Disappearing discount due to Demand?

[Oldddudders]

The margin hasn't been 33% for quite a while!

Thankyou. I couldn’t imagine 33% was realistic, otherwise dealers would be chaps dipping cigars in brandy! I remain convinced that no-one in our hobby makes a packet.

[adb968008]

The margin hasn't been 33% for quite a while!

It wasn’t in 2002 either. I just reverse calculated the margin from that invoice, and taking into account VAT on sale, and assuming VAT registration to get the purchase VAT refunded, if a retailer sold at RRP, it was still less than 33%... before discount.

Then you’ve got costs of running that business, rates, bills, taxes, staff...

 

There’s no multi-millionaires born out of model railway trading.

I suspect many retailers have their cash tied in stock, and will start to struggle to keep up with new releases if existing inventory doesn’t move, especially if they rely on volume turnover to keep the lights on.

 

As I said earlier, l suspect re-releases might be good for the manufacturer, but maybe less so for the retailer in the longer term.

Edited March 30, 2018 by adb968008

[adb968008]

Thankyou. I couldn’t imagine 33% was realistic, otherwise dealers would be chaps dipping cigars in brandy! I remain convinced that no-one in our hobby makes a packet.

I actually think the end purchaser makes the most.

 

When you look back at models from the 1980’s thru 2005, selling them on ebay your most likely going to recoup your money or maybe make a bit extra on it, assuming they’ve been taken care of.

 

Take 34041 Wilton for example.. it’s one of the least popular, but still would have your hand bitten off if sold for £80 notes, and goes in a range upto c£120, yet many here probably scored them for £60-80 new.

Edited March 30, 2018 by adb968008

[Butler Henderson]

Tweaking toolings to introduce a variety are one way to make re-releases more attractive; still cannot understand why Hornby have not modified the K1 so as to allow for 2005 / 62005 to be accurately portrayed as that would be a good seller IMO 

[Robin Brasher]

It looks like my local traders are doing well now whatever Hattons and Rails are doing. The Swanage Railway shop has stopped selling Hornby due to delivery problems but has sold all its Bachmann locomotives and is waiting for the next delivery in June. The other shop is Swanage that does sell Hornby is also doing well.

[Mike Storey]

I really don't buy the explanations/excuses for the current state of the hobby.

 

It has always changed, but perhaps it is now changing faster. There has never been a better time for expectations, in variety, quality and functionality, in RTR anyway, but that costs, and many do not like it. But there has also never been a higher expectation of exquisite standards for locos, rolling stock and layout building/detailing/scenery etc. 

 

Is social media to blame? or has it been a salvation? Are we expecting too much of new entrants from the "off", or are the new higher standards encouraging more to participate? Indeed, maybe they are expecting too much of themselves. I never had such high expectations when I was young, and, despite the maturity of age and experience, I hesitate to share anything I have done yet, until it is near perfect.

 

In such a rapidly changing environment, how on earth do the major manufacturers forecast what it might be best to do to satisfy demand at a profit? Let alone the new commissioning retailers. Clearly many on here feel able to offer their solutions. I don't have one, because I have never even attempted to own and run a major manufacturing business. I am pleasantly surprised at the number of people who do feel so qualified.

 

The outstanding examples, that I could cite, that of FTG (Filling The Gap), that has had a very tricky initiation into eventual cost versus promised RRP, and that of SLW, who have produced probably the best 00 diesel model ever made (IMHO), but who are now struggling to go beyond the single model (albeit with minor variations) so far produced. Even Charlie, with his superb record on new DMU production (despite being a Yorkshireman) is apparently struggling with what to do next - he even asked us, which is surely a road to bankruptcy....... 

 

My point, for there is one, is that some experimentation is needed for the moment, especially when the red and blue boxes need some stability of cash flow, and that we, as the Everest of Wisdom, need to be understanding of that, rather than the Judge Rinders, or GHUA, the Sugar/Trumps of ideas not yet proven.

[robmcg]

I agree Mike that the standards of modelling which are on show now via social media and the web make any of us with limited skills feel quite humble, and in my case /i would not normally want to show what I can achieve with my one working hand. Visible glue marks on details of an RTR model?  Shock, horror, how can anyone be so clumsy? 

