Hornby's financial updates to the Stock Market

[MatthewCarty]

According to a post on Facebook, Hornby are hiking prices 15% on Monday . If that is true, do they seriously think this will not be a huge negative reaction on their future sales ??

 

No logic, they are desperate for capital and shoot their selves in the foot yet again with stupid business decisions and naivety in the extreme, if its true.

Where on Facebook?

[Kelly]

According to a post on Facebook, Hornby are hiking prices 15% on Monday . If that is true, do they seriously think this will not be a huge negative reaction on their future sales ??

 

No logic, they are desperate for capital and shoot their selves in the foot yet again with stupid business decisions and naivety in the extreme, if its true.

 

Complain all you want, but it is a reality of the current climate economically, prices for virtually everything imported will be going up over the next few months.

[Mark Saunders]

Complain all you want, but it is a reality of the current climate economically, prices for virtually everything imported will be going up over the next few months.

 

On the flip side any exports will now be more competitive, especially If the raw materials are priced in Sterling!

 

Mark Saunders

[darren01]

No retailer in their right mind is going to buy a large number of Hornby (or any other) item to sit on the shelf for several weeks, just so he might get some sales at a price which then reduces his margin to a minimal amount.

   I have made it known to Hornby that I feel the non-discounting of new releases will work against us, and I am not prepared to accept this part of the new terms. I have not had a reply to this point from them.

 

   Indeed, such is the content of the new terms and price lists that I reckon to do the same amount of business with Hornby over the next year will actually cost me around £3,000. The changes in margins that have been put in place are not all positive to retailers, many parts of the range have had their margin severely reduced, and make stocking everything uneconomical. There are other caveats which require clarification from Hornby before the full picture is known.

  In many cases, there are alternatives available, and we are actively persuing some of these.

Have not Bachmann been doing this for some time now?.

[micklner]

Where on Facebook?

 

On a Model Railway thread, as I said no other evidence. 

 

 

Moaning?? no its called disappointment !!

[jjb1970]

I still really don’t see that the model train retail sector faces unique challenges compared to other specialist retailers or that there are imperatives making pre-ordering and discounting new items an essential part of model retailing. What I would accept is that a combination of factors, in which we as consumers are far from blameless, has created conditions where discounting has moved from being perceived as a bonus to one where an absence of a bonus is seen as a rip off price. In a sense model railways have gone down the same path as certain furniture shops where the SRP is a meaningless figure in their special one off must buy today sales which are one off only by virtue of being a single continuous sale that never ends (admittedly, model trains are not as extreme as things like DFS sofas). If all shops discount by 15% then the de-facto SRP becomes published SRP – 15%, that is fair enough apart from the fact it creates animosity towards those shops who actually try and sell at the SRP. And before I’m accused of being a hypocrite, yes of course I take advantage of discounts, but model trains are the only interest I have where there is an assumption that I will get a discount for new items at least.

 

Something to ask, if it is true that model shops need pre-orders to tell them what to order (noting that I think that it is less “need” and more “it makes life easier”) then what is the point of a shop? I can pre-order from Hornby directly and to be honest I’ve found their direct ordering service to be excellent, no complaints at all, quite the opposite. If it is necessary to have resellers, then that could be met by the sort of mail order only warehouse style operations far more efficiently than a shop. The reason for going to a shop is in my view to find advice, to see things and have a chance to examine products in detail before buying and to browse things that we would probably never have considered of interest if not for them catching our attention in a shop. If I am expected to pre-order then I don’t need advice, I don’t need to examine something before buying and browsing stuff to find nuggets that catch my eye becomes a review of advance release information. In that case I see no need to have shops as they are then nothing more than an additional profit margin and intermediate stop in the delivery chain. Shops need shelf stock to have any purpose or meaning. I can order things far more comfortably and efficiently from my own home than from a shop, and if shops become virtual shops operating as on-line businesses with no shop front then why not just strip that whole cost layer out? Personally, I still believe that while Hornby’s shift towards direct sales was premature that we will see a long term shift towards direct selling in specialist sectors at least. In a sense I think in some ways the argument that kicked off this particular sub-discussion (pre-orders and discounting by shops) is probably the wrong argument, the more fundamental argument is how will shops offer a service that enables them to remain relevant to customers in the future and allow them to compete against the likes of Amazon or on-line box shifters?

