Bachmann - why price increases are necessary

[The Stationmaster]

"Well done Bachmann"...are you serious? Do you send letters of congratulation to the big 6 energy firms every time they hike up the Gas & electric bills? 20% increase. What's inflation running at? What's the average payrise figure? Im going to leave this thread as I'm not sure which makes me more disconsolate....the thread headline or the responses!

 

Dave

Have you looked at wage increases in China, the rise in the international value of their currency, rising price of oil, shipping costs?  No - thought not - in reality i reckon they're probably doing fairly well to hold to an average of 20% - some of us were expecting much bigger percentage increases.

[Tase]

Nah - washing machine on 800 spin does it for me..........

 

Cheers,

Mick

told you there was one

[Emilie's grandad]

 I wonder how many retailers will push up their prices almost immediately?

The sensible ones will do so.

Yes, they will make more 'paper' profit, but most importantly the cash flow aspect will be the positive.

The cleverly sensible ones will seek to 'lose' the extra profit with a little bit of creative accounting,

otherwise they will be paying tax on the extra income and the ensuing profit.

The essential and very necessary result will be cash at bank to fund the eventual purchase of replacement stock,

which will of course be held at a higher value in the accounts, but that's not about successful trading.

 

Otherwise that funding would come from external sources, bank borrowings or more personal capital injected into the business.

That route, if commercially based, means servicing the loan interest, if the capacity to do so exists, if the lender permits the increase,

and with the higher overheads, making lower profits over a longer time, finding collateral to cover the loan value.  Not clever, not necessary.

 

Cash is the key - pay more, don't grumble and enjoy having traders who can stock an adequate range of goods.

[Piskey]

Thanks for such a comprehensive report Andy.

 

 

 

The products from China are bought in US$ so currency variations can come into play in the three-way balancing act

 

A tiny crumb of comfort then for the USA having embarked upon the same crazy short-term policy of printing money as the UK!  Had they not then the cost of USD-priced items would have gone up by considerably more.

 

For example GBP1 = AUD 2.50 in lAugust 2008, now it only buys AUD1.80 (and has been lower), a fall of 28%.  The pound was worth USD 1.82 in August 2008 but now is USD 1.68, a fall of only about 8%

[Dazzler Fan]

I don't buy into the magnitude of all the reasons, to arrive at 20%.

Fall in sales and recording losses, I think are more to do with the true

reason. nothing is said about the artificial value of the Luan, used

within China for wages, materials etc.

Devaluation of the Pound against the Dollar was there in 2008/9 and

it has only improved since. QE2 has to end sometime, do we see any

reductions should the Dollar is finally devalued against the Pound & Euro

and we return to pre 2008 rates of exchange?
 

[ThaneofFife]

I dont think anybody with an ounce of common sense here would say this is the end the world -an expression of disappointment over the increases shouldnt itself be deliberately misinterpreted as that should it? No it simply means we are all going to have to revise our spending patterns going forward.

[ThaneofFife]

for the pedants i should amend that catch all statement to "most of us".

[Xerces Fobe2]

Around 4 years ago a Bachmann 4 CEP retailed at @ £90 and now a 2 car Derby Lightweight DMU is @ £144, so a 4 CEP in the new pricing structure A 4 CEP could be around £288 (if it was still available) However if we now kook at. Hornby 5 BEL we are have been looking at a list price of @ £300 for a while now, so is Bachmann is not doing anything different to what it's main UK competitor has been doing for sometime?

With prices like this I am sure we will now see both consolidation of some manufacturers and others disappearing altogether. The perceived desperation of one manufacturer at Ally Pally this year was only to evident to many visitors and has been mentioned by numerous commentators away from RMweb!

XF

[reevesthecat]

So is the answer now to get your preorders in at Hattons etc before they factor in the price rises and how can they afford to honour the preorder price and take a 20% hit on each model sold?

Mark

[Ian Hargrave]

Has any member of this forum commented on the quality of the product yet ? It now runs to 112 postings and it's too early in the morning to trawl through the varied expressions posted here.In the last few months,Bachmann have released the diesel twins,the Lanky tank,theJ11 and ( despite their teething problems) an improved Class 40.All of them are excellent models and they ARE an improvement on what has gone before.

I have been fortunate enough to  examine at close hand some engineering examples of what is to be released later in the year.I believe that they too will raise the bar in quality.So it is perhaps worth remembering that although we will be paying more,we'll maybe getting more.

