Hornby's financial updates to the Stock Market

[Kelly]

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.

 

I used to do similar with computer games, until I realised, that if I wait about 4-6 weeks after launch I can get the same game either second hand or even new at at least 33% less, if not a lot more after the initial rush has passed. The same is true for model railways, I don't preorder items, as the lead time is so long it is impossible to know I'll be able to afford it by the time it is released. This is one area where payment plans/crowdfunding perhaps helps for me personally spreading the costs over that period rather than a big lump I can't manage at the end.

[Classsix T]

I used to do similar with computer games, until I realised, that if I wait about 4-6 weeks after launch I can get the same game either second hand or even new at at least 33% less, if not a lot more after the initial rush has passed.

I did the same with PS2 & PS3 games for years, but with the the recently purchased PS4 I have been buying new as, with the advent of online gaming, you can't guarantee the DLC/online pass/bonus certificate will be valid if the game is pre-owned. Deus-Ex also had bonus content on the release date version not included in the general release.

Negating this though, after a while Asda at least like you say, will bargain bin games to clear stock.

 

(none of which has anything at all to do with model railways, as you were) C6T.

Edited October 13, 2016 by Classsix T

[Kelly]

I did the same with PS2 & PS3 games for years, but with the the recently purchased PS4 I have been buying new as, with the advent of online gaming, you can't guarantee the DLC/online pass/bonus certificate will be valid if the game is pre-owned. Deus-Ex also had bonus content on the release date version not included in the general release.

Negating this though, after a while Asda at least like you say, will bargain bin games to clear stock.

 

(none of which has anything at all to do with model railways, as you were) C6T.

 

Most of the content/dlc is usually part of the ultimate or season pass releases anyway I find. There are some games that don't include everything in Ultimate or Season Passes (I'm looking at you EA, greedy gits!).

[ruggedpeak]

As other people have said many times before WHAT MATTERS IS PROFIT NOT SALES VOLUME.

What matters is cash. If you can't pay the bills profit is irrelevant. First and foremost Hornby need to generate and maintain proper cashflow, and then maintain their margins. This constrains what they can do for retailers, compounded by the pound collapsing. There is a clear intention to undo the complete mess the last management made of sales and marketing, and the no discounting policy reflects these realities. Perhaps Hornby are aware that there are several large retailers who could discount heavily to the detriment of indies and are trying to protect the indie channel despite not having the financial strength to offer the margins they'd like?

[Willie Whizz]

The issue of how profit margins work for businesses that are facing financial challenges is widely misunderstood - even by many business people, let alone Joe Public.  It is often suggested, for example, that by cutting prices more sales (and therefore profit) will be generated; conversely that raising prices at such a time will cut sales and make matters worse not better.

 

One of my prized possessions is a little card I was given while attending a course at Durham University Business School nearly 20 years ago.  One side shows the impact of 'price reductions' and the percentage that a business's sales must therefore increase just to maintain total gross profit at its current level.  The other side shows 'price increases' and the percentage that sales can fall before the current level of gross profit reduces.

 

I have no idea what Hornby's present gross margin is (and there's more than one way of calculating such a figure anyway, depending on the type of business).  But just by way of "illustration" let us imagine "a" model railway business with a current gross profit margin of, say, 25%.

 

If prices are reduced by just 3%, sales volumes must rise by 9% just to stay in the same place.  If prices are reduced by 10%, sales must rise by no less than 67% just to stay in the same place.

 

Conversely, if prices for the same business are increased by just 3%, the company can afford to lose sales volume of 11% of  and still keep the same level of gross profit.  If prices are increased by 10% the company can actually afford to lose 29% of its sales before its total gross profit reduces.

 

Depending upon the actual GP percentage of any given business these figures will obviously vary; but the underlying point remains the same:  quite often the very worst thing a business struggling for sales can do is reduce its prices - because it will have to shift a heck of a lot more 'product' just to keep treading water.  On the other hand, if it can make even a modest price increase 'stick', the company can afford to lose quite a few price-sensitive customers - and yet still strengthen its position.

 

I suspect somebody in the Hornby hierarchy has finally cottoned-on properly to this fundamental point, and is prepared to risk losing a handful of (often vocal, self-proclaimed) price-sensitive buyers in order to secure the longer-term future of the business.

 

So the key point for us, as customers, is to decide how "elastic" our own demand for model railway products actually is going to be in the face of these rises.  Especially if they keep-on making stuff that meets our needs, yet that may not be repeated if it flops ... so buy now, even at a higher price, or miss out!

