Hornby secure £18 million loan

[jjb1970]

I think peoples tolerance to mediocre service is much less than it once was. People have become accustomed to very slick, professional delivery and service and now expect it. I know a lot of people don't like Amazon, but I can order stuff from them late at night and it'll be delivered the following day, even at weekends. In my office I can even get some products delivered the same day as ordering. Is it fair to expect model shops to offer an equivalent service? Maybe not, but because so many retailers do now offer a first class online shopping experience (to the point that these days I can't see the point of going to the shops for a lot of goods) people do expect a certain level of service which is a lot better than many hobby shops offer. That may be unfair, but it is what it is and to be honest I'm pretty much of that opinion myself.

[adb968008]

I think peoples tolerance to mediocre service is much less than it once was. People have become accustomed to very slick, professional delivery and service and now expect it. I know a lot of people don't like Amazon, but I can order stuff from them late at night and it'll be delivered the following day, even at weekends. In my office I can even get some products delivered the same day as ordering. Is it fair to expect model shops to offer an equivalent service? Maybe not, but because so many retailers do now offer a first class online shopping experience (to the point that these days I can't see the point of going to the shops for a lot of goods) people do expect a certain level of service which is a lot better than many hobby shops offer. That may be unfair, but it is what it is and to be honest I'm pretty much of that opinion myself.

Hear hear

 

I recently ordered Hornby R8264 coach wheels from Amazon a few months back, I ordered them Saturday morning and at 5pm same afternoon they were under the bogies of my selected coaches, as they were half the price of ebay ( £6.64 vs £12) I decided to go all out and ordered 15 packets as that would do me to the future... I had them in my hands on Sunday afternoon.

 

It’s hard to argue with Amazon sometimes.

 

I see those wheels are £16 now, so i’m Happy.

Edited September 3, 2018 by adb968008

[robmcg]

You're of course as entitled to your opinion as I am to mine Rob (although in my case I do work on the basis of facts as some other folk are quite aware).

 

Shouldn't you inform the CEO of Hornby of the identity of the member of management who might well bring about the demise of the company, single-handed? On the basis of your facts, of course..  Rather than state here that this person whom you choose not to name will be responsible if the company fails.

[jjb1970]

I won't speak for the Station Master, but I think his view is shared by others. Last year we saw a period where there was a serious drop off in how they were inter acting with customers. For example, the very successful and popular engine shed looked like it had been neutered (and to be honest, I still don't think it has ever really recaptured its old mojo) and some of their handling of announcements started to look a bit amateurish when previously corporate communication and interaction with customers was one of the things that the old regime had got very right. Given the skill sets of certain people within Hornby and timing I think many of us put two and two together. Things did improve and in fairness to LD (or somebody) it does seem they realised just how badly some of the changes had been received by many of their customers but I still don't think they're doing comms anything like as well as the old team. And in modern business communication and interaction with customers is more critical than it has ever been, the old way of doing a few magazine interviews and issuing a catalogue once a year etc won't cut it anymore. Will an individual kill a company? Probably not but I'm still a bit unconvinced that some of their higher people are the right ones to steer them back to financial sustainability.

[The Stationmaster]

Shouldn't you inform the CEO of Hornby of the identity of the member of management who might well bring about the demise of the company, single-handed? On the basis of your facts, of course..  Rather than state here that this person whom you choose not to name will be responsible if the company fails.

 

I suggest you read what I have written and not what you appear to have thought I have written.  Where exactly have I said that one person might well bring about the demise of the company?  it is of course always possible that one person in the right position could harm a company but the whole idea of managing with teams is that you avoid that sort of potential problem.   JJB has I think spelt it all out fairly precisely enumerating various factors which are pretty obvious to us all should we care to look and think about them. 

[Ian Hargrave]

All true, except that many of the smaller folk who have set up "businesses" in model railways, have done so not to become mega rich, or to evolve into larger concerns, but to supply something either they think is missing, or where they have a particular skill and want to share their "product". These are usually the folk who cannot be contacted easily, and seem to fall by the wayside from time to time. But they are often highly valued in a niche. They often garner an awful lot of loyalty and patience from customers, due to the unique gaps they usually fill. Unfortunately, one or two have turned out either to be utter rotters or simply inept at taking money but being incapable of delivery.