Every morning,the world turns and changes and,like everyone else on this planet,I have to run a little faster to keep up with it.To be honest,we've been getting jam on it at modest cost for quite a while.Every one of the models I have quoted above weighs in at way less than £ 100. Colleagues,if we want to sustain high standards,the brutal truth is that we are going to have to pay more.In 21st Century phrase......Wake up and smell the coffee.

[Fenman]

So is the answer now to get your preorders in at Hattons etc before they factor in the price rises and how can they afford to honour the preorder price and take a 20% hit on each model sold?

Mark

 

Isn't the issue for Hattons that the amount by which they would like to discount new models has been severely cut by both Bachmann and Hornby, so this would simply enable them to achieve a nominal discount closer to the size they, traditionally, have wanted to do.

 

So, far from being a problem, this might be a short-term boost for Hattons by letting them revert for a while to their preferred trading model.

 

Paul

[micklner]

The problem Bachmann as many companies have with rising prices is that Model Railways are very very low in most peoples priorities. When people are getting 1% wage rises and 0.5% on savings this simply says many people wont buy or cant afford too.

 

 

Of course they could always lower their profit margins.

[Jol Wilkinson]

Isn't the issue for Hattons that the amount by which they would like to discount new models has been severely cut by both Bachmann and Hornby, so this would simply enable them to achieve a nominal discount closer to the size they, traditionally, have wanted to do.

 

So, far from being a problem, this might be a short-term boost for Hattons by letting them revert for a while to their preferred trading model.

 

Paul

This reflects the actions taken by the motor industry in the 80's when dealers were only too keen to give away the majority of their discount to get the sale (offering an up front discount is the sign of a poor salesman). Led by Ford, discounts were reduced by almost half, although in that case, retail prices were also reduced to reflect that.

 

What may be happening here is that discounts are being reduced to minimise the increase in retail prices. I say "may", because most of what has appeared following Andy's OP is conjecture!

[Andy Y]

Of course they could always lower their profit margins.

 

If you don't want after-sales service and development of new products or want redundancies and curtailed production that is an option.

[Fenman]

In response to the suggestion that we will see Bachmann rising prices by 20% every year, I would question this:

Wages have been rising for a few years in China  I believe. Wages will continue to rise up to 2015. This does not imply that prices will rise 20% every year, especially given that wages are not 100% of the production cost! ...

 

This issue was discussed at huge length on another thread, when the Hornby Chairman revealed that the labour component in model railways was about 50% of the production cost.

 

See here for the full skinny.

 

Paul

[Neil]

First of all thanks to Andy and Bachmann for one of the most informative pieces I've read for some time.

 

Chinese wage increases. A very good thing. The global race to the bottom in wages and conditions of employment ultimately only benefits the very richest; reversing this trend has to be a good thing.

 

Simpler models to reduce manufacturing costs. Again a good thing. I would suspect that the vast majority of models are bought by those who would be more than happy with a well running model of accurate shape with a reasonable level of detail at a reasonable price. I believe that some of us have become spoiled and lazy, expecting the same level of finesse and detail previously only attainable by some patient, careful work, at a flourish of the credit card.

 

Q6. MTFU, make one for yourself; you will have something to treasure, something to set your layout apart from the rest, the originality that money can't buy.

[Stevelewis]

Has any member of this forum commented on the quality of the product yet ? It now runs to 112 postings and it's too early in the morning to trawl through the varied expressions posted here.In the last few months,Bachmann have released the diesel twins,the Lanky tank,theJ11 and ( despite their teething problems) an improved Class 40.All of them are excellent models and they ARE an improvement on what has gone before.

I have been fortunate enough to  examine at close hand some engineering examples of what is to be released later in the year.I believe that they too will raise the bar in quality.So it is perhaps worth remembering that although we will be paying more,we'll maybe getting more.

Every morning,the world turns and changes and,like everyone else on this planet,I have to run a little faster to keep up with it.To be honest,we've been getting jam on it at modest cost for quite a while.Every one of the models I have quoted above weighs in at way less than £ 100. Colleagues,if we want to sustain high standards,the brutal truth is that we are going to have to pay more.In 21st Century phrase......Wake up and smell the coffee.

I think  I  mentioned  the  quality   matching  or  being  pretty  close  to  Euro & USA outline in an earlier  post  when  I referred  to  price  comparison  of the  2  sectors--------   post  19  follow up  post 43

[micklner]

If you don't want after-sales service and development of new products or want redundancies and curtailed production that is an option.