 

Of course, if serious inflation were to take hold in the longer-term then all bets might be off because the climate would have changed and our disposable incomes would be hammered.  But I suspect by then either Hornby will have survived and moved on ... or ... not!

[RJS1977]

Companies like Bing and Bassett-Lowke made premium products with fairly small numbers of sales. Even HD was a relatively premium product with a limited number of sales. It wasn't until Tri-ang (and later Airfix and Lima) came along with low-priced, mass-market models that the model railway hobby really became accessible to everyone.

 

The model of increased prices require fewer sales to produce the same level of profit may be good for Hornby's bank balance, but I'm not sure that going back to pre-Triang days with fewer people being able to afford models is good for the hobby in general. Yes, Hornby may still make the same profit (at least for a while until the 50+ market who have been buying the expensive models die off and the younger, more cash-strapped folk who can't afford to get into the hobby don't take their place) - but a pricing policy which discourages people from entering the hobby ultimately hits all the businesses in the hobby - folk like Ratio/Wills etc making the scenic extras, the retailers, clubs, shows, even the heritage railways.

[MarkSG]

The problem is that we - at least, the hobbyist and collector sectors of the market - won't accept Tri-ang levels of detail and accuracy any more.

 

Hornby does still have cheap'n'cheerful models that make little or no pretence to fidelity, such as the various train sets based around the little 0-4-0 that we've referred to before (eg, the Santa special). But I suspect that nobody on RMweb is going to be buying them, at least for themselves (I suppose we may get them as presents for children or grandchildren). We are far more demanding than that, and the models that Hornby wants to sell to us have to be designed and priced accordingly.

 

Maybe a part of Hornby's problem is that they're not producing enough of the bargain basement stuff that is clearly intended as a toy and nothing more. We've talked in the past about things like the helicopter wagon that used to be a part of Tri-ang's range, and the circus train complete with ducking giraffe! It's entirely plausible that Hornby could benefit from increasing that sector of their output. But that's not an argument for reducing the price of the more "serious" models.

[coachmann]

Hornby and Bachmann have a problem. Poor quality control. It is pointless producing locos with fine added-on detail if the assemblers churn out models with components barely glued in place and even hanging off.  I can't see it being just me that has had to reinstate handrails and plastic knobs or trying to get a badly assembled running plate straight. In the face of this lack of care, the best locos I have come across are in the Railroad range. Molded handles and other detail cannot be messed up on the assembly line, but a person used to doing things for himself will easily replace such things with wire and make sure his work doesn't fall off at the slightest touch.

 

I never thought I would be saying this, but I now reckon 00 gauge would be better off with more "Railroad" locos. Those who have the urge will super-detail them. The ones I did turned out to be the best runners to with their fly-wheel chassis.

Edited October 14, 2016 by coachmann

[Coryton]

I never thought I would be saying this, but I now reckon 00 gauge would be better off with more "Railroad" locos. Those who have the urge will super-detail them. The ones I did turned out to be the best runners to with their fly-wheel chassis.

 

I fully agree. As you say, they can be super-detailed, and they aren't so horrendously expensive and delicate as to put people off attempting to modify them.

[jjb1970]

Unfortunately I think model train companies got themselves into an arms race mentality on detail and features and as with any arms races I think what started out as rational measures to improve something ended up detached from concerns other than having to keep up with somebody else. I’m not advocating a return to the standards of detail found on pre-China Hornby, but there is a sensible balance between detail, cost and perhaps even more pertinent than cost, making models that are suitable for the degree of handling and treatment necessary to use them on a layout. Some efforts to improve detail can be counterproductive as efforts to capture details that would be seldom noticed when viewing the real model from the distances equivalent to those when viewing a model can result in heavy, over scale details. Not every example of etched grills is better than well done mouldings in my view. In the modern world compromise tends to carry negative connotations and is often used as a pejorative term yet any product is essentially a collection of compromises. I do want well detailed models but I also think that there is a sensible balance between details and ensuring models are usable, if that also assists in controlling model inflation then so much the better IMO. The new generation Railroad models are very good, and I have to say the ones we have are beautiful runners and a fine example of why model running qualities should not be pre-judged based on claims of using high end motors etc. A well-engineered chassis with a basic but good 3 pole motor and drive can run as well as models with far more exotic drives (and in some cases, run a lot better). I have quite a few Korean and Japanese brass models of mainly US diesels which are beautiful and finished to an extraordinary standard but sometimes just taking the things out of the box is challenging never mind running them on a layout. For the collector market that is not an issue, but it is for working models. I find that a few key qualities of a model (overall shape, the bogie – body interface, glazing and the front pilot area) are the real key to a model looking right, all the fine detail in the world won’t compensate for those things not being right but on the other hand if those things are done well they can carry a quite basic model despite losing some of the refinements that manufacturers are able to provide.

