Musings on Rapido

[JSpencer]

We can actually compare a striped down model with a fully assembled model. Dragon, Trumpeter do have some models available as kits or ready made. A striped down model is about 60 to 70% of the price.

 

I pick Dragon in particular because there are complex 250 part model tanks in 1/72nd scale. Note you have to paint and apply decals yourself with the kit. The prices of these kits have tripled in the past 10 years like trains.

 

How many would buy a modern model train as a box of 300 plus bits for assembly at 70% of the price?

 

The china price increases already put a strain meaning projects had to run on time or face reduced margins because of delay. Bachmann got round that by not stating the price until release though with risk that retailers might find themselves stuck with cancelled orders!

Brexit and Trumo have thrown in some wild cards for the next few years meaning that projects are likely to be put on hold until the storm clears and the waters calm.

 

There are clearly signs the price increases and now uncertainly plus too many makers causing saturation and duplication is making it hard to get full order books:

The Stirling single lost one tender option

The HSDT is postponed

The Pendolino might now make a loss

The Hattons King now postponed and handed over to DJM for possible consideration as general release (though most likely N gauge only)

The fact some manufacturers are have shown little news on some projects until finances are recovered, also points that things are not selling as fast as hope. While some manufacturers high ticket items have sharply ended in the bargain bin to recover cash...

 

The problem is, no product means no business and making product for a loss also means no business... A tough choice!

[dibber25]

 

An interesting news letter for sure. The argument about pricing won't go away, and given the price rises we've seen in recent years I think it would be unrealistic to expect prices not to be a recurring topic for discussion in the hobby. I'm conflicted really. There can't really be any dispute that a currency devaluation of the magnitude and speed of that which hit sterling last year will have a sharp impact on any companies manufacturing overseas. Also, there is no dispute that living standards in China have been rising and wage inflation over there is real. Yet for all that, companies still control their own costs (or should) and the costs of development and design in particular are a variable under the control of the supplier, whilst factory prices will also be subject to all sorts of variables. Manufacturing is like many other things in that the end cost is largely determined by managerial skills, technical efficiency and how smart the process is (in particular, designing in ease of manufacture). There are very few genuinely fixed costs in any business and different companies will expect different margins and will have very different internal cost bases. So it is far more complex than just pointing to a devaluation of sterling and wage inflation in China. There is an assumption that if a model is not viable for one manufacture then it is not viable, I work in an industry where there is a whole sector which specialises in buying assets and operations from majors who cannot operate them profitably and making a tidy profit out of it. There is also a bit of a contradiction in a lot of the debate. Note, this is not aimed at Rapido or this newsletter, but traditionally many have pointed to the effort needed to assemble ever more finely detailed models as a major engine of rising prices, yet then we're told that making a stripped down model is no cheaper. There is something of a contradiction there.

For all that, my own opinion is that if you like a model, you think it is fair value and can afford it then buy it. I think any hobby is about much more than £ or $ signs. On the other hand, if people do not think a model offers value or that it is over priced then my advice is not to buy.

I question whether it is really within the power of companies to control costs at the design and development stage. Let's take a typical project for a commission customer.

2)You can limit the cost by getting the commissioner to do the research and supply the drawings, photographs and research material, or (if practical to do so) the 3-D scan. However, that has always been a requirement, so manufacturers have not normally carried that cost anyway. If it's your own project you have to carry that cost - skimp and you face item 3.

3) You still - as designer - have to assimilate and understand the supplied research material. That's designer time/cost. If you skimp it you then get issues with detail etc which will be expensive to correct later. If you decide not to correct them, you get slated on a certain forum and you risk loss of sales to a segment of your market.

4)You still have the cost of design. Each project usually has just one designer. His time costs money and a member of staff is reckoned to cost two-and-half times his salary (that's provision of equipment, office space, NI employer's contributions etc). You can reduce the time he devotes to the project but you come back to item 3. You can cut his pay, but he'll probably leave if you do.

5) You can 'streamline' the sampling process before production by such things as eliminating second livery samples but you risk faults slipping through and you come back to item 3.

