Hornby's financial updates to the Stock Market

[jjb1970]

I've been doing most of those anyway!

 

Thing is though that the more people resort to those measures (apart from the first one), the less money Hornby makes....

I understand that, but in this case the situation is what it is. There are ways that model producers can suppress costs. Smarter design to ease manufacture, pulling back on features that many probably wouldn't really miss, go for a direct sales model and eliminate the retailer margin, adopt the crowdfunding model or manufacture to pre-order and take up front deposits. The problem is that those things are possibilities to alter a business model or product development, not a solution to a rapid collapse in the value of sterling. And if people are worried about this then they should probably be more worried about where food, clothing and energy prices will be going. If needs be you can just not buy models and it isn't the end of the world. Hornby need to worry about their balance sheet and long term viability, consumers need to consider their own finances and get their priorities right. Hopefully those two things are not incompatible but both Hornby and consumers have to try and live within certain things that are outside their control.

I also think we need to recognize the difference between not wanting and being unable to do something. Many cannot afford to buy new models and have no alternative other than to buy s/h or save hard. Others don't want to pay more but when push comes to shove can and will pay more. Life is about choices. In some ways if higher prices promote a more discerning and demanding attitude from consumers then it may not be all bad.

[JSpencer]

Talking to my local shop owner today, he advised me that his understanding of the new trade terms Hornby are proposing would enable him to return to selling at 15% off rrp rather than the current 10%, however there is a sting in the tail in that the terms also include clauses relating to discounting below rrp on 'new' products, where they will require retailers to offer no discount below rrp price for 4 weeks after 'new' item release, and no more than 10% for a further 4 weeks. His response has been that this is unacceptable as it will destroy his pre-order market as few customers will pre order an item at rrp. This seems to be a clause that favours Hornby's 'on-line' site where they can sell at the same price, full rrp.

 

In a round about way, the 10% part to me it sounds like they are copying what Bachmann do. Which is avoid massive discounting upon release and give small independents a chance to compete with big box shifters.

 

However 0 discount for the first 4 weeks will have a serious knock on effect on pre-orders. Few people will place them and simply wait for the first few weeks to pass by.

 

Shops will not be able to effective gauge pre-order stock, so demand at the pre-order stage will be a lot less giving false impressions that the market is a lot smaller than anticipated.

Hornby have again shot themselves in the foot as they will either :

 -- end up making far too few to satisfy the market because the pre-orders are fewer than expected

-- or keep to higher production levels and simply find certain items don't sell.

By the destroying the pre-order market, they will be missing a key piece of business intelligence indicating what items are going to sell well and what will not and loose the ability to adjust production figures accordingly.

 

They will end up with not enough of some (missed sales) and too many of another  (money lost as they have to be disposed of cheaply).

 

First hints, they did not correctly read the lessons it seems!

[adb968008]

In a round about way, the 10% part to me it sounds like they are copying what Bachmann do. Which is avoid massive discounting upon release and give small independents a chance to compete with big box shifters.

 

However 0 discount for the first 4 weeks will have a serious knock on effect on pre-orders. Few people will place them and simply wait for the first few weeks to pass by.

 

Shops will not be able to effective gauge pre-order stock, so demand at the pre-order stage will be a lot less giving false impressions that the market is a lot smaller than anticipated.

Hornby have again shot themselves in the foot as they will either :

 -- end up making far too few to satisfy the market because the pre-orders are fewer than expected

-- or keep to higher production levels and simply find certain items don't sell.

By the destroying the pre-order market, they will be missing a key piece of business intelligence indicating what items are going to sell well and what will not and loose the ability to adjust production figures accordingly.

 

They will end up with not enough of some (missed sales) and too many of another  (money lost as they have to be disposed of cheaply).

 

First hints, they did not correctly read the lessons it seems!

 

 

Shops that wish to discount, could simply wait till 4 weeks after release, before ordering... save the cash flow and a later 30 days for payment.

If enough shops did that, any lessons would filter through the sales channel quite fast.

Edited October 11, 2016 by adb968008

[Ian Hargrave]

Shops that wish to discount, could simply wait till 4 weeks after release, before ordering... save the cash flow and a later 30 days for payment.

If enough shops did that, any lessons would filter through the sales channel quite fast.

