Hornby Discount Limits

[brushman47544]

Hornby can set its COST prices to retailers at any level they like in order to make the margins they need. You still get your two locomotives although you may have to pay more if the retailer is paying more to Hornby.

 

What is less clear legally, and certainly objectionable as a consumer, is any attempt to prevent a retailer from selling to us, the consumer, at a price than the retailer WANTS to sell at.

 

Legend is correct in post 60, what other category would see consumers happy about interference like this resulting in higher retail prices?

 

Perfumes? Wasn't there a court case a while ago which Chanel won, arguing that their perfumes were priced high to ensure their exclusivity. They didn't want just anybody to be able to afford them?

[phil-b259]

Perfumes? Wasn't there a court case a while ago which Chanel won, arguing that their perfumes were priced high to ensure their exclusivity. They didn't want just anybody to be able to afford them?

 

Burbery is another brand who found out the hard way that they couldn't retain their high end fashion image when they were busy selling it off cheap to the lower income groups in society. The current management think it was a bad mistake and have spent a lot of effort correcting that by banning big discounts and raising prices. The result is their share price has gone up, and so have profits!

[JSpencer]

Objectionable yes, but as mentioned the knock on affect of allowing retailers to set there own prices will price smaller retailers out of the market. Tough titty you might say but that then potentially decreases the retailer base for the manufacturer, and potentially accelerates the downturn of modelshops because margins have become so squeezed they are not profitable. If all the smaller modelshops closed overnight do you honestly think the survivor's would maintain the level of discounts seen?

 

In the short term i agree the consumer loses out... But in hornbys case its 6 weeks... Its then up to the retailers to set discounts beyond that, and they do accordingly to their sales trends..... Long term i percieve the consumer losing out without these measures because shops will close and competition eill decrease.

 

Long term you will end up with just a few big players. Price is not the only aspect I buy on. Quality of Service counts a lot. Hornby's direct sales lags a long way behind there compared with certain retailers.

The strategy is rushed and not thought through, introduced just after mid year and not for the new 2019 program. This will make measuring success of the new rule hard to do. Some retailers might suddenly bump prices up on existing pre-orders placed at a previous price (sometimes not communicated too), I know who they are don't buy from those anymore. Some will honor as best as they can.

So bringing this out mid year long after most pre-orders are made is going to cause some issues.

 

Had it been from the start of the 2019 program, Hornby could measure whether or not it increases pre-orders from small shops. They need clear data to know if it improves their sales or not. Such data would show quickly if small shops order more or not,  and if big shops order less or not. And the effect on overall sales to determine whether or not the rule was a success.

[paftrain]

Would that same logic apply to, say, Rolls Royce - the lower the price, the more they’ll sell, and therefore the higher their profit?

 

Doesn’t seem right to me.

 

We know that both the big players have had profitability problems. Both have put prices up. One now seems to be back in profit (with the caveat that internal pricing is always tricky to work out), the other is making smaller losses. Neither have prices which seem wildly out of kilter with the rest of the market.

 

So I’m curious what you think the “correct” price is for, say, a Bachmann C1 (RRP £200) or a Hornby 87 (£171)?

 

Paul

I didn't say the lower the price, I just said that their prices were too high. Rolls Royce are a totally different ball game, but they did go broke about 40 years ago.

[Phil Parker]

Hornby et al need to be supporting independent retailers to make their shops special with trade marketing support.

 

Sorry, but they can provide all the point of sale stuff and friendly reps they like, numerous posts on this forum tell the story that only one thing matters to many people - price.

 

I'm tempted to say that this is a very clever move. If Hornby wants people to know about their products, they can spend a fortune on advertising and hope to bring everyone to the website, or make sure the product is in lots of stores who then pay for their own advertising. 

 

If they want the product in lots of stores then those stores need to exist. Assuming that the big H isn't planning to open a "Beatties" style chain itself, then they need to do something to make sure those shops already exist stay open and encourage others to set up new ones. Levelling the playing field on price is one of the ways to do this. 