 

I do not think we can compare them to any medium to large company operations.

Indeed but one individual did in my hearing and that of more than a few others declare his intention to retire to a Carribbean island on the proceeds of such profits in this game. Whether his tongue was in his cheek at the time and whether 5 years down the line he still holds such ambitions I cannot say.

[dibber25]

Indeed but one individual did in my hearing and that of more than a few others declare his intention to retire to a Carribbean island on the proceeds of such profits in this game. Whether his tongue was in his cheek at the time and whether 5 years down the line he still holds such ambitions I cannot say.

 

Either tongue in cheek or completely deluded! (CJL)

[adb968008]

Indeed but one individual did in my hearing and that of more than a few others declare his intention to retire to a Carribbean island on the proceeds of such profits in this game. Whether his tongue was in his cheek at the time and whether 5 years down the line he still holds such ambitions I cannot say.

I just returned from the Caribbean yesterday, I can honestly say I did not find any model railway shops, proprieters there.

 

Plenty of fish, toucans, parrots and the odd boa constrictor, which I was severely tempted to bring back with me for squeezing out someone to find my GNR single, but alas I settled for duty free whisky to console myself instead.

Edited September 4, 2018 by adb968008

[Legend]

I think Model Railways cannot be a get rich quick industry. However there are a good few players in the market , so they must have adaquate returns . Not only that but new entrants are being attracted. There are probably more people making Model Railways for the U.K. market than ever before . Are they doing that because they are enthusiasts , well maybe it’s part of it , but the main part must be that they think they can make money. Prices have shot up in the last 6 years , that’s got to have helped. Not so good for the consumer though.

Edited September 4, 2018 by Legend

[bennyboy]

It's easy to become a millionaire in the model railway industry, as along as you start off as a billionaire.

[dibber25]

It's easy to become a millionaire in the model railway industry, as along as you start off as a billionaire.

 

As spoken by Pete Waterman and Jason Shron - and probably numerous others before them! (CJL)

[Legend]

But I think Pete Waterman was in a fairly niche market , not typical of the mainstream model railway market at all, in fact it was probably an indulgence , making the models he needed for his own layout more generally available. Jason is clearly expanding his operation , hardly the actions of someone struggling to make ends meet, unless he’s a really poor businessman, and I certainly don’t believe that . I’m not saying mountains of cash are being made but neither should we be passing the hat round.

Edited September 4, 2018 by Legend

[robmcg]

I suggest you read what I have written and not what you appear to have thought I have written.  Where exactly have I said that one person might well bring about the demise of the company?  it is of course always possible that one person in the right position could harm a company but the whole idea of managing with teams is that you avoid that sort of potential problem.   JJB has I think spelt it all out fairly precisely enumerating various factors which are pretty obvious to us all should we care to look and think about them. 

 

oo-er

[adb968008]

There’s a few earning over a £100k in this industry, dig and you can find them.

 

But for the most part it’s not a mass salary, my dad made a living out of the hobby for 20 years, it was ok, but low enough to convince me to work in IT instead.

 

It’s a job about fun, if you don’t enjoy it I doubt you’d last very long.

Edited September 5, 2018 by adb968008

[jjb1970]

Business exists to make profit. And that's not a criticism. Pete Waterman was unusual as I also think that JLTRT was as much about his own needs as it was about normal business. And eventually he pulled the plug on it. Most others involved in manufacturing models however wouldn't be doing it if they didn't think there was money to be made, and why should they? Whether or not they do make money is another question entirely but we shouldn't make an assumption that if they don't it's because they were motivated by altruism. So I am another one who takes the stuff about if you want to make a small fortune in making models then start with a large fortune etc with a pinch of salt.

[Legend]

There are a lot of factors in this , it’s not one size fits all, and indeed the market varies as well. And to bring us back on point this has an impact as to what should Hornby should do now .

 

If we establish the base level as Oxford then they are making locos @£90, coaches @ £35 and wagons @£10 in general . Oh I can already hear outbursts of its Oxford , too many mistakes etc etc . But in the main these are silly mistakes that could have been put right before going into production. They sell through retailers , so there’s their profit and the retailers profit to consider . I haven’t seen Oxfords accounts, but I doubt they introduced the range to make a loss.

