Hornby discounts

[locomad]

 

On the other hand, you could argue that a modern locomotive is worse value for money, because it is likely to be less robust than in the past and there is no guarantee that if you need repairs you will be able to get the parts.

Fully agree with this and once a brand or a particular model get a bad reputation either as a very poor performer or has a particular fault then the second hand value falls to nothing.

 

Take the second hand value for say mainline locos with split axles from the 70's & 80's beautifully detailed bodies yet most failed after a few years, most ended up in the scrap bins.

 

Then you have the "wiser" or "careful" buyer someone who hears or reads that a particular model has a fault they just look elsewhere, in the past model press afraid of losing advertising kept quiet, not now with the internet. The "careful" buyer with years of experience tends to wait, they might hope prices fall, buy other models, makes even change gauge.

[caradoc]

I agree. I remember the days when if you wanted something that was in the catalogue then you could go to your local shop and actually buy it. If they didn't have it then they would get it in.

 

But you try and tell the young people today that... and they won't believe ya'.

 

 

 

Jason

 

But in those days the choice was so limited; If you modelled BR blue in 1972, for example, you had a choice of D5572, D6830 (with Class 31 bogies and a huge slot in one end), and a Class 08 which from the age of about 10 I realised was not quite right. And those same models, with the same running numbers, were in the catalogue for years. Compare that to the incredible variety available to us now.

 

As regards discounting, everyone loves a bargain, and personally I find that a 'sale' often encourages me to buy something I would not have considered getting, at all, at full price.

[Dunsignalling]

Don’t forget that storage is not a free option.

Covered in the preceding sentence of my post.

Edited October 18, 2017 by Dunsignalling

[Dunsignalling]

But maybe there is not so much stock in the warehouse considering that the last regime also tried to reduce stock and indeed sold off large chunks at a discount. So maybe now it's bottomed out. The secret is then to make the correct amount of new stock to prevent a further build up, in fact ideally not have stock at all,but have a sell out.

 

I agree from Hornbys point of view they need to extract the maximum amount of cash from the enthusiast to help their profitability. To me this means new models where they can actually charge a premium for it, not further releases of K1s etc . There is an essential truth that some locos can be repeated every few years e.g. Kings, Castles, MNs , WCs , A3,A4 Duchesses and Black5s . Ironically more mundane locos like J15s , Drummond 700s ,S15, k1s ,B17s. Probably not. What they also need to realise , though, is the enthusiast is not a bottomless pit. There is a limit to what they will pay. Judging that sweet spot is what it's all about

Also, of course, there comes a point when we have enough examples/variants of a particular model. 

 

The S15 is one of my favourite locos, and Hornby's model is superb, but three Maunsell S15s are pretty much all (if not more than) I'll ever need, operationally, and it would have probably been just two without the hefty discounting.  

 

Mind you, if there turned out to be a Urie one in the 2018 catalogue, that would change my outlook somewhat........... 

 

John

Edited October 18, 2017 by Dunsignalling

[Ian Hargrave]

Legend's "sweet spot" observation is exactly right.But is it now rather "raw nerve" we are touching  and a "glass ceiling" with pricing ? A posting has already pointed out the rrp cost of the "Final Day" LMS Scot 6108..an image of which now sits in front of me as I type this.Ironically (?) it's described on the Hornby ad as R3385TTSSound Black 5.Someone get a grip,please. Seriously I would love one of these but I'd be losing my grip on reality and sweet reason if I parted with THAT amount of money for a revamp that's been in the catalogue for a decade..even at a 20% discount. One has to wonder and it pains me to say it...for how long are these going to be sitting on shelves much as I applaud the CEO's decision to terminate deep discounting and appreciate exchange rate problems and supply cost increases ?

[DCB]

The answer is to bring production back into the UK and have a dedicated facility working 45 weeks of the year producing stock which is pre ordered by retailers instead of stuffing a container with Chinese imports and basically dumping them on the UK market for what ever they could get for them.  Which was not much when they missed the Christmas market a couple of years back.   Maybe stuff a container with Chinese low end Railroad "Smokey Joe's" and 4 wheel carriages and Thomas stuff every October to keep the kiddies interested or get a few more hooked.

