Tennents Trains to stop stocking Hornby

[Chamby]

An announcement on the Hornby page of Tennent’s Trains website reads as follows:

 

“We are now no longer allowed to sell the Hornby brand and these pages represent the remaining models that we have in stock.  Our efforts to sell the range at competitive and realistic prices have been stopped by Hornby after we refused to support the maximum 10% discount on new models. Only the secondhand models will continue on these pages.”

 

Following on from the similar announcement from Rails earlier this week (albeit without explanation), I wonder how many other retailers have made a similar decision?

[Steamport Southport]

5 minutes ago, Chamby said:

An announcement on the Hornby page of Tennent’s Trains website reads as follows:

 

“We are now no longer allowed to sell the Hornby brand and these pages represent the remaining models that we have in stock.  Our efforts to sell the range at competitive and realistic prices have been stopped by Hornby after we refused to support the maximum 10% discount on new models. Only the secondhand models will continue on these pages.”

 

Following on from the similar announcement from Rails earlier this week (albeit without explanation), I wonder how many other retailers have made a similar decision?

 

That was about a year ago. Old news I'm afraid.

 

 

It was a dispute about discounts. Tennent's Trains have always been quite generous with the discounting and it seems that Hornby didn't like it....

 

 

 

Jason

[Michael Hodgson]

Is that legal again now?  I thought Retail Price Maintenance had been outlawed unless you could prove it was in the public interest, but I know there has been new competition legislation in recent years, and no doubt EU law will cease to apply soon anyway.

[frobisher]

1 hour ago, Michael Hodgson said:

Is that legal again now?  I thought Retail Price Maintenance had been outlawed unless you could prove it was in the public interest, but I know there has been new competition legislation in recent years, and no doubt EU law will cease to apply soon anyway.

 

It's perfectly legal - Hornby, for example, are under no obligation to sell to anyone, and whilst a shop may sell at any price it cares to,  it may find that it may not be able to obtain any new stock after over generous discounting contrary to the terms of supply from the wholesaler.

[dpgibbons]

3 hours ago, frobisher said:

 

It's perfectly legal - Hornby, for example, are under no obligation to sell to anyone, and whilst a shop may sell at any price it cares to,  it may find that it may not be able to obtain any new stock after over generous discounting contrary to the terms of supply from the wholesaler.

 

Not so. This is taken from the CCA's advice on RPM here

 

"You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make resellers stick to recommended resale prices"

 

"RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price"

 

To add insult to injury, a reseller that acquiesces to such restrictive supplier actions may also be complicit in RPM! 

Edited August 31, 2020 by dpgibbons

[rockershovel]

... which also demonstrates a key constraint of the outsourcing business model. Hornby have a cost defined by their supplier. They have no related assets (plant etc), no tax advantages (amortisation of assets etc) and add no value (since they simply move boxes about).

 

Nor can they benefit by improving productivity. RPM originally provided a mechanism to encourage productivity (since a manufacturer could improve profits, by improving productivity within a defined retail cost range) but that has largely ceased to apply. 

 

They MUST maintain a flow of new designs, publicise those designs to sustain demand, and achieve defined margins between purchase and resale. 

[ThaneofFife]

so potentially this was the new news last year and the Rails announcement was old news! 

[frobisher]

1 hour ago, dpgibbons said:

 

Not so. This is taken from the CCA's advice on RPM here

 

"You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make resellers stick to recommended resale prices"

 

"RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price"

 

To add insult to injury, a reseller that acquiesces to such restrictive supplier actions may also be complicit in RPM! 

 

The emphasis there is MAY and/or LIKELY be illegal.  It isn't until brought to court.  The CMA has done NOTHING since the last time we saw this letter trotted out with regards Bachmann, and if, like Bachmann, Hornby are offering REASONABLE terms within any supply contract on suggested discounting levels on a time limited basis then they are not taking UNREASONABLE sanction by terminating trade accounts.  The case law shown was for suppliers acting in an unreasonable and concealed manner.

 

 

 

 

[john new]

The worst thing in recent years in many ways was the abolition of RPM and other retailing restrictions. At first it seemed great to get the lower prices but we now have less options for purchasing as it largely killed off local shopping/specialist shops.