 

Then there are other companies selling locos @£150, coaches @£50 , wagons @£20 in general , again mainly through retailers . Quite a difference in price, do their production facilities cost that much more to run . mostly it’s similar production from China. Does it cost that much more to design in detail ? I don’t think it’s proportionate . So should be more profitable.

 

Then there’s the top of the tree . Production for a commission or maybe sell direct themselves . Locos tending towards £200+, coaches £125 , wagons £35 . The commissioning party has to make money and the manufacturer . But again with prices at these levels there are more options and should be more profitable. The ultimate is if you can do away with the commissioner and as a manufacturer sell direct . Then you’ve got all that extra income to yourself . Attractive , but then you need to make sure you can deal with the customer and give order confirmations and answer emails . In other words deal with us! Maybe not so attractive!

 

It’s still a relatively small market compared to other industries , so I doubt anyone’s going to get rich quick on these volumes, but I think there’s money to be made and that’s why there are new entrants.

 

As to Hornby . It’s tricky . The business model that makes most money is selling direct. I think their management realised that 5 years ago with their efforts to sell direct . But it was clumsily executed , maybe a few years ahead of time and launched before they were really ready,alienating their retailer network , so revenue from the traditional retailers dropped like a stone but had not yet been replaced with direct sales. And now they are in a mess . They could have perhaps done that differently , maybe with a high quality range , maybe even a different brand, sold direct, while trying to maintain retailer sales .

 

Reluctantly, because it has an effect on the shops I like visiting, I think the future is direct sales . In some areas, like Glasgow, its already happened . I don’t have anywhere to go to browse Hornby except a very limited range in Hamleys! My options are Hattons, Rails. Why not Hornby direct?

Edited September 5, 2018 by Legend

[Andy Y]

If we establish the base level as Oxford then they are making locos @£90, coaches @ £35 and wagons @£10 in general . 

 

Then there are other companies selling locos @£150, coaches @£50 , wagons @£20 in general , again mainly through retailers . Quite a difference in price, do their production facilities cost that much more to run . mostly it’s similar production from China. Does it cost that much more to design in detail ? I don’t think it’s proportionate . So should be more profitable.

 

 

Primark and Next both sell clothes on the high street with comparable turnover; one sells in higher volume and one sells at a higher price (there is a different quality) and there's probably not a massive difference in their material and labour costs so I think it's simplistic to compare companies solely based on selling price.

[Phil Parker]

Reluctantly, because it has an effect on the shops I like visiting, I think the future is direct sales . In some areas, like Glasgow, its already happened . I don’t have anywhere to go to browse Hornby except a very limited range in Hamleys! My options are Hattons, Rails. Why not Hornby direct?

 

Possibly because Hornby, like Bachmann and Peco, has finally seen a benefit in high-street outlets and would like to see more rather than less. Bachmann say they have over 500 UK outlets and the number is growing slowly. OK, so we aren't seeing much in the town centres yet, but once House of Fraiser etc. have given up, even this could change as landlords struggle to fill premises.

 

Direct sales are all very well if all you want to do is buy boxes for the cupboard, but when you need paint, Plastikard, track pins etc. it's a lot less appealing. Who puts an order through for a single tinlet? Long term, people modelling, as opposed to collecting, are more use to the manufacturers as they tend to comit to their hobby more so when cash is tight, they keep buying.

[SteveCole]

Reluctantly, because it has an effect on the shops I like visiting, I think the future is direct sales . In some areas, like Glasgow, its already happened . I don’t have anywhere to go to browse Hornby except a very limited range in Hamleys! My options are Hattons, Rails. Why not Hornby direct?

 

If we want to grow the hobby, we need high street model shops. Hornby, Bachmann and many other manufacturers know this, hence they are making a real effort to support shops of all sizes. The new Hornby team are working really hard on this but Rome wasn't built in a day...

[JeremyC]

I always feel many people confuse direct sales (i.e straight from Hornby, Bachmann etc. )with internet shopping (from Hattons, Rails etc). I'm not convinced direct sales is the future, but Internet shopping probably is. To me the problem with direct sales is if you want a selection from different manufacturers you end up paying a lot in postage. Phil Parker puts it better

....Direct sales are all very well if all you want to do is buy boxes for the cupboard, but when you need paint, Plastikard, track pins etc. it's a lot less appealing. Who puts an order through for a single tinlet? ...

