Rep allocation of reduced production quantities

[Georgeconna]

5 hours ago, Bernard Lamb said:

There is nothing to prevent people from "pre-ordering" a model from several suppliers.

In a case of suspected severe under production I can see this happening.

Will we reach a point when the suppliers start to ask for a deposit?

There is nothing to prevent any customer returning or declining any model if it is not to the specification that they expect.

As the final details are vague I can see this happening.

I don't buy the "I want to se it running" comments. All stock runs to a respectable standard these days.

I do go along with the concerns about just what details a model will depict.

For example with the A2 variants "late crest" does not specify any details such as top lamp iron and number plate position.

There are detail variations that are more subtle than simply a different boiler and fittings and insignia.

If these sell out I can see further models being produced as is the case with the A3 and A4 classes to cover other variants.

Don't say they have not done that on the original P2, that is an exception to the normal level of models. A long past and best forgotten, period in the history of Hornby.

Oddly enough I get a banner advert from Hattons for the original W1.

Are they selling less well than other models or is it a case of the flavour of the weekend?

Bernard

 

I don't buy the "I want to se it running" comments. All stock runs to a respectable standard these days.

 

Yes Bernard Heljan is right up there on this Respectable Standard eh?I really enjoyed arsing about posting engines back and forth to the UK.  Not to mind many other items which I have sent back due to crap motors and such,Horbny 08 another one for poor running spring to mind.

 

The Rocket IS different with perhaps a 4 wheel pick up? I dont know but I will wait till I see it flying around someones track.

 

cheers

 

George

[GWR-fan]

1 hour ago, phil-b259 said:

 

.................................................................... If you sell out of  then you can make another a year or two later and be fairly sure they will sell out quickly too - all of which makes the financiers very happy.

 

 

 

When you limit your customers you limit your financial return.  Shareholders are more concerned with the current price of their shares and the current dividend returns.  Telling a shareholder that in two years time we are doing another limited run is hardly convincing enough to reassure the shareholder of the value in their investment.  When demand exists you do not artificially play games with your customer by limiting production runs simply to maintain the demand on a future run.  A shareholder wants to see a financial return on the high cost involved in tooling.  Having an expensive set of tooling sitting idle is hardly economic. 

 

Unsatisfied demand is a cost burden on a shareholder as he sees it as a wasted market opportunity.  A company needs shareholders but just as importantly it needs customers to buy its product.  When you limit production you limit your customer base.  Yes, you may not have surplus stock sitting on a shelf but you have ignored genuine sales when pre-orders are unmatched to production levels.  Theoretical production ideas may look good on paper but they ignore reality by not matching production to sales.  Limited production runs result in exclusivity and ignore the actual demand.  Model trains are not exclusive pieces of art or jewellery, they are mundane toy trains.

 

By keeping to limited production runs prices are kept high,  but as unsatisfied demand exists at these high price levels then limiting production is counter productive to economic return.    Maintaining customer loyalty is important to financial success and without a customer base you do not have a market for your product.  A modeller who has received a trainset for Christmas decides that he wants to extend his set up so he purchases a newly released catalogue and seeing numerous items he goes along to his hobby store to place an order or two.  The store keeper responds that all or most of the items he wishes to purchase are unavailable as the manufacturer has limited the production for those items and the production run is sold out.  The modeller thinks how can this be, the catalogue has only just been released and I cannot buy items in it.  Disillusioned,  he goes home,  packs up his trainset and sits in front of his television and plays video games.   The trainset sits unused collecting dust and a lifetime of potential purchases is missed by the manufacturer.

[JSpencer]

22 hours ago, mdvle said:

This means Hornby would have needed to place the order say October last year, and so would have needed to guess at quantities.  Yes, selling out sucks, but it is the lesser of the evils for a manufacturer than sitting on unsold product.

 

I'd say the order was placed in March last year at the earliest.

 

They have not done a rocket since the 80s and have designed and whacked the thing into production entirely in secret. Then January comes along, it will be out the next month, suddenly sells out and lots of model shops not being able to get stock (not to mention their disatisfied customers). 

The item would have made a bigger killing if it was announced at Warley last year and due in - say - September allowing them to adjust production figures to suit the demand. More money for Hornby, more money for the model shops less money for the online auction sharks.

 

The trouble is that if the model shops don't have enough to sell, it then hits their bottom line hardest. Bigger shops - if they feel a shortful in main manufacturers products - will probably fill the gap with their own.

Great the items selling for Hornby but they still fail to max the gains on a winner and are leaving themselves open to others to come in and fill the gap.

[dogbox321]

14 hours ago, mdvle said:

 

Hi - mdvle, a few comments added.  

 

A couple of days ago I posted about 2 guys in the US attempting to crowd fund a group of similar box cars that would share some parts but need a reasonable amount of tooling.  This is useful because as part of using IndieGoGo they have had to give us numbers - 6,000 boxcars divided up into 5 different(ish) model, for which they need $250,000.  Yes, we know China are "ruthless" and can pretty much charge what they want, plus have lots of customers competing for slots. 

 

Why do they need that much money upfront?  Because all the bills need to be paid upfront - design, tooling, production, shipping - before the models in arrive to be shipped to customers.   And if you are someone like Hornby, where retailers may not pay you for another several weeks (even though you have paid out this money to China already), it become very easy to see why oversupply - having paid for inventory nobody wants to buy - is dangerous.  Yes, but if you already have guaranteed sales, then you are turning down custom, and ultimately those sales have a positive effect of being an additional contribution to the running costs to the company, boots profits, capital that can be re-invested etc.  

