Hornby discounts

[melmerby]

What is obvious to me that Hornby still have not got their product ranges properly organised.

 

What is "Railroad"

It should be an entry level system to get people into the "Hornby" brand, however it quite often isn't e.g. P2, DoG & Crosti. All were far too expensive and sit uncomfortably in the middle of the price range.

 

What could be in the Railroad range?

Anything that is still worth manufacturing e.g. where intial tooling costs have been recouped and a new version is available.

Anything from the old absorbed ranges - Triang, Airfix, Lima & Dapol where the tools are still in reasonable condition.

 

There are wagons with the old giant moulded on tension lock still being marketed as part of the main range complete with new highly complex liveries. these are extemely crude compared to more modern tooled designs.

These should be kept firmly in the railroad range with simpler liveries

 

Etc. etc.

 

keith

Edited October 20, 2017 by melmerby

[stewartingram]

But if Hornby have a loco (or other) model, first produced many years ago, which still sells despite being crude by todays standards, they will keep on producing it. The moulds and R&D costs have long been paid for (though refurbs/replacements of tools may occur at times) so the true production ​costs may be relatively low, if they can still sell ​at higher prices it makes sense for them to do that. Easy income for nothing! It helps to support the company (which needs income) and indeed actually subsidises newer models. 

 

Stewart

Edited October 22, 2017 by stewartingram

[John Tomlinson]

I've just skimmed this thread, and the starting point was the observation that the new CEO of Hornby has said he will cease the deep discount sales.

 

It seems to me as an observer this in principle is a very sensible management decision. The problem with these sales becoming a regular feature is that consumers in time adjust their behaviour, and hold off buying items they like, on the basis that in a while they'll be available for a lower price. I certainly do this, I'm sure there are many others. The experience of seeing an item that for example you paid £130 for, and is now available for £75, constitutes a fairly pointed lesson on optimising your purchases! Of course you will occasionally miss out altogether, and may have to revert to a secondary market like Ebay if you really want something. But that's just tough, and a small negative for what can otherwise be significant savings over time. It isn't possible to evaluate the cost to the producer of this behaviour shift, not least as we don't know how many make a purchase of a given item at a lower price that wouldn't have done so at a higher one, and so from a business perspective the impact is impossible to measure.

 

What we do know historically is that over-production and deep discounting has done a lot of damage to brands no longer with us, Lima being a prime example, and so I can see why the new CEO has taken this line. The statement shows he recognises the immediate impact on sales will be negative, and in the short term there may be stock writedowns and a P&L hit, with surplus stock perhaps being let out in dribs and drabs over a long time so as not to damage the overall market. But in the longer term, if he wishes to establish and maintain a margin structure that keeps the company in business, he probably has no choice.

 

Written as a consumer who is grateful for the good times past, but recognises they're over!

 

John.

[melmerby]

But if Hornby have a loco (or other) model, first produced many years ago, which still selsl despite being crude by todays standards, they will keep on producing it. The moulds and R&D costs have long been paid for (though refurbs/replacements of tools may occur at times) so the true production ​costs may be relatively low, if they can still sell ​at higher prices it makes sense for them to do that. Easy income for nothing! It helps to support the company (which needs income) and indeed actually subsidises newer models. 

 

Stewart

But the problem is it muddies the waters and alienates some of their potential customers.

Hornby needs to decide what it is producing.

 

One range with no clear distinction between what is sold at what price point or two ranges "Railroad" and "Main" range with a clearly defined difference. That does not happen at the moment.

It's often difficult to decide which is which especially with sets where there is no distinction at all.

 

Some of the Railroad product has been upgraded (at some cost presumably) so that it is closer to the main range both in finish and price, effectively Railroad Plus. Why? It immediately moves it from budget to middling and could make a difference to somebody on a tight budget.

 

There is nothing worse than an indistinct definition of the scope of your product range. It is not good for business.

 

Keith

[Chamby]

I've just skimmed this thread....    Written as a consumer who is grateful for the good times past, but recognises they're over!

 

John.

 

I don't think that discounting is completely over though.  Cash flow is king, as they say... so discounting will always be an obvious way to stimulate income when things get really tight. It may take Hornby a while for the new broom to make its clean sweep, and their wages and bills still need to be paid in the interim.  

