Hornby Make a Profit

[jonnyuk]

12 minutes ago, Dunsignalling said:

The thing with Hornby's pricing policy is that it doesn't always seem logical, those for new, and not-so-new tooling Pacifics wander about all over the place. 

 

The Thompsons (new tooling) and a/s Merchant Navies (fairly new tooling) are significantly cheaper and have higher spec mechanisms than the Battle of Britain Winston Churchill  (basically 2002 tooling, unless the rumours of a new set being produced to make the second run of Exeter are true).  Moreover, it's a number/name they have done twice before (albeit most recently in a train pack) even if you don't include the ex-Tri-ang ones!

 

At under £50 a go, I reckon Hornby's newer coaches are excellent value, but asking much the same for the ex-Dapol LMS Restaurant car is taking the proverbial! By contrast, under £40 for the superb new SR baggage van is way less than most of us expected to pay. Surely an interior moulding doesn't cost ten to fifteen quid.... 

 

Go figure.

 

John

i'd agree, their pricing seems abit all over the place. Maybe its money for old rope with charging high prices for old tooling, higher margins.

where as new tooling, sell at a good price to shift them, re-coupe all the costs, a little bit of profit.

 

[Michael Hodgson]

Nonsense,  it's a simple case of sell at whatever the market will bear.

[jonnyuk]

8 minutes ago, Michael Hodgson said:

Nonsense,  it's a simple case of sell at whatever the market will bear.

i was not saying that was what i would do, putting the question out there, is that Hornby's thinking?

 

As someone else has said Bachmann products seem to sell well, with lets say high prices so the vast majority of buyers are not put off. Personally i'm at the limit of my spending per item, i'm really struggling to justify Bachmann prices.

 

[AY Mod]

1 hour ago, The Johnster said:

but if H have their current pricing right then B are overcharging and profiteering, but nobody mentions that!

 

Except for you; often.

 

They're not overcharging, they charge what their business needs to cover costs and margins. They're not profiteering either, I see the cars in the car park and we see the group accounts. I'm sure any of the staff would be quite offended to read the ill-advised comments.

[The Johnster]

I buy Bachmann stuff more than any other manufacturers’, but this is nothing to do with brand loyalty and plenty to do with modelling a South Wales coal mining branch  set in the 1950s. I have a Hornby 42xx and a much worked up 2721, but the bread and butter 57xx, 8750, 45xx, 4575, 5101, 56xx,  94xx and BR Standard 3MT tank are not available from Hornby (the Triang Hornby 8750 does not, IMHO, count, nor does the Triang 3MT, as a ‘serious’ model and the 2721 is pushing things a bit!).  The most essential item, the 16ton mineral, is only available from Bachmann as an RTR model if you require, as I do, a chassis of the correct wheelbase. 
 

 

11 minutes ago, AY Mod said:

 

Except for you; often.

 

They're not overcharging, they charge what their business needs to cover costs and margins. They're not profiteering either, I see the cars in the car park and we see the group accounts. I'm sure any of the staff would be quite offended to read the ill-advised comments.

 

Not guilty, Andy.  I said ‘if’, like the Laconians did to the Athenians, in the context of comparing them to Hornby.  I have never accused or suggested that Bachmann overcharge or profiteer, and have in fact very often defended them on RMWeb in ‘it costs what it costs’ terms when others have complained about price increases.  I usually point out that the reason our models are produced in China is because our companies cynically and, I’d suggest, somewhat in a racist ‘they’ll work all day for a bowl of rice’ way, exploited their low labour costs back in the day, when there were waiting lists for Flying Pigeon bicycles.   Chinese workers expect cars, flatscreen HDTV, a nice flat, and two holidays a year same as us, and why shouldn’t they?; exploitation has come back to bite. It costs what it costs 

 

I don’t think Bachmann overcharge, and incidentally I’ve never paid full RRP for any new RTR item since re-entering the hobby 5 years ago.  Taken properly in context (I appreciate that you are busy and perforce ‘scan’ many posts) I argued that, since costs for ball park similar models commissioned and produced, assembled, and distributed in ball park similar ways, must be ball park similar for both companies, and the price difference is ball park 20% cheaper Hornby, and Hornby are barely making a profit, then Hornby must be undercharging.  If (as the Laconians etc.) they aren’t, then Bachmann are overcharging, but this depends on the Athenians defeating the Laconians, which they never did, so I am in my funny little way  saying that Bachmann’s pricing is ball park right and Hornby’s is too low.  It’s ball park, not exact science, and I never claimed it to be anything else, but 20% is too big a difference for ball park…
 

Guilty as charged to complaining about long lead times and lack of information during them, but to be fair they’ve partially addressed that.  Guilty as charged to endless banging on about the 94xx, but I am happy now. 
 

