Hornby Sale.

[edcayton]

Why can't it be both? In their position I would be reluctant to give up a large part of my market.

 

Ed

[antrobuscp]

Why can't it be both? In their position I would be reluctant to give up a large part of my market.

 

Ed

Possibly, and this is pure speculation, because Hornby hasn't got the resources to fund both. In principle though, I agree with you as it spreads the business risks across 2 separate strands - which is sound business practice so long as you understand the different markets and marketing strategies, and play to them. That doesn't appear to have been Hornby's strong suit in recent times.

 

Colin

[edcayton]

Possibly, and this is pure speculation, because Hornby hasn't got the resources to fund both. In principle though, I agree with you as it spreads the business risks across 2 separate strands - which is sound business practice so long as you understand the different markets and marketing strategies, and play to them. That doesn't appear to have been Hornby's strong suit in recent times.

 

Colin

 

They already have two ranges. The wonderful high detail recent releases that can be priced way above the "toy" market, and the out-dated models that must have washed their faces by now, so can go into the Railroad, train set and Thomas ranges at low prices. What I don't understand is the bizarre policy of doing a Railroad Cock o'the North with simplified lining, or putting the Crosti 9F out as a Railroad model. I think most enthusiasts would pay the higher prices.

 

Ed

[antrobuscp]

They already have two ranges. The wonderful high detail recent releases that can be priced way above the "toy" market, and the out-dated models that must have washed their faces by now, so can go into the Railroad, train set and Thomas ranges at low prices. What I don't understand is the bizarre policy of doing a Railroad Cock o'the North with simplified lining, or putting the Crosti 9F out as a Railroad model. I think most enthusiasts would pay the higher prices.

 

Ed

I wasn't actually thinking of the 2 ranges you mention  as being anything other than part of the modellers side of the business. I was thinking of the wider toy market as being goods, not necessarily just trains, supplied to, perhaps, larger retailers such as Argos, etc - but yes, I agree with the apparent illogicality of how some models are treated within the current model railway ranges.

 

Colin

[The Stationmaster]

Why can't it be both? In their position I would be reluctant to give up a large part of my market.

 

Ed

 

Quite right Ed.

 

I think what we are missing is the wider Hornby picture, they are not just model railways/toy trains.  having said that I do get the impression from their figures quoted at various times that UK model railway sales can have a noticeable, in not necessarily significant, impact on their overall sales figures and I'm of the view that their £1million dip (presumably below budgetted sales levels) in January was probably linked as much with the model railway sales situation as with any other strands of their business.  Clearly - to me at any rate - they had to recoup that £1million somehow or they could be in danger of breaking their banking covenant (but I am linking 2+2 to make 4 and could be well wrong) so they took the logical step of selling the stock they should otherwise have sold (and more no doubt) be seriously discounting their normal trade price by offering out (seemingly not to every retailer) via their sales reps instead of dumping it through their direct sales outlet and concession sites.  Selling it that way meant the money cam in in some biggish lumps and quickly enough to go into the books before the financial year ended and hopefully protected their banking and financial situation as well as reducing their warehousing and distribution costs as noted by Andy Hayter.

 

In my view they were caught in a perfect storm of their own making - by concentrating on their direct sales and offering very big discounts to clear items they were undermining the willingness of retailers to place orders for all but the most saleable items (i.e. 2017 new releases).  But at the same time their failing to adjust their marketing approach and resultant manufacturing pattern to the way the market has changed and to what the market wants has resulted in both sated and saturated demand for many models - unfortunately the newest ones likely to offer quick returns at a healthy level if marketed correctly.

 

The market probably has contracted but their marketing should have been responsive to the ways in which it has changed in order to lessen the impact on their sales - but it didn't because they were too busy looking for quick answers to improving sales revenue; those measures turned round and bit them.

 

I don't know if this extends beyond what we see of the model railway side of their business.  Certainly a year or two back some retailers I know were becoming increasingly critical of the way Hornby was steering Corgi back to exactly what had - in their eyes - caused its problems and certain parts of the diecast market were saturated while other areas were going begging for product (a gap neatly filled by Oxford Diecast it would seem).  I know virtually nothing about the Airfix situation but judging by what I have seen at one retailer the marketing has again at times not been entirely sensible as they produced items which directly competed with another of their items; the sated market situation perhaps?  As far as Humbrol is concerned they seem to have quite simply got the product wrong and although some innovations have helped the basic paint range has been outclassed by others.