But a loco which doesn't have to be dismantled and rebuilt before it will pull trains shouldn't be beyond them, Hornby Dublo managed it, and one of theirs will pull two modern Hornby backwards...

[Clearwater]

Covered in the preceding sentence of my post.

Not fully. You say it “may” be cheaper but offer nothing to support the assertion. From the outside and without access to their costings, you simply can’t tell.

 

However the strategy of holding stock until you reach your target sale price feels to me risky. Each period you hold it for will increase the cost of the item and thereby reduce your ability to discount should you want to shift the stock at a later point. A stock sale at a loss is a one-off hit against which you have an ongoing stock saving. Warehouse capacity will be finite. At what point are you physically full? If you have to firesale at that price point, then what?

 

Also, the amount of cash you are tying up in stock increases to the detriment of working capital/net debt. Of course, at the point you bust your lending covenant again, the “value” of your stock is likely to be impaired. Also, in NPV terms, holding stock long term at say a 10% discount rate may not add up. Crudely, if your stock is worth £100 in a fire sale to box shifters today, you’d have to be sure of getting at least 100/0.909 (a one year discount factor at 10%) to be financially neutral. Divide by 0.909 gain to get the figure if selling at 24m etc. If the product hasn’t sold this year at a price that’s too high for the market (see comments across this site on rtr rrp) it’s a ballsy call to expect to do better in 12/18/24 months later.

 

That said, if you’re faced with a situation where your minimum production volume is greater than what you think you can sell to the market, you have little option but to store but you should be buildin that into your day 1 costings. Again, it comes back to sizing the production runs appropriately.

 

The holding stock strategy may work as part of a run down of existing stocks to sustainable levels but I’m not convinced it’s a viable model going forward.

[Fireline]

The answer is to bring production back into the UK and have a dedicated facility working 45 weeks of the year producing stock which is pre ordered by retailers instead of stuffing a container with Chinese imports and basically dumping them on the UK market for what ever they could get for them.  Which was not much when they missed the Christmas market a couple of years back.   Maybe stuff a container with Chinese low end Railroad "Smokey Joe's" and 4 wheel carriages and Thomas stuff every October to keep the kiddies interested or get a few more hooked.

But a loco which doesn't have to be dismantled and rebuilt before it will pull trains shouldn't be beyond them, Hornby Dublo managed it, and one of theirs will pull two modern Hornby backwards...

 

I presume you would be happy to pay the price for the UK made locos, which is likely to rise severely. Chinese costs may be rising, but they are still well behind those in the UK. Oh, plus Hornby would presumably want to off-set the cost of shipping all their toolings back from China, which would push the cost up further. I am afraid that this is the sort of thinking that made Ratners what it is today....

[Guest Midland Mole]

The answer is to bring production back into the UK

 

NEVER going to work! Most people who suggest this as a good course of action have no idea of the costs involved of producing items in this country. You think locos are expensive now, you would be looking at around 3 or 4x the price if said loco was made here to the same standard. Are you going to pay upwards of £350-400 for a King or a Duchess just because it is made here? The hobby would die overnight if everyone moved production back here now.

 

Alex

[JSpencer]

Fully agree with this and once a brand or a particular model get a bad reputation either as a very poor performer or has a particular fault then the second hand value falls to nothing.

 

 

 

The Heljan Beyer-Garret seems to be an exception to that rule.

 

Mainline locos re-appeared under Bachmann re-motored and then later still were completely retooled so not surprised their value is not so great in the secondhand market. Wrenn remain a mystery though given that everything they did (except an R1) has been replaced by modern tooling. I expect these to collapse at any moment.

 

That said Hornby/Bachmann stuff I brought 10 years ago makes more money now secondhand than I paid for them. Time to retire??

[The Stationmaster]

Agreed... we'll see in a year or two's time. Made me wonder how much stock Oxford carries - they may have a more relaxed attitude to clearing stock levels and be happy to hold until it sells.

 

It all depends what the stock is, and how much they are carrying finance wise by not selling it off.

 

Deep discounting is highly dangerous thing in my view but doing sales the Bachmann way might work if all retailers get a crack at ordering some and they can then average their own retail prices to avoid losses - but they are then carrying the cost of the stock.