6) You can pare down your margin (your profit over cost) but you quickly reach the point where you are getting little or nothing out of the deal and you may, in any case need to keep that option open to deal with other factors such as currency fluctuations.

As the customer, you can decide whether or not you can afford something. That's very different from deciding it's over-priced. Unless you know the costs involved, you can't know if it is over-priced or not. One of the problems in model railway manufacturing at present is the belief in some quarters that manufacturers are making big bucks out of producing model railways. The truth is very different and model companies large and small are operating on the basis of juggling cost and quantity and in the end - hoping that they get the quantities right on the big sellers and, particularly, on the not-so-big sellers. That's why you're seeing projects put on the back burner or scrapped altogether and why duplications such as the 'King' are such a potential disaster. (CJL)

 

[jjb1970]

 

I question whether it is really within the power of companies to control costs at the design and development stage. Let's take a typical project for a commission customer.

2)You can limit the cost by getting the commissioner to do the research and supply the drawings, photographs and research material, or (if practical to do so) the 3-D scan. However, that has always been a requirement, so manufacturers have not normally carried that cost anyway. If it's your own project you have to carry that cost - skimp and you face item 3.

3) You still - as designer - have to assimilate and understand the supplied research material. That's designer time/cost. If you skimp it you then get issues with detail etc which will be expensive to correct later. If you decide not to correct them, you get slated on a certain forum and you risk loss of sales to a segment of your market.

4)You still have the cost of design. Each project usually has just one designer. His time costs money and a member of staff is reckoned to cost two-and-half times his salary (that's provision of equipment, office space, NI employer's contributions etc). You can reduce the time he devotes to the project but you come back to item 3. You can cut his pay, but he'll probably leave if you do.

5) You can 'streamline' the sampling process before production by such things as eliminating second livery samples but you risk faults slipping through and you come back to item 3.

6) You can pare down your margin (your profit over cost) but you quickly reach the point where you are getting little or nothing out of the deal and you may, in any case need to keep that option open to deal with other factors such as currency fluctuations.

As the customer, you can decide whether or not you can afford something. That's very different from deciding it's over-priced. Unless you know the costs involved, you can't know if it is over-priced or not. One of the problems in model railway manufacturing at present is the belief in some quarters that manufacturers are making big bucks out of producing model railways. The truth is very different and model companies large and small are operating on the basis of juggling cost and quantity and in the end - hoping that they get the quantities right on the big sellers and, particularly, on the not-so-big sellers. That's why you're seeing projects put on the back burner or scrapped altogether and why duplications such as the 'King' are such a potential disaster. (CJL)

 

 

That assumes that their is a standardised, non-alterable way of doing a task. In any process all of the things you mention can be performed in an almost infinitely variable number of ways depending on the productivity of people and processes, the quality of tools available and how a business is managed. This is not about doing less, it's about doing the same with less effort. I know that is a groan inducing management cliché, but too many people and businesses base their analysis of how well they do things by input rather than output. For example in terms of people, Joe Blogs is great, he's there first thing every day, doesn't take a break, last one out etc, model employee, when the more appropriate thing to consider is what does Joe Bloggs actually do when he is there and is that of any value? In terms of process, looking at man hours, tracking time & work orders etc rather than analysis what the business is producing and quality. The sort of pressures facing model railway producers are no different to any other manufacturing sector. We have to move away from thinking that model train production is somehow different. Of course the product is different but it is a manufacturing, distribution and sale process the same as any other. If you go into any successful business of that type I suspect in the great majority of cases the concept of fixed costs would be an anathema as almost all costs are controllable and monitored closely. I fully accept that there is genuine inflationary pressure pushing model prices up, I don't accept that all of those inflationary pressures are beyond the control of producers. The obvious one is not designing in ease of manufacture.

[cheesysmith]

I was just looking at said newsletter and was thinking do they have a supplier who has the preserved RDC on this side of the atlantic? Just thinking that there may be a few over here prepared to buy some to help with the preservation of the real thing.