 

I appreciate it's a bit odd that we are celebrating firm keeping prices high, although the fashion and exotic car worlds have done this for years very successfully, but if those "high" prices are what it takes to keep the manufacturer in business then we have to suck it up. I'd rather everyone in the supply chain made some cash and were still there next week than I got a couple of cheap models and then the who lot disappeared. 

[Andy Hayter]

Just out of interest, has anyone good examples where immediaitey after the 6 week period, retailers have massively dropped their prices below the 10/15% that is frequently quoted?

 

And i do stress immediately.  I am aware that some models which are over-stocked do get heavily discounted, but usually that is some months later not 6 weeks.

 

This is a genuine question because the area I am most interested in tends to sell out in around the 6 week period or shorter, so I don't know what happens in other areas.

[dpgibbons]

If consumers wish to pay higher prices in order to support their local retailer then that is perfectly legal. And indeed commendable.

 

However, if suppliers force all consumers to pay higher prices by restricting discounting then that is quite possibly not legal. And certainly not commendable.  

[Fenman]

I didn't say the lower the price, I just said that their prices were too high. ...

Exactly. So what should the prices be?

 

Paul

[The Stationmaster]

Hornby can set its COST prices to retailers at any level they like in order to make the margins they need. You still get your two locomotives although you may have to pay more if the retailer is paying more to Hornby.

 

What is less clear legally, and certainly objectionable as a consumer, is any attempt to prevent a retailer from selling to us, the consumer, at a price than the retailer WANTS to sell at.

 

Legend is correct in post 60, what other category would see consumers happy about interference like this resulting in higher retail prices?

 

But the retailer can still sell at any price he likes - that is not being stopped.  All he/she has to do is wait a few weeks, it really is as simple as that and what on earth is wrong with that?    If a particular retailer sees its survival as retailing at a gross margin of £1 on a loco that is entirely up to them and no doubt - as in the past -  other retailers might occasionally buy from them and then retail at or near RRP and make themselves a decent profit on items they were unable to obtain from the manufacturer.  As a consumer I don't find that in the least bit objectionable and cannot really understand why I should because the manufacturer has advised a recommended price for their product and I then decide (if I want it) whether or not I consider it worth the price they are asking as part of my decision whether or not to buy.  And if I don't think it's worth the price, or it doesn't suit my needs at that price, then I won't buy it.  Ad as I'm not generally a cheapskate (although I will freely admit to being careful with my money) equally I generally tend to ignore or see through all the marketing and sales promotion nonsense coming from many companies (there are only a few examples of it in the model railway world anyway).  

 

I might well be an atypical consumer but I do at least consider myself a reasonably intelligent and informed one and price is only one of many considerations when it comes to buying anything.  No doubt there can be occasional advantages in getting 'a bargain' but if somebody is offering a massive discount on RRP it strikes me as sensible to ask what they aren't doing in order to reduce their margin, particularly in model railway retailing where margins are already wafer thin at RRP for retailers.  For many years there was, and might still be, an oft used saying when it came to wages etc and that was 'if you pay peanuts you get monkeys'; something similar can no doubt at times be said of retailers or manufacturers.  On the other hand there are times when you can trul wonder what on earth you are paying them for. 

 

All that Hornby are doing is seeking a 10% maximum discount below RRP for a very limited period and I bet (or would be surprised if they haven't) also thought that through in relation to their trade payment terms.  It doesn't worry me in the slightest that they are doing that although as I've already said I'm not entirely sure if it is the best way of achieving what they seem to be wishing to achieve?

 

Andy, can you name one category where consumers approve of price controls that keep retail prices artificially high?

 

A buoyant manufacturing and retail sector is great but achieving this through what looks like price fixing is not.

 

Waitrose and M&S can thrive in a world of Aldi, Lidl and now Jack's by offering a differentiated service. Hornby et al need to be supporting independent retailers to make their shops special with trade marketing support.