I agree they will have to be very careful with marketing or they will, like all similar companies are going to be in serious trouble in the future.

[Oldddudders]

A Q6 is in full running order another successful preserved line, the NYMR, so I have to disagree with the above comment!

 

 

What a loada tosh.

 

 

 

Is it really necessary to again remind the grieving LNER/NER community of the reasons behind the SECR C and LBSCR E4 being modelled? These are locos in full running order on one of the nations most successful preserved railways - the Bluebell. Their sphere of operations in BR days has nothing to do with it. Their visibility to enthusiasts now is the reason they are a commercial stone-bonk certainty to sell.

So what is there to disagree with in my post? What have I said that is "tosh"? Are the E4 and C Class not on the Bluebell? Is the Bluebell not one of the nation's most successful preserved railways? More importantly, is it not one of the longest-established lines, having closed for the second time (despite the best efforts of Miss Bessemer etc) in 1957, and conveniently close to London? If you were Bachmann, manufacturing in tough times as we have now, wouldn't you model locos from a line that is in the heart of the most affluent part of the country, with greater chances of spin-off sales to people with jobs and spare cash?

[Clive Mortimore]

On a personal level the announced price increases without an increase in my spending ability will mean I will be buying less, not a protest but a fact. I am sure Bachmann took this possibility that others in my position would mean potentially less sales for them, I hope so as I would like them to continue as a business.

 

As I will be spending less time opening boxes I better go and have a look at what unfinished projects are awaiting my attention in the manshed.

[micklner]

So what is there to disagree with in my post? What have I said that is "tosh"? Are the E4 and C Class not on the Bluebell? Is the Bluebell not one of the nation's most successful preserved railways? More importantly, is it not one of the longest-established lines, having closed for the second time (despite the best efforts of Miss Bessemer etc) in 1957, and conveniently close to London? If you were Bachmann, manufacturing in tough times as we have now, wouldn't you model locos from a line that is in the heart of the most affluent part of the country, with greater chances of spin-off sales to people with jobs and spare cash?

If you quoted the rest of my post it is self explanatory.

 

There is far more to the Model Railway market than one preserved line ( although it is one of my favourite lines) .

[stewartingram]

So we get, via Andy, a very detailed report from Bachmann, outlining their business strategy with explanations for the reasoning behind it. There are plenty of pertinent business FACTS in there, showing a company with positive plans for the future.

And then we get the doubters.

 

So, what would YOU do in Bachmann's shoes, realistically? And more importantly, will you still be around to give us next year's Annual Report.......?

 

Get real, people.

 

Stewart

[graveand]

Personally I have a fixed amount or pot that I am willing / able / justify to myself on my hobbies. Increasing the prices being charged does not increase the size of the pot just I will buy less units for the same cost.

 

Diecast model cars from the likes of Oxford Diecast become ever more attractive - pocket money costs

[Andrew P]

Firstly thanks to Andy and BRM / RM Web for such an in depth report, and allowing the opportunity to comment so freely on its contents.

 

Secondly I cant see how the likes of Hornby DJ Model etc can avoid a similar price increase, if they come out of the same Factories in the same Region of the same country with the same wage issues, and the fight, as mentioned for employees then surly it must follow that they MUST increase prices to have investment in new products for us all to enjoy.

 

Don't get me wrong, I don't want to pay more for my toys, but being realistic I think we will have to, or as was pointed out to me earlier in a PM by a well established contributor to RM Web, maybe kit building will make a return.

 

Oh how I wish Simon K was around to answer some questions, hhaaa.

[Andrew P]

Sprung buffers are around £4 or less trade price, bulk buy is probably £2.

 

Bachmann says it costs £15 to make and fit sprung buffers

 

So if it costs £11 in labour I have a solution for them... The mould is obviously pre drilled and there is no "old" buffer to remove.

All that's needed is push fit and crimp the bar.

 

Send them to me, I can buy them and fit them in 10 minutes or less per loco. That means I can make 6 locos per hour...£66 ph to me..

 

I'll do 6 an hour for £50, above that rate I'm in bonus territory and I fancy my chances pretty good..Indeed at that rate don't send them I'll come to you.. Anyone want a job pushing buffers ?

 

That DMU price can come down £5 right there..

Or just put them in the accessory bag.