Hornby discounts

[Clearwater]

I don't know if will amount to any large discounting, or dumping of stock, but Hornby will have a second and separate stand at Warley in a couple of weeks time.

It's listed on the show guide as "Hornby Sales".

 

Is it an attempt to emulate Bachmann's exhibition sales effort?

 

.

I don’t think you can infer that. I think “sales” in this context means to retail as opposed to a discount to rrp

 

David

[Ron Ron Ron]

I don’t think you can infer that. I think “sales” in this context means to retail as opposed to a discount to rrp

 

David

 

 

Infer what?

If you read what I said, I asked if the Hornby Sales stand was (quote) "an attempt to emulate Bachmann's exhibition sales effort? "

i.e. Carrying out direct retail sales at the show.

 

The preamble was written with regard to the topic of this thread (i.e. context).

I said I didn't know if the presence of this stand would amount to any discounting or dumping of stock.

 

 

n.b. From the show plan (hall layout), although not that far away, the Hornby Sales stand (A37) appears to be separate and located away from their main stand (A18).

 

edit: I also note that Bachmann's sales stand will be on the opposite side of the hall to their main stand.

 

 

 

 

.

Edited November 8, 2017 by Ron Ron Ron

[RAF96]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

[Coryton]

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

I'm not sure what you mean by the "true market value".

 

What you describe as the "try-on" price is how companies normally set prices.

 

They might well have a target for profit (reasonable or otherwise) but they won't use that to set prices by adding it on to their manufacturing costs; they'll work the other way - work out what they could sell it for and only make it if that will leave them with enough profit.

[Western Dave]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

No company in any trade is ever going to reveal that information, its called market forces/commercially sensitive

 

If you don't like what the price is don't buy it and wait to see if the prices drops in the future if it does not sell out. Also why shouldn't large trade purchasers

(like box shifters) get a bigger discount? its just a different business model

[adb968008]

Every model has its price.

Every model also has a reputation.

 

If it’s reputation is seen as being easy, in every shop window and sold cheap.. people don’t care, don’t look and dont rush.

If it’s reputation is seen as being hard, not available and not discounted, people make huge efforts to find them and buy it ASAP.

 

One creates a downward spiral, the other creates an upward spiral.

 

2017 Hornby has done well, Pecketts, MN’s and now H and Duchesses seem to be selling out fast.

 

Next step for Hornby is to raise the price a little further, as after all if people are buying SWS for £250 on ebay, why should Hornby be selling them for less ?, similarly reducing that supply incentives that increase too... eventually they will find the upper limit, they already found the lowest one a few years back... £89 is too cheap for a tender engine, as years on B1’s, K1s still Line some shelves.

 

Every model is different. But there’s few complaints of 250 NCiM models at £189, so that barrier is successfully attained, if they sell out, then try either 500 at £189 or £220 for 250 ?

 

There’s a saying in sales, start high bargain down, as if you start low you can’t bargain higher.

Edited November 9, 2017 by adb968008

[JohnR]

 

Love this bit in the Article .Finally, the engineering advances has meant that the time getting a product to market has decreased, it took a year back in the 70’s. Today, give me a subject and the motivation and I could get it to market in 6 months.

 

I dont think it only took a year to get a product to market in the 70s. It may well have taken a year from the announcement of a product in the catalogue in January, but there would no doubt have been a lot of work done before that announcement - including what we would call "engineering prototypes" now. Several of them are illustrated in Philip Hammonds books on Triang and Rovex. 

[John Tomlinson]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

 

Yes this would be fascinating, but as noted a bit later its not going to happen because of commercial sensitivity.

 

You beg the question of what is the "real price to produce and market", actually you never really know this until all the sales of a product are in, because the true cost includes an allocation to each unit of the costs that aren't production specific, including design, research, tooling and any marketing specific to that particular range. I suspect that as with many household items the marginal cost of production of one item is actually quite low compared to RRP, but to compare the two if known would be very misleading.

 

I'm rather inclined to agree with "Western Dave" above, unless you happen to be a shareholder your concern here is as a consumer, in the short term hoping to buy at as low price as possible, in the longer term hoping the company survives and introduces more goodies to be bought in the future!

