Hornby model shop Tiers system

[Meld9003]

17 minutes ago, AY Mod said:

Several weeks into this whole issue I'm still struggling to see why it needed to be done. 

Andy Hayter covered this. It will help them understand their retailers better in terms of which are most important to the business. It also formalises this and let retailers know where they stand. None of this is a bad thing. The implementation feels rushed, but Covid and production issues may have forced their hand.

[Dunsignalling]

Under what looks increasingly like a form of retail Apartheid, the question arises "if they can do it to Hatton's, who's next, and who's safe?" Even amongst those who seem OK this time, it will be a very confident retailer who isn't wondering where they will stand next year or the year after. 

 

Those in Tier 3 (and not just Hatton's) will need to make up the the revenue formerly generated from pre-selling new releases, which is effectively being diverted to others and/or Hornby Direct. The cynical/realistic view, is that by the time they are permitted to order from Hornby, any really popular stuff will be sold-out and their intended function will be to clear Hornby's shelves of slow selling releases and keep the back catalogue ticking over.

 

To me, Hornby's stated policy still smacks of a gradual move towards attracting new customers through mainstream outlets and at least predominantly direct selling of everything thereafter. My feeling is that the process isn't likely to be concluded under the present top management, but when that changes it may happen very quickly.

 

However, the writing is well-and truly on the wall IMO and retailers will want/need to hedge against the possibility by increasing non-Hornby sales as a proportion of their overall turnover. Anybody whose business is heavily reliant on Hornby sales should urgently be working out what to do if Hornby shift the goalposts again.

 

That's the exact opposite of Hornby's short term needs, whatever their long-term intentions turn out to be, but the good old Law of Unintended Consequences is ignored at ones peril.

 

John

 

 

Edited May 27, 2021 by Dunsignalling

[Chris M]

33 minutes ago, AY Mod said:

Several weeks into this whole issue I'm still struggling to see why it needed to be done. 

Hornby still have big loans to pay back and need to generate cash to fund new tooling. They must think that this approach will improve their cash situation. Business is all about having the money you need to keep the business going. If you don’t generate enough cash from sales you go under. The people in charge at Hornby, or maybe some bright spark wanting to make an impression will have come up with this plan. I just hope the idea didn’t come from highly paid external consultants - they always muck things up.

[AY Mod]

1 minute ago, Meld9003 said:

Andy Hayter covered this. It will help them understand their retailers better in terms of which are most important to the business. 

 

They should know that anyway themselves, from the reps and the order books. 

[AY Mod]

1 minute ago, Chris M said:

They must think that this approach will improve their cash situation

 

How? There are other tools employed to do that. 

[Trains4U]

15 minutes ago, LimboBrit said:

Could it be that the feedback they were getting from retailers on pre-order quantities was proving to be too inaccurate to be used when placing orders at the factories leaving models either in short supply or leaving Hornby with excessive stock? And/or they see this as a way of boosting their average selling price?

No

 

We place our orders in January 

production quantities are known (or at least planned) at that time and we are advised at the time or shortly afterwards if any items are restricted and given allocations.

 

what is happening is that confirmed orders are being arbitrarily reduced by the supplier at short notice before delivery for whatever reason.

 

It may be that covid has impacted factory capacity and Hornby have decided to have less of everything rather than none of something, restricting supply, there may be other reasons, we haven’t been told.

 

all we are told is that our allocation is reduced, here is what you are getting and that’s final.

[Andy Hayter]

4 minutes ago, AY Mod said:

 

They should know that anyway themselves, from the reps and the order books. 

 

Experience says very clearly that reps are very protective of "their" customers to the expense of all others.

 

I can well imagine that the reps for Rails and Hattons are spitting feathers at the loss (essentially) of these clients.  For example if the rep is rewarded for the level of sales they will have lost a lot of potential income.

 

What the rep sees and what the financials say can be very different.

Then there is the issue of how much useful market feedback comes from your customer.

 

So no Andy, without a formal process that examines all of the issues for the business from all departments, it is quite probably not known.  Each will have their view but when you agglomerate those views you end up with very different pictures.  

[Patriot87003]

19 minutes ago, AY Mod said:

Several weeks into this whole issue I'm still struggling to see why it needed to be done. 

My own opinion on this ... I feel that Hornby are trying to fix/improve several issues in one swoop. Each individual issue is probably not enough to justify the move, but collectively there maybe some logic;

 

- 1) Supply chain issue: Balancing and optimising supply v demand issue (This potentially includes the possibility that Hornby has surprised itself with the volume of pre-orders being received directly on it’s website. Possibly due to the new improved website itself, also newcomers to model railways during the pandemic, also the 2021 range is pretty impressive). So there is the potential that for every one order being made direct to Hornby, that that’s one less for the lower end of the priority chain)

- 2) Head-off some competition threats (from the existing competition eg Hattons, also any retailer that’s plotting competing products (note; not complimentary products).