 

In 1967 I could however assemble an Airfix 9F 2-10-0 so it ran with silky smoothness, but never felt that anyone else would be all that interested, I still derived satisfaction from it, and try to do any current modelling with the same attitude; that it works for me.

[robmcg]

For those of interest,

 

I have i front of me an invoice from more than 15 years ago.

 

R2218 Wilton 34041 Unrebuilt Bulleid, from the same tooling as 34001 Exeter was a trade price of £53.62 + 17.5 % VAT.

 

That was 15 1/2 years ago.ED37BDC9-36F4-4E7D-B74A-5B75E69CE2C3.jpeg

 

Obviously things change since then, I suspect margins then were more generous in those days too.

An Exeter in 2018 is not £50 trade, because it never was in the first place, right back to when the tooling was new.

 

I think most people would be very surprised to find how slim the margin is on a loco, when I used to do my bit in retail, there was more profit on 3 wagons for £10 than a loco for £60.

 

In case your wondering what “1” means, that’s the minimum order... and today I still have 34041 and 35029 (below it), one of the flaws of the 1990’s is anyone could be a “trader”, so the ultimate discount was trade price, and in the days before ebay they would trawl their unwanteds around swap-meets which dragged prices for retailers to the bone.

 

This industry goes in circles, but whilst the circle gets smaller, some things never change.

 

For those really desperate to work it out... Hattons last sold 34041 new in 2008, at £82. Bear in mind 34041 was last released in 2003.. which means it sat in their warehouse eating their cash flow for 5 years before the last of the money was recouped.

http://www.hattons.co.uk/7370/Hornby_R2218_Streamlined_West_Country_Class_4_6_2_34041_Wilton_in_BR_Green/StockDetail.aspx

So taking into account VAT on £82 (17.5% back then)... that’s £67 and assuming they paid same trade as everyone else, they get on that £53 investment...that’s feasibly just £14 for 5 years work, warehousing, staffing etc etc.

 

Today’s margins could well be less.

 

Now your a retailer with 3x Wilton’s and 100 others such like.. you’ve £150k cash tied up in stock, watching maybe 10 walk out of the door on a good day... £140 a day yippee.. now pay the business rates, electric, advertising and your staff from £140 and see how much you’ve got leftover...

That’s why many shops are sole owner, reliant of friends, or have to upscale into the box shifter range to compete.

 

Consider you sold 10, and got £820 back... then you need to re-invest that cash in new stock... but the new price has doubled. The retailer now needs to dig into their own pocket, order less or chose not to stock everything...

 

If a retailer is now selling at RRP and discounting is faded away, it’s through business necessity, not profiteering. But even then I feel the risk has been greater shifted from manufacturer onto retailer, and cash reserves for any retailer are finite. I’m in the camp that things are going to get tighter down the road.

 

I agree with the last statement, and in general with the rest of the post.  Our £50 Exeter friend has explained that it was a deceased state and apologised for the misunderstandings which may have arisen, I suspect he now knows that current wholesale for comparable models is nearer £100, possibly over £100 before VAT, which as you point out does not leave much margin for profit, overheads, re-stocking and so on.

 

I continue to be surprised by the quality and diversity of new RTR 00 offerings, especially given the costs in China and exchange rates. I haven't hard about the effect of the Chinese New Year on current and forthcoming production but my guess is that it was not good. Delays or q c issues or both methinks,   but then I think Neal in 'The Young Ones' was an optimist.

 

Actually I have bought 2 Hornby R3509TTS Duchess 46235 models and one was from a a good retailer at effectively £149 + free post to NZ, I doubt there was a large margin in that. The other was from Hattons at £167 + £8 air post (retail £199)  where they may have 'milked' as much as £30-40 before overheads... 

 

I also suspect the days of over-production and massive clearances are fading, can still buy some fine Gresley B17s for tuppence though, and they are stunningly good models, if you need more than one!

[JSpencer]

Now here is an idea to mull over:

 

Part of the problem today is the diversity of models out there diluting the spending power meaning smaller production runs. If we were all concentrated on one class in one colour, tooling and production costs would be less.