 

So, what happens to the factory while you wait for these additional parts?  Thats why I said you talk to your suppliers and see what they can do, and possibly compromise on regards delaying certain models. (A good many models are often delayed, regardless of manufacturer) For example with the Class 50 and Class 60.  Do the class 50 in the slot of the Class 50 and 60, based on the proviso that there are still a few DB Class 60 with TTS sound, so pool resources and increase the production of the Class 50.  Then do the Class 60 when another slot becomes available, again to a quantity to match demand.  Likewise - DRS MK2's , the wheels etc., are the same, so leave the Virgin ones a little longer or something, and then do a larger run of those too.  The advantage too, is not having to set up so many tampo printing machines, changes in parts etc.,  Not saying that anyone should be sitting around on mobile phones, but just make your assets work harder.  Technically there is more money to be made by the Chinese by making more of the same, than fewer runs of more models.  A few is unviable, but a shop I were in the other day said his order on a few products was cut by 50%.  Thats basically a double production run!  

 

 

 

The APT rumour is an interesting one given that it is not expected until December, which in a way suggests that Hornby may be planning on having it arrive in time for the Christmas shopping season.  If this is the case, then it means that Hornby will have to carefully work the schedule backwards from their hoped for arrival date, allow the shipping time, ..., time for manufacturing.  If you are working a schedule like that then it means you are booking a firm production slot late last year, and that allows no flexibility to suddenly add another 500 units at the last minute.  Its already likely to be early 2021.  Which again goes against what your saying.  Production gets delayed for a number of reasons, and then the manufacturer has to change things around.  Hence my suggestion of sacrificial delays.  Plus to allow production to change, then a good quantity of supplies must be held in anycase.

 

 

 

 

Some perspective please.  Some traders have already had quantites cut.  Also, a couple of years ago - look how Hornby were refusing to do a Mk3 GWR First Class Coach!!!!   If you produce small quantities then you mess then you can easily get your fingers burnt.  Riko were one of the worst, with Reps always telling traders there orders would be cut back.  Hence some ordered 2, 3 and sometimes 4x the amount of stock they wanted to actually get cut back and still get what they wanted.  Thats dangerous, because if you only produce 800 of an item say R4XXX, but traders actually want 1200, but orders come in for 3000. in the hopes that they get a quantity near what they ordered.  Then if a company then uses this informtion for the basis of a R4XXXa, the order is "estimated" to be 1800, not the 400 that there is still a demand for.  What I am saying is, short supply distorts demand.  People order more, knowing they will get cut back and end up with less.  That does not give accurate information regarding the quantity that can actually be sold.   Plus, as the market moves on, those who wanted and had the ability to purchase in 2020, by the time a second version has come out in 2021, then there may be other new products that the modeller wants more, hence they now don't buy your product, but one from a competitor!

 

Shareholders (and at this point there is only one shareholder that matters given they own most of Hornby) are even less impressed when you end up filling warehouse with unsold inventory, and then selling it at a loss to make space in the warehouse, and then customers don't buy your next round of products because they are waiting for the fire sale in 12 weeks, and repeat...  Speculate to accumalate!  All businesses carry risks as per anything else in life.  That what managers are paid to assess and create robust business plans.  Personally I think some of the limited editions are very risky.  Plus a tad gimmicky!  A normal production run - according to Hornby 2016 Handbook 600-800.  Limited editions of items that have been done in other guises 1000, 1500 and 2000?  ( I know at least 1 is only 500).  

 

In fact, you could perhaps make an argument that the previous Hornby management was replaced precisely because they were constantly ordering too much inventory and being forced to clear it out, with resulting disastrous results to the profits.  I think to fully understand that you have to look at a number of wider issues in the market, and Hornby's objectives etc..  Steam has still been discounted to some retailers this year!

 

 

Well, there is an answer - the preorder system combined with making announcements throughout the year.  Thats what I were proposing, and make the order up, to the next viable order quantity. 

 

Preorders allow you to base your production orders on actual demand.

 

Announcements throughout the year mean you can better keep the production pipeline flowing.  It also makes production slots more fluid.  Look how Lima managed it!!!!!

 

 

 

Best Regards,

 

C.

 

[Phil Parker]

On 11/01/2020 at 19:52, RAF96 said:

My local shop had not had the 2020 catalogue delivered yet, although oddly it was on the shelves in Tesco and WHSmith, so they rang Hornby to pre-order a Rocket for a customer only to be told they were already sold out. 

 

The other odd thing they are only scheduled to visit Margate to put their an usual annual order in this Monday, so how is the average model shop supposed to cope with a chaotic system like that.

 

The Rocket is only one of hundreds of new items so I would like to see the business model that enables a range to sell out before the retailers get a chance to bid their orders.

 

OK - I've had a chat with Hornby to clarify this - partly because I have a Rocket set on pre-order.

Allocations for sets are being made by the reps, not via calls to Margate, and Hornby assure me that all those who have done reasonable business with Hornby in the last year will receive and allocation. Exactly what reasonable is isn't disclosed but if a shop ordered a single Flying Scotsman in 1973 and nothing since, that won't cut it. However, several hundred shops will qualify.