[jjb1970]

On price rises, the scenario we’re seeing with Tesco and Unilever should be enough to tell people this is not just a case of Hornby trying to rip us off (although I am not so naïve as to imagine some companies will not use an opportunity to increase their margins on the back of rises which are made necessary by the sterling collapse). We’ve been in the equivalent of a Brexit phoney war, we are now starting to feel the effects. Now long term nobody knows what will happen, there is no more evidence to predict it will be an economic catastrophe than to predict it will lead to a new golden age and my own view is that people’s positions on that question are based more on their existing political beliefs than rational analysis (and yes, I do have an opinion on the long term effects but I admit it is just an opinion). What is clear is that the short terms effects will see volatility and almost certainly there will be a lot of pain. Higher prices are the tip of an ice berg, even if people believe Brexit will be our salvation I think it would be dishonest to try and tell people the transition will not involve pain. This is not about model trains, it is about everything we import. So my advice is that if people are really concerned about price rises, don’t be worried about model trains as if needs be you can just stop buying models and it isn’t the end of the world, start thinking about food, clothes, fuel and all the things that you do actually need.

[Mike at C&M]

Have not Bachmann been doing this for some time now?.

No. Bachmann are completely geared up for detailing through their retailing chain.

 

Unlike Hornby, where the goalposts keep moving, making it impossible to plan ahead, Bachmann, and almost the other suppliers, continue to trade with us on a consistent basis, giving us a mutually beneficial trading relationship.

 

We don't have to look back far, just a few years when Hornby's financial problems started, to a time when Hornby too worked to the benefit of retailers and themselves. Then they started to tinker with that relationship.

[JSpencer]

On price rises, the scenario we’re seeing with Tesco and Unilever should be enough to tell people this is not just a case of Hornby trying to rip us off (although I am not so naïve as to imagine some companies will not use an opportunity to increase their margins on the back of rises which are made necessary by the sterling collapse). We’ve been in the equivalent of a Brexit phoney war, we are now starting to feel the effects. Now long term nobody knows what will happen, there is no more evidence to predict it will be an economic catastrophe than to predict it will lead to a new golden age and my own view is that people’s positions on that question are based more on their existing political beliefs than rational analysis (and yes, I do have an opinion on the long term effects but I admit it is just an opinion). What is clear is that the short terms effects will see volatility and almost certainly there will be a lot of pain. Higher prices are the tip of an ice berg, even if people believe Brexit will be our salvation I think it would be dishonest to try and tell people the transition will not involve pain. This is not about model trains, it is about everything we import. So my advice is that if people are really concerned about price rises, don’t be worried about model trains as if needs be you can just stop buying models and it isn’t the end of the world, start thinking about food, clothes, fuel and all the things that you do actually need.

 

On the other hand, London is currently the cheapest place to buy Louis Vuitton Handbags : http://www.bbc.com/news/business-37630344

 

So if you ever fancied keeping your rolling stock in one, now is the time to buy.

 

Seriously though, the mark up on Vuitton is huge, even if the pound dropped to 1 pence per dollar, they could still sell them and make a profit! Doubtless next years range will see the prices between countries leveled again.

Edited October 13, 2016 by JSpencer

[JSpencer]

I still really don’t see that the model train retail sector faces unique challenges compared to other specialist retailers or that there are imperatives making pre-ordering and discounting new items an essential part of model retailing. What I would accept is that a combination of factors, in which we as consumers are far from blameless, has created conditions where discounting has moved from being perceived as a bonus to one where an absence of a bonus is seen as a rip off price. In a sense model railways have gone down the same path as certain furniture shops where the SRP is a meaningless figure in their special one off must buy today sales which are one off only by virtue of being a single continuous sale that never ends (admittedly, model trains are not as extreme as things like DFS sofas). If all shops discount by 15% then the de-facto SRP becomes published SRP – 15%, that is fair enough apart from the fact it creates animosity towards those shops who actually try and sell at the SRP. And before I’m accused of being a hypocrite, yes of course I take advantage of discounts, but model trains are the only interest I have where there is an assumption that I will get a discount for new items at least.