[Chamby]

2 hours ago, rockershovel said:

... which also demonstrates a key constraint of the outsourcing business model. Hornby have a cost defined by their supplier. They have no related assets (plant etc), no tax advantages (amortisation of assets etc) and add no value (since they simply move boxes about).

 

Nor can they benefit by improving productivity. RPM originally provided a mechanism to encourage productivity (since a manufacturer could improve profits, by improving productivity within a defined retail cost range) but that has largely ceased to apply. 

 

They MUST maintain a flow of new designs, publicise those designs to sustain demand, and achieve defined margins between purchase and resale. 

 

If this is the case, then why have Hornby taken the stance they have?  Surely the key factor for them is the price achieved from Hornby to the retailer, since this will determine their profitability derived from the unit mark-up over the price they pay the manufacturers.  

 

The additional margin that retailers then add on when selling to customers will not affect that one jot.  Open price competition between retailers is surely fair play, if the price they pay Hornby for the product is the same?

[Enterprisingwestern]

 

I agree with Chamby on this.

A strange stance by Hornby, by their economic methodology many supermarkets would have been abandoned by major manufacturers when they sell food items as loss leaders to get customers into the store.

Is there a bit of protective nest feathering going on within the hobby?

 

Mike.

[rockershovel]

6 minutes ago, Chamby said:

 

If this is the case, then why have Hornby taken the stance they have?  Surely the key factor for them is the price achieved from Hornby to the retailer, since this will determine their profitability derived from the unit mark-up over the price they pay the manufacturers.  

 

The additional margin that retailers then add on when selling to customers will not affect that one jot.  Open price competition between retailers is surely fair play, if the price they pay Hornby for the product is the same?

 

True; provided, and ONLY provided that uncontrolled discounting by suppliers does not result in downward pressure on  the price paid by retailers to Hornby, and that volume of sales achieved by Hornby Appointed dealers is not affected. 

[Enterprisingwestern]

1 minute ago, rockershovel said:

 

True; provided, and ONLY provided that uncontrolled discounting by suppliers does not result in downward pressure on  the price paid by retailers to Hornby, and that volume of sales achieved by Hornby Appointed dealers is not affected. 

 

Is that not the free market in operation?

I thought protectionism was illegal also?

 

M.

[rockershovel]

1 minute ago, Enterprisingwestern said:

 

I agree with Chamby on this.

A strange stance by Hornby, by their economic methodology many supermarkets would have been abandoned by major manufacturers when they sell food items as loss leaders to get customers into the store.

Is there a bit of protective nest feathering going on within the hobby?

 

Mike.

 

Hornby aren’t in the same business as supermarkets, whose business consists of mass marketing of (mostly) essential consumables in a strongly price sensitive market. 

[Joseph_Pestell]

Just now, rockershovel said:

 

True; provided, and ONLY provided that uncontrolled discounting by suppliers does not result in downward pressure on  the price paid by retailers to Hornby, and that volume of sales achieved by Hornby Appointed dealers is not affected. 

 

Not proven. It could be that a few major "box shifters" ultimately reduce the overall numbers sold by Hornby as local retailers disappear. 

 

But I find it somewhat hypocritical of Hornby to take this attitude when they have their own direct retail operation which sometimes offers large discounts which has certainly damaged retailers.

[Chris M]

So far as I am aware it was only earlier this year that Tennents made this decision. I suspect that Hornby don’t like shops discounting because Hornby want to get more direct and online sales themselves.

[Enterprisingwestern]

3 minutes ago, rockershovel said:

 

Hornby aren’t in the same business as supermarkets, whose business consists of mass marketing of (mostly) essential consumables in a strongly price sensitive market. 

 

You're comparing apples and oranges, Hornby are in the same business, ie, selling things in competition with other manufacturers/suppliers.

 

Mike.

 

 

[rockershovel]

4 minutes ago, Joseph_Pestell said:

 

Not proven. It could be that a few major "box shifters" ultimately reduce the overall numbers sold by Hornby as local retailers disappear. 