 

The Rocket has NOT sold out. Shops will be given an allocation and it is possible that they may already have pre-orders for more than that allocation.

 

The intention is to spread the range as widely as possible over the trade - you can't march in an order the entire production run.

Once allocations have been dished out, if any shop decides not to take up their full allocation, those models go back into the trade. If shops keep talking to their rep, then they will find out if they can up their allocation and get more models in.

 

So, it looks good for me getting my Rocket...

[Dungrange]

32 minutes ago, dogbox321 said:

Yes, but if you already have guaranteed sales, then you are turning down custom, and ultimately those sales have a positive effect of being an additional contribution to the running costs to the company, boots profits, capital that can be re-invested etc.  

 

A normal production run - according to Hornby 2016 Handbook 600-800.  Limited editions of items that have been done in other guises 1000, 1500 and 2000?  ( I know at least 1 is only 500).  

 

I agree with you IF you already have guaranteed sales.  However, when Hornby are estimating the size of a production run, they DO NOT have guaranteed sales - just a guess of potential sales based on numerous conversations with the public at shows and conversations that the reps have with retailers.   Expressions of interest / pre-orders placed after the announcement of a model's imminent arrival is not the same as guaranteed sales at the point a decision was made many months before. 

 

A lot of comments have been about Rocket and whether Hornby have produced enough to satisfy demand. 

 

You highlight above that a normal production run is 600 - 800 models.  This is lower than I would have thought, but I'll take it as being correct.  However, I believe that the Limited Edition run for Rocket has been stated as being 1,500 models and the set that is not a limited edition has presumably been produced in greater numbers, albeit this number hasn't been stated.   It therefore seems likely that Hornby may have ordered something like  4,000 - 5,000 models of Rocket, which I don't think is deliberately limiting supply: it's certainly much larger than a normal production run.  Yes, there may be demand for 6,000 or even 7,000 sets but how would Hornby know that when the order was placed in 2019?

 

Supply may be 5,000 units and demand 7,000 units meaning some people will be disappointed, but it could equally have gone the other way: Hornby produce 7,000 units and there is only demand for 5,000 leaving a lot of unsold stock that needs to be discounted to clear the warehouse.

 

Hindsight is a wonderful thing.  Sadly none of us can see into the future, including those who are employed to estimate production quantities.

 

Personally, I think the best way forward would be to scrap the annual announcements and drip feed announcements throughout the year a few months before the factory requires confirmed figures for the production slot.  The issue is of course that that doesn't fit very well with the publication of an annual catalogue.

[eldomtom2]

2 minutes ago, Dungrange said:

You highlight above that a normal production run is 600 - 800 models.  This is lower than I would have thought, but I'll take it as being correct.  However, I believe that the Limited Edition run for Rocket has been stated as being 1,500 models and the set that is not a limited edition has presumably been produced in greater numbers, albeit this number hasn't been stated.   It therefore seems likely that Hornby may have ordered something like  4,000 - 5,000 models of Rocket, which I don't think is deliberately limiting supply: it's certainly much larger than a normal production run.  Yes, there may be demand for 6,000 or even 7,000 sets but how would Hornby know that when the order was placed in 2019?

Remember that the 600-800 model production run figure is probably for a single model, and not the total number of models produced from a tooling including all the livery variants and so forth.

[GWR-fan]

When one looks back at previous firesales from Hornby,  what is readily noticed was that there was a surplus of first class and brake coaches.  Now blind Freddy has been telling all manufacturers for years that productions runs for third (or second class for a particular period) coaches should exceed the number of first and brake coaches and yet poor Freddy was ignored.  The tourist type coaches were always sold out and even on the pre-owned market these coaches still command a premium.  The only exceptions seems to be when a particular Mk2 or Mk3 coach was initially sold in very limited numbers and a first or buffet car will command a high pre-owned price.

 

Similarly a loco would be on firesale when a second run was released while the initial run was still in abundance on the shelves.  The recently released Lord Nelson class in olive green livery was released minus the smoke deflectors, thus limiting the modelling timeframe to approximately 1926-1929.  This model almost immediately went to discounting.  The modelling timeframe for this configuration was appropriate for a minority of modellers and so sales were relatively unhealthy. Even the 2020 proposed release from Hornby ignores the very popular olive green period during the 1930's.  The yet to be released model is in malachite green (post-1939),  thus modelling an olive green loco in the 1930's is completely ignored.

 

For many models chosen by Hornby the timeframe suitability may be just a matter of weeks.  A collectors edition (1000 units from memory) release of "Britannia" in an all black livery with no roadname on the tender was barely applicable for but a few days operation before the prototype received a traditional mainline livery.   Similarly the Royal Duties edition "Britannia" released in a run of 500 units and most likely still available today as an unsold item. The early crest Royal duties Schools class was also flogged off on a firesale.   Recall the "Flying Scotsman" with a different cab number each side.  While I do not recall it being firesaled it certainly caters for a very limited market.  While it is not possible to manufacture a "generic" livery and configuration to cover a wide timeframe,  Hornby does have a knack of modelling locomotives where the relevant operating period is extremely time limited making them more suited to a collector than a modeller.  Where a model is released primarily for the collector market then it skews the production run numbers, keeping them artificially low. 