 

Something to ask, if it is true that model shops need pre-orders to tell them what to order (noting that I think that it is less “need” and more “it makes life easier”) then what is the point of a shop? I can pre-order from Hornby directly and to be honest I’ve found their direct ordering service to be excellent, no complaints at all, quite the opposite. If it is necessary to have resellers, then that could be met by the sort of mail order only warehouse style operations far more efficiently than a shop. The reason for going to a shop is in my view to find advice, to see things and have a chance to examine products in detail before buying and to browse things that we would probably never have considered of interest if not for them catching our attention in a shop. If I am expected to pre-order then I don’t need advice, I don’t need to examine something before buying and browsing stuff to find nuggets that catch my eye becomes a review of advance release information. In that case I see no need to have shops as they are then nothing more than an additional profit margin and intermediate stop in the delivery chain. Shops need shelf stock to have any purpose or meaning. I can order things far more comfortably and efficiently from my own home than from a shop, and if shops become virtual shops operating as on-line businesses with no shop front then why not just strip that whole cost layer out? Personally, I still believe that while Hornby’s shift towards direct sales was premature that we will see a long term shift towards direct selling in specialist sectors at least. In a sense I think in some ways the argument that kicked off this particular sub-discussion (pre-orders and discounting by shops) is probably the wrong argument, the more fundamental argument is how will shops offer a service that enables them to remain relevant to customers in the future and allow them to compete against the likes of Amazon or on-line box shifters?

 

Model shops play a huge part in bringing and keeping new customers in the hobby. They act as focal points where people can meet like minded people and share skills and information. Our hobby is highly constructive and demands all sorts of hands on skills to be learned which is part of pleasure.

 

That said, no one is expecting anyone and everyone to pre-order. My point is, pre orders help determine what quantities stock should be ordered in. It is an extra bit of business intelligence to  be added to the educated guesswork.

 

If I look at my buying habits then there are those models I pre order (Merchant Navy class, H class etc). And those I buy after seeing reviews or touching the item. Model shops play a role in the 3rd. For example, I had no intentions of buying Bachmann's last incarnation of the class 40. I was perfectly happy with the old Lima one. But was blown away by reviews and seeing it in the flesh (the same with their 1F and others).

 

Pre-orders are one tool that help shops to secure sales and plan their spending. They should not upset this apple cart by imposing terms.

[Fenman]

Model shops play a huge part in bringing and keeping new customers in the hobby. ...

 

We may assert that, but do we really know it?

 

Presumably, if it's true, vast swathes of London will have a tiny proportion of new customers joining the hobby compared to the numbers joining in, say, a 5 mile radius around your own favourite model railway shop. There will now be whole areas of the country where, relatively speaking, no-one is joining the hobby - and others which will be in disproportionately rude health.

 

Is that really true? I have no evidence though, on the face of it, it seems implausible.

 

Paul

[Revolution Mike]

According to a post on Facebook, Hornby are hiking prices 15% on Monday . If that is true, do they seriously think this will not be a huge negative reaction on their future sales ??

 

No logic, they are desperate for capital and shoot their selves in the foot yet again with stupid business decisions and naivety in the extreme, if its true.

 

Actually there is perfect logic to this - it is a reaction to the fall in the value of sterling (over the past 2 years the GBP has lost 15-20% of value)! We are at a 10 year low for the value of sterling against the USD: http://www.xe.com/currencycharts/?from=GBP&to=USD&view=10Y

 

Given that Hornby (like many other model manufacturers) are paying in USD then it was only a matter of time before some/all of the manufacturers increased their prices dramatically.  As Charlie P mentioned on another thread it can take 2-3 years to go from the start of a project to completion of production - you plan at the start of the project to be sure that you can make a profit and that it will come out at a price that you think the market will bear.  Even with very conservative estimates of currency changes I doubt anyone in the model trade predicted the current currency problems (if they did then they missed their calling as a currency trader).

 

Hornby have blinked first but I'd be amazed if they are the last.

 

Cheers, Mike

[Clearwater]

Seems to be rather topical - very similar to the Tesco/Unilever story

 

David

[rembrow]

The discussions about rrp and whether we should expect discounts are to my mind red herrings, as we are supposedly in an open retail market, where the retailer can charge the price they choose, backed by competition law and a regulator. In most retail sectors we don't know as consumers the rrp of products, as it is only an advisory value between the supplier/wholesaler and the retailer. So the 'discounts' in the model railway market should be seen as competitive pricing, as that is what it is. We no longer have retail price maintenance in the UK, by law, so the rrp has no legal basis. I have an arrangement with my local model shop, who I've bought from for 32 years, that if I pre-order, he gives me a price below the rrp, which is his normal sale price, as he and I have a trust that I will buy what I've ordered and he will give me a price based on the cost of the item when he receives it. I don't expect the price to be fixed, as I and he both agree that with long lead times, product prices can and do increase, particularly with Bachmann.