 

It really comes back to what I and others have said in the past - the market has changed and Hornby has to change its ways with the market.  The company has to be nimble and fleet of commercial foot which means getting the models right and pricing them right to get a return on the investment and Hornby seems - in some areas - to be too top heavy or 'organisation bound' to be able to do that.  But I do hope this change won't mean the end of investment in hi-fi models which have been properly researched, one OxfordRail is quite enough for me.

 

Incidentally when viewed against inflation the general situation with prices is that they ware not particularly excessive - it's more a matter of bigger numbers due to inflation rather than anything else.  True the way in which income has had to be used has changed over the past decade but again in reality it is little more than moving back a bit, and not necessarily a lot, towards the sort of percentage splits on outgoings that were around earlier in the post WWII period.  This doesn't go back very far but it shows some interesting numbers and comparisons

 

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/bulletins/familyspendingintheuk/financialyearendingmarch2016

[Dunsignalling]

Not fully. You say it “may” be cheaper but offer nothing to support the assertion. From the outside and without access to their costings, you simply can’t tell.

 

However the strategy of holding stock until you reach your target sale price feels to me risky. Each period you hold it for will increase the cost of the item and thereby reduce your ability to discount should you want to shift the stock at a later point. A stock sale at a loss is a one-off hit against which you have an ongoing stock saving. Warehouse capacity will be finite. At what point are you physically full? If you have to firesale at that price point, then what?

 

Also, the amount of cash you are tying up in stock increases to the detriment of working capital/net debt. Of course, at the point you bust your lending covenant again, the “value” of your stock is likely to be impaired. Also, in NPV terms, holding stock long term at say a 10% discount rate may not add up. Crudely, if your stock is worth £100 in a fire sale to box shifters today, you’d have to be sure of getting at least 100/0.909 (a one year discount factor at 10%) to be financially neutral. Divide by 0.909 gain to get the figure if selling at 24m etc. If the product hasn’t sold this year at a price that’s too high for the market (see comments across this site on rtr rrp) it’s a ballsy call to expect to do better in 12/18/24 months later.

 

That said, if you’re faced with a situation where your minimum production volume is greater than what you think you can sell to the market, you have little option but to store but you should be buildin that into your day 1 costings. Again, it comes back to sizing the production runs appropriately.

 

The holding stock strategy may work as part of a run down of existing stocks to sustainable levels but I’m not convinced it’s a viable model going forward.

The problem is that widespread and deep discounting also affects models that aren't reduced to clear and even new ones yet to be released..

 

It seems that an expectation of substantial discounts has grown up, not without justification, which causes significant holding back of purchasing by some (even, occasionally, me). The result is a vicious circle; discounting leading to slower sales of non-discounted items, leading to more discounting ad infinitum.  

 

There are so many variables in play that costing how they all interact is probably not achievable to even one decimal place (unlike the cost of storage) but those near the sharp end will have a fairly strong instinct about the overall effect.

 

The cost of holding back unsold stock will cause some, relatively short-term, pain but Hornby really need to interrupt the cycle and make deep discounting the exception, rather than the rule if they are to thrive.

 

I use a modest sized self storage facility from time to time, which probably costs, per cubic metre, a lot more than Hornby will be paying. A few minutes on the calculator, working out the number of loco-sized boxes it would take to fill it entirely, came out at around  0.5p per loco per month. Even if this ploy were only to reduce the bigger discounts from £40 t0 £30, that seems cost effective.   

 

John

Edited October 18, 2017 by Dunsignalling

[darren01]

At least it will give a level playing field for other shops, by not dropping a load of stock at a few shops, so a good thing.

[Ian Hargrave]

At least it will give a level playing field for other shops, by not dropping a load of stock at a few shops, so a good thing.

If indeed that is what happens in practice.

[bike2steam]

New boss, new ideas - yeah, let's see how long this one lasts!! How many actual model railway enthusiasts are at the top of Hornby these days ??

[JSpencer]

Legend's "sweet spot" observation is exactly right.But is it now rather "raw nerve" we are touching  and a "glass ceiling" with pricing ? A posting has already pointed out the rrp cost of the "Final Day" LMS Scot 6108..an image of which now sits in front of me as I type this.Ironically (?) it's described on the Hornby ad as R3385TTSSound Black 5.Someone get a grip,please. Seriously I would love one of these but I'd be losing my grip on reality and sweet reason if I parted with THAT amount of money for a revamp that's been in the catalogue for a decade..even at a 20% discount. One has to wonder and it pains me to say it...for how long are these going to be sitting on shelves much as I applaud the CEO's decision to terminate deep discounting and appreciate exchange rate problems and supply cost increases ?