 

At one time in the past a limited run from Hornby was in the region of 4000 to 5000 units. From memory,  the black fronted APT had a release of some 13000 units over several years.  The less popular earlier series without the black window surround was but a few thousand units.   For a train pack the number was generally around 2000 or so units.  Are market numbers of potential customers much lower these days than back in the late 20th and early 21st centuries?  Are we more discerning these days in our choices and so  a generic model locomotive which was once acceptable and produced in much higher numbers than today is no loner acceptable as modellers choose prototypical fidelity?  Also in the past actual railway operating company liveries were more restricted so a production run of say 5000 units in the past has to be split amongst a multitude of railway company liveries today, explaining lower production run numbers for specific items.

 

It would seem that intentional short production runs offer a surefire financial return to quickly recoup investment and make a profit to do a production run on another announced product.  The Hornby business model seems  highly underfinanced and needs a quick cash injection from one production run to finance the next.  Back on January 6th I was completely staggered by the number of releases planned given that finance has always been Hornby's Achilles Heel.  The announced range seemed to be highly optimistic and would require a lot of cash injection to achieve over the year and that cash has to come from sales.  While a limited production run does guarantee a speedy return on investment it disenfranchises many customers who miss out.  Are these customers willing to await a future production run or will their limited hobby funds find their way to finance another new release from a different manufacturer?

Edited January 13, 2020 by GWR-fan
Additional information

[Mel_H]

9 hours ago, phil-b259 said:

 

But I still don't see the problem.

 

If health issues mean you find you do not wish to go through with your purchase then pretty much all retailers will let you cancel said pre-order without charge. If on the other hand things work out well then you are not denied a model you want through it selling out by pre-ordering.

 

As I said before - if the time frame between ordering and delivery gets too large then the price will probably have gone up - and retailers are legally obliged to get your consent before taking payment. If paying by card then card expiry issues may also come into play.

 

The only real issues with extended delivery times and pre-ordering is where non refundable deposits are taken but the product takes ages to appear - but such arrangements are rare and even where they do exist (such as the D class from Rails of Sheffield) then many retailers will exercise their discretion with refunds if the worst were to happen.

 

In short all this worrying over pre-orders is a smokescreen - at the end of the day you are simply worried that you may not be able to enjoy an announced model due to the length of time it takes to reach the shelves. That has NOTHING to do with the process of pre-ordering models, but is rather the natural human desire to not miss out on something you like.

 

 

 

For various reasons I’ve just cancelled two long-standing so-called ‘pre-orders’ with Rails (not due to any issue with Rails, I must point out). Cancellation was easy and simple 

 

To be pedantic, they are actually  ‘non-binding orders for stock yet to be delivered’’. 

 

A ‘pre-order’ is surely an ‘expression of interest ‘, NOT any sort of order.

 

There’s no such thing as a ‘pre-order’. You either place an order’ (even if there’s no deposit and it’s  non-binding) or you don’t.

 

You are in one state or the other.  Eg you are either pregnant or you are not. You are not pre-pregnant, and then expect to receive a child!

 

Some shops operate a non-returnable deposit when you order.  That’s a business decision for them, and a customer decision for you. 

 

I really hate  the term ‘pre-order’.  It is an ‘order’. Shops could dress it  up as an ‘advance order‘ , or do what sofa tv ads do: ‘order today for (expected) delivery in December 2020. Nothing to pay now!’

 

I’ll get back in my box. Sorry to have bothered you 

 

 

 

[mdvle]

4 hours ago, GWR-fan said:

When you limit your customers you limit your financial return.  Shareholders are more concerned with the current price of their shares and the current dividend returns.  Telling a shareholder that in two years time we are doing another limited run is hardly convincing enough to reassure the shareholder of the value in their investment. 

 

Lets be clear about a couple of points.

 

One, as far as I am superficially aware Hornby is not currently paying out any dividends, so that is a non-issue.

 

Second, Phoenix owns 75% of Hornby and as such is the only shareholder that matters.  Stock price is currently irrelevant, as it won't significantly change in a meaningful way unless the company returns to profitability.

 

4 hours ago, GWR-fan said:

When demand exists you do not artificially play games with your customer by limiting production runs simply to maintain the demand on a future run.  A shareholder wants to see a financial return on the high cost involved in tooling.  Having an expensive set of tooling sitting idle is hardly economic. 

 

Again, to repeat, the threat of unsold inventory in a warehouse is a far greater financial threat to Hornby's future than being unable to meet demand because they underestimated the popularity of a new product.

 

4 hours ago, GWR-fan said:

Unsatisfied demand is a cost burden on a shareholder as he sees it as a wasted market opportunity.  A company needs shareholders but just as importantly it needs customers to buy its product.  When you limit production you limit your customer base.  Yes, you may not have surplus stock sitting on a shelf but you have ignored genuine sales when pre-orders are unmatched to production levels.

 

The current shareholder that matters put the current management in place in part because the previous management was losing significant amounts of money paying for production of items that sat in expensive warehouse space, and then had to be cleared at below cost.

 

The current management team, by doing their best to eliminate those previous over-productions, has reduced the significant yearly losses and put Hornby in the right direction.

 

So for now at least, I think it is fair to say Phoenix does not see wasted market opportunity but rather reduced losses, and that presumably makes them happy (because if they weren't then they will also toss the current management).