Hmm, have you visited Waitrose lately?  As a result of having to reduce prices and offer more 'value' or 'essentials' level products they have made severe cuts elsewhere in their business resulting, most noticeably in our part of the world in an overstrained internal logistics operation which has led to empty or poorly stocked shelves in their supermarkets.  Same old story - cut the prices, cut the costs (I know how they did some of that in their logistics operation as it happens) and the customer suffers - net result we could not buty any pork fillet when we visited our usual branch last Thursday = sale & revenue lost.

 

And Phil has already drawn attention to what has happened with overall John  Lewis profits this year - down to price matching (i.e. price cutting) according to their Chief Exec.

 

By the way I thoroughly approved of what amounted to price fixing in respect of milk, but then one of my grandfathers was a dairy farmer.  And of course the end of that arrangement through the MMB has resulted in the disappearance of numerous dairy herds so one is left wondering quite where some of our milk and milk products comes from because it sure as heck isn't the three dairy farms which once existed within a 4 mile radius of where I'm sitting typing this; race to the bottom once again. 

 

BTW surely a suggested level of discount over a limited period is a form of 'trade marketing support'?

[adb968008]

There is a perfectly legal way any manufacturer can manage price of their product for 6 weeks..

 

Set the trade price 10% higher upon release and lower the trade price after 6 weeks.

 

It is a very fair and level playing field and there is no ambiguity about legals.

 

The result will be the same, regardless perception that retailers may hold back stocking for 6 weeks as the current proposal will probably see the same outcome... after all why buy a load of stock you know is going to cost you interest for an extra six weeks whilst customers wait patiently at the window watching the clock tick down.

 

Similarly as an incentive they could offer a rebate on the increased price differenc of the opening order if the customer re-orders at the same quantity once the price drop occurs.. win win, total sales target achieved, if the retailer sells at the higher rate and maintains the stock order level, Hornby gets a higher retail at low risk, retailer gets higher margin.

If it doesn’t sell the retailer has a double or quits back stop if they think they can sell at the lower level.

Edited September 19, 2018 by adb968008

[Andy Y]

I'm just sharing 30 year's experience in brand marketing.

 

As a consumer, not very keen on manufacturers attempting to keep prices artificially high.

 

I don't think I can be alone in seeing the irony of those two statements in proximity to each other,

 

Brand marketing is a cost which benefits the seller rather than customer.

 

The Stationmaster has covered the points regarding Waitrose not being in good health (and M£S ain't so good these days); ironically I will buy certain things from Aldi (and Lidl) based on the quality being high rather than the price being low.

[mdvle]

There is a perfectly legal way any manufacturer can manage price of their product for 6 weeks..

 

Set the trade price 10% higher upon release and lower the trade price after 6 weeks.

 

 

But I don't think the retailers would agree that it would help to achieve the goal.

 

If the goal is to help support the retail network by allowing all your retailers to benefit from a reasonable profit margin for the first 6 weeks, then how does removing that profit margin from the bottom differ from having to remove it from the top by price matching?

[mdvle]

From Amazon on down, box-shifters make their money by slashing prices to gain volume and market share, so neither altruism nor margins seem likely motivators for their toeing the line on price discounts. 

 

Retailers like Amazon work differently.  Amazon for the first 10+ years of existence didn't make a profit, and even now barely makes a profit (and even its most recent results have a profit thanks to the US but significant losses in the rest of the world).  And I believe much of its current profit doesn't come from the "box-shifting" but rather from AWS, its online computer services.

 

Amazon also heavily relies on not paying taxes - in the US its early advantage was that it sold everything free of sales taxes which left normal retailers at a significant disadvantage.

 

So trying to compare Amazon to any of the hobbies box shifters isn't going to work.

 

In the particular case of our hobby, it could be argued that the model railway box shifters rely on the existence of some sort of larger retail network - not that it necessarily has to be model railway shops - to provide all the things that aren't necessarily cost effective to order online when needed.  So while the box shifters could survive without the larger retail network, it is likely in their benefit for it to continue to exist.

[Nick C]

On the question of whether or not this is legal I think that can only be definitively answered in the event that it is tested in court (the favourite answer of the European Commission to any questions about the legality or otherwise of things subject to directives and regulations). Certainly, I think there are enough indicators that the policy of limiting discounting may constitute illegal price management that I wouldn't like to be the person told to deal with it in a company if we got a legal letter on the matter.

