Hornby Financial Update.

[truffy]

10 hours ago, mdvle said:

Like it or not, and whether it is a bargain or not, we like the idea of getting a bargain.  If Bachmann and Hornby both end up with a model out in any given month, psychologically we are far more likely to buy the model that is 20% or 30% off than the model that is only 10% off (on the assumption we either need or want both models).

 

Apart from some pre-orders (Class 37, Class 66, GT3, SR box car) and KRMC's Bulleid diesel, everything that I've bought this year has been discounted.

[Fenman]

11 hours ago, mdvle said:

 

The problem for Hornby though is that they aren't just trying to keep the retailers in business, but also sell models.  Which means their prices need to reflect the prices of the competition, and the pricing policies of the competition.  And while there are people out there who will buy based on the name of the box, for most of us a budget can't purchase everything in a year we want.  So if Hornby limits the discount because they don't want to offer as good terms to the stores as their competitors, then the competitors might end up getting the larger amount of spending.

 

Like it or not, and whether it is a bargain or not, we like the idea of getting a bargain.  If Bachmann and Hornby both end up with a model out in any given month, psychologically we are far more likely to buy the model that is 20% or 30% off than the model that is only 10% off (on the assumption we either need or want both models).

 

And the retailers now this as well, so they are more likely stock an item that they can entice people to buy with a larger discount.

 

I do find statements like this a bit hard to understand. Maybe I'm projecting my own mindset on everyone else?

 

I model ex-GE and ex-M&GR. I buy models which are appropriate to those lines. The fact that a different manufacturer is offering a model from the ex-GWR at a much bigger discount than an ex-GE model is utterly irrelevant to me. I have no interest in modelling the ex-GWR, so the models might as well be of the Trans-Andean or the Eastern Japanese. Instead, the prices of the ex-GE and ex-M&GR are what they are. If I want that model, I have to pay that price.

 

I realise it's a different situation where either there is competition among manufacturers over the same prototype (aren't we meant to hate that situation, though?), or where I want to start modelling something else. But, in general, different discount levels among manufacturers don't at all affect my choice of what to purchase.

 

Paul

[AY Mod]

'We' seem to be think parochially as usual.

 

Phil's recent chat with Chief Operations Officer, Tim Mulhall, looks at the inroads into less price-sensitive markets.

 

 

[The Stationmaster]

52 minutes ago, Fenman said:

 

I do find statements like this a bit hard to understand. Maybe I'm projecting my own mindset on everyone else?

 

I model ex-GE and ex-M&GR. I buy models which are appropriate to those lines. The fact that a different manufacturer is offering a model from the ex-GWR at a much bigger discount than an ex-GE model is utterly irrelevant to me. I have no interest in modelling the ex-GWR, so the models might as well be of the Trans-Andean or the Eastern Japanese. Instead, the prices of the ex-GE and ex-M&GR are what they are. If I want that model, I have to pay that price.

 

I realise it's a different situation where either there is competition among manufacturers over the same prototype (aren't we meant to hate that situation, though?), or where I want to start modelling something else. But, in general, different discount levels among manufacturers don't at all affect my choice of what to purchase.

 

Paul

Exactly so (although my interest railway wise is obviously some way to the west of yours).  I think that as money has become tighter the market has changed from the old 'I'll have one of those because I like it' to much more selective buying particularly when it comes to higher priced models so many folk are spending their money in a different way in the model railway market place.  In some respects that might not impact too badly on Hornby which has several levels of market with different approaches but what it probably (undoubtedly?) does mean is that the hi-fi market is very different from what it once was and they have to be very careful about the pace at which they re-release the more expensive models.   If they get that wrong they can end up with a lot of unsold inventory on their hands effectively adding a double whammy to their books because it isn' t bringing in money to service debt, let alone repay investment, and it's adding cost to their overheads.

 

The answer I think must come back - as ever - to getting the marketing right in the first place and then thinking a lot more carefully about Year 2/Year 3 releases.  Not an easy job obviously but in my view it clearly remains an area needing some very careful thought and control rather than simply re-running a model because it sold well in Year 1.

 

Equally I too basically take no notice of discounting at the hi-fi end of the market and i never have - partly because if I want and can afford it I will buy it and partly because I don't believe in supporting the deep discounters who have hammered others in the retail trade.