 

4 hours ago, GWR-fan said:

By keeping to limited production runs prices are kept high,  but as unsatisfied demand exists at these high price levels then limiting production is counter productive to economic return.    Maintaining customer loyalty is important to financial success and without a customer base you do not have a market for your product.  A modeller who has received a trainset for Christmas decides that he wants to extend his set up so he purchases a newly released catalogue and seeing numerous items he goes along to his hobby store to place an order or two.  The store keeper responds that all or most of the items he wishes to purchase are unavailable as the manufacturer has limited the production for those items and the production run is sold out.  The modeller thinks how can this be, the catalogue has only just been released and I cannot buy items in it.  Disillusioned,  he goes home,  packs up his trainset and sits in front of his television and plays video games.   The trainset sits unused collecting dust and a lifetime of potential purchases is missed by the manufacturer.

 

Get real.  There is exactly one item that is currently (by second hand info but seemingly confirmed as a possible issue by Phil) unavailable to order and that is the two versions of Rocket.  I don't think many people new to the hobby based on a train set under the Christmas tree are running out to purchase a £190 limited edition Rocket, or even the £180 regular Rocket set.

 

Everything else in the catalog is available to order, as well as any stock that the retailer has on the shelves being available to purchase then and there.  So the rest of your theory is nonsense.

 

1 hour ago, GWR-fan said:

Similarly a loco would be on firesale when a second run was released while the initial run was still in abundance on the shelves.  The recently released Lord Nelson class in olive green livery was released minus the smoke deflectors, thus limiting the modelling timeframe to approximately 1926-1929.  This model almost immediately went to discounting.  The modelling timeframe for this configuration was appropriate for a minority of modellers and so sales were relatively unhealthy. Even the 2020 proposed release from Hornby ignores the very popular olive green period during the 1930's.  The yet to be released model is in malachite green (post-1939),  thus modelling an olive green loco in the 1930's is completely ignored.

 

Hornby only has so much money, and thus can only produce so much product (new or otherwise) in any given year.  Remember, all production in China has to be paid for in advance.

 

1 hour ago, GWR-fan said:

While it is not possible to manufacture a "generic" livery and configuration to cover a wide timeframe,  Hornby does have a knack of modelling locomotives where the relevant operating period is extremely time limited making them more suited to a collector than a modeller.  Where a model is released primarily for the collector market then it skews the production run numbers, keeping them artificially low. 

 

Incorrect.

 

Yes, collectors buy models (good for us, more models sold!)

 

But 80% or more of the market does not care about accuracy to relevant operating periods or other stuff that many of us on RMweb care about - all they care about is whether they like the look of the model or not and they are quite happy to have a mish mash of eras and regions on their layout as they have fun.

 

Thus it is entirely possible that Hornby knows more about choosing liveries that sell than those of us worried about accuracy are willing to admit.

 

 

1 hour ago, GWR-fan said:

At one time in the past a limited run from Hornby was in the region of 4000 to 5000 units. From memory,  the black fronted APT had a release of some 13000 units over several years.  The less popular earlier series without the black window surround was but a few thousand units.   For a train pack the number was generally around 2000 or so units.  Are market numbers of potential customers much lower these days than back in the late 20th and early 21st centuries?

 

Again, covered extensively.  As more models get released each year than the past, the unit numbers per model must inherently go down.

 

1 hour ago, GWR-fan said:

It would seem that intentional short production runs offer a surefire financial return to quickly recoup investment and make a profit to do a production run on another announced product. 

 

Stop the presses - model train company wants to make a profit.

 

1 hour ago, GWR-fan said:

The Hornby business model seems  highly underfinanced and needs a quick cash injection from one production run to finance the next.

 

This is not unique to Hornby, this is how every model train company works (unless they have a wealthy sugar daddy to cover the bills).  The high upfront costs, combined with only getting paid months after paying out the money, means the companies in this hobby are constantly needing cash flow to keep the pipeline running.

 

1 hour ago, GWR-fan said:

Back on January 6th I was completely staggered by the number of releases planned given that finance has always been Hornby's Achilles Heel.

 

We don't know how Hornby is financing this, though their financials do show they still have credit available to them to use if needed.

 

But like any business, you have to spend money to make money.

 

1 hour ago, GWR-fan said:

While a limited production run does guarantee a speedy return on investment it disenfranchises many customers who miss out.  Are these customers willing to await a future production run or will their limited hobby funds find their way to finance another new release from a different manufacturer?

 

Why can't it be both?  Buy something else this year (either from Hornby or others), and then use next year's funds to buy from the second release.

 

But that is assuming that they can't get what they want, which again is all rumour based on some non-Rocket items possibly being in too short supply - because they other alternative is that Hornby have judged the market correctly and 95% or more of the people who want those Class 50/60/mk2/3 actually end up getting what they want.

 

[Mel_H]

7 minutes ago, mdvle said:

 

Lets be clear about a couple of points.

 

One, as far as I am superficially aware Hornby is not currently paying out any dividends, so that is a non-issue.

 

Second, Phoenix owns 75% of Hornby and as such is the only shareholder that matters.  Stock price is currently irrelevant, as it won't significantly change in a meaningful way unless the company returns to profitability.

 

 

Again, to repeat, the threat of unsold inventory in a warehouse is a far greater financial threat to Hornby's future than being unable to meet demand because they underestimated the popularity of a new product.