Edited September 5, 2018 by JeremyC

[dibber25]

One of the things which increases the end retail price is the number of samples, revisions, etc. More samples, more inspections by experts etc, means more cost. Revisions to tooling, prompted by those inspections mean more cost. Manufacturers have to take decisions about when to say "It will do." No two people have the same standards as to what they feel 'will do'. That has far more effect on the final selling price than whether or not you sell direct or cut out the middle man. Briefly, if you want perfection, it costs, either in care at the beginning of the process or in revisions later on. Either way, it has to be paid for. (CJL)

[Phil Parker]

I always feel many people confuse direct sales (i.e straight from Hornby, Bachmann etc. )with internet shopping (from Hattons, Rails etc). I'm not convinced direct sales is the future, but Internet shopping probably is. To me the problem with direct sales is if you want a selection from different manufacturers you end up paying a lot in postage. Phil Parker puts it better

 

Good point, but direct sales could allow models to go out at prices well below the large retailers can manage - you've taken out their cut and costs of distribution after all.  Cost is everything to many people and I'd expect (based on past discussions) to see demands that a manufacturer selling directly would be at a rock-bottom price. This is appealing to bean-counters who want to justify the large fulfilment department that needs to be set up.

 

Now imagine Hattons could only sell their own models, because the Hornby sales are taken by the direct selling operation. It would mean a massive change to their business model. Those mail-order outlets with no in-house commisions could pack up straight away. 

 

However, I still think that the manufacturers see the benefit of a retailer network and for the time being are happy to support it - evidenced by Hornby pulling away from direct sales in the last couple of years.

[adb968008]

A number of pages back, I did a chart based on Hornbys financials going back to the 1980’s.

 

One thing that stands proud to me there was the failure of direct selling...

If you note, Hornby ramped up the marketing machine, and outsourced the logistics to support the direct selling model those two cost went from a steady line to massive spike.

 

Those costs haven’t reduced much, added little to the top and certainly drained a lot from the bottom line and is in my opinion of that analysis, why they continue to hurt today.

 

Shipping 10 boxes to 10customers costs more than 1 box of 10.. and it’s not just logistics... it’s the costs of promotion, website etc.

 

Why are the major website retailers successful at it ? - apart from being geared with in house resources to wrap, pack and ship in-sourced, all too often when I buy from them..it’s more than 1 manufacturers product in the box, it’s a shopping basket of items ..something Hornby doesn’t provide.

Edited September 5, 2018 by adb968008

[TheSignalEngineer]

Possibly because Hornby, like Bachmann and Peco, has finally seen a benefit in high-street outlets and would like to see more rather than less. Bachmann say they have over 500 UK outlets and the number is growing slowly. OK, so we aren't seeing much in the town centres yet, but once House of Fraiser etc. have given up, even this could change as landlords struggle to fill premises.

 

 

One reason for Ian Allan pulling out of the Manchester shop was the new rent demands from the landlord. I was told at the time that they were asking twice the price for about half of the sales floor area. The same landlord was reportedly asking £98K p.a. from a charity shop in the vicinity.

[BWsTrains]

High Street Retail faces one big problem that on-line tackles head on and this alone explains why certain sectors have gone over to the latter. Ability to hold suitable stock and meet the walk-in customer's needs is a big challenge for the physical retailer and that's before rent considerations.

 

Even in a (current) World of low interest rates, buying stock to have on your shelves takes "up front" funds and space. The big on-line sellers have various ways to manage this,

1. sheer volume
2. Deals with manufacturers
3. Automated product dispatch
4. Rapid stocking-in from the supplier etc.

Why else have so many market sectors become the darlings of the Big "A", Banggood. etc.?

 

From the latter, I bought 20 mini Neo-magnets for the massive sum of $3 including shipping from China. Postage internally in Australia or the bus fare into town is more than that!

 

Main street retail is a "Norwegian Blue" WRT railway modelling unless it is combined with an effective on-line presence. There are good examples out there.

 

Colin W