[paulbb]

I think that many of us that been in the hobby for the last 20 years will have much of the items that they want/need/always wanted, and we have been truly spoilt in 4mm . This applies to wagons/coaches/locos even buildings and other scenic items. Meanwhile much new product continually pours like a torrent from the makers. I wonder how sustainable it all is really, especially with the demographic of the hobby being what it is. Guess that Ebay and its ilk is and will be  increasingly flooded with surplus items; there are a lot of old Lima items for sale and people are not getting rich from selling them, from what I see from the prices-unless you have HO South African stuff possibly.

[woodenhead]

59 minutes ago, AY Mod said:

'We' seem to be think parochially as usual.

 

Phil's recent chat with Chief Operations Officer, Tim Mulhall, looks at the inroads into less price-sensitive markets.

 

 

This is a recently interesting video, I do remember seeing the concession at St Pancras recently.

 

The way Tim describes the strategy shows a real shift in intelligence with the current Hornby management, they are putting toys back into the faces of the general public in places where an impulse purchase is likely and they are also considering carefully what they put where.

 

You can see how this strategy should serve the group well as it massively expands their footprint of bricks and mortar locations and their product base looks attractive.  

 

Contrast with Bachmann who are facing pressure from a number of incumbents and are not in a place to expand outside traditional routes as easily because the brand name is not no synonymous with trainsets with the general public. 

[woodenhead]

7 minutes ago, paulbb said:

I think that many of us that been in the hobby for the last 20 years will have much of the items that they want/need/always wanted, and we have been truly spoilt in 4mm . This applies to wagons/coaches/locos even buildings and other scenic items. Meanwhile much new product continually pours like a torrent from the makers. I wonder how sustainable it all is really, especially with the demographic of the hobby being what it is. Guess that Ebay and its ilk is and will be  increasingly flooded with surplus items; there are a lot of old Lima items for sale and people are not getting rich from selling them, from what I see from the prices-unless you have HO South African stuff possibly.

I think Hornby recognise this hence the re-establishment of concessions but in places you wouldn't normally link with them - finding new markets and getting your product in the face of consumers is what keeps you afloat.

 

Those people will not be trawling Ebay like us looking for a trainset or a Scalextric or an Airfix product

[autocoach]

Sold a lot of those Rivarossi Big Boys and increased the international contribution. Nostalgia sells but perhaps better in southern England than elsewhere. Steam era products are diminishing to the point of non-existence in the product lines of North American importers from China. 

 

Manufacturing in China and the complexity of international trade in an unstructured future international environment is going to be Hornby's big problem for the future. One of the problems is how to navigate as a very small player in the world of international trade when your don't know what the rules will be and can have no impact on rule making.

Edited November 30, 2019 by autocoach

[woodenhead]

4 minutes ago, autocoach said:

Sold a lot of those Rivarossi Big Boys and increased the international contribution. Nostalgia sells but perhaps better in southern England than elsewhere. Steam era products are diminishing to the point of non-existence in the product lines of North American importers from China. 

 

Manufacturing in China and the complexity of international trade in an unstructured future international environment is going to be Hornby's big problem for the future. One of the problems is how to navigate as a very small player in the world of international trade when your don't know what the rules will be and can have no impact on rule making.

Hornby have shown themselves to be savvy when it comes to getting models into the marketplace at the right time.

 

The budget 66s at the same time Hattons are developing their super detail version, the Terrier ahead of Rails/Dapol version, a Rivarossi Big Boy as one is being steamed in the US.

 

I bet if DJM had got the APT to an EP that Hornby would somehow resurrected it's model just before it was released.

[Mike Storey]

27 minutes ago, autocoach said:

Sold a lot of those Rivarossi Big Boys and increased the international contribution. Nostalgia sells but perhaps better in southern England than elsewhere. Steam era products are diminishing to the point of non-existence in the product lines of North American importers from China. 

 

 

 

I thought the implication was that these had sold out in the USA??? Which would, unusually, mean that Hornby had read the runes absolutely right. Given your comment, it is possible they are picking up a niche but lucrative market.

[autocoach]

 

Hornby's timing with the 4-8-8-4 was just right. Athearn also produced one but it was delayed past the peak period of interest in the 150th Transcontinental celebration.  Broadway Limited also came out with one about that time but I don't recall much mention of it.  Lionel also tried both HO and tinplate O. Brass importers may have also tried to cash in on the market.

 

Anyway what I am getting at is the coming uncertain future of international trading from 2020 on and resulting cost of doing business in very uncertain times may have a lot more to do with the future of Hornby than its tactical product marketing skills. 