 

Overall I can't help coming back to a consistent theme through all of this and one which is reflected in their licencing of gimmick/passing fad toys from other sources - they have lost the plot on marketing.  From the Olympics debacle onwards they seem to have been almost stabbing in the dark at some times while failing to recognise a changing marketplace at others.

[jjb1970]

Hornby OO trains can be split into even more than two, I'd split into three. There is the full fat super detail high end range, where the models are as good as any OO items offered by any other manufacturers (I think its easy to forget just how good Hornby can be at their best). There is the low end stuff made for the residual toy and train set market, much of it using tooling that was around in one form or another for many decades. The train set market isn't what it was but I tend to think a train set entry route into the hobby does retain some importance for the hobby. The interesting strand for me is the third one, those Railroad models that are scale models tooled to a good standard and with good mechanisms but which lose the refinements and detail of the full fat range (e.g. Hall, DoG, Tornado), and this is the range which although heavily criticised on account of not being full fat has a lot of potential to fill a real gap IMO. Yes the models are a little basic, but they're not that basic and for running on a layout they're very good, my view is that there are many modellers who are quite happy with them for running trains. I compare it with super markets, I might go to the food hall of Waitrose for the nice things and stuff I've got a soft spot for but buy a lot of the staples at Aldi, I do not see economy and premium products as being exclusive. Given that the UK market is quite price sensitive and that nobody else appears to be really pitching for the segment that wants good, accurate but perhaps more basic and lower cost models (in some ways the Oxford Adams radial is in that segment but it is unclear whether that was intentional) then I tend to think it is one that has a lot of potential. And I see no reason why Hornby cannot continue to offer a multi faceted range to different price points provided they get their marketing right, in fact if they get the marketing right it'd put them in a better position than their rivals.

[Ian Hargrave]

Hornby OO trains can be split into even more than two, I'd split into three. There is the full fat super detail high end range, where the models are as good as any OO items offered by any other manufacturers (I think its easy to forget just how good Hornby can be at their best). There is the low end stuff made for the residual toy and train set market, much of it using tooling that was around in one form or another for many decades. The train set market isn't what it was but I tend to think a train set entry route into the hobby does retain some importance for the hobby. The interesting strand for me is the third one, those Railroad models that are scale models tooled to a good standard and with good mechanisms but which lose the refinements and detail of the full fat range (e.g. Hall, DoG, Tornado), and this is the range which although heavily criticised on account of not being full fat has a lot of potential to fill a real gap IMO. Yes the models are a little basic, but they're not that basic and for running on a layout they're very good, my view is that there are many modellers who are quite happy with them for running trains. I compare it with super markets, I might go to the food hall of Waitrose for the nice things and stuff I've got a soft spot for but buy a lot of the staples at Aldi, I do not see economy and premium products as being exclusive. Given that the UK market is quite price sensitive and that nobody else appears to be really pitching for the segment that wants good, accurate but perhaps more basic and lower cost models (in some ways the Oxford Adams radial is in that segment but it is unclear whether that was intentional) then I tend to think it is one that has a lot of potential. And I see no reason why Hornby cannot continue to offer a multi faceted range to different price points provided they get their marketing right, in fact if they get the marketing right it'd put them in a better position than their rivals.

Agreed....and then there is occasionally a hybridisation of all three,as witnessed in the Churchill funeral train pack with the inclusion of the ghastly ex-Triang tooling funeral/baggage/whatever van which degrades the entire pack.

[The Stationmaster]

Agreed....and then there is occasionally a hybridisation of all three,as witnessed in the Churchill funeral train pack with the inclusion of the ghastly ex-Triang tooling funeral/baggage/whatever van which degrades the entire pack.

 

Exactly so - yet another high spot in their 'we don't really understand our markets and how they crossover' league table.  

 

That train pack would readily sell to the 'R number collector' market but that is, I reckon, a very small market although at least it is not discriminatory when it comes to price, realism and perceived quality (within certain limits).  It might also sell to a Churchill memorabilia market but again relatively small at that sort of price point for a modern commercial item.  The potentially much larger market is the railway modeller market but that needs consistent quality and realism across the whole contents of the train pack - and that wasn't delivered.  While the final sector is the modeller/collector area where people buy things which are not their usual modelling theme but are bought because they look good and deliver something which can be put on display or trotted out occasionally onto a layout or at the club.