 

 

The current shareholder that matters put the current management in place in part because the previous management was losing significant amounts of money paying for production of items that sat in expensive warehouse space, and then had to be cleared at below cost.

 

The current management team, by doing their best to eliminate those previous over-productions, has reduced the significant yearly losses and put Hornby in the right direction.

 

So for now at least, I think it is fair to say Phoenix does not see wasted market opportunity but rather reduced losses, and that presumably makes them happy (because if they weren't then they will also toss the current management).

 

 

Get real.  There is exactly one item that is currently (by second hand info but seemingly confirmed as a possible issue by Phil) unavailable to order and that is the two versions of Rocket.  I don't think many people new to the hobby based on a train set under the Christmas tree are running out to purchase a £190 limited edition Rocket, or even the £180 regular Rocket set.

 

Everything else in the catalog is available to order, as well as any stock that the retailer has on the shelves being available to purchase then and there.  So the rest of your theory is nonsense.

 

 

Hornby only has so much money, and thus can only produce so much product (new or otherwise) in any given year.  Remember, all production in China has to be paid for in advance.

 

 

Incorrect.

 

Yes, collectors buy models (good for us, more models sold!)

 

But 80% or more of the market does not care about accuracy to relevant operating periods or other stuff that many of us on RMweb care about - all they care about is whether they like the look of the model or not and they are quite happy to have a mish mash of eras and regions on their layout as they have fun.

 

Thus it is entirely possible that Hornby knows more about choosing liveries that sell than those of us worried about accuracy are willing to admit.

 

 

 

Again, covered extensively.  As more models get released each year than the past, the unit numbers per model must inherently go down.

 

 

Stop the presses - model train company wants to make a profit.

 

 

This is not unique to Hornby, this is how every model train company works (unless they have a wealthy sugar daddy to cover the bills).  The high upfront costs, combined with only getting paid months after paying out the money, means the companies in this hobby are constantly needing cash flow to keep the pipeline running.

 

 

We don't know how Hornby is financing this, though their financials do show they still have credit available to them to use if needed.

 

But like any business, you have to spend money to make money.

 

 

Why can't it be both?  Buy something else this year (either from Hornby or others), and then use next year's funds to buy from the second release.

 

But that is assuming that they can't get what they want, which again is all rumour based on some non-Rocket items possibly being in too short supply - because they other alternative is that Hornby have judged the market correctly and 95% or more of the people who want those Class 50/60/mk2/3 actually end up getting what they want.

 

 

Well said on all those points!

[adb968008]

Omg..

 

pages on economic theory and accountancy..

 

not one post talks about the customer.

The customer only has so much money to spend.

2020 has a huge range on offer (not just Hornby).

Prices of dcc rtr locos are now £160-200.

 

What ever theory you apply, if the customer runs out of cash, they cannot spend. So many a fretting over pre-orders in, I suspect later in the year could see many re-adjustments of those pre-orders once reality bites and sense is applied, especially if too much arrives at once.

 

I cant help but wonder, how much of this new range will arrive in 2020... much of what I saw had a December 2020 date.. thats going to be one tough month on the walket, or those dates are going to change.

 

I stopped pre-ordering all but the “essentials” last year, and didnt miss anything on my “B” list as a result either, indeed a bit of patience saw some prices drop. Ive not changed this year and have an order for a few essentials again.

 

Not much sold out in 2019, the gene pool isnt growing that fast, I think most people dont have much to worry about, except the obvious one that everyones non-stop talking about...Rocket, but as for the rest.. well just look at the LN, Bathtub Duchess etc.. they are still here...

Edited January 13, 2020 by adb968008

[Phil Parker]

7 hours ago, mdvle said:

There is exactly one item that is currently (by second hand info but seemingly confirmed as a possible issue by Phil) unavailable to order and that is the two versions of Rocket.

 

Which bit of the Rocket is not sold out didn't I make clear? Allocations haven't even all been made yet, let alone taken up.

[truffy]

9 hours ago, Mel_H said:

For various reasons I’ve just cancelled two long-standing so-called ‘pre-orders’ with Rails (not due to any issue with Rails, I must point out). Cancellation was easy and simple 

 

To be pedantic, they are actually  ‘non-binding orders for stock yet to be delivered’’. 

 

A ‘pre-order’ is surely an ‘expression of interest ‘, NOT any sort of order.

 

Not strictly true. I have several items on 'pre-order' with Rails.

 

Some are standard manufacturer catalogue items, if cancelled there is no loss to me.

 

But Rails' special commissions involve a deposit of around £30. Unless there are extenuating circumstances (such as the price increase of the 812), if I cancel those orders I lose the deposit.

 

Whether these are pre-orders, expressions of interest, or something else is somewhat bandying semantics.

[Matt C]

2 hours ago, truffy said:

 

Not strictly true. I have several items on 'pre-order' with Rails.

 

Some are standard manufacturer catalogue items, if cancelled there is no loss to me.

 

But Rails' special commissions involve a deposit of around £30. Unless there are extenuating circumstances (such as the price increase of the 812), if I cancel those orders I lose the deposit.

 

Whether these are pre-orders, expressions of interest, or something else is somewhat bandying semantics.