And the obvious flaw in that scenario is that their order may no longer be available.Bachmann's policy and thir relationship with the retail trade is clear and unequivocal,is generally a cordial one and was originally introduced to ensure a level playing field between large and small retailers.This avoids a free fall in retail prices and seems to work well.Barwell have a much tighter grip on distribution than their competitors

[GordonC]

 "All people whatever their age still love steam locos" would be definitely. But I wrote "People of all ages still like steam engines for whatever reason". That is not a sweeping statement.

 

'Liking' and 'buying' could be two entirely different things though. I 'like' steam engines, but they'll make up less than 1% of what I 'buy'

[Coryton]

And the obvious flaw in that scenario is that their order may no longer be available.Bachmann's policy and thir relationship with the retail trade is clear and unequivocal,is generally a cordial one and was originally introduced to ensure a level playing field between large and small retailers.This avoids a free fall in retail prices and seems to work well.Barwell have a much tighter grip on distribution than their competitors

 

If I understand correctly, the pricing rule doesn't affect what shops pay to Hornby, it is supposed to determine what they charge to the customer.

 

So - if customers are prepared to wait 4 weeks for a lower price - maybe the shop could accept pre-orders from the customer at the reduced price so long as they don't let the customer walk out with it until 4 weeks have passed from the release date?

 

Maybe they could offer a premium full RRP option as well if you do want it that bit earlier.

 

All a bit daft....

[DonnyRailMan]

 "All people whatever their age still love steam locos" would be definitely. But I wrote "People of all ages still like steam engines for whatever reason". That is not a sweeping statement.

 

I totally agree with what you say . And I think along the same lines as you have said.

[MarkSG]

And have no real competition despite so far as I know having no active patents. There are Lego imitations but must have a tiny market share. 

 

Lego have addressed the expiry of their patents by shifting their focus away from simple "boxes of bricks" (which now can be, and indeed are, manufactured by a whole host of competitors) and towards specific kits. Those kits are subject to design right, and cannot therefore be copied (at least, not immediately, and by the time the right expires Lego will have moved on). They also do a lot of brand tie-ins, such as Star Wars themed kits, which again cannot be copied as they have an exclusive licence.

 

It's been a very successful move, and in many respects Lego are a textbook example of how to transition a company away from reliance on being a monopoly supplier of a single product to a creative, design-led multi-product supplier. To be sure, it's all still bricks, but it's what they do with the bricks that counts.

[Hroth]

... To be sure, it's all still bricks, but it's what they do with the bricks that counts.

Ah, Bricks - there's a song about that...... 

 

I don't think they were thinking about Lego!

[MarkSG]

Bachmann's policy and thir relationship with the retail trade is clear and unequivocal,is generally a cordial one and was originally introduced to ensure a level playing field between large and small retailers.This avoids a free fall in retail prices and seems to work well.Barwell have a much tighter grip on distribution than their competitors

 

Hornby's problem in this respect is that, unlike Bachmann, the wholesale channel is important to them as that's their route into the general toy and hobby market rather than specialist model shops. And once a wholesaler has taken delivery of a crate of models, Hornby have absolutely no further control over who they are sold to or at what price.

[Ian Hargrave]

Hornby's problem in this respect is that, unlike Bachmann, the wholesale channel is important to them as that's their route into the general toy and hobby market rather than specialist model shops. And once a wholesaler has taken delivery of a crate of models, Hornby have absolutely no further control over who they are sold to or at what price.

I suspect in Hornby's case the wholesaler is not the complete picture.I think that recently it has been a case of 'any which way you can'.

[Andy Hayter]

Shops that wish to discount, could simply wait till 4 weeks after release, before ordering... save the cash flow and a later 30 days for payment.

If enough shops did that, any lessons would filter through the sales channel quite fast.

The potential flaw is that this suggests there is a combined will on the part of purchasers to wait 4 weeks for the latest must have.

 

I am sure there will be some who will be happy and prepared to do just that, but I think for the right model there will still be a surge of interest to get their models as soon after release as possible.

 

This proposed option has been around for Bachman models here the similar idea has been in place for years, yet I have seen no real movement to delay purchases en-mass. Indeed on a few occasions those who waited have ended up disappointed - C Class in full SECR livery for example.

 

So yes it may help some modellers to get the models they want, but as a mass movement protest I don't see it happening any time soon.

[Coryton]

The potential flaw is that this suggests there is a combined will on the part of purchasers to wait 4 weeks for the latest must have.