[Legend]

That assumes that their is a standardised, non-alterable way of doing a task. In any process all of the things you mention can be performed in an almost infinitely variable number of ways depending on the productivity of people and processes, the quality of tools available and how a business is managed. This is not about doing less, it's about doing the same with less effort. I know that is a groan inducing management cliché, but too many people and businesses base their analysis of how well they do things by input rather than output. For example in terms of people, Joe Blogs is great, he's there first thing every day, doesn't take a break, last one out etc, model employee, when the more appropriate thing to consider is what does Joe Bloggs actually do when he is there and is that of any value? In terms of process, looking at man hours, tracking time & work orders etc rather than analysis what the business is producing and quality. The sort of pressures facing model railway producers are no different to any other manufacturing sector. We have to move away from thinking that model train production is somehow different. Of course the product is different but it is a manufacturing, distribution and sale process the same as any other. If you go into any successful business of that type I suspect in the great majority of cases the concept of fixed costs would be an anathema as almost all costs are controllable and monitored closely. I fully accept that there is genuine inflationary pressure pushing model prices up, I don't accept that all of those inflationary pressures are beyond the control of producers. The obvious one is not designing in ease of manufacture.

You obviously come from a manufacturing background and quite a large company too I'll wager. I also work for a large corporation where it's all about Continuous Improvement and reducing unit costs . That's not to say we don't increase prices but the accent is very much on mitigating increases or finding another way to do it.our customers just dont accept huge increases like 20% for the last three years in one manufacturers case. I just feel model railways is a peculiar market where a proportion of the market appears to accept ever increasing prices on the basis that it would cost them a fortune to make a kit. Very true but these aren't kits but bulk produced items. We need to exert consumer price pressure or the prices just keep going up. Edited February 5, 2017 by Legend

[jonklein611]

Where I'd disagree with Rapido is the idea that since the skills base is in China then the jobs won't return to the USA. I'm not saying the jobs will return to the USA, but if there was a sound argument for manufacturing in the USA then you'd build the necessary skills. I've seen processes way more technically demanding than making models and where the necessary technical skills are extremely demanding where established players assured the world there was no way those processes could be done elsewhere which were mastered very quickly by new players if the figures make sense.

 

It's not an issue of skill base, it's wage based.  You'd have one heck of a time getting North American based employees to assemble model trains for the wages paid in China.  As Jason has said before, the prices of their models would triple if they used North American labor (or labour, depending on which country you're in).

[Stanley Melrose]

And yet - it's some years since I read that if Apple doubled the wages of all their production workers, it would not increase the manufacturing cost by more than a couple of percentage points.  That's why Trumponomics is rubbish.  He can try and force US companies to bring back all the production he likes but that won't make many jobs as most assembly is robotised, even in China.  There'll perhaps be a few menial jobs driving fork-lift trucks to accompany those watching the automated assembly lines but there won't be thousands of jobs - and those that are created will mostly be low-paid.  Even the Chinese are shifting production of (relatively) labour-intensive work to other countries.  Some of these worry about their costs - e.g. Vietnam concerned that Cambidia or Laos will take jobs they have worked hard to get.  Then some of the poorer South American countries will bid for jobs and Africa is already on Chinese minds.

 

Stan

[Gerald Henriksen]

I was just looking at said newsletter and was thinking do they have a supplier who has the preserved RDC on this side of the atlantic? Just thinking that there may be a few over here prepared to buy some to help with the preservation of the real thing.

 

Looking at the webpage for it indicates that it is not available from retailers but must be ordered direct from Rapido:

 

http://rapidotrains.com/ho-scale-absolute-rdc-project-exclusive/

 

However the last UK newsletter did deal with ordering direct from Rapido for UK customers:

 

http://myemail.constantcontact.com/Rapido-News-UK-Vol--10.html?soid=1101318906379&aid=6dazJANxFxE#direct

[Talltim]

I agree that designing and manufacturing model railway items isn't unique from the point of the management and skill sets required. However it's a small luxury market, but without the advantages that brand and exclusivity normally give the producers.

[Gerald Henriksen]

There is also a bit of a contradiction in a lot of the debate. Note, this is not aimed at Rapido or this newsletter, but traditionally many have pointed to the effort needed to assemble ever more finely detailed models as a major engine of rising prices, yet then we're told that making a stripped down model is no cheaper. There is something of a contradiction there.