 

Also, whilst Hornby may not discount, their retailers may well choose to do so with their stock that isn't shifting.

 

Phil.

[melmerby]

Maybe they should try and reconnect with the retail market?

 

They really p*ssed them off a few years ago and several stopped stocking Hornby product.

e.g. Ian Allan in Birmingham was almost exclusively Hornby. Hornby wouldn't do business with them so now they are exclusively non-Hornby! What was the point of that?

The Entertainer used to stock Hornby's basic stuff (RR & Thomas), last time I looked they had no Hornby at all.

Both potential openings into the Hornby brand. There are no doubt many other lost opportunities due to they way the retail sector was treated.

 

Keith

[John Tomlinson]

I don't think that discounting is completely over though.  Cash flow is king, as they say... so discounting will always be an obvious way to stimulate income when things get really tight. It may take Hornby a while for the new broom to make its clean sweep, and their wages and bills still need to be paid in the interim.  

 

Also, whilst Hornby may not discount, their retailers may well choose to do so with their stock that isn't shifting.

 

Phil.

 

I think you're absolutely right that there will always be some discounting by the manufacturer, as no business ever gets the level of demand right all the time for every product. 

 

The strategy of the new CEO however seems to be the avoidance of a grand annual sale, that consumers can anticipate and wait for, so failing to buy earlier at full margin. This probably goes hand in hand with lower production levels for a while at least, so that you end up with higher and sustained margins per item on a lower level of sales. As we don't have access to Hornby's detailed management accounts we can't really second guess how this pans out, but it seems a reasonable explanation for his new strategy.

 

John.

[Butler Henderson]

I don't think that discounting is completely over though.

There will still be retailers who having covered, or nearly covered, their purchase costs of whatever particular stock offer some dramatic discounts. The classic example of this is a certain West Midlands modelshop that has the odd Saturday flogging items at hefty discounts.

[adb968008]

lLabour costs in China are way way below ours and will remain so. I import finished manufactured product from China (nothing to do with railways or modelling) and their labour costs are about 18-22% of ours. They work 10-12 hours a day 6 days a week for about 47 weeks a year including all holidays and bank holidays! NI and pension equivalent is zero to minimal making them highly cost advantage and business costs like rent and rates are a fraction of ours. With UK wages incrasing year on year as well as pension increases added to increased rents and business rates it’s a pipe dream to bring production back home in any great numbers. Plus remember it’s a numbers game if you start to pull too much away you become too small a player for them to want to work with you or be responsive and competitive. Once you have made the move it’s very difficult to come back. Basic truth it’s its too expensive in the UK to do business.

So tell me, if nothing, no chance, never ever is viable in the UK, how do Dapol and Peco manage to do it, and remain market competitive ? Have Peco ever left these shores on track production ?

 

I also work with Chinese production lines, for IT equipment I think your post is too generalised.

It is possible to manufacture outside China, but agreed labour rates are what you say, but if the task is not labour intensive, China’s economics don’t always stack up, Mexico can easily compete on many items, as can Brazil and increasingly South Africa. But on simple items the UK can do just as well.. if it didn’t there wouldn’t be any plastic injection moulding equipment in this country.. but there actually is quite a lot.. next time you order Chinese, look where the tub those noodles come in, comes from...there are producers in the uk.

 

Railroad wagons are often 3-4 pieces of plastic, with 3-4 colours, 2 coupling hooks, a weight, wheels and a box, which can be assembled in minutes. A piece of Hornby platform I doubt has hours of labour attached to it either.

A Royal Scot however is a completely different prospect and agreed this will never leave China, labour intensive or not even if other countries develop the resources, and even if China’s economics become suspect..they won’t let them leave., for that reason alone often US companies have more than 1 production line and tools.

Edited October 20, 2017 by adb968008

[APOLLO]

This is an interesting video about China and electronics production. A bit disturbing also. Big problems looming over there with polluted drinking water being but just one.

 

http://www.aljazeera.com/programmes/specialseries/2017/10/death-design-171019054750796.html

 

Brit15

[Western Dave]

So tell me, if nothing, no chance, never ever is viable in the UK, how do Dapol and Peco manage to do it, and remain market competitive ? Have Peco ever left these shores on track production ?

I also work with Chinese production lines, for IT equipment I think your post is too generalised.