[Mike Storey]

2 minutes ago, autocoach said:

 

 

Anyway what I am getting at is the coming uncertain future of international trading from 2020 on and resulting cost of doing business in very uncertain times may have a lot more to do with the future of Hornby than its tactical product marketing skills. 

 

That has more to do with the hobby, than Hornby. Everyone (more or less) faces the same issues, Brexit notwithstanding, and it will be the ones who take advantage of discreet marketing and sales opportunities, on time and with relevant products, that will gain the edge. The 2012 Olympics was an example of how not to do it.

 

The rest, about gaining new markets to supplement and even replace old ones, is SOP, in an enlightened company.

[truffy]

1 hour ago, woodenhead said:

I bet if DJM had got the APT to an EP that Hornby would somehow resurrected it's model just before it was released.

With tooling that had been dumped by management during one of Hornby's moves?

[woodenhead]

1 hour ago, truffy said:

With tooling that had been dumped by management during one of Hornby's moves?

I know, it was said in jest but I omitted the smiley, I laughed at it but that never shows in a post does it 

[mdvle]

4 hours ago, Mike Storey said:

 

I thought the implication was that these had sold out in the USA??? Which would, unusually, mean that Hornby had read the runes absolutely right. Given your comment, it is possible they are picking up a niche but lucrative market.

 

For reason that only Athearn know, they didn't announce their Big Boy until June 28th of this year, with availability June 2020.  So that effectively knocked them out of the race.

 

Broadway Limited did offer one (they still have stock on their website), but they have an iffy quality reputation apparently and are on the expensive side ($750).

 

Hornby came in with a product that was priced much more competitively and was available at the right time, so yes Hornby did well on this.

[mdvle]

12 hours ago, Fenman said:

I do find statements like this a bit hard to understand. Maybe I'm projecting my own mindset on everyone else?

 

I model ex-GE and ex-M&GR. I buy models which are appropriate to those lines. The fact that a different manufacturer is offering a model from the ex-GWR at a much bigger discount than an ex-GE model is utterly irrelevant to me. I have no interest in modelling the ex-GWR, so the models might as well be of the Trans-Andean or the Eastern Japanese. Instead, the prices of the ex-GE and ex-M&GR are what they are. If I want that model, I have to pay that price.

 

Most of this hobby aren't that specific, and it is more of a "if I like the looks of it I will buy it" type of mindset.

 

12 hours ago, Fenman said:

I realise it's a different situation where either there is competition among manufacturers over the same prototype (aren't we meant to hate that situation, though?), or where I want to start modelling something else. But, in general, different discount levels among manufacturers don't at all affect my choice of what to purchase.

 

But what if there were 2 models, different prototypes, that were appropriate for what you are modelling and you didn't have the budget for both?

 

Would the cheaper product get your choice, as it would allow money to either put into next year's budget or on some other smaller items you need?

 

Or perhaps the one with the greater discount gets chosen, on the basis that the limited discount model might be available at a greater discount next year?

 

And even if you are more sensible in your decision making, do you think all the other customers would be?

[Neal Ball]

I’m surprised to see the gross margin is now 37.5% I would have thought it would be closer to 50%

 

Overall it is good to see their financial position improving. Key to that though is going to be improving the engagement with the enthusiast sector (us), whilst at the same time attracting the non enthusiast sector who would have watched the TV and just want a train set.

 

i echo the calls for the engine shed blog to get a revamp as called for by Mike ska @The Stationmaster

 

Next years range will be interesting to see the plans from the new management.

[adb968008]

No one seems to have commented on the planned website revamp...

 

Digital experience, customer videos, interactivity...

 

seems like Hornby wants to grow a community.

What could be an interesting leap could be promoting of after School model railway clubs in some form... it doesnt just have to be railways... scenics, arts, cameos etc are all great skills making the “train” incidental... same thing for Scalectrix racing clubs.

pethaps a theme like “create a scene where you live” as a project! Then organise a competition or gathering where people bring their local recreations together in a national competition... think Cake box challenge, just a little bigger / focussed ?

 

 

 

[Coach bogie]

News report on Hornby progress.

Mike Wiltshire

 

https://www.thisismoney.co.uk/money/markets/article-7803257/Hornby-boss-Lyndon-Davies-plots-Christmas-revival-old-style-gifts.html

 

[The Stationmaster]

On 18/12/2019 at 10:58, Coach bogie said:

News report on Hornby progress.