I think there IS a difference though.  If Jo blogs models places an order with Hornby for 30 Rockets and then invites pre orders, and i am number 19 who DOES express an interest then. . . If they get 20, I get one, if they get 10 I dont. . If they get 20 and I dont buy one, number 21 on the list gets mine. If Jo blogs COMMISSIONS a Rocket from Hornby, takes a deposit from 100 people and orders 100 then those 100 would expect to get their model or lose the deposit if they choose not to take it. Surely the first one is an expression of interest and the other is a pre order ?

 

I think Hornby must have had these on order for some time to be able to ship for a February release date so numbers will have been estimated, maybe on the conservative side, who knows ?  Reading between the lines its quite possible that shops are putting in initial high orders, being told allocations may be cut, and this information is causing potential buyers to place orders with multiple sellers, fuelling even more speculation about shortages as sellers scrabble to find stock to satisfy even higher perceived demand !

 

From Hornbies stock ordering point of view, they are damned if they do and damned if they dont  order too much/ not enough stock, but I'm sure they will have worked out a quantity that will cover development costs, make a good return on the investment made and leave them with new tooling that can satisfy any shortcoming by a re issue next year or the year after  at a much reduced cost = greater profit from the next run 

Edited January 13, 2020 by Mattc6911

[ruggedpeak]

4 hours ago, truffy said:

 

Not strictly true. I have several items on 'pre-order' with Rails.

 

Some are standard manufacturer catalogue items, if cancelled there is no loss to me.

 

But Rails' special commissions involve a deposit of around £30. Unless there are extenuating circumstances (such as the price increase of the 812), if I cancel those orders I lose the deposit.

 

Whether these are pre-orders, expressions of interest, or something else is somewhat bandying semantics.

It isn't semantics - it is a key issue here. If I pre-order a special commission and pay £30 deposit or pay a deposit with say Accurascale (other firms are available) for an item from their range then subject to them going bust or some other very bad thing happening I am near enough 100% likely to get what I ordered when it is produced.

 

If I "pre-order" items from the Hornby 2020 range from a number of retailers or even Hornby themselves I have no idea whether I will actually get that item at all,ever. So they are not pre-orders because the retailer/Hornby has not accepted it as an agreed order. It is an expression of interest, perhaps even an invitation to treat for the lawyers amongst you. But it is not an order. Not until it arrives from the factory and they whether or not they are going to send it to me.

[adb968008]

God help us if we get to the point of lawyers for shops suing their customers over pre-orders.

 

Then its time for a new hobby.

 

i’d have to consider suing my plastic oo gauge passengers for not boarding my oo gauge trains I am providing them service to use. Though one did complain of a short formation, the advertised Class 800 was substituted last minute by a Piko HO ICE, I had to cut his knees off to fit him in.

Edited January 13, 2020 by adb968008

[JSpencer]

There are at least 10 of the 1980s versions in an auction site right now (and almost as many of the 3.5inch gauge ones!). The prices are in the main not far short of the new packs, with some optimistic sellers going up £299.

A couple of lower priced items are in an auction which will doubtless reflect a more realistic value for these old sets. 

 

Over 13,000 were made in the early 80s and I would be surprised if most finished in the skip.

[Martin.M]

Interesting points here, there was not much in the Hornby 2020 stuff for me but I like the look of the rocket and  i had one back in the day so I tried to pre-order a set with my usual supplier but he was sold out so I tried the next one i use and he was sold out so I have given up. Hornby have lost a sale of £179-189 and I am better off. Agreed if it was more of I my interest I would have made an effort to chase round more shoe to pre-order but it look like Hornby have lost my sale.... There is still 2021 to see what comes out...

Martin

 

[Mel_H]

11 hours ago, truffy said:

 

Not strictly true. I have several items on 'pre-order' with Rails.

 

Some are standard manufacturer catalogue items, if cancelled there is no loss to me.

 

But Rails' special commissions involve a deposit of around £30. Unless there are extenuating circumstances (such as the price increase of the 812), if I cancel those orders I lose the deposit.

 

Whether these are pre-orders, expressions of interest, or something else is somewhat bandying semantics.

 

You are quite right, of course! I'd forgotten that. Without too much semantics bandying, I'd suggest that it's a deposit - same as putting down a deposit on a car etc. Anyway, I'll pop away now before it all gets out of hand....

[Mel_H]

4 hours ago, Martin.M said:

Interesting points here, there was not much in the Hornby 2020 stuff for me but I like the look of the rocket and  i had one back in the day so I tried to pre-order a set with my usual supplier but he was sold out so I tried the next one i use and he was sold out so I have given up. Hornby have lost a sale of £179-189 and I am better off. Agreed if it was more of I my interest I would have made an effort to chase round more shoe to pre-order but it look like Hornby have lost my sale.... There is still 2021 to see what comes out...

Martin

 

 

I had an email today from TMC saying they still had some of their Rocket allocation available for order (not the Limited Edition version). Just checked, and they are still showing availability. I suggest you be quick!

 

https://www.themodelcentre.com/r3810

 

[Mel_H]

14 hours ago, adb968008 said:

Omg..

 

pages on economic theory and accountancy..

 

not one post talks about the customer.

The customer only has so much money to spend.

2020 has a huge range on offer (not just Hornby).

Prices of dcc rtr locos are now £160-200.