 

Pre ordering does assist retailers with stock ordering, particularly where it is based as a trust arrangement between the retailer and the customer, as in my case, as the retailer has a base to buy product from. Many retailers do this with known loyal customers. With the huge range of models now available each year, retailers cannot afford to stock all items. We no longer have suppliers announcing 6-10 new or different liveried models each year as was the case in the 1960s-1990s, there are 50 or more from each supplier. With locos wholesaling at over £100 each, and maybe 30 different types/ liveries from Hornby each year, how many and which ones to buy is an issue. Some retailers will only buy a selection and order in others on request, relying on the customers patience. Some suppliers have minimum orders per item so again the retailer can go for an item with the confidence of pre orders and have 1-2 for stock.

 

I am however concerned of where we are heading on pricing, with Bachmann, followed by Dapol and now Hornby, imposing minimum pricing rules to retailers on 'new' products, which is creating a controlled price retail market, which I feel is contrary to the current competition law. There is a limited allowance for a wholesaler/supplier to set a minimum price, for a limited period, on new lines that are being promoted, however legal opinion I've read indicates this should only be for a couple of weeks to enable a product to get established, not the multiple weeks that these suppliers are insisting on. There is also the issue of what is a 'new' line in model terms. Is a new livery or running number on a model previously sold a 'new' item. Also the minimum pricing is for the promotion of a new line, but what promotion occurs on most 'new' models, I have serious doubts. If Hornby are seeking to apply an rrp as the minimum price for the first weeks, I again have doubts that this will meet the limited legal allowance for suppliers setting a minimum price. Not only is there the issue of what is a 'new' line, but can a minimum price be the rrp, which gives no flexibility and competition in the retail market. Further as Hornby acts as a retailer, by setting a minimum price as the rrp, which is the price they sell at, they are setting themselves with an advantage of being able to sell at the same controlled price which they have imposed on their customers, rather than have a higher price than other retailers sell at which is the  current position. I cannot see their position as viable re UK competition law, however I'm not a legal expert, but with the main suppliers in the industry now adopting a pricing regulation system, the competition regulator will surely investigate.

Edited October 13, 2016 by rembrow

[adb968008]

With some exceptions I note from your earlier post.

 

Unless I've not interpreted it correctly I think both posts are in alignment with each other are they not ?

 

My strategy is pre-order, but I will cancel if I think theres a better price to be had down the road.

(With regards the grange and 4p.. the price offered was guaranteed, so If I order before the price rise.. I save.. it looks like the price didn't rise on those items, so I may now cancel as i'm not convinced it will sell well, and may still be further discounted from it's current price a few months down the road after release).

 

In short, I'm learning that the pre-ordering price is no longer to be assumed as the best price.

 

In the old methodology:

- a release is announced with an RRP

- retailers set a discount price, and the pre-orders go in, invariably inflation takes a bite before release, meaning the pre-order acted as a goodwill discount in advance.

- If it hangs around, there may be a slightly reduced discount after a period.

- if it really doesn't sell inevitably after a long period there is a shelf clearing offer.

 

loyalty pays.

 

If I understand the new proposed methodology:

 

- a release is announced with an RRP, despite inflation, if you pre-order you have to pay full RRP at the time of release regardless.

- after 4 weeks it'll be discounted anyway.

- If it hangs around, there may be a slightly reduced discount after a period.

- if it's really doesn't sell inevitably after a long period there is a shelf clearing offer.

 

 

Some box shifters have already have accepted non-commitment to pre-orders when there is no issued RRP price, they are offering free option to cancel once it is known..

 

So I may now just become unreliable as a pre-order buyer, as their is no loyalty from the price side I don't see why I have to be loyal on the commitment side.

 

Perhaps the future is not pre-orders, just non-binding expressions of interest... this is good for manufacturers whens setting production totals, but risky for the model shops to order stock on this basis. The alternative is deposit or pre-paid based, but this will lead to a much smaller hobby !!!

