Hornby 2014 - A fatal sting for retailers?

[Mike at C&M]

Last week we got an e-mail from Hornby which stated:
   Please note, we have made several amendments to our pricing policies for 2014 in a bid to make it easier to understand. Therefore we strongly advise you review the pricing in detail prior to issuing any communication to your consumers.
 
At around 10 a.m. this morning, our new release lists came through and the first thing to be noticed was that there was no recommended retail price on the lists, which definitely does not make it easier to understand. Time to look deeper.....
 
The results should strike fear into any retailer who stocks Hornby, and those customers who look to get discount from their retailer, including the box shifters.

 

IN MANY CASES, THE PROFIT MARGIN GIVEN TO ANY Hornby RETAILER WHO SELLS AT FULL RRP HAS BEEN HALVED!
  
Therefore any one who discounts as a matter of course would have their margins reduced even further if they continue to sell at a discount. The squeeze on retailers has just been tightened at a time when many are already struggling and need to encourage as many customers to buy from them as possible by being competitive.

 

As a business man, my aim has to be to make a profit, and it is my choice that I choose to do it be selling model railways. Is it time to re-assess that decision?

[Red Baron]

Do you offer any proof to substantiate this?

[Mike at C&M]

You will need to take my word on this, as I am not prepared to quote values and percentages.

 

The trade prices I have used are on the listing sent to us by Hornby this morning, and the RRPs have been taken from the Hornby website for newly announced items, compared to items which we have bought during 2013.

[woodenhead]

So you are saying that Hornby are expecting its retailers to absorb a price hike by maintaining headline RRP but increasing the trade price?

 

Is the margin even less on the new sound locos?

[Mike at C&M]

Woodenhead,

  Without looking at the detail, I do not know if there is a general increase in RRPs, although this is the opportunity that Hornby usually use to nudge prices up.

 

  The one example I have just looked at is the BR 52XX tank, where we have a 2013 release and a 2014 announcement, and the RRP has remained the same at £119.99. We, however are being asked to pay a sizeable increase in trade price to stock this (again, I will not give the details as I consider this to be confidential to the trade).

 

  A quick look at one of the new sound locos shows the margin offered to traders is the same as for other locomotives.

[woodenhead]

Ok, I was just wondering if they were disguising the cost of the sound chip on the new range by having you absorb it, but if it is across the range then it is just a general price rise with retailers being forced to absorb.

 

But like you say it is the smaller outlet who will feel this most whereas a big shifter can use other lines to make up the loss.

[bike2steam]

Never did like dealing with Hornby, that's why I swapped buying from them to going through the wholesaler AB Gee, it was much easier to get Hornby from them than Hornby themselves. But I do find it difficult to believe that Hornby would make life even harder for the trade at the moment, by decreasing the markup. Most, if not all smaller retailers get the same wholesale deal from Hornby, although I often let the reps know that I thought the big boys got a better deal - which he vehemently denied, but he was a bad liar, the smile always gave it away.

[Andy Y]

Do you offer an proof to substantiate this?

The evidence that I've seen on pre-order prices from boxshifters backs up Mike's statement. On the plus side for independent retailers it looks as though there will be less of a differential between the boxshifters and the independent so although the margin between trade and RRP may be less there may be better sales volume to be had.

[47423]

 ATW 67002 is listed on Hattons as £108 and the newly announced 67003 is £129.80 !! HST packs from £160 to £194 too

[Legend]

Wouldn't this be consistent with Hornby offering its goods direct from concessions or their website.   Increasing the price to retailer while maintaining RRP reduces the profit margin, therefore less scope for discounts,  Box shifters and the smaller retailer then have the same price as (the full price) concessions where Hornby make more money (by cutting out the middleman or retailers profit and keeping it to themselves). So in effect Hornby are saying stop giving discounts, or at least restricting the ability of the small retailer to give one, making them less attractive to buy from.

 

I think this action is entirely consistent with Hornbys policy ,not at all surprised ,and I don't like it as what it will do is eliminate the small model shop.

[bigherb]

 

The evidence that I've seen on pre-order prices from boxshifters backs up Mike's statement. On the plus side for independent retailers it looks as though there will be less of a differential between the boxshifters and the independent so although the margin between trade and RRP may be less there may be better sales volume to be had.

There's always a back story.

[JimC]

If the vast majority of their retailers discount RRP then you can hardly blame them for making the assumption that the retailers consider the margin too generous and adjusting accordingly. Offering bigger discounts to the boxshifters on the other hand stinks IMO, for all its accepted and standard practice, but maybe I'm just biased because of past experience in another line of business.