Now before Airfix and Mainline appeared in the 70s, there were no UK RTR models per se, just a massive series of toys. Then some Great Western models appeared and model shows were full of Great Western branches. People wishing to model other scenes would model it themselves. Unfortunately Mainline and Airfix diversified away from Great Western and died despite a last ditch attempt to bring out a Dean goods and 56XX.

The 80s stagnated until Dapol and Replica came along re-introducing the ranges, both doing their own Great Western engines which sold well before moving to LMS and LNER were things just ticked over. Bachmann arrived with the great force of Kader behind them, they tried a couple of Southern locos without much success (no new ones would appear for well over a decade), Hornby took Dapol's range and brought out some decent models across all railways.

Both Hornby and Bachmann were doing really well until their ranges started being saturated with Southern items.

 

There is obviously one conclusion. Models should be confined to only Great Western locos. Modern image, the LMS and LNER are more for newcomers and should be restricted to toys while southern items should be banned completely. To make all manufacturers play ball, we should petition the government to bring out a law right away.

 

(P.S the above is all just a bad joke - nothing against southern, it is what I model most)

[jjb1970]

The companies who supply the hobby are like most other things, they evolve and change. Outsourcing has removed the big barrier to entry (i.e. having a production capability) and allowed anybody with a willingness to put their money on the line to become a "manufacturer". Mechanisms like crowd funding, manufacture to pre-order and staged payment which de-risk projects combined with new entrants having a much lower cost base are allowing some new entrants to offer both quality and attractive prices. It isn't just model railways, look around and their are all sorts of established companies struggling to compete against new entrants who are more flexible, lighter on their feet and using new marketing approaches etc. I still wonder when one of those Chinese factories will have a go at cutting out middle men and take the profit themselves by selling direct to the market. If they wanted to they could pay a retainer to a good enthusiast or two to do their research and utilise some of the same mechanisms used by commissioners and the new entrants to reduce risk.

[asmay2002]

I still wonder when one of those Chinese factories will have a go at cutting out middle men and take the profit themselves by selling direct to the market. If they wanted to they could pay a retainer to a good enthusiast or two to do their research and utilise some of the same mechanisms used by commissioners and the new entrants to reduce risk.

That's exactly what Bachmann is. https://en.wikipedia.org/wiki/Kader. 

 

Unlike Hornby, Bahmann/Kader is a maunfacturer whereas Hornby is just a glorified wholesaler.

[jjb1970]

That's exactly what Bachmann is. https://en.wikipedia.org/wiki/Kader. 

 

Unlike Hornby, Bahmann/Kader is a maunfacturer whereas Hornby is just a glorified wholesaler.

Indeed, I wonder how many others have had the thought that they could do better selling models for their own account than supplying commissioners. From what I can see Bachmann as a brand name for Kader are the only OO model train "manufacturer" that are an actual manufacturer (though I may be wrong).

[robmcg]

That's exactly what Bachmann is. https://en.wikipedia.org/wiki/Kader. 

 

Unlike Hornby, Bahmann/Kader is a maunfacturer whereas Hornby is just a glorified wholesaler.

 

You might just as well call Apple a glorified wholesaler.

[Robin Brasher]

The 00 Works manufactures trains in the UK and Peco manufactures track and accessories in the UK. Peco track is competitive with Hornby track. The 00 Works produces less detailed but more robust locomotives than Hornby and Bachmann. The 00 Works Southern D15 cost £280 which is more than double the price of a Hornby T9. There were no discounts and the model sold out quickly (I think there are still 2 left on Ebay). To me I thought it was good value for money and reminded me of the well engineered Hornby-Dublo models.

 

The Hornby and Bachmann locomotives and rolling stock seem cheap in comparison but I think that model railways are maily a buyer's market as I found out trying to sell mine at a toy fair. There are still plenty of Hattons bargains like a Heljan class 16 diesel for £72 with a recommended retail price of £134.95 or a Bachmann weathered class 30xx for £72 with a recommended retail price of £142.95.

