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The Cost of Our Hobby

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Like the man above said!

 

Cheap as chips, I store it in a metal cabinet in the garage, along with other bulk bought liquids.........acetone, isopropyl, etc.

 

Ps......as an aside.........last year I had delivered over the space of a few days, acetone, butanone, liquid lead and potassium permanganate ( for staining sleepers etc). I thought I would get a call from the plod at one stage!!!!!!! ;)

Edited by BlackRat

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.....Do you expect all that for free?

Many people still do, it would seem....

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I understand the financial difficulties of recent years but have a look at cost in other industries. Products also made in China. Much larger products. More man hours. More materials. More expensive shipping. More packaging. More R and D. Prices aren't going up by 60%. In fact, they've been coming down. White goods for example.

 

And what sort of volumes are the white goods produced in? Hugely more than any model railway items and that makes a massive difference.

 

The proof of the pudding is to look at the accounts of the model manufacturers (Hornby's are easy enough to find) and see if they are making massive profits (I'd be surprised if they are).

 

Cheers, Mike

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Information received from a very credible source advised that a recent article in the model railway press reported that the average hourly rate in China was equivalent to £1.11 per hour. The  Chinese government has wants wages to rise by 20% per year for the next 5 years.

A 20% rise equates to about 22 pence. If it takes 5 hours of manual assembly of a simple wagon (not an expensive autoballaster) that would be a manpower cost increase of £1.11. 

I think we would all be more than happy to pay an increase of £1.11 per wagon, year on year to a total increase of £5.50 at the end of 5 years.

So, in agreement with the comment made by Legend, where do these massive price increases come from.

Yes material, yes shipping but the influence of these items would be similarly minor compared with the increases we have experienced.

 

Bob

 

Sorry to pick on your post again, but the £1.11 increase in labour costs at the factory gate is amplified by margins (as they are typically based on percentages).  Traditional margins were basically along the lines of 1/3 of the RRP was retail margin (ie retailer to customer), 1/3 trade margin (manufacturer to retailer) and 1/3 cost price.  So you are starting with a relatively small increase at the factory gate and soon amplifying it into a much larger increase by the time it hits the customer.

 

Cheers, Mike

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Like the man above said!

 

Cheap as chips, I store it in a metal cabinet in the garage, along with other bulk bought liquids.........acetone, isopropyl, etc.

 

Ps......as an aside.........last year I had delivered over the space of a few days, acetone, butanone, liquid lead and potassium permanganate ( for staining sleepers etc). I thought I would get a call from the plod at one stage!!!!!!! ;)

Ah but if it was pre-retirement you could simply have turned round and said 'Not to worry chaps, I got here first and am happy that it's all legal and above board - see you in the canteen tomorrow' :jester:

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John the point is that labour is a proportion of all or at least most of these items. I could point out its ridiculously cheap to transport a container (£100s) that plastic costs are going down, so while labour is not just assembly it is still a relatively small part of the total of the selling price . I think Dibber said 25% of total. Frankly I'm surprised at that and suspect it was a model with many small parts to get to that level. Remember what we are seeing is 15-20%(and more) increases on the selling price which includes retailers and manufacturers profits. For this all to be labour would mean labour is increasing by 60% per annum, which clearly it isn't!

Bachmann are only making one coach, three or four wagons and a Wickham trolley that I want this year (I'm not expecting to see either of the locos) so I am probably more laid back about this issue than most.

 

However, there is much more going on than the increase in basic pay rates in China. If you ran Kader Industries, which division would you prioritise for production slots; Bachmann Branchlines or Liliput with selling prices around 50% higher for items that cost much the same to manufacture? Like it or not, price convergence with mid-level European HO is already happening.

 

The UK market traditionally enjoyed lower prices dating back to the days when, Lima et al were churning out UK models with mechanisms that Continental buyers wouldn't touch with a barge pole. Those days are gone and I, for one, have no nostalgia for them.