- 3) Incentivise Hornby brand placement/marketing amongst retailers

 

I think 1 speaks for itself ... it’s a prioritisation system to clarify the order in the event of demand exceeding supply. No different to say a typical FA Cup final ... season ticket holder get first dibs, members the next and so on.  2 also makes sense to me ... why should Hornby prioritise Hattons over a smaller retailer, when Hattons have an increased potential capital to invest in announcing a rival product, such as a new Class 50 or HST?

 

3 is a bit more nuanced. In the modern digital age, product placement/advertising is a big deal. So Hornby is encouraging retailers to advertise the Hornby brand (all ranges) with retailers it wants to be associated with going forward.

 

I found the adverts within the latest issue of BRM interesting ... eg Hattons advert has it’s own brand very visible, yet the branding of it’s suppliers were almost invisible. Compare with the Gaugemaster advert ... while the Gaugemaster brand is visible, so too is the branding of the main suppliers ... so Gaugemaster are doing Hornby’s marketing for them. This is probably why Hornby also go direct to some high street stores and Argos and Amazon.

 

 

[Nile]

11 minutes ago, Trains4U said:

all we are told is that our allocation is reduced, here is what you are getting and that’s final.

And this from a Tier 1 retailer, it doesn't look good.

[Mike Buckner]

No doubt, some shopkeepers nearing retirement will be thinking, Now is the time.

[Phil Parker]

30 minutes ago, APOLLO said:

 

Just a simple, 100% honest statement from Hornby would have prevented most of this angst.

 

If they are having supply problems, and think they will not get the numbers ordered from the manufacturers TELL US

If the models ordered take longer to arrive, TELL US

If they hold X % of said models for their own website TELL US

If they reduce certain shops orders in a tier based system - TELL US

If they have a falling out with a particular retailer TELL US nicely, and simply - we don't need to know exact details.

 

A bit of honesty (especially when the news is bad) goes a long way in public relations.

 

Brit15

 

And then sit back with some popcorn and watch the fight?

 

No business is going to give all the details to a self-appointed group of experts, and what would those experts do with them anyway?  Personally, I wouldn't look forward to moderating this forum if all this stuff was put into the public domain.

[Andy Hayter]

20 minutes ago, AY Mod said:

 

They should know that anyway themselves, from the reps and the order books. 

Just to expand on my previous post Andy, suppose we had a customer a bit like Hattons and see what the business views are:  (and I say a bit like so as not to suggest that any particular attribute applies specifically to Hattons)

 

1.  Sales rep - brilliant.  They shift thousands of sales units.

2.  Accounts - not bad.  The turnover is very high but they do tend to delay payment to the very last day.  The profit per sales unit is a bit below average but a good steady customer.

3.  Marketing - they are a competitor.  They are tight lipped about what the market is saying [perhaps because they want first dibs on any market development be it developing coaches for an expanding bit of the market or producing their own versions of out-dated models on our range.] 

4.  Technical - all we ever get from them is customer returns,  [ A consequence of being a bit tight lipped, they don't feed back heavily on all the repairs and customer support they carry out themselves.]

 

So Andy, sort the bones from that.

 

And that is why it is actually very difficult to carry such an analysis of all your customers and then you have to decide where the boundaries lie between the worst customer in one band and the best customer in the next.

[amwells]

1 hour ago, AY Mod said:

Several weeks into this whole issue I'm still struggling to see why it needed to be done. 

Hornby clearly still need to do something - they aren’t making any profit and have backers that have supported them to a big amount.  Though I do wish people would stop saying they have big loans to pay off - that’s not what the public financial statements say. They do have big (relative to size of the company) equity investors who will be looking for a return on that investment. 
 

Whether this is the right action, time will tell but while the CEO says that the ‘engine is fixed’, the public financial statements suggest that it’s not fixed in a way that gives a satisfactory return (would anyone be happy with pumping in £millions and getting £0 return)?

 

To me, Hornby is still in a critical situation. Yes much better than it was before (much, much better), but still not where it needs to be to be sustainable. This is not about corporate greed as some have suggested, it’s about survival. And many retailers that we are talking about have a mutual need on that survival, so as an enthusiast and customer, I hope it works out well for all. 

[PeterStiles]

23 minutes ago, Mike Buckner said:

No doubt, some shopkeepers nearing retirement will be thinking, Now is the time.