 

The latter area is probably the one which has suffered most of all from the tightening of consumer purse strings.  I'm not exactly badly off but hardly wealthy and I have had to think ever more carefully about the 'off piste' models which might otherwise appeal and I know from many posts on here that I am not alone and that others are perhaps far more straitened in their purchasing power than me.  To compete in that sector of the market the model/train pack or whatever has got to deliver - and that 'delivery' includes realism, quality, consistency, and reliability (if you are going to run it).  In other words what purchasers seek is the same as those in the 'modeller' market area but in this sector they will be more readily turned off, and turned away, by silly shortcomings - let alone outright geriatric models - especially at high retail prices.

[ruggedpeak]

I got criticised pointing this out before, but the harsh reality is the Sales & Marketing Director is a management accountant with a marketing qualification, the new CFO is presumably an accountant and the CEO is the ex-CFO. And who of them is active in the marketplace and actually understands it?

 

However good your bean counting skills, you have to understand your customers and the market. Especially when your financial position is so parlous that you can't afford any mistakes. I agree wholeheartedly with the comments above. The Board and investors need to get a grip.

[antrobuscp]

I got criticised pointing this out before, but the harsh reality is the Sales & Marketing Director is a management accountant with a marketing qualification, the new CFO is presumably an accountant and the CEO is the ex-CFO. And who of them is active in the marketplace and actually understands it?

 

However good your bean counting skills, you have to understand your customers and the market. Especially when your financial position is so parlous that you can't afford any mistakes. I agree wholeheartedly with the comments above. The Board and investors need to get a grip.

I agree with this - up to a point. I'm an accountant, recently retired, and now that I have retired I'd be quite happy never to look at another set of accounts. I'm not therefore interested in looking in more detail at Hornby's accounts. My background has never been in large business, rather in local businesses.

 

This may well be a case of square pegs in round holes, but it is the fault of management/shareholders/other stakeholders who put them there and allow them to mismanage the situation. It does however take a little time to learn that your new manager is not the right answer. Also, it may not be the case here, but frequently it is forgotten that accountants often provide information or alternatives for others who make the actual decisions.

 

Furthermore, an accounting qualification is often only a base from which individuals move into other specific areas of management so that they become much less "bean counters" and more managers in those other areas of expertise.

 

All that said, as much as I had to "know my client", managers should know and have a thorough understanding of the business they are managing and their function should be within their competency. All the more so if they intend to make important changes to customer relationships. Business failures that I have seen have mainly flowed from an unsuitability to run any business, or from going into a business area that was not understood, often because it was outside prior experience and not properly researched either financially or practically.

 

Not understanding the business relationships is a serious failing irrespective of the business background  but I would expect that someone with an accountancy background should appreciate that. Too many people know the cost of everything and the value of nothing - accountants are often accused of that in decisions that emanate from any number of sources. My experience of talking to other accountants is that they often do know the real value within a more expensive solution, but are not in a position to push it through, or their hands are tied by "the company line".

 

In Hornby's case, no less than in any other, the people appointed to Sales/Marketing, CEO, and CFO should have the correct related skill set and should be capable of fulfilling the role. The accounting background may or may not be directly relevant. The accounting background is not the primary problem, the ability of the individual in their role is.

 

Hornby is likely, at the moment, to be not in control of its own destiny, I just don't like the sum total of what I read of the company's actions as they affect customers and retailers, and of the general comments on this and other forums on a range of subjects covering pricing, quality and quantity of supply, etc.

 

It is a bad time to be where Hornby is and, sad to say, much of the cause has been self-inflicted.

 

Colin

[ruggedpeak]

In Hornby's case, no less than in any other, the people appointed to Sales/Marketing, CEO, and CFO should have the correct related skill set and should be capable of fulfilling the role. The accounting background may or may not be directly relevant. The accounting background is not the primary problem, the ability of the individual in their role is.

Colin

 

Thanks for your considered response.

 

My point is that Hornby is still being led by people who's basic thought processes are probably all accounting led. This lack of diversity of thinking and knowledge may be a serious failing. It is not so much about individual talent but the 'groupthink' that comes with people from similar backgrounds working together. However good they are as individuals the question remains whether they are sufficiently capable and skilled at thinking and operating outside of the accounting mindset to address what we think are key issues such as understanding the market. This is not to criticise accountants per se (the same criticism could be levelled at lawyers or whatever), but to point out that having a lot of people who all think the same way is probably not the best solution. Right now it would be no use for Hornby if the top 3 jobs were all held by sales people. There remains however little evidence to date of anyone senior being properly endowed with a detailed understanding of the market and how to address it. At this point this is not a good place to be in IMHO. Hornby are facing testing market times and competition who are run by people who really do understand the marketplace.