 

Whatever the name on the box, all of the players are nowadays effectively commissioners and the models produced for them are pretty uniform In specification. That means there is now a more-or-less level playing field and the lion's share of production capacity (of which there does not appear to be a surplus) will naturally gravitate to those offering better returns. It might be different if Bachmann's main competitor were fighting fit and chasing market share but Hornby have nothing to gain from holding or forcing prices down. 

 

We're all going to have to choose how we deal with this, spend more, buy less, make more for ourselves, go find a cheaper hobby etc. and the manufacturers will react to whatever we collectively decide. If we buy less (and I think that is a likely outcome overall) the number of new models and the quantities produced will shrink and prices might rise further as a result.

 

Ultimately, I think the market may polarize (as Hornby already have) with the big boys declining in influence and the true commissioners offering low-volume, pre-sold, higher priced items  becoming more important.

 

John    

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And what sort of volumes are the white goods produced in? Hugely more than any model railway items and that makes a massive difference.

 

The proof of the pudding is to look at the accounts of the model manufacturers (Hornby's are easy enough to find) and see if they are making massive profits (I'd be surprised if they are).

 

Cheers, Mike

Kader's accounts are freely available on the 'net and show in stark terms just how much they have been losing on model railway manufacturing over the past several years.   Effectively factory losses were subsidising Bachmann's prices.

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Bob

 

Sorry to pick on your post again, but the £1.11 increase in labour costs at the factory gate is amplified by margins (as they are typically based on percentages).  Traditional margins were basically along the lines of 1/3 of the RRP was retail margin (ie retailer to customer), 1/3 trade margin (manufacturer to retailer) and 1/3 cost price.  So you are starting with a relatively small increase at the factory gate and soon amplifying it into a much larger increase by the time it hits the customer.

 

Cheers, Mike

Pick away. That's why we are here.

But I fail to see how a 20% increase in not very much, multiplied by everyone's finger in the pie equates to a 60% increase in the finished product. Or, as was quoted in an earlier post, a 100% increase in the cost of a guards van.

Not a good idea to select one item as an example by the general tend seems gross.

Smells like manufacturers getting their heads deeper into the trough.

If they have been loosing money, that is not the customers fault.

There will be some impact from genuine cost manufacturing cost increases. I include all stages of the process in manufacturing costs. However, the increases we've seen strikes me that the industry is too fat and the manufacturers need to look to themselves before they look to the customer to fund the gravy train.

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 And if you buy more than two, you've still got to renumber them if you want them totally authentic with different numbers.

Actually, If you buy more than one as I only wanted the early BR livery.

 

Anyway, I've already done that on over a dozen 16t Minerals and anything else I have bought in multiples. I'm not just a box opener and can do that sort of stuff.

 

It's no different to applying decals to kit built wagons.

 

John

Edited by Dunsignalling
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Like the man above said!

 

Cheap as chips, I store it in a metal cabinet in the garage, along with other bulk bought liquids.........acetone, isopropyl, etc.

 

Ps......as an aside.........last year I had delivered over the space of a few days, acetone, butanone, liquid lead and potassium permanganate ( for staining sleepers etc). I thought I would get a call from the plod at one stage!!!!!!! ;)

You've really got to control that drinking habit you're developing. ISO? MEK? 

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Bachmann are only making one coach, three or four wagons and a Wickham trolley that I want this year (I'm not expecting to see either of the locos) so I am probably more laid back about this issue than most.

 

However, there is much more going on than the increase in basic pay rates in China. If you ran Kader Industries, which division would you prioritise for production slots; Bachmann Branchlines or Liliput with selling prices around 50% higher for items that cost much the same to manufacture? Like it or not, price convergence with mid-level European HO is already happening.

 

The UK market traditionally enjoyed lower prices dating back to the days when, Lima et al were churning out UK models with mechanisms that Continental buyers wouldn't touch with a barge pole. Those days are gone and I, for one, have no nostalgia for them.