 

What ever theory you apply, if the customer runs out of cash, they cannot spend. So many a fretting over pre-orders in, I suspect later in the year could see many re-adjustments of those pre-orders once reality bites and sense is applied, especially if too much arrives at once.

 

I cant help but wonder, how much of this new range will arrive in 2020... much of what I saw had a December 2020 date.. thats going to be one tough month on the walket, or those dates are going to change.

 

I stopped pre-ordering all but the “essentials” last year, and didnt miss anything on my “B” list as a result either, indeed a bit of patience saw some prices drop. Ive not changed this year and have an order for a few essentials again.

 

Not much sold out in 2019, the gene pool isnt growing that fast, I think most people dont have much to worry about, except the obvious one that everyones non-stop talking about...Rocket, but as for the rest.. well just look at the LN, Bathtub Duchess etc.. they are still here...

 

I thought the same, but happily, there is time to save, given that a number of items won't be here until December (thank heavens).

[phil-b259]

On 12/01/2020 at 20:16, GWR-fan said:

 

When you limit your customers you limit your financial return.  Shareholders are more concerned with the current price of their shares and the current dividend returns.  Telling a shareholder that in two years time we are doing another limited run is hardly convincing enough to reassure the shareholder of the value in their investment.  When demand exists you do not artificially play games with your customer by limiting production runs simply to maintain the demand on a future run.  A shareholder wants to see a financial return on the high cost involved in tooling.  Having an expensive set of tooling sitting idle is hardly economic. 

 

Unsatisfied demand is a cost burden on a shareholder as he sees it as a wasted market opportunity.  A company needs shareholders but just as importantly it needs customers to buy its product.  When you limit production you limit your customer base.  Yes, you may not have surplus stock sitting on a shelf but you have ignored genuine sales when pre-orders are unmatched to production levels.  Theoretical production ideas may look good on paper but they ignore reality by not matching production to sales.  Limited production runs result in exclusivity and ignore the actual demand.  Model trains are not exclusive pieces of art or jewellery, they are mundane toy trains.

 

By keeping to limited production runs prices are kept high,  but as unsatisfied demand exists at these high price levels then limiting production is counter productive to economic return.    Maintaining customer loyalty is important to financial success and without a customer base you do not have a market for your product.  A modeller who has received a trainset for Christmas decides that he wants to extend his set up so he purchases a newly released catalogue and seeing numerous items he goes along to his hobby store to place an order or two.  The store keeper responds that all or most of the items he wishes to purchase are unavailable as the manufacturer has limited the production for those items and the production run is sold out.  The modeller thinks how can this be, the catalogue has only just been released and I cannot buy items in it.  Disillusioned,  he goes home,  packs up his trainset and sits in front of his television and plays video games.   The trainset sits unused collecting dust and a lifetime of potential purchases is missed by the manufacturer.

 

Perhaps you should offer your advice to the 'fast fashion' brands like ASOSs, Boohoo and to a lesser extent Primark and see where that gets you!

 

We are not talking rare collectables or expensive jewellery here - mainstream retail IS changing and those that don't change with it are going out of business rather rapidly.

 

The overall trend amongst business, as far as City traders is clear - short batches that quickly sell out at what the retailer considers full price* is the way forward in terms of having a lean / efficient business while delivering profits for shareholders.

 

Its an unfortunate side effect of the de=regulation of the City markets in the 1980s that Shareholders these days are far more likely to be those with short term outlooks like Hedge funds and venture capitalists whose main focus is a high share price now (signalling virality to the market and the potential of high returns if the shares are sold on) - not good dividends over the medium to long term

 

All said companies have performed very strongly as regards share price despite operating very much on the basis of smallish batches that sell out quickly rather than more tradition retailers who generally produce larger volumes of items so as to try and cater for all demand.

 

As for tooling - modern practice is to get that tooling to pay for itself in the FIRST run - storage of said tooling is a tiny expense which will easily be covered by subsequent re-runs.

 

Finally, with respect to cultivating customer loyalty, that is a DEAD business concept these days - brand loyalty counts for NOTHING in business terms. From insurance to food we are encourage to change suppliers regularly and those who do not are seen by business as  'cash cows' to be fleeced for as much cash as possible. What you see as 'brand loyalty' in the model railway sector actually has far more to do with the fact that head to head duplication is not viable for manufacturers due to the small size of the market. Consequently with unlike baked beans or car insurance, if you want a 00 model of a Stainer 8F you HAVE to buy from Hornby

 

 

* Be careful of discounts. If a sofa spends most of the time 'on sale' / discounted at £250 then it will in fact be a £250 sofa that the retailer overcharges for periodically to satisfy the regulators - NOT a 'bargain' in the sales....

Edited January 14, 2020 by phil-b259

[adb968008]

Personally i’m expecting much of “December 2020” releases to be in 2021.

 

Last years range felt to me a bit slimmed down to previous years, I wonder if some of 2020’s vast range is borrowed from 2019/2021  ?

 

if it isnt, and its all planned for 2020, then it would feel a bit like dejavue from Lima days... as every else is also making everything this year.

[maico]

I would of thought the Hornby group would of had enough volume to buy into an exsisting factory in China? The Germany company Piko have a good reputation for competive pricing on some models and good quality control. It's surely no coincidence they own, or co-own this large facility and are not at the end of a long supply chain and third party production slot allocations

 

 

 

 

Edited January 16, 2020 by maico