[Clearwater]

I think, without knowing personally the people concerned, it's impossible to answer whether or not they are collectively competent or too narrow in their thought processes. That's for the chairman and non-execs as proxies for the shareholders to assess. All we know is the business has under performed for the last few years and precipitously earlier this year

 

David

[antrobuscp]

Colin

 

Thanks for your considered response.

 

My point is that Hornby is still being led by people who's basic thought processes are probably all accounting led. This lack of diversity of thinking and knowledge may be a serious failing. It is not so much about individual talent but the 'groupthink' that comes with people from similar backgrounds working together. However good they are as individuals the question remains whether they are sufficiently capable and skilled at thinking and operating outside of the accounting mindset to address what we think are key issues such as understanding the market. This is not to criticise accountants per se (the same criticism could be levelled at lawyers or whatever), but to point out that having a lot of people who all think the same way is probably not the best solution. Right now it would be no use for Hornby if the top 3 jobs were all held by sales people. There remains however little evidence to date of anyone senior being properly endowed with a detailed understanding of the market and how to address it. At this point this is not a good place to be in IMHO. Hornby are facing testing market times and competition who are run by people who really do understand the marketplace.

I understand the point you are making, but for many years accountancy has been seen as a route into management as a whole and not just the number crunching. It forms a base on which to build. Don't forget also, that accountancy is not quite the exact science it might be imagined to be, and there can be some lively discussions about how accounts may be put together, yes, but also on all manner of views about how general business problems can be resolved. The accounting qualification, of itself, is often only a foundation from which to go into other specific areas of management and for many of those people the accountancy qualification is there to give them the ability to understand what they are being told by those who are actually number crunching.

 

It is however impossible to argue against the possibility that the individuals at Hornby may collectively have a too narrow a skill base for the task at hand, but that is down to those appointing them. Accountants are perfectly capable of thinking "outside the box", but to do that they have to know where the outline of the box currently exists - i.e. know your business. That customer relationships have in part been trashed is not about accountancy, it is either not knowing and understanding the business, or trying to impose a prior experience into a different set of circumstances, or simply trying to look clever and not caring, or ......, or...... There are many possibilities and we're not going to know.

 

I'm as sure as I can be without being involved that currently cash will be king, which will only compound the short termism within the company and may hasten its demise(I hope not). A situation like this can rapidly escalate into an out of control "snowball going downhill" - until inevitably the rock at the bottom is hit. Then others will be picking up the pieces. Time, which may well be the saviour, may ultimately be the resource least in supply.

 

Colin

[jjb1970]

Accountants often get a bad name I think as they're one of those groups (along with journalists, lawyers and politicians) that collectively people love to hate. Whether or not they actually deserve any of the opprobrium is not the point for many, it is easier to have an easy bogey man to point to than to look further. Equally there are certain other groups who seem to be coated in Teflon. However that is by the by and all that.

 

At the risk of returning to an old argument, it strikes me that Hornby have a wasted potential source of sales in their international range. I recently bought one of their superb U25Cs in Pennsylvania livery, I bought it from the US as Hornby UK seem totally disinterested in marketing them over here. Incidentally, it is striking that their US range does not seem to be deeply discounted, yes you do get a discount but this seems on the whole to be smaller than for Athearn, Atlas, Walthers etc.

[Willie Whizz]

Accountants often get a bad name I think as they're one of those groups (along with journalists, lawyers and politicians) that collectively people love to hate. Whether or not they actually deserve any of the opprobrium is not the point for many, it is easier to have an easy bogey man to point to than to look further. Equally there are certain other groups who seem to be coated in Teflon. However that is by the by and all that.

 

 

How true ...  "Back in the day" I was once a Bank Manager - one of the last of the traditional kind ('Captain Mainwaring' - style if you must) to be appointed.  Although I took voluntary redundancy and got out before the worst of the 'sell at all costs' culture took hold, and made a moderately successful second career doing something else, if I'm asked I still sometimes find it necessary and less stressful to jest that in my earlier years I used to be the Piano-Player in a House of Ill Repute ...