 

That isn't what Jason said.

 

To quote from the newsletter:

 

"The margins on our Prime Movers line are very small. If you weigh the extra sales we got due to the lower price against the higher margins of our regular line, it's a wash."

 

 

 

In other words, in order to make the cheaper price point one of the things done was to reduce the $ amount of profit per unit sold compared to a normal model.

 

Now that can work if the increased sales mean you overall make more money, but in this case sales increased only enough so that the model will make the same profit as a regular model.

 

So in summary, yes the model was cheaper to produce and sell.  However, it didn't result in increased profits.

 

[edited: - for those unaware the current prices are (non-DCC) $225 for a regular model and $160 for the "basic" model]

Edited February 6, 2017 by Gerald Henriksen

[jjb1970]

It's not an issue of skill base, it's wage based.  You'd have one heck of a time getting North American based employees to assemble model trains for the wages paid in China.  As Jason has said before, the prices of their models would triple if they used North American labor (or labour, depending on which country you're in).

 

From the Rapido newsletter:

 

The possibility of stiff tariffs being imposed on imports from China to the United States is another thing that has all of us model train manufacturers worried. I understand and respect the desire to balance the trade deficit between the United States and its trading partners. But model trains have primarily been built in China since the 1980s.

 

The core of the industry - and thus the talent and experience - has been based in Guangdong province in southern China for over 30 years. We can't bring these jobs back to Canada and the United States because they were never here to begin with. Here's why:

 

In recent years our hobby has evolved from shake-the-box kits to museum-quality models with incredible, prototype-specific detail. This has only been possible due to the talents of the very experienced engineers in the model train factories combined with a much lower cost of labour in China than in North America. It takes about eight hours of work to trim, paint, print, assemble, test and package a typical Rapido model. Obviously it will never be cost effective to do that assembly work in Canada at $15/hour. The assembly cost alone of a $110 retail model would be $120!

 

Underline added by me. So yes, clearly there is a cost issue but the newsletter also points to a skills issue. The skills issue would probably be addressed if the economics made sense. I don't deny that it is unlikely the wage gap will close anytime soon but the newsletter does make clear it is not just a wage issue.

 

[jjb1970]

That isn't what Jason said.

 

To quote from the newsletter:

 

 

In other words, in order to make the cheaper price point one of the things done was to reduce the $ amount of profit per unit sold compared to a normal model.

 

Now that can work if the increased sales mean you overall make more money, but in this case sales increased only enough so that the model will make the same profit as a regular model.

 

So in summary, yes the model was cheaper to produce and sell.  However, it didn't result in increased profits.

 

[edited: - for those unaware the current prices are (non-DCC) $225 for a regular model and $160 for the "basic" model]

 

My post did say that my comments was not aimed at Rapido or this newsletter. That said there is a contradiction in that one minute we are told that all those fine details pump prices up, but then we're told that it would be no cheaper to offer basic, stripped down models. I actually admire Rapido for being honest enough to say it is about margins, I think they're the only supplier that has been honest enough to say that.

[Clearwater]

Let's be glass half full on this. If fewer model imports to the US, those factories can attack the back log of uk models!

[JSpencer]

The train market is probably not big enough for any manufacturer to invest in the required skills and infrastructure required to produce then elsewhere.

 

This is before you face production costs which are knowingly more.

 

Now in many markets designing for ease of manufacture helps. In the train market, that resulted in design clever with a drop in fitted details. Which caused some grief amongst purists.

[The Stationmaster]

I agree that designing and manufacturing model railway items isn't unique from the point of the management and skill sets required. However it's a small luxury market, but without the advantages that brand and exclusivity normally give the producers.

 

And a further problem is the ever increasing level and accuracy of detail the market seems to demand.  That doesn't just impose a research cost but can inevitably impose a design and manufacturing cost as ways are found to minimise the amount of tooling needed to produce such variations.

[jjb1970]

The train market is probably not big enough for any manufacturer to invest in the required skills and infrastructure required to produce then elsewhere.

 

This is before you face production costs which are knowingly more.