 

But I find it somewhat hypocritical of Hornby to take this attitude when they have their own direct retail operation which sometimes offers large discounts which has certainly damaged retailers.

 

True again. Major box shifters also have the option to shift boxes from other sources, for one thing.. which brings us back to the earlier point, that Hornby are under constant pressure to provide a uniquely differentiated product 

[rockershovel]

6 minutes ago, Enterprisingwestern said:

 

You're comparing apples and oranges, Hornby are in the same business, ie, selling things in competition with other manufacturers/suppliers.

 

Mike.

 

 

 

True, as far as it goes.

 

However I could go to several different supermarkets, all within a few minutes drive, and buy products which are (for all practical purposes), no different. I would also have the choice of their own brands, or brands from third party suppliers. There’s also the not-so-small matter that at least some part of their range, is necessary - you have to eat, after all. 

 

Hornby are competing for disposable income, in a market where the option not to buy at all is ever-present. 

Edited August 31, 2020 by rockershovel

[Chris M]

Tennents are only a small shop and can’t stock all products. They do have a great range of Woodland scenics at good prices and a good range of Metcalfe last time I looked. They also seem to be starting to sell Dapol now they have dropped Hornby which for me as an N gauge modeller should turn out to be a good thing. I know a lot of work has gone into their stock control system over the past year so now they know what they have in stock which is pretty good for a small shop. Their website is well worth taking a look at.

 

i have no connection with the shop other than being a customer.

[Enterprisingwestern]

4 minutes ago, rockershovel said:

 

True, as far as it goes.

 

However I could go to several different supermarkets, all within a few minutes drive, and buy products which are (for all practical purposes), no different. I would also have the choice of their own brands, or brands from third party suppliers. There’s also the not-so-small matter that at least some part of their range, is necessary - you have to eat, after all. 

 

Hornby are competing for disposable income, in a market where the option not to buy at all is ever-present. 

 

Fully agree, I wasn't saying you were wrong!

 

Mike.

[phil-b259]

3 hours ago, dpgibbons said:

 

Not so. This is taken from the CCA's advice on RPM here

 

"You must not use threats, financial incentives or take any other action, such as withholding supply or offering less favourable terms, to make resellers stick to recommended resale prices"

 

"RPM can also be achieved indirectly, for example as a result of restrictions on discounting or where there are threats or financial incentives to sell at a particular price"

 

To add insult to injury, a reseller that acquiesces to such restrictive supplier actions may also be complicit in RPM! 

 

Then please explain why Bachmann have been able to operate just such a 'big discounts = no product' policy for well over three years now!

The fact that no action has been taken says to me that such a stance IS legal providing you are very careful / good at drafting the wording.

 

 

Edited August 31, 2020 by phil-b259

[Joseph_Pestell]

4 minutes ago, phil-b259 said:

 

Then please explain why Bachmann have been able to operate just such a 'big discounts = no product' policy for well over three years now!

The fact that no action has been taken says to me that such a stance IS legal providing you are very careful / good at drafting the wording.

 

 

 

On another thread, someone stated that such restrictions are lawful for a fixed period of time after the product launch (and he quoted the relevant guidance). It seems like a sensible arrangement in that it protects the smaller retailers.

[Enterprisingwestern]

 

I would consider Tennents to be such a smaller retailer?

 

Mike.

 

 

[rembrow]

We have discussed this issue before on other threads. There is legislation in the UK relating to minimum pricing, it exists due to us previously being a member of the European Community. Normally a seller cannot set a minimum price that a reseller must not go beyond, or impose sanctions. However there are a couple of allowances where the seller can impose a minimum price, one is where a new product is being actively marketed. This is to ensure no individual retailer can grab the market. This allowance can only be used for a limited period. These reseller minimum price restrictions are used by Bachmann, Dapol, Heljan and Hornby  with Hornby being the last to use it. I believe they are using this new product allowance in the legislation as in each case it applies for something like 6-10 weeks after release.

Personally I think this use is open to interpretation, as these model suppliers are not intending for the 'new product to be in circulation for a significant period of time. Their success is to sell out quickly rather than continue with the product in that guise for a couple of years or more, which is what the allowance in the legislation is intended for.