[Coryton]

Unfortunately I think model train companies got themselves into an arms race mentality on detail and features and as with any arms races I think what started out as rational measures to improve something ended up detached from concerns other than having to keep up with somebody else. I’m not advocating a return to the standards of detail found on pre-China Hornby, but there is a sensible balance between detail, cost and perhaps even more pertinent than cost, making models that are suitable for the degree of handling and treatment necessary to use them on a layout. Some efforts to improve detail can be counterproductive as efforts to capture details that would be seldom noticed when viewing the real model from the distances equivalent to those when viewing a model can result in heavy, over scale details. Not every example of etched grills is better than well done mouldings in my view. In the modern world compromise tends to carry negative connotations and is often used as a pejorative term yet any product is essentially a collection of compromises. I do want well detailed models but I also think that there is a sensible balance between details and ensuring models are usable, if that also assists in controlling model inflation then so much the better IMO. The new generation Railroad models are very good, and I have to say the ones we have are beautiful runners and a fine example of why model running qualities should not be pre-judged based on claims of using high end motors etc. A well-engineered chassis with a basic but good 3 pole motor and drive can run as well as models with far more exotic drives (and in some cases, run a lot better). I have quite a few Korean and Japanese brass models of mainly US diesels which are beautiful and finished to an extraordinary standard but sometimes just taking the things out of the box is challenging never mind running them on a layout. For the collector market that is not an issue, but it is for working models. I find that a few key qualities of a model (overall shape, the bogie – body interface, glazing and the front pilot area) are the real key to a model looking right, all the fine detail in the world won’t compensate for those things not being right but on the other hand if those things are done well they can carry a quite basic model despite losing some of the refinements that manufacturers are able to provide.

 

I agree fully.

 

Apart from good running, two things make the biggest difference to me - flush glazing and livery application.

 

Livery application is something that has hugely improved, although of course also comes at a cost.

 

If you compare one of the original Hornby 142s in Provincial livery with the more recent FGW, there is a world of difference despite using exactly the same moulding. Now of course the older ones have had more time to age, but I don't think that's the main cause of the difference. The painting and printing is just so much better.

 

A lot of the older mouldings were actually very good, and become much better with modern painting/printing techniques.

 

And of course painting is also something you can do yourself. I find the difference made to a cheap Hornby Railroad truck by painting over the self-coloured plastic amazing - it looks like a whole new model, so long as you don't let yourself pay too much attention to the chassis...

[ruggedpeak]

The problem is that we - at least, the hobbyist and collector sectors of the market - won't accept Tri-ang levels of detail and accuracy any more.

 

Hornby does still have cheap'n'cheerful models that make little or no pretence to fidelity, such as the various train sets based around the little 0-4-0 that we've referred to before (eg, the Santa special). But I suspect that nobody on RMweb is going to be buying them, at least for themselves (I suppose we may get them as presents for children or grandchildren). We are far more demanding than that, and the models that Hornby wants to sell to us have to be designed and priced accordingly.

Yet when Bachmann push up their prices on premium models like the Blue Pullman there are howls of outrage. The fact is if you really want super detail etc in the future it is going to cost you a lot more. Bachmann prices are spiralling upwards, Dapol is moving into this sector with its Black Label range. I think there is a growing split between collectors and those who use/operate their trains.

 

Hornby are stuck between the 2 as the Railroad concept has not been properly implemented, and they have been trying to do super detail at normal prices. Hornby need to understand these segments better with some proper market research (and ignore web forums) and develop a product strategy accordingly.

 

Hornby and Bachmann have a problem. Poor quality control. It is pointless producing locos with fine added-on detail if the assemblers churn out models with components barely glued in place and even hanging off.  I can't see it being just me that has had to reinstate handrails and plastic knobs or trying to get a badly assembled running plate straight. In the face of this lack of care, the best locos I have come across are in the Railroad range. Molded handles and other detail cannot be messed up on the assembly line, but a person used to doing things for himself will easily replace such things with wire and make sure his work doesn't fall off at the slightest touch.

 

I never thought I would be saying this, but I now reckon 00 gauge would be better off with more "Railroad" locos. Those who have the urge will super-detail them. The ones I did turned out to be the best runners to with their fly-wheel chassis.

Quality is definitely an issue, although I haven't had any problems with anything I've bought from Hornby for some years, except for one motor that died and was replaced.

I fully agree. As you say, they can be super-detailed, and they aren't so horrendously expensive and delicate as to put people off attempting to modify them.