[Joseph_Pestell]

This is worrying for the hobby as a whole.

 

The hobby can only survive if there are new entrants. And new entrants need well-stocked local model shops where they can get advice. Kill that off and leave only the boxshifters in place and the hobby will decline just as it did in France.

[shortliner]

"Design Clever" does not appear to have fed through to the Marketing Division, and would appear to be leading to a reduction in their retail outlets - not a sensible marketing strategy, I'd have thought

[APOLLO]

Just looked at Hattons forthcoming releases prices.
The Hornby 9F Railroad Crosti is £111. Nearly twice the cost of the railroad 9F a year or so ago. Not many forthcoming bargains it seems.

I will therefore choose future purchases very carefully at these sort of prices.

Anyone any idea of production batch sizes of these future models?

I doubt the likes of Hattons will be piling em high and selling em cheap anymore.

Brit15

[orford]

Frankly I don't care what they cost, nor whether I get a discount or not.

 

At long last us Great Eastern guys finally have our J15 ....and I already have three of them on order with Hattons and a D16/3 by way of a bonus.  Yippie !!

 

That is all that matters.

 

I can absolutely assure you all, after 30 years of modelling in 'O' Scale,  they are literally 'giving away' 'oo' locos at the current prices, when you bear in mind the detail levels we are getting now, to those of a few years ago. 

[APOLLO]

They are certainly not "giving away" reduced detail Railroad models. (and if the Crosti is fully detailed, why is it in the Railroad range ?).

 

Brit15

[farren]

Frankly I don't care what they cost, nor whether I get a discount or not.

 

At long last us Great Eastern guys finally have our J15 ....and I already have three of them on order with Hattons and a D16/3 by way of a bonus.  Yippie !!

 

That is all that matters.

 

I can absolutely assure you all, after 30 years of modelling in 'O' Scale,  they are literally 'giving away' 'oo' locos at the current prices, when you bear in mind the detail levels we are getting now, to those of a few years ago. 

you may be lucky enough not to worry about the cost at the moment, but many Do care with the cost of ever thing going up and shops closing all the time then the number of sails will fall which can only push up prices. will you still be buying as many locos with the average  electric/gas bill expected to be £2500 £2800 by 2020. food up too I would think Toy trains will be forgotten about  for many.

[frobisher]

Just looked at Hattons forthcoming releases prices.

The Hornby 9F Railroad Crosti is £111. Nearly twice the cost of the railroad 9F a year or so ago.

To be fair, you have picked on an oddity there. The previous 9F was always going to be a high volume seller, the Crosti not so much and it's left with recouping its tooling costs pretty much on its first production run. Hence two liveries in the first year, (which only differ at the final stage of the painting process (crest and numbers) so if your normal batch size is 500, it would make two lots of 250 viable as you'd just have to split the production run into two piles for the finishing part of the painting process and maybe run one extra paint station for each of the loco plus tender at that point), because let's face it anyone who really wants these won't just be buying one.

 

 

They are certainly not "giving away" reduced detail Railroad models. (and if the Crosti is fully detailed, why is it in the Railroad range ?).

I suspect because if it was in the main range there would be a whole bunch of people moaning about it reusing an "obviously Railroad" chassis that is somewhat devoid of detail compared to Bachmann's 9F. Looking at the EP, it's the only thing in common with the previous 9F - everything else is newly tooled, or on loan from the Britannia. So it's actually quite high end Railroad

[Retro_man]

On the one hand, those traders who need a higher margin to cover their costs are going to be hurt, or have to start charging more than RRP.

On the other hand, the box shifters will not be able to cut as much possibly making the spread between high street and box shifters less which may push some trade back to the high street.

All this is assuming that the box shifters are getting the same discount from Hornby as the high street traders and not getting extra volume discounts.

Of course we don’t know yet what Hornby are planning on pricing at their retail store or their concessions.

Traditionally they have sold at full RRP but more recently have been cutting prices a lot...

[The Stationmaster]

First I would say that I don't doubt one little bit what 87029 is saying as I have also heard it from other sources in the retail trade.  But the key thing about it is that it has some  potentially far wider effects than simply a reduction of the gap between 'usual' retail prices and RRP as it potentially gives Hornby a price and profit advantage when selling directly or through its concession outlets - which is somewhat at odds with the statement some while back from Roger Canham that the company cares about its retailer network.