I do think H are charging a bit much for outdated and redacted stuff like the shorty clerestories and the Airfix A30, and have said so. 

[AY Mod]

3 minutes ago, The Johnster said:

I have never accused or suggested that Bachmann overcharge or profiteer,

 

I don't care how you dress it up; it's the message that's been heard.

[Dunsignalling]

The two companies have a required level of return, to cover their costs plus a slice on top for the shareholders and to finance future developments. Clearly that won't be the same for both businesses, and charging the same retail prices would result in differing levels of return. That said, shareholders ultimately dictate what will be aimed for.

 

Whilst the pricing differentials are not constant B vs H, where pricing is fairly close for certain types of model, it suggests either that some judgement as to what the market will stand may have been made by the lower-cost producer, whilst the higher-cost producer may be making only what it "needs" to. 

 

A lower-cost producer, by setting prices between what it needs to charge, and what its competitor must will appear to offer "better value". That's a win-win-win as it can simultaneously improve market share, profit margin and customer sentiment. 

 

It has been suggested that the typical Hornby purchaser is more price-sensitive that his/her Bachmann-buying counterpart. If true, that must restrict Hornby's room for manoeuvre in pricing and it might go some way toward explaining the seemingly large differentials between some apparently comparable items.

 

In practice, Hornby have consistently produced much more of the "stuff" that I want than have Bachmann, so I'm on the comfy side of any divide. When desired Bachmann items do come along, I'll bite the bullet and pay, within reason, their asking price.

 

Of course, another's judgement of what constitutes "within reason" may be very different if the quantities he/she wants are significantly larger than what I have in mind.....

 

John

Edited June 14, 2021 by Dunsignalling

[Dunsignalling]

30 minutes ago, The Johnster said:

 

I do think H are charging a bit much for outdated and redacted stuff like the shorty clerestories and the Airfix A30, and have said so. 

 

 

Of course, it may be that the money Hornby make from the "old rope" is what enables them to (usually) undercut Bachmann on new product....

 

John

Edited June 14, 2021 by Dunsignalling

[The Johnster]

38 minutes ago, AY Mod said:

 

I don't care how you dress it up; it's the message that's been heard.

Not dressing it up, Andy.  If (Laconians again) you read what I have written my meaning is clear enough; as a Mod you should not need me to tell you this.  Discussion is clearly pointless and I choose not to engage with you further on this matter; I don’t feel a necessity to explain myself further and am happy that I have not accused anyone of overcharging or profiteering, very much the opposite in fact, and that full reading of my posts will vindicate this opinion. 

[AY Mod]

All I read into that self-aggrandised codswallop is that you think you are more intelligent than me. Since we can't quantify whether that is true all I can tell you is that you have really angered me and that all your posts will now have to wait for me to check you're not riding your tired old hobby horse before a posting shows up.

[Michael Hodgson]

1 hour ago, Dunsignalling said:

 

Of course, it may be that the money Hornby make from the "old rope" is what enables them to (usually) undercut Bachmann on new product....

 

John

If you want money for old rope, you're looking in the wrong place 

https://www.ebay.co.uk/itm/334015555245

 

... and some of it is RARE ...

https://www.ebay.co.uk/itm/Money-Old-Rope-Dave-Mort-RARE-pb-/154489149956

[No Decorum]

On 14/06/2021 at 19:07, Michael Hodgson said:

If you want money for old rope, you're looking in the wrong place 

https://www.ebay.co.uk/itm/334015555245

 

Good grief! Reginald Perrin!

[GWR-fan]

As regards new tooling versus older tooling then given advances in CAD and CNC tooling I would presume that the tooling cost on a new model would be considerably less than days of old when much tooling was the domain of master machinists.

 

When Hornby moved production to China then I believe that manufacturing was done from the start by Sanda Kan.  Sanda Kan would retain ownership of the tooling and then contract assembly for Hornby,  thus would tooling costs have been fully amortised during Sanda Kan's production time?  Some years ago with the demise of Sanda Kan,  Hornby purchased existing tooling for from memory around GBP650,000.00.    Alas,  with the move to new facilities,  I believe that some of the acquired tooling could not be used due not being compatible with the diecast machinery in the new factories.  Thus when one talks of "old" tooling models being more expensive than newer tooled models,  then are the "old" models actually tooled with the original tooling or has new tooling had to have been produced or older tooling modified to suit the machinery in the new factories?

[Fireline]

7 hours ago, GWR-fan said:

...Some years ago with the demise of Sanda Kan,  Hornby purchased existing tooling for from memory around GBP650,000.00.....   