 

Whatever the name on the box, all of the players are nowadays effectively commissioners and the models produced for them are pretty uniform In specification. That means there is now a more-or-less level playing field and the lion's share of production capacity (of which there does not appear to be a surplus) will naturally gravitate to those offering better returns. It might be different if Bachmann's main competitor were fighting fit and chasing market share but Hornby have nothing to gain from holding or forcing prices down. 

 

We're all going to have to choose how we deal with this, spend more, buy less, make more for ourselves, go find a cheaper hobby etc. and the manufacturers will react to whatever we collectively decide. If we buy less (and I think that is a likely outcome overall) the number of new models and the quantities produced will shrink and prices might rise further as a result.

 

Ultimately, I think the market may polarize (as Hornby already have) with the big boys declining in influence and the true commissioners offering low-volume, pre-sold, higher priced items  becoming more important.

 

John    

I think you're on the money there John except in one respect - I understand there is plenty of model railway manufacturing capacity in China looking for business (although that might not be the case in Kader's factories of course and they are perhaps doing what you suggest?).  Just look how Hornby have managed some rapid progress by going to a variety of factories.

 

But, and it is a big but, while the capacity exists there are also some sound business heads running it and they are quite happy, so I understand, to pull the stops out and get on with the job if they happen to know the concern using them to do the work will pay them on the nail with no messing about or delays (I have seen a drawing and photos turned round into a top notch CAD in about 7-8 weeks).  If you pay you get; if you can be relied on as a regular prompt payer you get; if you are tardy about paying then your job drops down the queue until you cough up for what you owe on work done in the past, and the folk running the various factories talk to each other so they know who coughs up when they should.

 

All very simple - now put 2 and 2 together

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Bachmann are only making one coach, three or four wagons and a Wickham trolley that I want this year (I'm not expecting to see either of the locos) so I am probably more laid back about this issue than most.

 

However, there is much more going on than the increase in basic pay rates in China. If you ran Kader Industries, which division would you prioritise for production slots; Bachmann Branchlines or Liliput with selling prices around 50% higher for items that cost much the same to manufacture? Like it or not, price convergence with mid-level European HO is already happening.

 

The UK market traditionally enjoyed lower prices dating back to the days when, Lima et al were churning out UK models with mechanisms that Continental buyers wouldn't touch with a barge pole. Those days are gone and I, for one, have no nostalgia for them.

 

Whatever the name on the box, all of the players are nowadays effectively commissioners and the models produced for them are pretty uniform In specification. That means there is now a more-or-less level playing field and the lion's share of production capacity (of which there does not appear to be a surplus) will naturally gravitate to those offering better returns. It might be different if Bachmann's main competitor were fighting fit and chasing market share but Hornby have nothing to gain from holding or forcing prices down. 

 

We're all going to have to choose how we deal with this, spend more, buy less, make more for ourselves, go find a cheaper hobby etc. and the manufacturers will react to whatever we collectively decide. If we buy less (and I think that is a likely outcome overall) the number of new models and the quantities produced will shrink and prices might rise further as a result.

 

Ultimately, I think the market may polarize (as Hornby already have) with the big boys declining in influence and the true commissioners offering low-volume, pre-sold, higher priced items  becoming more important.

 

John

 

One small point, don't Oxford own their own factory (if I have read it correctly) - if so (which means they are not 'commisioners') it will be interesting to see if they can hold their prices down over the next few years

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Very easy to take selective extracts and take the overall message out of context.

 

I understand the financial difficulties of recent years but have a look at cost in other industries. Products also made in China. Much larger products. More man hours. More materials. More expensive shipping. More packaging. More R and D. Prices aren't going up by 60%. In fact, they've been coming down. White goods for example.

Well lets take another selective extract.