Edited October 13, 2016 by adb968008

[Legend]

Seems to be rather topical - very similar to the Tesco/Unilever story

David

It is fascinating. In this case I'd equate it more to the Bachmann increases of the previous years. Unilever seem to be imposing a 10% across the board increase allegedly because of Brexit , although of course with Bachmann it's been considerably more over the last three years. Tesco ( unfortunately there isn't a model railway equivalent) , are saying whoa! Some of these goods you make in the UK , so what's your justification for increasing the price of them?

 

The currency devaluation is real, and as I've said before I can see the need for Hornby and others to increase the price of goods to compensate. It will be the same in the groceries trade. But in Unilever we have a supplier that I think had been exposed as jumping on the band wagon and imposing a 10% increase across the board regardless of their actual cost increases. They are just using Brexit as a handy peg to increase their margins.

 

More power to Tesco! Although cynically the exposure this is giving them will do their PR no harm at all and I wouldn't be surprised if they let this story out so they could appear to be on side of consumer.

[Clearwater]

I suspect the situation between Tesco/Unilever is way more complicated than their respective PR teams are leaking to the media. Would be an interesting business school question to analyse using porter's five forces. Let's not forget Tesco is quite content to use its buying power with farmers. Unilever as a supplier is much stronger than some others and can distribute its products through other outlets. I'm slightly surprised we've not seen adverts from Sainsbury's saying "marmite available here.."

 

David

[gismorail]

Well sounds as if Hornby is like marmite you either love it or hate it

[Vistisen]

<snip>

 

Pre-orders are one tool that help shops to secure sales and plan their spending. They should not upset this apple cart by imposing terms.

I think I have preordered about 6 items. I have cancelled all of them. Why? Because I have come to my senses. I have a family with three teenagers, and several hobbies of which Model railways is just one. It is not possible for me to preorder a model that first gets delivered 3-4 years later and just set the funds to side and hope that the price does not almost double (Bachman auto coach) in the intervening four years. Mý new logic is simple. If I have a bit of cash that is earmarked to trains. Then I browse around the net and e-bay and decide what to buy straight away.

[The Stationmaster]

The discussions about rrp and whether we should expect discounts are to my mind red herrings, as we are supposedly in an open retail market, where the retailer can charge the price they choose, backed by competition law and a regulator. In most retail sectors we don't know as consumers the rrp of products, as it is only an advisory value between the supplier/wholesaler and the retailer. So the 'discounts' in the model railway market should be seen as competitive pricing, as that is what it is. We no longer have retail price maintenance in the UK, by law, so the rrp has no legal basis. I have an arrangement with my local model shop, who I've bought from for 32 years, that if I pre-order, he gives me a price below the rrp, which is his normal sale price, as he and I have a trust that I will buy what I've ordered and he will give me a price based on the cost of the item when he receives it. I don't expect the price to be fixed, as I and he both agree that with long lead times, product prices can and do increase, particularly with Bachmann.

 

Pre ordering does assist retailers with stock ordering, particularly where it is based as a trust arrangement between the retailer and the customer, as in my case, as the retailer has a base to buy product from. Many retailers do this with known loyal customers. With the huge range of models now available each year, retailers cannot afford to stock all items. We no longer have suppliers announcing 6-10 new or different liveried models each year as was the case in the 1960s-1990s, there are 50 or more from each supplier. With locos wholesaling at over £100 each, and maybe 30 different types/ liveries from Hornby each year, how many and which ones to buy is an issue. Some retailers will only buy a selection and order in others on request, relying on the customers patience. Some suppliers have minimum orders per item so again the retailer can go for an item with the confidence of pre orders and have 1-2 for stock.

 

I am however concerned of where we are heading on pricing, with Bachmann, followed by Dapol and now Hornby, imposing minimum pricing rules to retailers on 'new' products, which is creating a controlled price retail market, which I feel is contrary to the current competition law. There is a limited allowance for a wholesaler/supplier to set a minimum price, for a limited period, on new lines that are being promoted, however legal opinion I've read indicates this should only be for a couple of weeks to enable a product to get established, not the multiple weeks that these suppliers are insisting on. There is also the issue of what is a 'new' line in model terms. Is a new livery or running number on a model previously sold a 'new' item. Also the minimum pricing is for the promotion of a new line, but what promotion occurs on most 'new' models, I have serious doubts. If Hornby are seeking to apply an rrp as the minimum price for the first weeks, I again have doubts that this will meet the limited legal allowance for suppliers setting a minimum price. Not only is there the issue of what is a 'new' line, but can a minimum price be the rrp, which gives no flexibility and competition in the retail market. Further as Hornby acts as a retailer, by setting a minimum price as the rrp, which is the price they sell at, they are setting themselves with an advantage of being able to sell at the same controlled price which they have imposed on their customers, rather than have a higher price than other retailers sell at which is the  current position. I cannot see their position as viable re UK competition law, however I'm not a legal expert, but with the main suppliers in the industry now adopting a pricing regulation system, the competition regulator will surely investigate.