Mike Wiltshire

 

https://www.thisismoney.co.uk/money/markets/article-7803257/Hornby-boss-Lyndon-Davies-plots-Christmas-revival-old-style-gifts.html

 

Interesting reading although not much which is unexpected or new.  The comments make interesting reading and perhaps as far as model railways are concerned reveal a hole in Hornby's marketing where it  seems clear that the 'Railroad' range isn't well enough known or promoted (or priced?) as an entry level/toy market product distinct from the more expensive hi-fi range.

[dibber25]

On 29/11/2019 at 11:47, The Stationmaster said:

I think I can give part of an answer to some questions LCD has posed in his report - here -

 

 

Bring back 'The Engine Shed' in the way it used to be.  It was excellent for creating interest and excitement (aka 'froth') whereas now it has become bland and subservient to the 1970s 'god' of the big annual announcement.  Even Hornby's belated and half hearted attempt to get on the announcement band wagon at the Warley show was something of a damp squib.  The company needs to recognise that for many of its current customers the big 'customer facing' (yuck marketing term that it is) events are the major shows and not going secondhand through cosy theatricals in seaside hotel once a year.

 

If you really want to make your current customers aware and excited about your products and whip up their interest in what is coming just look at what your competitors for their money are doing in the UK market.  The continental market is differeent still as far as I know but the UK market has moved on in leaps and bounds and teh newcomers and commissioners have taken teh vibrancy and made it their own.  And at show we, the end customers, can in many cases talk to their 'backroom boys (and girls)' but we can no longer do that with Hornby where the developers and researchers now seem to be kept in a cupboard back in Margate.

 

And another thing - the GMRC has introduced a whole new audience to model railways but whose presence. was in evidence on the day of fiiming the judging of the final - Bachmann.  whose products were clearlu y in evidence during the tv showing of the construction phase - Peco.  yes Hornby trains were there but very much as incidentals.

Why does it need to be all one thing or the other? The four or five major shows will be lucky to muster 80,000 visitors between them once a year. The model railway media may have declined but still musters in excess of 100,000 regular readers every month. The cost of attending shows is also pretty staggering these days and I can assure you there are no 'cosy theatricals in a seaside hotel', the presentation taking place at the Hornby HQ these days. In the words of the Squire in 'The Titfield Thunderbolt', "We're not asking for a monopoly....." (CJL)

[The Stationmaster]

3 hours ago, dibber25 said:

Why does it need to be all one thing or the other? The four or five major shows will be lucky to muster 80,000 visitors between them once a year. The model railway media may have declined but still musters in excess of 100,000 regular readers every month. The cost of attending shows is also pretty staggering these days and I can assure you there are no 'cosy theatricals in a seaside hotel', the presentation taking place at the Hornby HQ these days. In the words of the Squire in 'The Titfield Thunderbolt', "We're not asking for a monopoly....." (CJL)

It's not one thing or the other Chris because Hornby now has two video promotional channels in the shape of The Engine Shed and The Signal Box thus they can easily work to two different parts of the market if they wish.  In fact looking across their model railway range they could be ideally situated to go for two distinct market areas (plus some starter stuff) if they put their minds to it.   The comments in that 'Money' article linked by Mike Wiltshire are worth a look as it seems likely that quite a lot of them came from what is not normally a model railway media audience.  (Although knowing where you can register to be able to comment on that article some people might regard those commenting on it as biased in a different way.  )

 

And yes show attendance and model railway printed media might well be a limited area but generally I suspect it includes those who are able /prepared to buy in the more expensive end of the r-t-r market judging by the carrier bag contents you see coming away from the bigger shows.   Dealing with the wider retail market is one thing and probably benefits from some sort of annual presentation but my point is that it is not the whole of the market although it is c;learly one that Hornby is out to build and redevelop.

 

As for 'cosy theatricals' we can but judge by what we saw on a certain tv documentary in the past year where we not only saw folk arriving at hotels (maybe where they were staying but that wasn't the implication of the shots televised) and we definitely saw some theatricals.

[mdvle]

4 hours ago, dibber25 said:

Why does it need to be all one thing or the other? The four or five major shows will be lucky to muster 80,000 visitors between them once a year. The model railway media may have declined but still musters in excess of 100,000 regular readers every month. The cost of attending shows is also pretty staggering these days and I can assure you there are no 'cosy theatricals in a seaside hotel', the presentation taking place at the Hornby HQ these days. In the words of the Squire in 'The Titfield Thunderbolt', "We're not asking for a monopoly....." (CJL)

 

It's not so much the shows, but rather the "big bang" style announcement that the returned to, in the process making their other promotional channels (the engine shed) less exciting and useful.