 

How many houses in the UK, say 20,000,000, How many white goods per household, Fridge, Freezer, washing machine, tumble dryer, cooker, microwave, hobs, extractors even wine coolers. some having a life of less than 4 years, so 10 million units a year required.........you start to see why there are so many after this business hence driving some costs down.

 

As Stationmaster and others say take a look at the accounts of Kader and Hornby etc and you start to see a picture not of greed but of companies caught with diminishing markets and rising costs.

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You've really got to control that drinking habit you're developing. ISO? MEK?

 

On the rocks......the drinks and me!

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One small point, don't Oxford own their own factory (if I have read it correctly) - if so (which means they are not 'commisioners') it will be interesting to see if they can hold their prices down over the next few years

True, but they don't become "players" until they get models on dealers' shelves. 

 

They should certainly have more control over most aspects of their products than others but have nothing to gain from setting their prices any further below the competition than they need to in order to acquire whatever market share they have in mind for themselves.

 

In order to grow their presence in model railways, Oxford need their products to generate the funds to invest in making more so I don't expect them to "turn the clock back" when it comes to pricing. 

 

John

Edited by Dunsignalling

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You've really got to control that drinking habit you're developing. ISO? MEK? 

At least he's solvent. :jester:

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Smells like manufacturers getting their heads deeper into the trough.

 

......the increases we've seen strikes me that the industry is too fat and the manufacturers need to look to themselves before they look to the customer to fund the gravy train.

 

Have you been having a sniff in BlackRat's cupboard, by any chance?

 

It's already been pointed out several time, you only have to look at the well publicised accounts for Hornby and Kader, to see there is currently no "gravy train".

 

 

 

 

.

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Have you been having a sniff in BlackRat's cupboard, by any chance?

 

It's already been pointed out several time, you only have to look at the well publicised accounts for Hornby and Kader, to see there is currently no "gravy train".

 

 

 

 

.

He's jst trying to Acetone the facts......

 

 

 

 

 

Coat on.... leaving...

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Well, to take extracts from a recent magazine interview with one of the men at the top of one of the organisations:

 

His organisation has always been successful.

 

2014 was there best year ever.

 

Turn over has increased, if I recall correctly, for £7m to £15m.

 

They are increasing the workforce. Strange at a time when they are struggling so badly.

 

I'm probably doing the same as others and being elective but that's what was said. 

 

As I've tried to put across, there is more to a failure to make a profit than not charging enough for your product. Yes, you can put the burden of recovery on the customer but if the organisation is "fat", squeezing the customer will only work for so long.

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Have you been having a sniff in BlackRat's cupboard, by any chance?

 

It's already been pointed out several time, you only have to look at the well publicised accounts for Hornby and Kader, to see there is currently no "gravy train".

 

 

 

 

.

A failure to make a profit does not exclude the possibility of pigs lining up at the trough.

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The thing is we will never know. Although I do work in costings, and yes my company brings things in from China, so I do have an appreciation of shipping, warehousing costs etc.

 

So to those that disbelieve I challenge you: show me something else that's made in China and is escalating by 15-20% a year!

 

Anyway you either buy it or you don't. At the minimum it seems people are being more discerning in their purchases. Others are just not buying at all.

 

I don't know any other market where the consumer just takes it and we blindly accept what manufacturers tell us.

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 And if you buy more than two, you've still got to renumber them if you want them totally authentic with different numbers.

You still have to alter the decals even if you only buy one.

Some variants of Tube, Pipe, CTT and 21T Hopper so far in my case. have all exhibited some very odd inscriptions.

Should we expect better research and QC in return for higher prices?

Bernard

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You still have to alter the decals even if you only buy one.

Some variants of Tube, Pipe, CTT and 21T Hopper so far in my case. have all exhibited some very odd inscriptions.

Should we expect better research and QC in return for higher prices?

Bernard

Yes, absolutely.

With all the increases in R and D staff and staff costing that has been passed straight onto the customer, surely it should be easier to get it right than to get it wrong.

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