It is possible to manufacture outside China, but agreed labour rates are what you say, but if the task is not labour intensive, China’s economics don’t always stack up, Mexico can easily compete on many items, as can Brazil and increasingly South Africa. But on simple items the UK can do just as well.. if it didn’t there wouldn’t be any plastic injection moulding equipment in this country.. but there actually is quite a lot.. next time you order Chinese, look where the tub those noodles come in, comes from...there are producers in the uk.

Railroad wagons are often 3-4 pieces of plastic, with 3-4 colours, 2 coupling hooks, a weight, wheels and a box, which can be assembled in minutes. A piece of Hornby platform I doubt has hours of labour attached to it either.

A Royal Scot however is a completely different prospect and agreed this will never leave China, labour intensive or not even if other countries develop the resources, and even if China’s economics become suspect..they won’t let them leave., for that reason alone often US companies have more than 1 production line and tools.

Your right it is and was meant to be a general quote unless anyone has actual insider information from a modelling company it’s impossible to any of us to post anything and be certain it’s factual in terms of actual numbers and margins. However their are some hard facts in their that will prevent (based on current economic facts) any current or new entrant to the market moving all or the majority of their production back to the UK, I have run the figures and possible options for doing so ( outside of this trade but the more than basics are exactly the same sadly) in Hornbys case if it want to maintain its “budgeted” margins it has to be China in the main, unless we all want to pay dramatically more for our desired models!

[Western Dave]

At the risk of sounding like a broken record...

 

Hornby need a consistent core range.   which must include high and low spec Mallard, Flying Scotsman and Tornado.  Current mainline trains (HSTs/Pendo/800) as affordable sets, consistent Thomas stock, dare I say it, pecketts?  All available, all the time.  

 

The Lima HST for example, is a reasonable model.   Slapping Virgin East Coast colours on it may not be prototypically correct, but a lot of 10 year olds and their dads won't care.  Its an HST that looks like the one they went to London on, and its under £100.

 

They also MUST MUST MUST look at the prices of their accessories.   these have been subject to broad-brush-beancounter price increases for years and years and years.   A plastic platform section (RRP £6.99) or point motor switch (RRP £11.49) should be no more than £2.50 - £3.50 each.    Economies of scale would quickly kick in if these were appropriately priced.   I sell maybe 15 or 20 point switches a year.   If they were £3.50 each, I'd sell that many, perhaps more, every week.  as it is the sales go to Expo or Peco instead.

 

I asked the marketing director last year if he has ever gone around and evaluated the phyiscal product in his hand before looking at the RRP (in this case a plastic platform section) and he said no.    I suggested it would be a worthwhile exercise - do all of the products they sell command the prices suggested?

 

 

Some of the recent product decisions astonish me.  Why, for example, was the railroad class 90 released in Mainline livery (Which no-one really liked at the time the real locos were built) when it could have been Freightliner, or EWS or Greater Anglia?  Why is the GWR HST a limited edition?   Why not paint some Mark 4s to go with the VEC 91s they made?

Why are they not increasing production runs of Pecketts?   Why not re-release the items that really are selling, or which will compliment other products in the range?

 

Hornby should also follow Bachmann in reducing output.     The market is close to a precipice of diecast bus proportions, especially as models from the 2000s are now coming back into the market in larger numbers, models are not thrown away as often, they have residual value and the used market is burgeoning - sales of used models have boomed, stripping sales of new models to a fraction of the volume of only 5 or 6 years ago.

 

A shake up of pricing, rationalising ranges, introducing some consistency and cutting down on deep discounts would all help (in my opinion)

 

But what do I know?

Some senior manager and directors of companies are devoid of any reality at the coal face. A few years ago I had A meeting with the UK national accounts manager of a well known household domestic goods manufacturer that also had a commercial operation and advised me and others that they were going thorough product codes (16 digits long with no real product description) and we’re implementing a uniformed pricing policy throughout Europe in the main part based on the percieved highest market rate in any one country being applied to all counties. When challenged on this by myself the response was we expect sale to decline and will 8ncrease prices to maintain th bottom line. When I and others pointed out this was crazy his response was “when we are bought out by another multi national they will have a different strategy in the meantime I have to balance the budget” that company has now some 6 years later indeed been bought out and by god was it and it is still one huge mess with sale none existent on some what were core product lines.