Not quite. Hornby had a contract with Sanda Kan. They bought themselves out of it for a figure. As part of that deal, they got some of the tooling, but not all of it. Certain things have had to be completely re-tooled since the split. Hence the long delay for some spare parts. Hornby didn't have the tools to make them, and had to re-run production of complete engines in order to get the tools for the spares.

[jonnyuk]

why would a manufacturer not retain ownership of tooling, its based off their cads is it not? What is the rational behind that?

[woodenhead]

31 minutes ago, jonnyuk said:

why would a manufacturer not retain ownership of tooling, its based off their cads is it not? What is the rational behind that?

Because Hornby had outsourced and the outsourcer wanted to retain business, if Hornby owned the tooling then they could simply hawk it around other factories to find the lowest bidder.

 

[Dunsignalling]

Depends on the nature of the relationship between the designer (Hornby in this case), and the physical producer (which Hornby has not been for around twenty years).

 

It's not difficult to envisage reasons why a factory prefers to produce the tooling that it will use to make the models; primarily, they can be certain it will be compatible with their machinery. 

 

So, what's the benefit of that to Hornby? Cost and convenience. Having made the tooling, the producer will be well aware that Hornby's business model is likely to result in further runs, and controlling the tooling means they will normally get first dibs on such work even though they won't hold the intellectual property rights.

 

With production taking place half way round the planet, Hornby aren't likely to want the hassle of transferring tooling from one factory to another, whoever owns it. The machinery compatibility issue is likely to rear its head, as is the question of ensuring everything actually gets transferred.

 

I'd guess the differing fates of the SK tooling would have been purely down to SK and Hornby having different ideas as to what some of it was worth.

 

John

 

 

[The Stationmaster]

But in reality tooling does get moved between factories although whether Hornby knows that has happened is another things.  If factory 1 is rather busy on its moulding machines but needs moulding work done for assembly purposes then it gets factory 2 to do the moulding work for them.  Ask folk who have visited teh factories and come across moulding work being done on Hornby models at a factory which doesn't normally work for Hornby.   But that's no doubt the way the factories do things and if it works and costs Hornby no more I can't see a problem with it.

 

Far more relevant to this thread is what has been happening with Hornby's share price.  It rose 0.5p the day before the financial results were released but since then - until yesterday - dropped steadily from 59p to 51p although it rallied to 51.5p yesterday but it is currently down very slightly on yesterday's closing price. noticeably it also fell, but subsequently rallied (and then became rather erratic) following the January Trading Statement.  

 

The question is why is this happening in the light of some positive results?   Is it down to profit taking, does it reflect the general mood in the stock market (the graphs don't really align), or is it driven by something else such as the wider economy and such things as thoughts about inflation?

[Right Away]

Returning briefly to the costing theme, I am not ashamed to admit that with regards to personal funding of the hobby, my finances are far from limitless and must view every prospective purchase with caution.

Attempting to vindicate manufacturers’ pricing policies can turn out to be a somewhat fruitless exercise. What am I going to achieve?; invariably, nothing.

This is a leisure market whose customer base will range from the wealthy, who can and will pay anything, right down to those whose every penny must count. As with all businesses, it must invest in order to prosper and with this comes the inevitable price increases. It is to which particular products that those increases are applied that can sometimes leave many (me included) somewhat at a loss to grasp. As has been mentioned, twenty year old models, rebadged and numbered with just a modicum of “improvements” commanding a higher price than a recently tooled model does seem a bit “a*se abour face”. 
However, it is what it is; manufactures have to, at the very least remain buoyant, but in order to do so, the customer will inevitably feel the effects, whether he/she fully understands them or not. 

It was not that long ago that we enjoyed enormous discounts on certain highly detailed models such as the Hornby 700 class 0-6-0. These models were available, for what seemed ages, at a low price. They was not alone. Available at what might appeared, a ridiculous - though most pleasing discount, we were all smiles and probably never even considered the overall financial effect this could have. But at what cost to the manufacturer? It looked as though the forecast of sales must have been way out; who knows? 

 

Our hobby will continue to flourish. It is to this end that the manufacturers must “get it right” with regards to its pricing. This might mean for those on a restricted budget (myself included) needing to be a little more selective in what we want, vis-a-vis what we actually need. (Do I hear Messrs Jagger/Richards?)

For newcomers to the hobby, this would be an excellent time to concentrate available funds on models appropriate to, and focussing on a particular location and era; there’s plenty out there for the most discerning of tastes. By restricting the layout in this way, first-class models of locomotives and rolling stock now available even at today’s prices will in many cases be within reach. 