 

I don't doubt what you say but somehow I can hardly see any arm of the bodies dealing with competition and pricing devoting much time to model railway items.

 

The root of this new perceived problem (and I think it is more of a perception than a reality to be honest) is the point I have often made in the past and which JJB has reiterated earlier today - discounting, particularly deep discounting) has distorted the view many people have had of model railway prices and it's a good job that has begun to disappear.  Now as far as Hornby imposing a 'no discount' for X weeks and Bachmann imposing 'no more than 15% for Y weeks' the important things to understand are where they have come from and the level of trade discount they offer.  If Bachmann's trade discount is much greater in percentage terms than Hornby's then they can allow a greater level of initial discount while hoping to see retailers make a  reasonable profit.  

 

If retailers have been giving a large discount on Hornby's current (2015) trade terms then i suspect their rate of real profitability per discounted item has been very low and they have perhaps followed the old Hattons model of going for very low rates of gross profit but relying on volume to give a reasonable overall level of gross income.  However I then begin to wonder about their customers if their sole loyalty to a retailer happens to be based on getting a discount - my (no doubt to be condemned as 'old fashioned') view is that if you have a decent retailer then you pre-order from them and if they don't discount then so be it while if they offer a small discount in some form or other to loyal customers then, again, so be it.  At least that way I help them to stay in business and supply me with with more, and more varied, items than the contents of a red or blue box.  And interestingly both of my regular retailers seem to be quite happy to put in pre-orders for whoever happens to order from them although in one case I know that the vast majority of his pre-orders are from 'regulars'.

 

I do agree about the shifting sands of Hornby's trade terms and that is invariably down to the way management has changed and the financial holes into which the company has dug itself over the past few years.  Fortunately the new arrival seems to be actually taking things seriously and listening to the concerns of his retail customers and in so doing has come up with a new strategy which answers some of their concerns but at the same time his major role has to be to address profitability issues and build value for shareholders so there will be compromises in what emerges.  the 'no discounts for X weeks' strikes me as a sensible approach as it will protect many retailers from those who discount as deeply as they dare while still making a couple of 3s on each loco sold.  

 

What I would then say is that it is up to retailers who don't like this idea to devise their own marketing approaches which offer value to customer in other ways such as free P&P on orders above a certain amount or redeemable loyalty points or whatever - those sort of things, as I understand matters, are how businesses can build and maintain their customer base.

[adb968008]

I suspect the situation between Tesco/Unilever is way more complicated than their respective PR teams are leaking to the media. Would be an interesting business school question to analyse using porter's five forces. Let's not forget Tesco is quite content to use its buying power with farmers. Unilever as a supplier is much stronger than some others and can distribute its products through other outlets. I'm slightly surprised we've not seen adverts from Sainsbury's saying "marmite available here.."

 

David

 

I think its quite uncomplicated...Poacher become Gamekeeper.

 

it's an ex-Unilever exec now working for one of Unilevers larger customers.

 

the advantage goes to Tescos, as this guy will know Unilevers sales strategies, production and capacities, weaknesses and crucially.. Unilever's other larger customers, probably on 1st name basis.

 

I suspect thats why all the other retailers will be happy to go along with it.

Tescos will get a discount, but will have to pay more, but if Unilever tries goes too far they will get pulled back by having knowledge of their own company used against them.. Going public was a brilliant PR move, as it gets the competitors to sit up and open the popcorn, the competitors will get to know what deal Tescos get as a benchmark for their negotiations... in short it was very expensive for Unilever and they'll be keen to get a deal that gets them out of the news with the least emerging details asap.

 

The sooner it's out of the news the better the deal Tescos has got ! If it drags it could affect others, as If I were negotiating with Unilever, I too may want to wait and watch the news, or even add to the story before signing now.

 

I'm sure such things have existed in the model industry, but Hornbys price rise isnt one of them.