 

Now in many markets designing for ease of manufacture helps. In the train market, that resulted in design clever with a drop in fitted details. Which caused some grief amongst purists.

 

Design clever should have been a statement of the obvious in that products are designed for ease of manufacture. Unfortunately because Hornby did it in an especially cack handed way on some of the design clever era models the concept became toxic (although the SR EMUs worked pretty well IMO) yet the real question is why any manufacturer wouldn't design in ease of manufacture. This does not have to result in visible compromises, the object is to cut costs and ease manufacture without the customer noticing you've done it.

[Gerald Henriksen]

Design clever should have been a statement of the obvious in that products are designed for ease of manufacture. Unfortunately because Hornby did it in an especially cack handed way on some of the design clever era models the concept became toxic (although the SR EMUs worked pretty well IMO) yet the real question is why any manufacturer wouldn't design in ease of manufacture. This does not have to result in visible compromises, the object is to cut costs and ease manufacture without the customer noticing you've done it.

 

Hornby's "design clever" wasn't really about ease of manufacture but rather attempting to use the same model to server both the railroad and high detail markets, and was doomed to failure because you ended up with a model that had compromises from both markets.

 

I am guessing anyone involved in actually making model trains is getting a good laugh if they are reading this because I really don't think they go out of their way to make manufacturing difficult.

 

The biggest costs (in China) for our models are the molds and assembly.  With a "basic" model where you either leave details off entirely or mold them on you obviously get savings on the assembly labour, but once you get into the highly detailed models that most of us want there is no way to get around a (relatively) high labour cost.  You simply can't get around the time it takes for an employee to put all those details on to the model, the multiple passes required for accurate liveries, etc.

 

Look, our hobby is small, and we are talking about production runs in the thousands not hundreds of thousands.  This rules out a lot of the automation that is transforming a lot of manufacturing because it simply isn't cost effective (if at all possible) for the small production runs.

 

As for moving production back to North America or Europe, it's not just the high labour costs but the lack of the "infrastructure" - the motor / paint / packaging / etc suppliers - who are all close by making sourcing of required inputs easy.

[jjb1970]

Design clever wasn’t just about sharing a common base model between the Railroad and main ranges, it also included use of moulded details, down spec’ing the motors, deletion of bearings and replacement with Mazak slots etc. Some of those things can work, I’ve found that the Hornby flywheel fitted three pole motors provide wonderfully quiet and smooth performance and personally if it is a cheaper solution then it seems a perfectly good drive arrangement. Ditto for moulded on details, provided it is well done then moulded details can work perfectly well, Hornby dropped a klanger by moulding on crude smokebox darts, the cab side handles of the Star etc. which stuck out like a sore thumb. Yet for all that, many HO suppliers are very adept at using moulded on detail without detracting from the appearance of models. Sometimes the desire to use separate parts and brass grills and such like for everything can end up looking worse than a well done moulding as things can end up looking overscale and cluttered.

On manufacture, it’s important to remember that plenty of model trains are made in Europe, maybe not so many in the UK but certainly in Italy (ViTrains) and Eastern Europe (Roco and others). I agree that the viability of a location is about much more than salaries. I work in an industry where differences in salary aren’t that important as the less obvious cost differences (social security, tax liabilities, energy costs, regulation etc) far outweigh the obvious salary differences. Many Asian workers are on similar salaries to those in the more established economies (often more in the cases of Japan and Singapore) but they are still very competitive in the overall cost of business and often their workers are more productive. For all that, if the economics of moving production back to the USA or UK added up (and at the moment they don’t) then the business eco-system would also develop. And despite a lot of scare stories, our economies are nothing like as devoid of manufacturing as we are sometimes told.