Given my limited modelling skills (especially painting) there is no way I am doing anything with a £100+ model. There is a near endless supply of cheap secondhand models I use for that, so there is no need take the risk.

 

What is also interesting is how much some low grade models still go for secondhand. Hornby's hit and miss experience with new models shows how the right model choice can be far more important than the level of detail. Railroad Crosti 9F, Peckett and others have been or are rapid sellers, yet the Class 67 in various guises is an excellent and detailed model yet in normal or TTS format won't sell, even when discounted.

 

My view is they need to focus on decent quality models, not necesarily super detailed, at realistic prices, and let the modellers who want super-detail do some modelling. They can decide if they want to tackle the collector market with more detailed and expensive models. Why not make highly detailed collectors pieces in the UK? Avoid Marmite style currency issues for a start!

[Hroth]

...

What is also interesting is how much some low grade models still go for secondhand. Hornby's hit and miss experience with new models shows how the right model choice can be far more important than the level of detail. Railroad Crosti 9F, Peckett and others have been or are rapid sellers, yet the Class 67 in various guises is an excellent and detailed model yet in normal or TTS format won't sell, even when discounted.

 

My view is they need to focus on decent quality models, not necesarily super detailed, at realistic prices, and let the modellers who want super-detail do some modelling. They can decide if they want to tackle the collector market with more detailed and expensive models. Why not make highly detailed collectors pieces in the UK? Avoid Marmite style currency issues for a start!

The problem with the Class 67 is that not as many modellers address the ever changing NOW, which is where the 67 fits in.  Most people seem to want nice steam locomotives and to look back to a time when things seemed less difficult. An angular diesel box, even if its well executed and highly detailed isn't going to cut the mustard.  Even under Rule 1, its more likely that a P1 (the very definition of a Large Green Loco!) would be preferred over a class 67.

[Coryton]

The problem with the Class 67 is that not as many modellers address the ever changing NOW, which is where the 67 fits in.  Most people seem to want nice steam locomotives and to look back to a time when things seemed less difficult. An angular diesel box, even if its well executed and highly detailed isn't going to cut the mustard.  Even under Rule 1, its more likely that a P1 (the very definition of a Large Green Loco!) would be preferred over a class 67.

 

Hmmm.

 

Both Hornby and Bachmann keep releasing 66s in various liveries. They don't seem to gather dust on the shelves too long when they come out, and if they weren't selling I expect they would have stopped by now. These are even less angular boxes, albeit with more interesting sides.

 

Could it be more because the 67s form a small fleet (all owned by one operator and most in the same livery) and most people don't see them regularly, whereas there are quite a few operators with 66's, each with their own livery, and it's hard to travel round much of the UK by train without seeing a few?

 

I really don't see signs of modern locomotives and DMUs as a whole not selling, though clearly some don't sell well.

[GordonC]

The problem with the Class 67 is that not as many modellers address the ever changing NOW, which is where the 67 fits in.  Most people seem to want nice steam locomotives and to look back to a time when things seemed less difficult. An angular diesel box, even if its well executed and highly detailed isn't going to cut the mustard.  Even under Rule 1, its more likely that a P1 (the very definition of a Large Green Loco!) would be preferred over a class 67.

 

I think it depends where you look. I was at the Wigan show the other week and was surprised just how many current day layouts there were. Admittedly it is incorporating the 'North West Festival of Diesel and Electric Layouts' but there were significantly more current day than BR Blue, Sectorisation or early Privatisation era layouts.

[Kelly]

Hmmm.

 

Both Hornby and Bachmann keep releasing 66s in various liveries. They don't seem to gather dust on the shelves too long when they come out, and if they weren't selling I expect they would have stopped by now. These are even less angular boxes, albeit with more interesting sides.

 

Could it be more because the 67s form a small fleet (all owned by one operator and most in the same livery) and most people don't see them regularly, whereas there are quite a few operators with 66's, each with their own livery, and it's hard to travel round much of the UK by train without seeing a few?

 

I really don't see signs of modern locomotives and DMUs as a whole not selling, though clearly some don't sell well.

The 66s have a large number of potentially attractive liveries (depending on your viewpoint), such as the various drs ones, and the lt ones.

 

The 67s have comparatively few traffic options too as well as less limited liveries. The ews liveries never really looking to me all that much really.

[Coryton]

The 66s have a large number of potentially attractive liveries (depending on your viewpoint), such as the various drs ones, and the lt ones.

 

The 67s have comparatively few traffic options too as well as less limited liveries. The ews liveries never really looking to me all that much really.

 

It certainly does depend on viewpoint - I'm rather fond of the EWS livery (though all over red is good too).