 

It has already been tested in court - see https://www.gov.uk/government/case-studies/resale-price-maintenance-case-studies

 

There's no 'may' or 'could be' about it, retail price fixing is illegal - and I for one don't want to see any of the manufacturers (or retailers) being hit by a fine of 10% of their turnover...

[jjb1970]

 

 

People need to ditch the emotional attachment claptrap they seem to have from their youth. Hornby is not a 'national treasure' or a company that should be treated differently from its competitors. 

 

That's quite true, it is also true of retailers. This whole thread seems to be about whether or not manufacturers should be allowed to manipulate the market to protect retailers and prevent the normal evolutionary development of a retail chain regardless of what customers prefer.

[Butler Henderson]

There is a perfectly legal way any manufacturer can manage price of their product for 6 weeks..

 

Set the trade price 10% higher upon release and lower the trade price after 6 weeks.

 

It is a very fair and level playing field and there is no ambiguity about legals.

That's one way to upset retailers quickly - Heljan did it a while back on one model and I know of one model shop that had stocks bought at the higher price who consequently refused to stock Heljan.

[Phil Parker]

That's quite true, it is also true of retailers. This whole thread seems to be about whether or not manufacturers should be allowed to manipulate the market to protect retailers and prevent the normal evolutionary development of a retail chain regardless of what customers prefer.

 

The manufacturers and retailers are looking at the long term big picture. The customers are normally out for themselves. Something like this:

 

Customer: Wahhhh!! I want cheaper toy trains!!!!

 

Manufacturer: If they are any cheaper, all the mdoel shops will close as they need to make some money.

 

Customer: I don't care. I just want cheaper toy trains.

 

The market evolves. All the model shops shut. The only outlet is Amazon.

 

Customer: Wahhhh!! I want cheaper toy trains!!!!

 

Manufacturer: We are cutting things to the bone. Amazon takes the biggest cut.

 

Customer: I don't care. I just want cheaper toy trains.

 

The market evolves. The manufacturers close down.

 

Customer: Wahhhh!! I want any toy trains!!!!

 

Silence.

 

 

If you prefer another example, I don't want to pay for the fire brigade. Until I my house is on fire, then I'm glad someone has looked at the big picture and decided we ought to have one. Leaving everything to individuals isn't always the best long-term solution.

[jjb1970]

The manufacturers and retailers are looking at the long term big picture. The customers are normally out for themselves. Something like this:

 

Customer: Wahhhh!! I want cheaper toy trains!!!!

 

Manufacturer: If they are any cheaper, all the mdoel shops will close as they need to make some money.

 

Customer: I don't care. I just want cheaper toy trains.

 

The market evolves. All the model shops shut. The only outlet is Amazon.

 

Customer: Wahhhh!! I want cheaper toy trains!!!!

 

Manufacturer: We are cutting things to the bone. Amazon takes the biggest cut.

 

Customer: I don't care. I just want cheaper toy trains.

 

The market evolves. The manufacturers close down.

 

Customer: Wahhhh!! I want any toy trains!!!!

 

Silence.

 

 

If you prefer another example, I don't want to pay for the fire brigade. Until I my house is on fire, then I'm glad someone has looked at the big picture and decided we ought to have one. Leaving everything to individuals isn't always the best long-term solution.

 

I didn't say whether or not I considered the moves by manufacturers to be right or wrong, as it happens I have some sympathy for what they're trying to do but I'm also under no illusion as to what it amounts to. And making a comparison with the emergency services is a particularly asinine comment if I might say, unless you really do consider toy trains to be in the same category as saving peoples lives.

[adb968008]

That's one way to upset retailers quickly - Heljan did it a while back on one model and I know of one model shop that had stocks bought at the higher price who consequently refused to stock Heljan.

Rock and a hard place really..

 

Upset the retailers if you up the price, upset the customers if you stop the discount.

Upset everyone if the rrp goes up.