[jjb1970]

They tried that last December.

 

Unfortunately far too many representatives of model shops used it as an excuse to moan or resolve ridiculously narrow issues.

seriously, if you think people complain on here, it's nothing compared to that event, though bizarrely a lot spent more time complaining about Hatton's than Hornby. ( instead of figuring out ways to attract customers on their own merits)

 

A few of us tried to be constructive and highlight ideas or initiatives that worked before, or may boost business (once the mic was wrested from the hands of the most ardent complainers). But my guess is that they may be put off doing something like this again.

 

Unfortunately that sounds far too typical of these type events where things end up derailed because people see it as an opportunity for a whinge fest. And yes, after such an experience why would anybody make the same mistake twice of reaching out to people if they think the result will be another whinge fest? I've been to several seminars and meetings and witnessed similar things and decided it was another one to mark down "don't bother attending again".

[andyman7]

So tell me, if nothing, no chance, never ever is viable in the UK, how do Dapol and Peco manage to do it, and remain market competitive ? Have Peco ever left these shores on track production ?

 

Railroad wagons are often 3-4 pieces of plastic, with 3-4 colours, 2 coupling hooks, a weight, wheels and a box, which can be assembled in minutes. A piece of Hornby platform I doubt has hours of labour attached to it either.

A Royal Scot however is a completely different prospect and agreed this will never leave China, labour intensive or not even if other countries develop the resources, and even if China’s economics become suspect..they won’t let them leave., for that reason alone often US companies have more than 1 production line and tools.

Which is indeed why Dapol and Peco make wagons, track, kits in the UK - but the locos are made in China. I wouldn't be surprised if Hornby don't eventually bring platform pieces and similar back to these shores - it's pretty much a moulding machine spitting out product.

[phil-b259]

So tell me, if nothing, no chance, never ever is viable in the UK, how do Dapol and Peco manage to do it, and remain market competitive ? Have Peco ever left these shores on track production ?

 

I also work with Chinese production lines, for IT equipment I think your post is too generalised.

It is possible to manufacture outside China, but agreed labour rates are what you say, but if the task is not labour intensive, China’s economics don’t always stack up, Mexico can easily compete on many items, as can Brazil and increasingly South Africa. But on simple items the UK can do just as well.. if it didn’t there wouldn’t be any plastic injection moulding equipment in this country.. but there actually is quite a lot.. next time you order Chinese, look where the tub those noodles come in, comes from...there are producers in the uk.

 

Railroad wagons are often 3-4 pieces of plastic, with 3-4 colours, 2 coupling hooks, a weight, wheels and a box, which can be assembled in minutes. A piece of Hornby platform I doubt has hours of labour attached to it either.

A Royal Scot however is a completely different prospect and agreed this will never leave China, labour intensive or not even if other countries develop the resources, and even if China’s economics become suspect..they won’t let them leave., for that reason alone often US companies have more than 1 production line and tools.

 

(1) Mass production of plastic tubs - which you can probably churn out in the thousands per hour is a completely different ball game to model railway items. Even if Hornby did manufacture its platform sections say here in the UK then you could probably churn out a years supply (of all variations) on an automated injection moulding machine within a week. Its a fact that those actively involved in model railways make up a tiny section of the great British public and as such the economies of scale cannot be harnessed like they can for your 'Noodle Pot' manufacturer.

 

(2) Yes Peco do indeed produce their own track (and other items in the UK) but as far as I can tell the level of detail (and thus labour intensive assembly) is much less than that required for the high detail loco, coach and even wagon releases we expect from the likes of Hornby, Bachmann or even retailer commissions like the forthcoming P tanks fro Hattons. Also I believe Peco is still a privately owned family business - not one listed on the London stock exchange with venture capitalist shareholders to satisfy and as such Peco can afford to take a longer term view of its business decisions as well as doing things that would be seen by city investors as not 'delivering maximum shareholder value'

 

(3) If Hornby split production over several countries then it would face increased costs. Every separate country you manufacture in will involve a separate supply chain - and if directly employed there is the whole pensions, pay, T&Cs angle to consider. Therefore if you already manufacture part of your range overseas (the super high detailed stuff) it makes business sense to streamline your operations and have the low value stuff made out there too and take advantage of the supply network already in place.