 

I think when the CEO terminated deep discounts, he mean't avoid selling off remaining stocks rapidly with little or negative margins in order to rapidly recover cash. I don't think he will be stopping the retailer discounting as they see fit.

 

When models were cheap and highly detailed, there were no complaints. Now the same item are around 3 times what they were 10 years ago.

So we now see a debate between those willing to pay to have the finest detail possible and those whom are not and believe things can be scaled back (but not to railroad levels).

 

Each new model thread has a 1) great model, the cost is not an issue for me Vs 2) I have always wanted a XXXX but the cost is too great for me.

 

Our manufacturers have to find a balance between the extremes, a hard thing that could quite easily end up upsetting both groups by producing a model that is still too expensive for some and being not detailed enough for others.

I'm in a pick'n'choose phase today whereas I used to buy nearly every release.

Edited October 18, 2017 by JSpencer

[Clearwater]

John

 

I think there are two distinct points:

1) does overproducing and subsequent deep discounting to reduce stock cause a problem

2) is it profitable to store stock to create value. Within this point, there’s a sub point as to how you handle stock you already have and how you build up a price for a new production run that you intend to sell over a three year and not three month period.

 

On the first, I fully agree with you. They have to break the cycle and allow stock outs to occur and for customers to miss out on something they wanted. That sounds harsh but only if the buying public realises that if they can’t get their goody after a few months at a lower price, they’ll all be gone. In millennial speak create some FOMO.

 

On storage, your price point is interesting. On an item that is say £100 wholesale (not sure what rrp would be but at least £130 Id guess), what is Hornby’s margin? Say £50 (ie illustratively £100k cost to get model developed and landed divided by a 2000 production run). £1 storage doesn’t sound huge but is equivalent to 2% of margin. Not wholly immaterial though I take your point not penal.

 

However, the cost of not getting your money for a couple of years is huge. In the pic below, taking 100 as the cash you would have received, I’ve shown on the x axis the potential extra profit for storing the item and selling after two years. On the y axis, different discount rates. Even at a 5% discount rate, you’d have to be getting a >10% uplift in average price achieved. For 10% discount rate, you’re in the mid 20% price uplift over the fire sale proceeds.

 

It’s crude back of envelope analysis and I’m sure lots of holes can be poked but shows the time value of money clearly.

 

As you say, there are a lot of other factors involved. This is a pretty fine margin business which currently is loss making. The balance between lowering unit cost and production is complex. I suspect a storage model probably makes most sense for models like 4472 where you know you’ll sell x thousand per annum and can safely commit to larger production runs to bring down the average cost.

[JSpencer]

One could argue that outsourcing their warehousing is an error as it puts pressure on Hornby to move stock quickly. But these are items that may need to sit around for a year.

 

Most new comers are not going to understand the "grab the model now before it sells out" philosophy that currently exists in the market today. In fact most will blindly put off the purchase to just before their birthday or Christmas to be a present from a loved one.

You then have bread and butter items such as track that they should keep in stock and available all year round ready for those regular orders. I personally found it odd that Hornby had fire sales on flocking! A cheap enough item which will never benefit from deep discounting and something they need to keep all year long.

 

I conclude that in the main, they have items which can pass through an outsourced warehouse quickly, but they equally have others which would be more economic by being in house.

[Legend]

New boss, new ideas - yeah, let's see how long this one lasts!! How many actual model railway enthusiasts are at the top of Hornby these days ??

Well he's from the industry , so knows a fair bit. Better than any of the previous incumbents. The trick is , of course, to be an enthusiast and have buisiness acumen , other wise the next locos going to be a Bullied Leader

Edited October 18, 2017 by Legend

[locomad]

The Heljan Beyer-Garret seems to be an exception to that rule.

 

Mainline locos re-appeared under Bachmann re-motored and then later still were completely retooled so not surprised their value is not so great in the secondhand market. Wrenn remain a mystery though given that everything they did (except an R1) has been replaced by modern tooling. I expect these to collapse at any moment.