[JSpencer]

That assumes that their is a standardised, non-alterable way of doing a task. In any process all of the things you mention can be performed in an almost infinitely variable number of ways depending on the productivity of people and processes, the quality of tools available and how a business is managed. This is not about doing less, it's about doing the same with less effort. I know that is a groan inducing management cliché, but too many people and businesses base their analysis of how well they do things by input rather than output. For example in terms of people, Joe Blogs is great, he's there first thing every day, doesn't take a break, last one out etc, model employee, when the more appropriate thing to consider is what does Joe Bloggs actually do when he is there and is that of any value? In terms of process, looking at man hours, tracking time & work orders etc rather than analysis what the business is producing and quality. The sort of pressures facing model railway producers are no different to any other manufacturing sector. We have to move away from thinking that model train production is somehow different. Of course the product is different but it is a manufacturing, distribution and sale process the same as any other. If you go into any successful business of that type I suspect in the great majority of cases the concept of fixed costs would be an anathema as almost all costs are controllable and monitored closely. I fully accept that there is genuine inflationary pressure pushing model prices up, I don't accept that all of those inflationary pressures are beyond the control of producers. The obvious one is not designing in ease of manufacture.

Hornby in the 1990s (and before, right back to Triang in fact) were designed for ease of manufacture and even ease of maintenance. The resulting models (called toys in some corners) could be produced in the UK, but them Bachmann came along with increased detail, but running qualities and finish for around the same price or marginally cheaper.

By the end of the 1990s (with the help of buying up Dapol's tools), things became outsourced.

 

From that point on, the philosophy was greater detail, better running, superb finishes. Museum pieces in miniature.

Hornby were not alone, Rapido, DJM etc showed similar trends. Some outsourcing even the CAD work.

 

Looking closely at this model. Train company will put out a requirement to make a model to various factories. They come back with a bid (doubtless split into milestones). This bid is done before any cad work is done and therefore, before anyone has sat down and worked out all the detailed manufacturing plan. No one is going to give the go for CAD work unless they have a commitment on the final cost.

 

Factories doubtless come back with a good ball park figure based on experience producing similar models. Hornby differs from others producing CADs of the model in house, but doubtless little thought is given to manufacture, that is left to the factory.

 

Design clever was an attempt to bring the model to within reasonable cost. Whereby new models were specifically requested to have fewer parts and ease of manufacture was important.

There were consequences:

The 72xx which started out as fully detailed model, got simplified but was not cheaper

The Saint was supposed to be simpler model than the castle but was not cheaper

I suspect these 2 cases were simply not simplified enough to reduce the Factories ball park estimate one dime !

 

Cost saving only really occurred when the number of bits to assemble were halved, like the A1, P2 and Duke of Gloucester. Probably because it fell directly into the railroad like range and the factory had doubtless a different ball park calculation for it. Remarkably, even these hit high ball park figures as soon as they demanded a full paint job!

 

The Hornby EMUs hit the high ball park figures despite being simplified (and the roof cabling on these are actually more complex than Bachmanns).

 

Only Oxfordrail show they can produce complex models as cheaper prices. Doubtless because as they own the factory, they can cost more precisely and design for manufacture.

 

Cheaper processes require technical progress, but that progress is expensive. 3D printers will doubtless replace these special tools and assembly lines, but the technology needs a good 30 years to reach maturity to do so. Likewise, sure managers can do a value added analysis of a process, but it gets to a point whereby unless there is a cost effective technical evolution, the process reaches the point of optimisation. and cannot be optimised anymore.

Sprung buffers can go but should they return to moulded handrails?

Edited February 9, 2017 by JSpencer

[PaulRhB]

This bid is done before any cad work is done and therefore, before anyone has sat down and worked out all the detailed manufacturing plan.

 

 

. . . but doubtless little thought is given to manufacture, that is left to the factory.

 

 

. Really?

As they all have experienced designers with many models under their belts the idea that they have no idea about manufacturing the model is faintly ridiculous.

 

There are companies that commission the full process abroad but Hornby, Bachmann, Peco and Rapido all have featured in articles on their design process and indeed Bill has covered his work for Rapido on here!

Edited February 10, 2017 by PaulRhB

[dibber25]

 

And yet - it's some years since I read that if Apple doubled the wages of all their production workers, it would not increase the manufacturing cost by more than a couple of percentage points.  That's why Trumponomics is rubbish.  He can try and force US companies to bring back all the production he likes but that won't make many jobs as most assembly is robotised, even in China.  There'll perhaps be a few menial jobs driving fork-lift trucks to accompany those watching the automated assembly lines but there won't be thousands of jobs - and those that are created will mostly be low-paid.  Even the Chinese are shifting production of (relatively) labour-intensive work to other countries.  Some of these worry about their costs - e.g. Vietnam concerned that Cambidia or Laos will take jobs they have worked hard to get.  Then some of the poorer South American countries will bid for jobs and Africa is already on Chinese minds.