 

John.

[Coryton]

Next step for Hornby is to raise the price a little further, as after all if people are buying SWS for £250 on ebay, why should Hornby be selling them for less ?, similarly reducing that 

 

Are enough people paying that on ebay to sell a whole production batch at that price?

[Legend]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

 

Id really love to see that too, but it would be commercial suicide to release that , so no chance I'm afraid

[Andy Hayter]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

 

As others have said Rob, dream on.

 

The availability of a single bit of that data to others is so valuable that it is never going to happen.

 

We can however get some very broad brush numbers for information that has been put into the public domain.

 

Hornby group have in the past published data on their Gross Margin as a percentage.  Typically 42-48%.  This is a group number and the number for all of the groups products and model railways might be a bit different.

 

I have also seen numbers for the gross margin for retailers  in the region of 25-30% - and before any of those retailers on here say, "I wish", this is a broad brush number - and again covers all products sold. not just Hornby.

 

Please remember that Gross margin is the difference between what it costs to buy and what you get to sell.  It is NOT profit.  Gross margin has to pay for wages, rent, insurances, development costs, rates, distribution costs, interest and repayments on bank loans, taxes (never forget the taxes) and 101 other things.

 

So if we take Hornby's GM as 45% and the retailers GM as 25% we can do some very rough number crunching.

 

For a £120 model (sold to you), From this you gratefully granted £20 to the government as VAT; the retailer got £100 the retailer bought this for £80 (important to remember the 25% is based on the £80 purchase cost and not the £100 sales price).  

So the retailer got £20.to cover his costs

 

Hornby bought this item at £55.17 and sold it for £80.   So Hornby got £24.83 to cover its costs.

 

All very broad brush but lets now add some spice to the numbers.

 

Discounts:  you bought you £120 model at a discount which means the list price (which if you buy from Hornby via their website will be higher than the £120 unless there is one of their historic sales.  This reduced sales price is built into the retailers' margin.  If they sold at RRP they would have more margin, but probably fewer sales.  Is it better to sell 10 units at RRP, 100 units at 5% discount or 1000 units at 10% discount?

 

"Box Shifters":  I assume by bulk buying that they get an advantageous purchase price.  This takes a slice off Hornby's margin - so for these guys Hornby gets less, which means for the small trader Hornby gets more - perhaps it is 40% for the big guys and 50% for the small traders.   The big guys get an advantageous purchase price, but they have to have bigger storage to hold the bigger volumes they sell, they need more sales staff and that means more offices and that means more business rates for bigger premises.  They sell at a (perhaps) bigger discount than the small guy, so for each model instead of the £20 that we saw above as money to the retailer they may only make £10 and this has to cover more staff, more buildings (bank loans), higher rates, a higher wage bill etc.   So they absolutely have to sell many more models just to cover their costs.  

[Chamby]

I would like to see a comparison of actual price to market (i.e the real cost to produce and market any product) from any manufacturer alongside their RRP (which few people ever have to pay), the price to small retailers (your local model shop) and the large volume discount price (mega box shifters). Then you could assess the mark up for these sales outlets and see where your money is going.

 

Every time I see a flag price of £-any.99p on any product it immediately warns me it is a marketing department try-on price, based on what they think a punter is prepared to shell out for this product regardless of its true market value (i.e real production cost plus a reasonable profit).

 

Not that it will ever be possible to achieve this comparison of course.

 

​Rob

 

 

Even if you had this information it would be meaningless.   There are so many overheads that may or may not be included in the overall cost base, from HR to IT to marketing to finance to premises to distribution...  to say nothing of internal or cross-divisional transfer pricing...  all of which are discretionally large, small or negligible depending on how the business is run.   So you would never be comparing like with like, as different companies will account for all of these things differently.

 

Phil

[adb968008]

Are enough people paying that on ebay to sell a whole production batch at that price?

Time will tell.

 

But at Christmas last year no one thought anyone would pay more then £100 for a peckett.

 

Pecketts have consistently sold for a Packet all year, with >£150 being the norm.

I could imagine a Peckett holding an rrp of £125 for a while.