 

We might well guess at Hornby's motive and several scenarios - apart from direct sales - come to mind such as the move to more carefully targetted marketing for the various markets (possibly linked with producing in smaller quantities for the 'modeller' market and thus maintaining overall margins by 'imposing' sales at/very close to RRP level), or even attempting to move the retailers away from dealing directly with Margate and putting them onto the wholesaler.  

 

It would be helpful if Hornby were to clarify its policy although it is understandable that they would need to be careful what they say about the relationship between an indicative RRP and what retailers would effectively be forced to price at.  I wonder if we are in fact witnessing the start of a major change in Hornby's marketing philosophy where they will deliver the modellers' aspirations for, basically, a wider variety of potentially less marketable locos but at a price level which will cover the investment through comparatively low sales volumes (compared with the way Hornby have worked in the past) with relatively consistent retail pricing across all outlets?  In other words they are almost working, or aspiring to work, like the model commissioning market as well as telling us that if we want these things we're gonna have to pay their price for them and we can forget pile it high and sell it cheap prices.

 

In some respects the end of deep discounting was already coming, the writing has been on that wall for a while now but it is unfortunate that in possibly aiming to deal with that Hornby are potentially  also hitting the model shops which are still the backbone of our hobby.

[Red Baron]

The evidence that I've seen on pre-order prices from boxshifters backs up Mike's statement. On the plus side for independent retailers it looks as though there will be less of a differential between the boxshifters and the independent so although the margin between trade and RRP may be less there may be better sales volume to be had.

 

 

Thanks  - this now makes the OP make sense.

[Dunsignalling]

you may be lucky enough not to worry about the cost at the moment, but many Do care with the cost of ever thing going up and shops closing all the time then the number of sails will fall which can only push up prices. will you still be buying as many locos with the average  electric/gas bill expected to be £2500 £2800 by 2020. food up too I would think Toy trains will be forgotten about  for many.

Now I'm no longer working, I don't expect to buy as many new locos as I have in the past, anyway.

 

Frankly, I'm glad I'm not into BR(ex-GE) I couldn't really afford everything I would want if it all arrived too close together. A couple of 700s will do me nicely, though.

 

Hobbies aren't the only non-essential spending; rises in basic living expenses will also hit a lot of other "discretionary" purchases, such as replacing "dated" household appliances before they actually cease to work.

 

Everybody has their own limits (which change over time) and has to decide their own priorities; I'll take some model trains over a new telly any day.

 

John

[DaveF]

If discounting by everyone is limited by a reduced margin then surely the difference between  "box shifters" and "model shops" won't differ by more than now, all prices will rise.  

 

I prefer to use my local model shop as it is a pleasant afternoon out and I can do other shopping or visits at the same time, so I can forget the petrol cost.  Everything I buy I can see first, I can have locomotives tested, if a fault develops it is easy to return the item (once in over thirty years).  Fortunately my local shop generally keeps most things in stock from the ranges he stocks.

 

For those complaining about prices just look at prices for many items in Europe - and when you take the body off the chassis is often no better than ours, nor if you know the prototype, are they much more accurate models in many cases.

 

David

 

Edit.  At one time part of my family was in the photographic trade.  In the 70s many shops were selling SLRs at only just above cost price, all the profit came from film, D&P, and accessories.    Think now how few photographic retailers are left.  That is what can happen as a result of prolonged deep discounting.  Remember, the decline started long before digital photography came along

 

David

[andyman7]

There are two viewpoints here - the first is that this further accelerates the erosion of the local model shop as a viable entity. However, to be frank, that concept has ceased to exist for many people already.

 

Where there is still an opportunity for a brand with the sort of recognition that Hornby has is to persuade a least a few high street retailers to carry their stock. Where that has foundered in the past is where such outlets charged list price or similar, and found that their sales were cannibalised by box-shifters. If you can bear to look through the several dozen pages of the 'Modelzone' thread, an awful lot of people said that they liked browsing in MZ but would then buy from Hattons or Rails. This leads me to the second viewpoint which is that by following this strategy, stockists such as WHSmith and Hawkins' Bazaar (who are dipping their toe in the water by stocking Hornby) will benefit from sufficient sales to maintain the shelf space in their shops - because when I or someone else sees a new release I like in there, I might actually buy it there and then.

 

Of course, I'd be happy to support my local model shop, but I don't exactly have one any more, so it is more logical for me to support where I can any convenient local retailer that chooses to carry Hornby.

 

The other factor here is the squeeze on margins from inflation in the supply chain. To be honest, if the goods cost more from China but the market won't accept a commensurate price rise, then something somewhere is going to give!