The annoying thing is that I'd been thinking, as retirement planning is starting to play on my mind, that I'd love nothing better than to run a Model Railway Shop when I leave all this office work behind... Bother,.

[spikey]

1 hour ago, Trains4U said:

 ... all we are told is that our allocation is reduced, here is what you are getting and that’s final.

 

Is it not the case with other major suppliers nowadays that in practice you place an order and hope for the best i.e. you don't know for sure what you're getting until you open the carton?

[Edwardian]

14 hours ago, adb968008 said:

For more +£€$¥.

 

but i’m sure the marketing team will say its to support grassroots delivery drivers. Those drivers are in Tiers..

 

Tier 1 drivers have a clean white van, with parcels stacked nicely, and will speak english and offer a smile.

 

Tier 2 Drivers also have a clean white van, invariably (v2 Usually) they will  stack parcels neatly, but occasionally fall over if turning the corner too fast. But more importantly they might deliver your parcel no matter what condition it arrives.

 

Tier 3 drivers drive old smokies, often deliver parcels for other websites too. They will throw parcels over your gate, or on the roof but again most importantly they might deliver, somewhere, sometime, but being tier 3 it might get lost.

 

my grassroots delivery driver doesnt have a van, he comes on foot. He delivers for everybody and delivers everything. He is Tier 1, but am not sure why... but I hope he keeps coming as ive ordered quite a lot.

 

Tier 1: Retailers prepared to act as an unpaid substitute customer services department for the manufacturer?

 

I have heard expressions of relief, in the retail sector, at no longer having to spend all their time, and a good deal of cost and energy, returning in significant numbers the faulty contents of red boxes.

[JohnR]

3 hours ago, Dunsignalling said:

Not quite sure what function Amazon provides beyond their distribution network, but Hornby are by no means alone in having such a relationship.

 

My new TV arrived yesterday, "Sold by Currys PC World and Fulfilled by Amazon". My guess is that it just makes it easier to ensure next-day delivery.

 

John

 

Which means the stock is owned by Currys PC World, and is simply based in an Amazon warehouse. The price is set by CPC too. 

 

However, the Hornby stock (or at least those which I've looked at), do not have that. They are clearly stock owned by Amazon, priced by Amazon. 

[ruggedpeak]

43 minutes ago, Phil Parker said:

 

And then sit back with some popcorn and watch the fight?

 

No business is going to give all the details to a self-appointed group of experts, and what would those experts do with them anyway?  Personally, I wouldn't look forward to moderating this forum if all this stuff was put into the public domain.

I see an opportunity. Given the popularity of this discussion make it so that only RMWeb Gold members can discuss it!!! Subscriptions will skyrocket......

 

On a more practical note, I assume Hornby will have factored in that if and when we return to normality, holidays/pub/days out/socialising etc will suddenly become a much bigger part of discretionary spend and spend on models and hobbies may collapse, or at least drop to pre-COVID levels. I've realised I need to ease off on train spend as I can see family holidays etc on the horizon and my current train spending is not sustainable as those things become viable......

[Roy Langridge]

On 25/05/2021 at 16:03, phil-b259 said:

 

That might be a bit tricky.

 

The only 'Eastern European' countries which aren't in the EU are Belarus, Ukraine and Russia, Serbia and Montenegro.

 

Given two out of the five are headed by dictators in all but name and under Sanctions for their behaviour while the third is country partly under illegal occupation you don't have much choice.

 

 

You might want to go and have a look at a map and find the ones you missed like Albania, Azerbaijan, Kosovo, Moldova, North Macedonia...

 

All on the UN list of eastern European countries.

 

Edit: Well, I said I would not buy Hornby anymore and I stick by that.

 

As an aside, I recently had a batch of new locos that arrived damaged - as it happens not Hornby but that is irrelevant. One was from a smaller shop, two from Hattons and one from Kernow. The ones from Kernow and Hattons were replaced as they are big enough to carry more stock. The one from the smaller shop was a refund as they had no replacement and I was unable to source an alternative elsewhere by the time I had confirmed that I could not get an exchange.

 

Size does matter sometimes... 

Roy

Edited May 27, 2021 by Roy Langridge

[Trains4U]

9 minutes ago, spikey said:

 

Is it not the case with other major suppliers nowadays that in practice you place an order and hope for the best i.e. you don't know for sure what you're getting until you open the carton?

Not with any of the other 20 or so suppliers I deal with, No.

Edited May 27, 2021 by Trains4U
typo

[The Stationmaster]

1 hour ago, AY Mod said:

Several weeks into this whole issue I'm still struggling to see why it needed to be done. 