[adb968008]

So we all agree then.

 

But something somewhere has to give.

The consumer can and will only afford so much.

Costs in China can and will only be manageable so much.

The key is to make something the consumer can afford.

 

Oxford are certainly doing that, there models are among the cheaper end of the spectrum, at a quality cost that some gripe about when it comes to details.

 

Is Oxfords success in that they control their costs, or that they have cost advantages (their own factory) or are they sacrificing margin for increased sales ?

We don’t know.

 

However the new CEO has a tough line to follow.

[phil-b259]

What is obvious to me that Hornby still have not got their product ranges properly organised.

 

What is "Railroad"

It should be an entry level system to get people into the "Hornby" brand, however it quite often isn't e.g. P2, DoG & Crosti. All were far too expensive and sit uncomfortably in the middle of the price range.

 

 

This was a legacy of the "Deign Clever" era where models were deliberately designed to sit somewhere in the middle. Give them a high quality paint job and maybe one or two extras for the customers to fit and put them in the main range, give them a basic paint job and sell devoid of extras as a 'Railroad' product.

 

Had the "Design Clever" ethos been accepted by the modelling community THAT would be the norm by now for new releases like the H tank.

 

Happily modellers rejected the " Design Clever" ethos and Hornby switched back to making highly detailed models - but it has left the problem of the P2, etc.

Edited October 20, 2017 by phil-b259

[durham light infantry]

 

 

I think we are all broadly in agreement on this one. What we need are;

 

1) Hornby need to stop the cycle of feast or famine. The feasts are brief and the famines last for years.

 

2) To establish a core range that is always available at reasonable prices.

 

3) To remove, rename or clarify the Railroad brand.

 

4) To do some market research. So that popular loco's and stock are produced in the right liveries and in sufficient numbers.

 

Mike

Edited October 20, 2017 by durham light infantry

[Chamby]

. ...Also I believe Peco is still a privately owned family business - not one listed on the London stock exchange with venture capitalist shareholders to satisfy and as such Peco can afford to take a longer term view of its business decisions as well as doing things that would be seen by city investors as not 'delivering maximum shareholder value'.

Exactly. Built a sustainable business, rather than squeezing the most out of this month’s turnover (and repeat).

 

The thing is, are we prepared for the less exciting, more steady Eddie manufacturer? We may complain about the famine, but we have grown to like the feast...

 

Maybe we are moving to a market where the core products that shift steadily, such as the more popular Locomotives, Big four staples, BR standards and diesel classes are regularly available from Hornby and Bachman, and the likes of Hattons, Kernow, Locomotion, Sutton’s et al commission the more niche products where premium pricing is more justified and sustainable.

 

Phil

[adb968008]

Exactly. Built a sustainable business, rather than squeezing the most out of this month’s turnover (and repeat).

The thing is, are we prepared for the less exciting, more steady Eddie manufacturer? We may complain about the famine, but we have grown to like the feast...

Maybe we are moving to a market where the core products that shift steadily, such as the more popular Locomotives, Big four staples, BR standards and diesel classes are regularly available from Hornby and Bachman, and the likes of Hattons, Kernow, Locomotion, Sutton’s et al commission the more niche products where premium pricing is more justified and sustainable.

Phil

Maybe, my concern though is for the retailer.

 

It would be interesting know from the trade how sales are in 6months from now, on re-released toolings (not H, MN, Duchess or 87) but the likes of Black 5, Scot, 4MT, J94, 08, 71 etc at the new prices. Indeed one could ask that question now on Bachmann range.

 

With stock facing a sell by date & higher prices my concern is the financial risk is going to be loaded onto the retailer.

 

If in 2 years from now they are over stocked, with high priced re-released toolings facing down grade from new to past sell by status how many will be able to weather this ?

 

I just bought R3453 45274 at £114, but whilst I want R3599 45000 @£199 with cheap TTS sound, £85 difference is a lot (considering Rails are selling 45455 in Plain Black for £80) .. I could buy 2, indeed I might haggle for 3 Black 5s for slightly more than R3599.