[Dunsignalling]

Indeed, I wonder how many others have had the thought that they could do better selling models for their own account than supplying commissioners. From what I can see Bachmann as a brand name for Kader are the only OO model train "manufacturer" that are an actual manufacturer (though I may be wrong).

Perhaps, but is the way Hornby operates these days significantly different to how commissioners do things, albeit on a much larger scale?

 

John

Edited March 31, 2018 by Dunsignalling

[Robin Brasher]

I think that Rails, Hattons, Kernow and the 00 Works are cutting out the middle man with their commissions so they can control the prices. Hornby does this but it also sells its models to the trade and the trade can sell at a discount to encourage sales. I think that Hornby limits the amount that a trader can discount Hornby's stock within a limited period.

 

Model Rail commissioned some models including a black diesel shunter a few years ago. I did not buy it because it was too expensive and it tied me in to subscribing to the magazine. At the St Albans exhibition Kernow sold one to me at a reduced price so if a model does not sell well it goes to other traders.

 

Similarly the Trafford Model Centre commissioned some Bachmann Mk1 horse boxes a few years ago and now they are undercutting Bachmann's prices when they form part of Bachmann's main range.

[jjb1970]

Perhaps, but is the way Hornby operates these days significantly different to how commissioners do things, albeit on a much larger scale?

 

John

In a sense no, the problem for Hornby is they're carrying a lot of overheads and corporate baggage that their new competitors aren't. And after some really promising improvements in their communication, marketing and links with enthusiasts I think they've gone into reverse back to where they were a few years ago which is rather sad.

[Georgeconna]

The margin hasn't been 33% for quite a while!

 

Thanks for the info. Used to work in the trade so to speak some years back, that was the target margin at although some item did not quite reach that amount.

 

If only the factory's sold direct, the stuff would be dirt cheap!

[dibber25]

Indeed, I wonder how many others have had the thought that they could do better selling models for their own account than supplying commissioners. From what I can see Bachmann as a brand name for Kader are the only OO model train "manufacturer" that are an actual manufacturer (though I may be wrong).

 

That's just not true. Bachmann might be the only company OWNED by a Chinese manufacturer but other companies have their own manufacturing facilities - Oxford and Rapido certainly do, while I would suspect that Hornby has also had to put money and effort into establishing factories even if it doesn't own them outright. Check out Rapido's Youtube videos for an insight into the business of manufacturing railway models in China.  (CJL)

[adb968008]

Indeed, I wonder how many others have had the thought that they could do better selling models for their own account than supplying commissioners. From what I can see Bachmann as a brand name for Kader are the only OO model train "manufacturer" that are an actual manufacturer (though I may be wrong).

Europe is very different, however, many still make their own.

 

It may be a surprise here, but Brawa and Hornby are still supplied by Sanda Kan.

(Sanda Kan folded in 2012, but there is a new entity founded in 2015).

http://www.sdkmode.com

 

There are many other entities in China (regalway, refined, SDK, shine dew etc) as well as Piko, Kader, Oxford, Rapido etc), and those outside China such as Fuggerth (Hungary), Roco (Vietnam etc), Vi-Trains (Italy) and many more, even our own Dapol still manufacturers in Wales.

 

I suspect in the future Chinese manufacturers will become suppliers of parts direct to the market, and model shops will change from rtr specialists, into 3D printing and chassis assembly operations from those parts.. though the 3D tech needs to come along a bit more first, and include fine grain printing in colour.

 

But wholesaling from China to the UK already happens, look at ebay you can buy 100 painted figures for <£20 or buy 5 from Presier for the same price. There’s one manufacturer making Ho/OO electric lit signals, street lights etc for £2-3 each selling on ebay.

I suspect it will end like Rover.. let the distributors fail, acquire the toolings for pennies and commence direct sale of models and parts to the market. What will struggle is accuracy on rtr and probably few new toolings..but then they won’t need new toolings as commissioners are mopping up the last viable ones right now for them.

Edited March 31, 2018 by adb968008

[Morgenergy]

But wholesaling from China to the UK already happens, look at ebay you can buy 100 painted figures for <£20 or buy 5 from Presier for the same price. There’s one manufacturer making Ho/OO electric lit signals, street lights etc for £2-3 each selling on ebay.