I think it might well come back to my earlier questions about exactly that.  If Hornby accept trade orders at their traditional January time following their big-bang release of the new model year they can do one of three things assuming they have already placed their orders with factories in order to guarantee production slots to match Hornby's estimated release dates.

1. They accept retailer orders which match what they have ordered from the factory minus the number of models they intend to sell via other routes, or

2. They accept more retailer orders plus their own orders for sales via other routes than the number of models they have ordered from the factory, or

3. Later in the year, and for whatever reason, they divert stock which was against retailer orders to sale via other routes.

 

Method 1 is the ideal world and and it would only need subsequent  'allocation' if, for whatever reason, the factory is unable to supply the number of models originally ordered or QC (if it exists?) finds after arrival in England that a percentage of the models are unfit for sale and can't be distributed.  If delays occur to production they are simply delays - no more than that- they would not be cancellations.

 

Method 2 could work in one of two different ways.  Firstly if they really know their market and marketing and have correctly judged their factory orders they might be taking account in over-selling of the fact that there is always 'wastage' in the form of cancelled retailer orders and they know what percentage to allow for.  If done properly that could be seen to make a degree of sense BUT it needs deep understanding of the market and likely popularity of models.  

BUT. secondly, and on the other hand due to either poor controls, or for some other reason, they simply oversell and then have to try to correct things (i.e.balance what they have sold with what they have to sell) at a later date and to do so sensibly it is useful to have something like the tier system instead of just doing it on a whim or the basis of which rep shouts loudest

 

Method 3 would to me seem to be some sort of failure of marketing, or sales income budgetting (i.e. they make more money out of direct sales), or - I hardly dare say it 'grabbing an opportunity' to make more money when something becomes really popular'.  if one is 'managing a business and its staff for results' purely on a financial measure with nothing else considered then it could be quite an understandable temptation.

 

I can wholly understand that if stock was sold in January they cannot sell it again later in the year but they need a system of priority about how they should deal with cancelled retailer etc orders.  That's nothing new and normally in the past the reps have offered such stock to retailers possibly with some sort of preference; that preference is now on an official footing which makes a lot of sense to me.  In the past - and maybe still in future - it also depended on how good the liaison and relationship was between each rep and his client retailers - with lots of retailers in Tier 2 that might not change?

 

 

[ruggedpeak]

2 minutes ago, JohnR said:

 

Which means the stock is owned by Currys PC World, and is simply based in an Amazon warehouse. The price is set by CPC too. 

 

However, the Hornby stock (or at least those which I've looked at), do not have that. They are clearly stock owned by Amazon, priced by Amazon. 

Amazon is primarily a business services company now. It facilitates other business through AWS and logistics. Look at their numbers, the big and growing part of the business is not running a retail business but providing the online and logistics infrastructure to those who do. The idea Amazon is primarily a retailer is out of date. Much like people still think Tesla is a car company.

 

Hornby on Amazon is like John Lewis, a side show, and it shows given the limited range and poor design.

 

[APOLLO]

56 minutes ago, Phil Parker said:

 

And then sit back with some popcorn and watch the fight?

 

No business is going to give all the details to a self-appointed group of experts, and what would those experts do with them anyway?  Personally, I wouldn't look forward to moderating this forum if all this stuff was put into the public domain.

 

Well where I worked (British Gas) when things went wrong we (well I - it was part of my job) actually went to visit affected customers and told them the truth face to face - good or bad. When we messed up (and we did now ang again, sometimes big style) I found honesty, apologies and more over ACTION sorted it out.

 

Sorry - Hornby is hiding behind corporate speak / customer unfriendly actions. They have problems.

 

Brit15

 

 

[Trains4U]

7 minutes ago, Trains4U said:

Not with any of the other 20 or so suppliers I deal with, No.

Actually, we are having supply issues with Peco, and we don't always know what we will get in the box, but Peco have been completely transparent about their issues in providing covid-safe manufacturing and distribution capacity and the associated impact it has had on their product availability.  It is a temporary problem that will be resolved and we are doing our best to support them, as they have supported us over the years.

[JohnR]

6 minutes ago, ruggedpeak said:

Amazon is primarily a business services company now. It facilitates other business through AWS and logistics. Look at their numbers, the big and growing part of the business is not running a retail business but providing the online and logistics infrastructure to those who do. The idea Amazon is primarily a retailer is out of date. Much like people still think Tesla is a car company.

 

Hornby on Amazon is like John Lewis, a side show, and it shows given the limited range and poor design.

 

 

However, the fact remains, that Amazon have purchased a large range of Hornby stock, and are selling it themselves.  From what has been mentioned, its nothing like the John Lewis example - there we are limited to 3 (possibly the most popular) models to purchase.