 

By scattering announcements around the year, and offering teasers in something like the engine shed, you achieve keeping the Hornby brand in the front of the customers mind throughout the year rather than just for a couple of weeks in early January.

 

You also allow each new item you announce it's own exclusive period in the spotlight, rather than having some get lost in an avalanche of announcement.

 

If Hornby also have a 3D print or EP to show at the time of announcement, then all the better to have it around a show to help generate additional excitement and hence additional free publicity.

 

As for the magazines, the reality is regardless of how Hornby make the announcement the magazines (and for that matter the shows if done at a show) no longer have exclusives - whether it is the January big bang or the previous announcements spread around the year the first (if not a very close second) is the Internet through Hornby's own website and the social media response quickly followed by the retailer websites.

 

What magazines (and shows) get you is that additional audience who aren't paying attention to each companies website, or to social media (whether it be Facebook, Twitter, or even RMweb).  As such for as long as they are around magazines will continue to provide an important part for many.

[Phil Parker]

1 hour ago, The Stationmaster said:

As for 'cosy theatricals' we can but judge by what we saw on a certain tv documentary in the past year where we not only saw folk arriving at hotels (maybe where they were staying but that wasn't the implication of the shots televised) and we definitely saw some theatricals.

 

Yet again, someone naively believes all he sees on TV...

 

The media announcement in December ensures that all the channels are working to maximise coverage and make the most noise at a time of year when Hornby will pretty much have the stage to themselves. Do it at Warley and they share coverage with Accurascale, Heljan, KR Models and others.

 

One benefit is that letting us do our job gets all the web stuff up and running. As you will have seen from the documentary, it wasn't Hornby's website that Rails looked at, this had fallen over, it was RMweb. If we'd not had this info in advance, the best there would have been is a hurriedly cobbled together version of the announcements. This way, the media will be slick and the retailers ready and waiting for pre-orders.

 

22 minutes ago, mdvle said:

By scattering announcements around the year, and offering teasers in something like the engine shed, you achieve keeping the Hornby brand in the front of the customers mind throughout the year rather than just for a couple of weeks in early January.

 

Possibly, or you make a massive noise and then keep people coming back for more as you gradually feed out the updates? If you do it piecemeal, you also can't put out a paper catalogue, or if you do, it will have loads missing. That catalogue is a good seller and likely to be largely profit. It's something a lot of people look forward to each year, look at the moans when it disappeared, and keeping your audience happy is reasonably important. Are you suggesting that those updates don't get reported? They do, so Hornby is still in front of everyone. However, hard-core modellers are not their only market and much of the development (as in the Money article) is aimed at widening the portfolio of traders.

 

21 minutes ago, mdvle said:

What magazines (and shows) get you is that additional audience who aren't paying attention to each companies website, or to social media (whether it be Facebook, Twitter, or even RMweb).  As such for as long as they are around magazines will continue to provide an important part for many.

 

Model railways are a very conservative market and the trade know (and tell us) that paper matters for their customers.

[dibber25]

18 hours ago, The Stationmaster said:

It's not one thing or the other Chris because Hornby now has two video promotional channels in the shape of The Engine Shed and The Signal Box thus they can easily work to two different parts of the market if they wish.  In fact looking across their model railway range they could be ideally situated to go for two distinct market areas (plus some starter stuff) if they put their minds to it.   The comments in that 'Money' article linked by Mike Wiltshire are worth a look as it seems likely that quite a lot of them came from what is not normally a model railway media audience.  (Although knowing where you can register to be able to comment on that article some people might regard those commenting on it as biased in a different way.  )

 

And yes show attendance and model railway printed media might well be a limited area but generally I suspect it includes those who are able /prepared to buy in the more expensive end of the r-t-r market judging by the carrier bag contents you see coming away from the bigger shows.   Dealing with the wider retail market is one thing and probably benefits from some sort of annual presentation but my point is that it is not the whole of the market although it is c;learly one that Hornby is out to build and redevelop.

 

As for 'cosy theatricals' we can but judge by what we saw on a certain tv documentary in the past year where we not only saw folk arriving at hotels (maybe where they were staying but that wasn't the implication of the shots televised) and we definitely saw some theatricals.

Yes, well of course I wasn't present last year, either for the Margate presentation (which I'm told definitely was NOT done at a hotel) nor was I present at the show(s) when the theatricals took place. I did watch the TV documentary but I'll make no further comment about it. (CJL)