I think the shortcoming was announcing an Rrp for the second batch, if they had issued an announcement but held back price, like Bachmann, it would give them time to assess and determine an optimum price.

Edited November 10, 2017 by adb968008

[RAF96]

What an interesting set of responses to my 'knew it could never happen' wish - thank you for the insights.

 

...  to say nothing of internal or cross-divisional transfer pricing...​ 

 

Ah the corporate wooden dollar - seen it many times in industry 'twixt divisions and even departments within a division. I never knew we could make money just by pushing stuff round the factory.

 

​Rob.

Edited November 11, 2017 by RAFHAAA96

[jjb1970]

I'm not aware of many retail goods which base pricing on a cost+ model. Indeed in many sectors (such as fashion, cosmetics) the retail price is completely divorced from the cost of manufacturing and distribution, and people are basically paying for expensive marketing that has persuaded them to buy the product. Oddly enough those sectors with the greatest gap between cost to produce and cost to buy don't seem to really face the sort of price complaints we see in our hobby. Indeed it seems that a large part of the appeal is derived from the high cost and marketing as it promotes a feel good factor and makes people think they are a cut above.

I am a cycling enthusiast with a liking for steel framesets. The cost of high end steel frames would be considered outrageous by a detached, rational observer and you are basically paying for inefficient production and paying over the odds for something worse than aluminium or carbon fibre yet I have no regrets about my steel frame and do not feel short changed. Sometimes prices are less important than if you like something and can afford it.

My model train poison is brass HO, I would never try to defend the cost of brass models in rational terms but I don't regret the money I've spent (wasted?) on the products of the good people of Overland, PFM, Tenshodo, Fulgurex etc. However, neither do I swallow some of the reasoning for price hikes we have been fed by model train providers and magazines. My objection to much of what I've read and heard is not so much about the price, but about some of the arguments defending prices. I am happy to accept the price is what it is but is a supplier offers a public statement on why prices are what they are then they can't really complain is that statement is analysed. I've received legal coaching a couple of times and a recurring theme is do not go beyond what is needed and if you can do it with a monosyllabic answer then use a monosyllabic answer to minimise the risk of providing an opportunity to the other side or contradicting yourself. I can't feeling that a "less is more" approach would be better for model train supplier communications on the subject of prices.

On the question of cost plus, having worked on reimbursible contracts I don't think anything inflates cost quite like a cost+ system.

Edited November 11, 2017 by jjb1970

[jjb1970]

Here is an interesting perspective from an audio equipment manufacturer I like:

 

http://www.schiit.com/about/about/on-deals

 

The example of Schiit (yes, it is pronounced in the way you're thinking, and yes it was deliberate) is that if the product is good and offers good value then people will buy it without needing gimmicks (other than their brand of humour...) and big discounts. Which is hardly a revelation as that's the secret of many good companies. What is notable is that they achieve extremely competitive prices and manage to supply US made high-ish end audio equipment for prices way, way lower than "audiophile" high end brands at least partly by using a direct sales model and cutting out the retailer margins.

[Coryton]

Here is an interesting perspective from an audio equipment manufacturer I like:

 

http://www.schiit.com/about/about/on-deals

 

The example of Schiit (yes, it is pronounced in the way you're thinking, and yes it was deliberate) is that if the product is good and offers good value then people will buy it without needing gimmicks (other than their brand of humour...) and big discounts. Which is hardly a revelation as that's the secret of many good companies. What is notable is that they achieve extremely competitive prices and manage to supply US made high-ish end audio equipment for prices way, way lower than "audiophile" high end brands at least partly by using a direct sales model and cutting out the retailer margins.

 

If the company name is an example of their brand of humour, then I'm not sure I would get on with it.

[jjb1970]

If the company name is an example of their brand of humour, then I'm not sure I would get on with it.

Schiit are a great outfit, their product sells itself and their irreverent approach to things is very reminiscent of Jason at Rapido. My only issue is that I had to invent a very Germanic sounding way of pronouncing Schiit to explain the name of some gear I bought to my two kids.......

[Ron Ron Ron]

http://www.schiit.com/home