 

Stan

 

 

So, most assembly is robotised, even in China, is it? Take a look at Jason's recent video of his new factory. From memory, eight or ten girls sitting round a table and one of them has a small machine in front of her. The rest have trays of parts to assemble. Maybe it is robotised if you're making cars or electronics but clearly not if you're making model trains. (CJL)

[Legend]

We are getting fixated on labour again. I've often asked, and will never get a reply as to the % labour cost in a model. No doubt Rapido models are heavy on detail and the need for manual assembly and so are at the higher end, but there are many more that must be assembly minimal. In any case I'll wager actual labour costs as a % of the final selling price are actually quite small.

 

Another fallacy is that the Selling Price is directly relational to the cost of manufacture. There are a lot more factors in there, not least a manufacturers perception of what people are prepared to pay for a model. That in itself depends on what market the model is for . If it's the trainset market ( I think now rapidly diminishing) then it must be very cheap. If it's for the enthusiast market , it is clear it is less price sensitive and people can charge more.

 

It is a difficult time. Brexit or more specifically the drop in the currency as a result of Brexit , has clearly had an effect. I saw in the news yesterday that for the first time the current generation ( " the Millenials") will earn less than their fathers. Manufacturers have to take this on board . There will be less disposable income. Therefore you are going to have to find less expensive ways of making things.

 

I am also fascinated by the effect Trumponomics will have on things like Apple iPads . Constructed in China but sold in US . Again I wonder if globalisation has just enabled companies to make much more money than would previously have been acceptable ie 40% margins instead of 20%. I'd imagine constructing in the US for the US will cost lots more in labour but maybe all that will happen is that the prices will remain the same, reflecting that's there's a limit to what people will pay. Maybe companies will accept a lower margin and the new reality of make in US or face stiff import charges . Not that iPads are in any way related to model railways . Volumes and I suspect margins are much larger for iPads , but still fascinating to see which way it will go. And there will be fall out and lesson that will affect model railways. As Jason points out what happens on import tariffs is key.

[Dunsignalling]

 

I am also fascinated by the effect Trumponomics will have on things like Apple iPads . Constructed in China but sold in US . Again I wonder if globalisation has just enabled companies to make much more money than would previously have been acceptable ie 40% margins instead of 20%. I'd imagine constructing in the US for the US will cost lots more in labour but maybe all that will happen is that the prices will remain the same, reflecting that's there's a limit to what people will pay. Maybe companies will accept a lower margin and the new reality of make in US or face stiff import charges . Not that iPads are in any way related to model railways . Volumes and I suspect margins are much larger for iPads , but still fascinating to see which way it will go. And there will be fall out and lesson that will affect model railways. As Jason points out what happens on import tariffs is key.

If you are looking at Apple's margins, I'd suggest adding an extra '0' to those figures.

Edited February 11, 2017 by Dunsignalling

[Legend]

If you are looking at Apple's margins, I'd suggest adding an extra '0' to those figures.

Yes but underlines my point. Maybe some large corporations ( which in turn reflect shareholders aspirations) are just too ambitious when it comes to margins, I was going to say greedy! . If they did bring manufacturing back to US , their margins would certainly be impacted , but maybe that's the new reality or face import tariffs that will have same effect. Model railways is a cottage industry by comparison .

[jonklein611]

Yes but underlines my point. Maybe some large corporations ( which in turn reflect shareholders aspirations) are just too ambitious when it comes to margins, I was going to say greedy! . If they did bring manufacturing back to US , their margins would certainly be impacted , but maybe that's the new reality or face import tariffs that will have same effect. Model railways is a cottage industry by comparison .

 

And there in lies the catch.  The company won't let their margins drop because the shareholders would riot, so the costs get passed onto the customer.