 

I am sure there will be some who will be happy and prepared to do just that, but I think for the right model there will still be a surge of interest to get their models as soon after release as possible.

 

This proposed option has been around for Bachman models here the similar idea has been in place for years, yet I have seen no real movement to delay purchases en-mass. Indeed on a few occasions those who waited have ended up disappointed - C Class in full SECR livery for example.

 

So yes it may help some modellers to get the models they want, but as a mass movement protest I don't see it happening any time soon.

 

For me, it depends how much I want it.

 

If it's something I do want, I'll pay the asking price to make sure I get one.

 

If it's something I'm not so bothered about, I'll wait and if the price comes down I'll probably pick it up.

 

I like to think that this is a sustainable approach - as has been pointed out many times before the manufacturer can get their costs back + a reasonable profit so long as enough units sell at a high enough price. If a lower price is necessary to shift the rest then they've still won out, so long as this doesn't deter too many people from paying full price next time.

 

Of course if everybody sits tight and waits for the price to come down then the manufacturers (and ultimately the buyers) have a problem.

[jjb1970]

Another way to look at it is how many other hobbies or interests have an embedded culture of a sense of entitlement to a 15% discount on new items? I'm interested in a few things and I have to say that whilst discounts exist in other areas it is not that normal for people to expect and demand a discount on newly released items.

[Coryton]

Another way to look at it is how many other hobbies or interests have an embedded culture of a sense of entitlement to a 15% discount on new items? I'm interested in a few things and I have to say that whilst discounts exist in other areas it is not that normal for people to expect and demand a discount on newly released items.

 

Fair point, but we are where we are and if discounts go from 15% to 0% it's another price rise on top of increases in RRP.

 

And I'm not sure sense of entitlement is quite the right phrase; more that if people are expecting the discounts to come along they are much less likely to pay full price.

[DonnyRailMan]

The thing is at the end of the day if you want anything in life and you think it is worth-it you buy it.

This year 2016 I have been able to buy four locomotives Hornby R 3284 - R 3206 - R 3336 - R 3443

two low end price range also two high end price range.

[The Stationmaster]

In a round about way, the 10% part to me it sounds like they are copying what Bachmann do. Which is avoid massive discounting upon release and give small independents a chance to compete with big box shifters.

 

However 0 discount for the first 4 weeks will have a serious knock on effect on pre-orders. Few people will place them and simply wait for the first few weeks to pass by.

 

Shops will not be able to effective gauge pre-order stock, so demand at the pre-order stage will be a lot less giving false impressions that the market is a lot smaller than anticipated.

Hornby have again shot themselves in the foot as they will either :

 -- end up making far too few to satisfy the market because the pre-orders are fewer than expected

-- or keep to higher production levels and simply find certain items don't sell.

By the destroying the pre-order market, they will be missing a key piece of business intelligence indicating what items are going to sell well and what will not and loose the ability to adjust production figures accordingly.

 

They will end up with not enough of some (missed sales) and too many of another  (money lost as they have to be disposed of cheaply).

 

First hints, they did not correctly read the lessons it seems!

 

So presumably Bachmann's imposition of restricted discounting has destroyed their pre-orders?

[Coryton]

So presumably Bachmann's imposition of restricted discounting has destroyed their pre-orders?

 

They limit discounts to 15% at the start don't they, rather than full RRP as Hornby seems to want.

[Ozexpatriate]

Of course if everybody sits tight and waits for the price to come down then the manufacturers (and ultimately the buyers) have a problem.

The presumption of pre-ordering is that you will buy it when it becomes available - not so much because you want to be the first to have one (though that no doubt motivates some) - but because you want to secure an order.

 

It will be interesting to see how many Peckett tank engines sit on shop shelves. 

 

I can imagine discussion on the Peckett thread come December or January along the lines of "where can I find a Peckett?"

Edited October 11, 2016 by Ozexpatriate

[Ian Hargrave]

The presumption of pre-ordering is that you will buy it when it becomes available - not so much because you want to be the first to have one (though that no doubt motivates some) - but because you want to secure an order.

 

It will be interesting to see how many Peckett tank engines sit on shop shelves. 

 

I can imagine discussion on the Peckett thread come December or January along the lines of "where can I find a Peckett?"

In the words of W.S.Gilbert....."A nice dilemma we have here that calls for all our wit". Events of the last year in the Hornby calendar have conditioned us to waiting until the price falls.Is this the pattern for the foreseeable future or is the gravy train to suffer the Beeching Axe. "Mesdames et Messieurs,Faites Vos Jeux...."