 

This really makes me wonder how Chinese manufacturers haven't taken proper advantage. I don't exactly condone the act (Trust me, I've been to Marmaris and hated the counterfeit goods everywhere.), but - I'm surprised knock offs or disguised copies of RTR stuff don't truly exist - like how the figures of people and animals, and the LED street lamps and even foilage and trees do.

 

It's clear that it's possible, we've seen it before. First of all with Hachette's Model Railway Village partwork a few years back when we all went bonkers for Mk.1 TSO coaches at 3.99 a pop. That same partwork featured a Mainline/Airfix esque open wagon, and a while ago Hachette did a limited first issue for MillTown Model Railway, and that one had a LMS brake van for 2.99. Then you've got the Great British Locomotives Collection, and people went ape for Hornby Mallard copies for 2.99. The future issues were 8.99, which was still acceptable...Sure the models were static, as well as shoddy in quality sometimes, but they looked pretty great and were perfect project bases. Surely with a bit more work and investment, a half decent, possibly running and yet within budget model could be manufacturered by these people. All the inspiration and resources are there for them, clearly!

 

I'm surprised eBay and AliExpress etc aren't full of dirt cheap rolling stock, shipped from China, to go with the aforementioned figures and such. Seems like a missed oppurtunity..?

[eagle50043]

I think a point has been missed.

 

We used to preorder to lock in price.

In recent years that price hasn’t been honoured as the stock went up in price only to end up discounted back to the pre-order price anyway.

It made more sense to not pre-order and wait for the sale.

 

All that’s happened is a rebalance, you can safely pre-order knowing that your getting the best price, which will rise after release...

 

We’ve gone full circle..Until the next time.

 

The trend now seems to be towards deposits / prepayments.

My only concern is that model only works until a retailer goes pop and the modeller ends up a creditor.

I tired pre-ordering 2 Bachmann locos recently to lock-in what I thought was the price before stock arrived........only to find that twice, with two different shops, both increased the pre-order price a few weeks before stock arrived ! and would not even honour the price (it wasn't just a couple quid either)...so I for one will not pre-order again as the prices seem to increase willy nilly anyway so id rather wait till its in stock and then see if I want to pay the price.

[Bernard Lamb]

I tired pre-ordering 2 Bachmann locos recently to lock-in what I thought was the price before stock arrived........only to find that twice, with two different shops, both increased the pre-order price a few weeks before stock arrived ! and would not even honour the price (it wasn't just a couple quid either)...so I for one will not pre-order again as the prices seem to increase willy nilly anyway so id rather wait till its in stock and then see if I want to pay the price.

 

It has nothing to do with the shop and any contract you might think you have with them.

Some time ago some shops were taking pre orders and honouring the quoted price. Then the supplier failed to deliver and so the eventual price should have been much higher. Bachmann then introduced a system where an estimated price was issued but not an actual RRP. That leaves you with a situation where it is up to the punter as to any decision to pre order or not. The only difficulty in waiting is now that the supplies have got a better grip on production to sales figures then you might find the particular model to have sold out. 

Bernard

[Chris M]

I'm surprised knock offs or disguised copies of RTR stuff don't truly exist - like how the figures of people and animals, and the LED street lamps and even foilage and trees do.

 

There are Chinese knock offs of LGB in the marketplace. They caused great controversy when they first came out but are now just a normal part of G scale items for sale. They are not as good as LGB but are very reasonably priced in comparison. They used to be sold by Newqida and now just use the brand name “Train”. At one point the boxes were a very close copy of the LGB boxes which was very wrong but now they look quite different.

 

The quality and fidelity to prototype livery would be an issue if Chinese sold direct; if they want to make something cheap are they going to invest in sending someone to the UK to make sure they have all the details exactly correct? In G scale fidelity to prototype isn’t necessarily essential but in the smaller scales it is.

[bike2steam]

There are Chinese knock offs of LGB in the marketplace. 

I've no idea of what the LGB market it like for the rest of the world, but I would be surprised if the British outline market was big enough for Chinese copies.