[darren01]

Look's like the price has gone up a bit from this email i got today.http://www.Hornby.com/us-en/

S15.now £154.99.

Edited October 14, 2016 by darren01

[RJS1977]

The problem is that we - at least, the hobbyist and collector sectors of the market - won't accept Tri-ang levels of detail and accuracy any more.

 

 

 

Or at least a fairly vociferous part of the hobby won't. Generally speaking the people who want change tend to shout louder than those who are happy with things as they are, so the model companies listened to the people who were clamouring for ever-increasing detail levels rather than the "average enthusiasts" (including the traditional 'father and son' modellers) for whom affordability was more of a concern. As models have become more expensive, the "average enthusiasts" have increasingly been priced out. So the people who write letters to the magazines, post on RMWeb etc tend to be the ones who can afford the increases in detail, the dads who go into a model shop, see the £100+ locos and say "They're too expensive, son - I'll get you a new game for the Xbox instead" don't. But they're what the hobby needs in order to maintain interest to the next generation.

 

Whilst I'm not advocating a return to the 1950s style models with non-see-through spoked wheels and big flanges, personally I think the level of detail on Hornby, Lima and Dapol offerings in the early-mid 90s was perfectly adequate. I can live without sprung buffers, opening smokebox doors (though even the 1985 M7 had one of them!), firebox glows and DCC sockets. I can even live with a slight discrepancy in wheelbase if the loco still looks the part and it helps keep the price down. 

[Ozexpatriate]

Generally speaking the people who want change tend to shout louder than those who are happy with things as they are, so the model companies listened to the people who were clamouring for ever-increasing detail levels rather than the "average enthusiasts" (including the traditional 'father and son' modellers) for whom affordability was more of a concern.

Really?

 

Having seen so many posts about pricing and the affordability of RTR models, I'm inclined to say that the opposite of your assertion is true, (unscientifically of course).

 

I'd love to have a bot that could trawl through all of it and actually keep score. The results would be interesting, one way or another.

[Ozexpatriate]

Unfortunately I think model train companies got themselves into an arms race mentality on detail and features and as with any arms races I think what started out as rational measures to improve something ended up detached from concerns other than having to keep up with somebody else.

It is called competition.

 

Bachmann went to China and produced models with better details and blackened wheels. They were demonstrably better than the contemporary Hornby items.

 

Hornby responded with the rebuilt Merchant Navy to produce a product of comparable quality.

 

People don't still produce bicycles the way they did in 1985 either.

 

If there has been an 'arms race' to use your analogy, it has been the race to announce the cream from the top of wishlist polls and stake a claim to manufacture it - resulting in frequent duplication of plans, and in several cases duplication of releases. 

[Dunsignalling]

Look's like the price has gone up a bit from this email i got today.http://www.Hornby.com/us-en/

S15.now £154.99.

I clicked on your link and all the prices are in US dollars.

 

John

[adb968008]

Just a thought for retailers on this...

 

But if Hornby is restricting discounting, doesn't that give them an immediate advantage with the collectors club...

This gives 15% off RRP at any time and guaranteed price pre-orders..

(Their Pecketts haven't increased in price for existing pre-orders).

Edited October 15, 2016 by adb968008

[Legend]

Really?

 

Having seen so many posts about pricing and the affordability of RTR models, I'm inclined to say that the opposite of your assertion is true, (unscientifically of course).

 

I'd love to have a bot that could trawl through all of it and actually keep score. The results would be interesting, one way or another.

But you can only do this in context. It does depend on the base. I would say RMweb has more enthusiasts on it , rather than the dad and son clientele referred to above. The enthusiast market is less price conscious and is more prepared ,sometimes it seems ,any price to get the model it wants, whereas for others the price is much more of a disincentive. Sometimes it feels rather like a salmon swimming against the current even mentioning price on here, and daring to mention that some manufacturers may well be exploiting the lack of price elasticity in enthusiasts!

[BG John]

But you can only do this in context. It does depend on the base. I would say RMweb has more enthusiasts on it , rather than the dad and son clientele referred to above. The enthusiast market is less price conscious and is more prepared ,sometimes it seems ,any price to get the model it wants, whereas for others the price is much more of a disincentive. Sometimes it feels rather like a salmon swimming against the current even mentioning price on here, and daring to mention that some manufacturers may well be exploiting the lack of price elasticity in enthusiasts!

I'm in the wish it was cheaper with less detail camp, as I'd be more inclined to buy something cheaper to bash into something else and repaint. I wonder how many RMweb members can afford to buy the number of locos at current prices that some members can.