[Classsix T]

I've a pre-order in with my local shop for the B12 and won't be reneging on a Gentleman's agreement that I shall be purchasing said model from them (it's a "will you get me in such-and-such when released?" by the way, no cash down). I'll probably end up getting it sooner rather than later too.

 

However, as a rhetorical question to the assembled, if for some reason friend shop owner gives me a tinkle to inform me the model is now in, if I said for whatever reason I won't be picking it up for a month (thus only actually selling the item to me four weeks after release) do I pay RRP or garner the permitted shop owner discount?

I'd guess if Hornby's terms are 30 days payment from him, shop owner will want RRP from me? And if not, it's a non enforceable policy Shirley?

 

In this particular scenario, I'm not fussed, but I think in the near future these manufacturer/retailer terms will affect the retailer/purchaser relationship more and more. For good or bad (and in the longer term, for whom) I couldn't say.

 

C6T.

Edited October 11, 2016 by Classsix T

[Coryton]

The presumption of pre-ordering is that you will buy it when it becomes available - not so much because you want to be the first to have one (though that no doubt motivates some) - but because you want to secure an order.

 

 

Indeed. I wasn't thinking of pre-ordering, just the fact that if enough people are prepared to pay full price (either as pre-orders or within the first few months or more), the manufacturer can afford to then drop prices for what's left over to sell to people who can't or won't pay more.

 

Sort of the reverse of the budget airline selling model.

 

Of course Amazon uses a bizarre mixture of the two where prices move up and down in an apparently random way but probably based on stock levels, rate of sales, phase of the moon etc etc.

[Legend]

But if there are no discounts on pre ordering, what's to stop you from ordering direct from Hornby? It's post free I think. That way you guarantee receiving a model . No incentive to ordering locally, which I thought the newly reformed marketing program was supposed to encourage

[adb968008]

I dunno why it has to be so complicated.

 

 

Its fairly easy to see what models will fly off the shelves, and which ones might stay around a while.

Any new release, in a desirable livery or number is likely to sell, any old release in an undesirable livery is less likely to sell... in between theirs a median.

It could be measured in Pleasurable (Value), Desirable (Want) & Financial (price).

 

Desirability is in the eye of the beholder but easily viewed in  the pages of this forum, others, shops, model shows etc etc...

 

In this case 26 & 28 pages on this forum on the Peckett and Merchant Navy, I can't find anything recent on the new 4p 2-6-4t or the next Grange.

 

So in my case....

 

If I want one, see lots of people obviously want one too... then pre-order one.

If there's no guaranteed price, no deposit and or a desirable price, no date and it's not of interest... then I needn't rush to order one.

 

but If I know if I wait 4 weeks it'll be discounted, then I neednt pre-order at all if theirs no financial, desirable or pleasurable benefit to it.

Last week I pre-order the Hornby Grange and 4P as I had a pleasurable interest in them, but not at a financial price increase or desirable (I have 2 but not with the tender)... this week I see the price hasn't increased.. so I may actually just cancel it and wait and see... but the Pecketts.. (I have high financial, desirable and pleasurable benefit) so not a chance I will cancel, its inevitable more numbers / liveries will follow.. but the 2nd round will be higher priced than the 1st.

 

 

At the end of the day I'm (and most of us here) are not a charity, I / we all have a family who's needs have to be met and so if that squeezes model train budgets then I know I won't feel guilty for seeking the best deal for my £.

I don't see why anyone running a model shop shouldnt do the same for their families either... unless their loaded for cash and have no worries, if they see something thats "nice to have on display" but "won't fly off the shelves".. then why not wait a few weeks before ordering, save the £, wait until they can discount it  but spend on the faster selling newly pleasurable, higher financial margin more desirable stuff first ?

Edited October 11, 2016 by adb968008

[Coryton]

But if there are no discounts on pre ordering, what's to stop you from ordering direct from Hornby? It's post free I think. That way you guarantee receiving a model . No incentive to ordering locally, which I thought the newly reformed marketing program was supposed to encourage

 

To support your local model shop?

 

So you don't have to be in for a delivery that you have no idea when will come?

 

So that if it doesn't work, someone will deal with it without the hassle of packing it up and posting it (and possibly paying postage).?