 

I’m not price griping, I may end up shelling out on R3599, but i’m Being more chosey and in less of a rush about some of these, it may be, like Bachmann Collectors club 45504 in Black.. that I wait it out 18mths and picked one up for £40 odd less than it was advertised or I just wait until It’s high enough up my in tray that I buy it.

 

You don’t want to know what I spend on this hobby, but my income supports it, but i’m Acutely aware that most modellers aren’t so lucky, so if i’m holding back then, then others are maybe either buying reckless or are maybe just aren’t buying or being very reserved ?

 

If I were in trade I think i’d Be concentrating on pre-order business for new sales, and good quality (post 2000) second hand. But for new unless it was a new tooling or something very desirable i’d be very cautious about touching re-released stuff, I think it may be easy to get fingers burnt.

 

Thing is if we all end up doing this.. then retailers are going to need deep pockets to support it, or we could see a waterfall where discounted fire sales from failed retailers swamp out and draw even more revenue away from retailers who keep going and thus precipice even more model trade failures in a rapid decline cycle that may even take some manufacturers down with it as they will be left holding stock without buyers.

 

Though of course, seeing a lot of trade disappear, would see the goal of reducing discounting through reducing competition in the market, lead to the state of seeing the surviving retailers thrive with higher margins, and could be how to reach the desired European pricing.

Edited October 21, 2017 by adb968008

[Caledonian]

But the problem is it muddies the waters and alienates some of their potential customers.

Hornby needs to decide what it is producing.

 

One range with no clear distinction between what is sold at what price point or two ranges "Railroad" and "Main" range with a clearly defined difference. That does not happen at the moment.

It's often difficult to decide which is which especially with sets where there is no distinction at all.

 

Some of the Railroad product has been upgraded (at some cost presumably) so that it is closer to the main range both in finish and price, effectively Railroad Plus. Why? It immediately moves it from budget to middling and could make a difference to somebody on a tight budget.

 

There is nothing worse than an indistinct definition of the scope of your product range. It is not good for business.

 

Keith

 

An absolutely magnificent example lies with Huntley & Palmers biscuits, or rather Hornby stunned us last year with a state of the art model of a Peckett W4 in Huntley & Palmers livery. This year they have paired it with an ancient, crudely moulded wagon with the huge moulded on couplings and hooks 

Edited October 21, 2017 by Caledonian

[Clearwater]

An absolutely magnificent example lies with Huntley & Palmers biscuits, or rather Hornby stunned us last year with a state of the art model of a Peckett W4 in Huntley & Palmers livery. This year they have paired it with an ancient, crudely moulded wagon with the huge moulded on couplings and hooks

So if you want the loco, you have to buy the cruddy wagon and dispose of it... arguably a smart sales tactic to a) increase margins and/or b) shift some old stock in an efficient manner.

 

Retailers the world over do similar sales tricks / upselling / loss leaders / bundling etc etc etc

[No Decorum]

An absolutely magnificent example lies with Huntley & Palmers biscuits, or rather Hornby stunned us last year with a state of the art model of a Peckett W4 in Huntley & Palmers livery. This year they have paired it with an ancient, crudely moulded wagon with the huge moulded on couplings and hooks 

I have said before that I don’t know why manufacturers don’t tool up a pre-grouping or even grouping open wagon. The old mouldings are churned out year after year in lots of different liveries. An open wagon would not be the most expensive item to tool and it could appear every year in different liveries. It would pay for itself over and over again over the years. 

[Andy Hayter]

So would that be a 9ft wheelbase, 9ft 3in, 9ft 6in, 10ft or some other measure?

 

I could use all of them, and more.

[leavesontheline]

An absolutely magnificent example lies with Huntley & Palmers biscuits, or rather Hornby stunned us last year with a state of the art model of a Peckett W4 in Huntley & Palmers livery. This year they have paired it with an ancient, crudely moulded wagon with the huge moulded on couplings and hooks 

I quite like Hornby's PO wagons, even the older moulds. The couplings are easily removed and replaced with something more appropriate, which is what I always do, and the standard of decoration is always top notch, including the sole bar, which most manufacturers ignore (except for Oxford maybe?)

 

Getting back to the topic at hand, and apologies if this has already been mentioned, but if I was the new boss, and was keen to shift a load of discounted stock that has been cluttering up the warehouse/retailers for a while, the first thing I'd do is announce that there will be no more discounting for the foreseeable future!