 

That said Hornby/Bachmann stuff I brought 10 years ago makes more money now secondhand than I paid for them. Time to retire??

The Heljan beyer-Garrett was a limited production run, when it was announced everyone I seemed to know plus myself expressed an interest, those I do know who purchased one seemed to stick it in a glass wall cabinet.

 

Myself I built a k's one 40 years ago, but it didn't work using the k's motors, well before the release I converted it using two triang chassis and 2 X04 motors, very powerful, looked good, so was happy with that. I've also an unknown converted Hornby Dublo 3 rail one which is a real beast, but the body is not as good as the k"s version.

 

Going back to the Hornby discounts, I rarely visit model shops they just don't exist, nearly all my buying is done at toy fairs or model railway shows, less now the toy or model fairs as they all seem to be box shifters. At model railway shows I often find a mix of second hand and box shifters, given the fact I've a dozen or so modern locos already and some have given us problems, I am more likely to spend cash on us, on older tatty Hornby-dublo, wrenn, triang stock cause I know any faults I find will be easier to fix.

 

I'am also interested in fine "O" guage, yes it's slightly more expensive but some locos not much more, they are more reliable, you don't need as much stock because of the room, purchase just what you need or to plan and it's very much the trend of my generation

[Trains4U]

At the risk of sounding like a broken record...

 

Hornby need a consistent core range.   which must include high and low spec Mallard, Flying Scotsman and Tornado.  Current mainline trains (HSTs/Pendo/800) as affordable sets, consistent Thomas stock, dare I say it, pecketts?  All available, all the time.  

 

The Lima HST for example, is a reasonable model.   Slapping Virgin East Coast colours on it may not be prototypically correct, but a lot of 10 year olds and their dads won't care.  Its an HST that looks like the one they went to London on, and its under £100.

 

They also MUST MUST MUST look at the prices of their accessories.   these have been subject to broad-brush-beancounter price increases for years and years and years.   A plastic platform section (RRP £6.99) or point motor switch (RRP £11.49) should be no more than £2.50 - £3.50 each.    Economies of scale would quickly kick in if these were appropriately priced.   I sell maybe 15 or 20 point switches a year.   If they were £3.50 each, I'd sell that many, perhaps more, every week.  as it is the sales go to Expo or Peco instead.

 

I asked the marketing director last year if he has ever gone around and evaluated the phyiscal product in his hand before looking at the RRP (in this case a plastic platform section) and he said no.    I suggested it would be a worthwhile exercise - do all of the products they sell command the prices suggested?

 

 

Some of the recent product decisions astonish me.  Why, for example, was the railroad class 90 released in Mainline livery (Which no-one really liked at the time the real locos were built) when it could have been Freightliner, or EWS or Greater Anglia?  Why is the GWR HST a limited edition?   Why not paint some Mark 4s to go with the VEC 91s they made?

Why are they not increasing production runs of Pecketts?   Why not re-release the items that really are selling, or which will compliment other products in the range?

 

Hornby should also follow Bachmann in reducing output.     The market is close to a precipice of diecast bus proportions, especially as models from the 2000s are now coming back into the market in larger numbers, models are not thrown away as often, they have residual value and the used market is burgeoning - sales of used models have boomed, stripping sales of new models to a fraction of the volume of only 5 or 6 years ago.

 

A shake up of pricing, rationalising ranges, introducing some consistency and cutting down on deep discounts would all help (in my opinion)

 

But what do I know?

Edited October 18, 2017 by Trains4U

[Edge]

I still fully expect Hornby to have stuff available at a steep discount in the black friday sales in about a month. 

[Legend]

Gareth for CEO . Completely agree . You are absolutely correct, slap on VTEC livery and GWR onto their Railroad HSTs regardless of how accurate they are and they would sell. . The VTEC class 91 pack sales , has got to have been affected by the fact you couldn't buy more coaches. It certainly put me off, and the really stupid price it was released at.

[Trains4U]

Gareth for CEO .

 

Thanks for the compliment, but I'm not sure my shoulders are quite that broad 

[Legend]

I've always thought that their track and accessories were over priced. But I thought they used the profit generated by them to subsidise other areas . You are correct though it's difficult to view a £6.99 platform pressing, I think last updated in 70s for brick effect, as being anything other than complete rip off.