Edited October 13, 2016 by adb968008

[The Stationmaster]

I suspect the situation between Tesco/Unilever is way more complicated than their respective PR teams are leaking to the media. Would be an interesting business school question to analyse using porter's five forces. Let's not forget Tesco is quite content to use its buying power with farmers. Unilever as a supplier is much stronger than some others and can distribute its products through other outlets. I'm slightly surprised we've not seen adverts from Sainsbury's saying "marmite available here.."

 

David

As you appreciate it is of course far more complicated than the fact it happens to be made in England/the UK.  If a company - such as most of the British car industry - happens to be foreign owned the devalued £ has another impact because what the offshore owners receive in dividends/earnings from their UK businesses will be worth less in their own currency unless the falling £ allows that concern to boost its non-Sterling earnings.  So because the £ has dropped against even the Euro Unilever, with both British and Dutch HQ offices, will be receiving less in Euros for sales made in sterling in the UK - thus in order to maintain corporate income in non-sterling terms they have no option but to increase prices in the UK.

 

With so many internationally owned businesses nowadays who move their profits into offshore currencies at some stage this looks like a surefire outcome.  However I doubt the pips won't squeak because of model railway prices (which is really down to the higher costs of imports) and I doubt even the Tesco/Unilever situation will provoke an real and longer lasting debate (Mrs T. May shops in Waitrose; I've never seen her in Tesco and she has to drive past it to get to Waitrose) but once Starmucks start putting up their prices then there will be a major excrement and fan interface among the chattering classes.

[JSpencer]

We may assert that, but do we really know it?

 

Presumably, if it's true, vast swathes of London will have a tiny proportion of new customers joining the hobby compared to the numbers joining in, say, a 5 mile radius around your own favourite model railway shop. There will now be whole areas of the country where, relatively speaking, no-one is joining the hobby - and others which will be in disproportionately rude health.

 

Is that really true? I have no evidence though, on the face of it, it seems implausible.

 

Paul

 

From my own personal experience...

 

In the 90s, little Johnny gets a train set for Christmas from Toys'R'us or some other well known national outlet. Unfortunately their staff are utterly useless when the first fish plate gets bent (or other minor issue) and the train set does not function correctly anymore.

(they might also have brought it from a model shop directly).

 

So when I was at the Signalbox, they (Toys + Argos etc ) used to send them round to us. How kind. Some of these people were actually a pain expecting a free repair service, others however came for lots of wonderful expert advice. Saw that there are other companies other than Hornby and have their eyes opened to a world majesty and delight.

Eventually we put in contact with the local model club and they were hooked.

 

Granted, you have the internet and forums these days, but model shops really do allow weary buyers to get the feel on tangible items. It is a valuable support.

 

So yes, I know it from actual experience and I myself was drawn more into the hobby thanks to Baker's model ship (Gillingham) and when that closed, The Signal box (Rochester). (my first train set was a Trix Twin system handed down from the 50s).

[JSpencer]

I think I have preordered about 6 items. I have cancelled all of them. Why? Because I have come to my senses. I have a family with three teenagers, and several hobbies of which Model railways is just one. It is not possible for me to preorder a model that first gets delivered 3-4 years later and just set the funds to side and hope that the price does not almost double (Bachman auto coach) in the intervening four years. Mý new logic is simple. If I have a bit of cash that is earmarked to trains. Then I browse around the net and e-bay and decide what to buy straight away.

 

Bachmann's logic of not stating prices up front (for reasons I perfectly understand), has admittedly had me delaying placing pre-orders until they actually do state the price.

 

An exception to this is the Brighton Atlantic. Because I know this will be popular and I really really want one.

[jjb1970]

I think this thread has moved away from Hornby’s financial performance and developed into another regular point of discussion which many of us enjoy, namely the form and future of model retailing (with a further sub-thread on the implications of Brexit0. That is, I think a legitimate topic to discuss, but maybe better in a separate thread. I think many of us would also enjoy debating Brexit but I think that to go beyond the already highlighted implications for prices of good and implications for models would take us into politics and so is outside forum rules.

 

On the future of retailing, I see three large subjects for debate:

 

• The increasing presence of niche players using crowd funding to develop interesting models, plus commissioned models

• The role of the retailer in a retail environment shifting more and more towards on-line sales (and in some cases direct sales which remove the intermediate retailers)

• Pricing, discounting, costs of production etc and the sustainable future of model suppliers

 

I do think that many RMWeber’s (although not all) find such discussions good fun but maybe not for this thread?