 

 

 

 

 

 

 

Edited June 17, 2021 by Right Away

[88D]

3 hours ago, jonnyuk said:

why would a manufacturer not retain ownership of tooling, its based off their cads is it not? What is the rational behind that?

I’m amazed if they hadn’t done that. Generally under an outsourcing contract, one company has the rights to design, the other to manufacture. Poor contract for the owner of the product to allow its subcontractor to ‘take it over’ at the end of the contract.

[The Stationmaster]

I decided to be far more selective to place/time in respect of what I bought quite a while back although I still have one or two 'out of place/time'  fancies - but far, far less than I used to buy.   Carefully targeted purchasing is undoubtedly the way to go if you are watching the pennies and even if you are not watching them but don't have a magic money tree to replenish them when you want.  However it doesn't necessarily relate to price but what I regard as offering value for my money (which does not mean low prices) in giving me something which fits my wants for an amount I'm prepared/able to pay.  

 

And that comes back to pricing policy as I suspect (and hope) that most businesses know how much they need to make and sell in order to make a profit and they also know how to, in effect, promote new introductions by adjusting their pricing to encourage sales, i.e. where they think it will help sales they keep the price down.   A different situation applies to long established models in a range - if you intend to keep them in your range.  Standing aside that such models might in any event need the tooling to be renewed they are probably not going to shift as quickly because they lack the novelty of new introductions but they are still needed to complete or back up your range.  If they are slower moving they will not return the production costs as quickly as new models so the 'manufacturer' may have to carry and finance the debt of taking them into stock for much longer - hence higher prices than we might expect.

 

Sometime however it gets ridiculous I will agree - especially with some accessories which are fairly simple plastic mouldings with minimal assembly costs and limited decoration.  But at the end of the day it will always come back to a mix of costs, marketing, and finance, plus - obviously - trying to maximise gross profit.

[adb968008]

3 hours ago, The Stationmaster said:

 

 

The question is why is this happening in the light of some positive results?   Is it down to profit taking, does it reflect the general mood in the stock market (the graphs don't really align), or is it driven by something else such as the wider economy and such things as thoughts about inflation?

Supply and Demand.

 

were coming close to holiday season, people are less into trading generally.

Given how few Hornby shares are not in the hands of 2 major shareholders, trading is more a kin to two kids selling penny sweets.. if youve got the fizzy cola bottle, 2p, if youve got the liquorice it’ll take 5 for a penny.

 

I dont read anything into the share price, hornbys products are a much better bet for a trading gamble.

 

£189 on Hornby stock.. in Jan 2020, +20%, with with considerable +/- volatility.
£189 on a R3809 in Jan 2020 could net you a solid 80% return in 18 months, with minimal change.

 

 

Edited June 17, 2021 by adb968008

[Michael Hodgson]

10 hours ago, The Stationmaster said:

But in reality tooling does get moved between factories although whether Hornby knows that has happened is another things.  If factory 1 is rather busy on its moulding machines but needs moulding work done for assembly purposes then it gets factory 2 to do the moulding work for them.  Ask folk who have visited teh factories and come across moulding work being done on Hornby models at a factory which doesn't normally work for Hornby.   But that's no doubt the way the factories do things and if it works and costs Hornby no more I can't see a problem with it.

Could this approach to getting stuff made by unknown subcontractors possibly be why some models are falling apart with mazak rot whilst others are perfectly OK?

[Les1952]

10 hours ago, 88D said:

I’m amazed if they hadn’t done that. Generally under an outsourcing contract, one company has the rights to design, the other to manufacture. Poor contract for the owner of the product to allow its subcontractor to ‘take it over’ at the end of the contract.

 

An awful lot of this stuff was outsourced to the far East at a time when UK Government poilcy was that the UK shouldn't relly be manufacturing anything as others could do it cheaper- and that stuff outsourced shoud be as cheap as possible.

 

Not taking up ownership of the tooling transfers a chunk of your capital costs to someone else- sound policy in the eighties and nineties.  It is basically time that has changed our perspective on things- and we are finding that backshoring is a vastly more expensive and difficult process than offshoring....

 

Just a thought

Les

 

[Les1952]

1 hour ago, Michael Hodgson said:

Could this approach to getting stuff made by unknown subcontractors possibly be why some models are falling apart with mazak rot whilst others are perfectly OK?

 

Yes- and in other sectors it explains how big names get "outed" for their expensive product being made by slave labour/child labour/unpaid prisoners etc.  Very difficult to keep tabs on stuff on the other side of the planet- more so currently with Covid travel rstrictions etc.

 

Les