't tend to act unless the money is already there to pay for it. Like during covid where they paid back the government's covid a couple of months after getting it.

 

Regarding a USA factory, if I recall correctly, it was mused before but didn't amount to much as the people with experience that GW wanted to send over there, didn't want to go. There was also something about the cost of transporting master moulds as well (and dangers that entailed) but I don't know how much of the digital age has lessened it but probably not a great deal.

[Robbienw]

Good luck US fans.

[Captain Idaho]

Excuse the tongue in cheek response...

 

3 minutes ago, ZeroWolf said:

Worth pointing out that GW have stated why they like their profit margins that high, so they have that 3 month worth safety cushion should things take a wobble. For those 3 months, everything is paid for. Plus GW like paying out everything in cash apparently, and don't tend to act unless the money is already there to pay for it. Like during covid where they paid back the government's covid a couple of months after getting it.

 

Well once they got the surplus cash, that can sit in a bank account and lower our prices then because they don't need to do it year on year forever right?

 

I don't buy that as an excuse. Companies have surplus of cash sure, but they don't get that surplus with a profit margin like GW.

 

And where is this surplus? How much is it? What do they do with the excess?

 

And most importantly, do shareholders not get dividends because of it then?

 

3 minutes ago, ZeroWolf said:

 

Regarding a USA factory, if I recall correctly, it was mused before but didn't amount to much as the people with experience that GW wanted to send over there, didn't want to go. There was also something about the cost of transporting master moulds as well (and dangers that entailed) but I don't know how much of the digital age has lessened it but probably not a great deal.

 

Yeah years ago, before this big tariff hike world wide it was speculated on the Internet. Now circumstances are different.

[AppleCrumble]

Given the context I think a 10% increase on Warhammer might be the least of your worries. 

 

If we are only talking about the Tabletop space though (paints as well as models), most companies produce outside the US, and if they are from Europe or Japan the potential percentage increase could be higher, because the tariff is higher.

 

What table top games are made in the US? Battletech? You could all switch to Battletech Gothic! 

Edited yesterday at 03:35 PM by AppleCrumble

[Robbienw]

The cost of setting up a factory that could produce the entire range in the US would be incredible.  They’d have to duplicate every mold for every kit.  I know the steel molds for plastic costs less than it used to, but still!

[Evil Eye]

Speaking as a denizen of Soggy England, whilst I think a US manufacturing centre would be a good idea, I hope it doesn't completely replace the factory we have here if only because Warhammer is one of the last things actually made in the UK. The last British steel plant closed down very recently, and we've got bugger all left on this island. Though frankly with the way things are going at the moment I wouldn't object to the US annexing us anyway.

[Robbienw]

That would be the end of Warhammer if it ended up not being based in England, a massively undesirable outcome.

[N1SB]

My dyslexic brain conflated the words "reciprocal" and "YOLO" into "reciprocYOLO" tariffs.  Which is kinda appropriate.

 

The UK government is already talking to the US government.  You'll probably see these exemptions, these carve-outs, in action soon.  Probably something like UK mechanical components that go into cars, for US car manufacturers...because those are 2 very influential industries in their respective countries, I dunno.

 

I'm not talking politics, I'm just talking operationally, how these things shake out.  It's something to look out for confirmation.

 

There is a thing where the U.S. judicial system can do something to delay or prevent the tariffs, but that's a borderline topic I'll avoid going into, if only because I only have this Junior High Social Studies' level of understanding of it.   We're just talking Warhammer, I'm good with that!  But there are way broader issues.