The only thing left is sell too cheap and let the shareholders subsidise it...

I doubt they will be happy for much longer either.

 

Of course too much discounting could be seen to be too much competition, they could impose higher minimum spend requirements and cut the number of retailers... I doubt that would be popular either.

 

Considering it’s an industry about happiness, there doesn’t seem much of it.

At least my suggestion was unambiguously legal, i’m sure other suggestions are welcome ?

 

I guess Lyndons’ honeymoon is over.

Edited September 19, 2018 by adb968008

[APOLLO]

Hmm, have you visited Waitrose lately?  As a result of having to reduce prices and offer more 'value' or 'essentials' level products they have made severe cuts elsewhere in their business resulting, most noticeably in our part of the world in an overstrained internal logistics operation which has led to empty or poorly stocked shelves in their supermarkets.  Same old story - cut the prices, cut the costs (I know how they did some of that in their logistics operation as it happens) and the customer suffers - net result we could not buty any pork fillet when we visited our usual branch last Thursday = sale & revenue lost.

 

And Phil has already drawn attention to what has happened with overall John  Lewis profits this year - down to price matching (i.e. price cutting) according to their Chief Exec.

 

By the way I thoroughly approved of what amounted to price fixing in respect of milk, but then one of my grandfathers was a dairy farmer.  And of course the end of that arrangement through the MMB has resulted in the disappearance of numerous dairy herds so one is left wondering quite where some of our milk and milk products comes from because it sure as heck isn't the three dairy farms which once existed within a 4 mile radius of where I'm sitting typing this; race to the bottom once again. 

 

 

 

Waitrose ? Pork Fillet ? - It's Aldi's basics beans (no sausages) on dry toast for me - (I'm sure I saw Andy Y in there recently !!!!!!) it's the only way I can save for Hornbys new stuff !!!.

 

But I agree, the whole world of retail from is in turmoil and change these days. It's getting to be dog eat dog for survival out there. Tesco Jacks isn't the only new entrant. I went to our local Sainsburys yesterday, close nearby is a small Asda (was once Netto). Alongside sharing the same vast car park is a large B&M (mainly food) and just opened next door is a new food store - The Food Warehouse by Iceland. I called in the Asda first (as some basics are consistently & considerably cheaper). The new Iceland store had some bargains, I noticed Sainsburys had a load of completely empty shelves (unusual). There is a new Argos recently built into Sainsburys. (we have two Argosses 2 miles apart, neither are in the town centre).

 

This lot won't survive I reckon.

 

Our once vibrant town centre with its nearly new £ multi million shopping centre sees major closures almost weekly - Marks & Spencers (in the new centre) is to close.

 

Hornby will the least of anyone's problems soon.

 

Reasons - Not enough (spending) money around - inflation - rising cost of living (housing mainly) - frozen wages (or under inflation rises) - poor working terms and conditions for many jobs - etc etc etc. Where this will lead to I just don't know. I don't know where our milk comes from (geographically !!!) either.

 

Brit15

[Phil Parker]

I didn't say whether or not I considered the moves by manufacturers to be right or wrong, as it happens I have some sympathy for what they're trying to do but I'm also under no illusion as to what it amounts to. And making a comparison with the emergency services is a particularly asinine comment if I might say, unless you really do consider toy trains to be in the same category as saving peoples lives.

 

If you are determined to be offended and insult me that's fine. But at no point do I say toy trains are the same as the emergency services, just that there are many examples of someone needing to look at the big picture because individuals will only consider themselves. It's a metaphor.

 

My point is that I don't have a problem with manufacturers trying to manipulate the market to keep it alive in the long term. It's preferable to then looking very short-term and asset stripping an organisation. Will it work? I don't know, but I don't blame anyone for trying. 

[Dunsignalling]

I didn't say whether or not I considered the moves by manufacturers to be right or wrong, as it happens I have some sympathy for what they're trying to do but I'm also under no illusion as to what it amounts to. And making a comparison with the emergency services is a particularly asinine comment if I might say, unless you really do consider toy trains to be in the same category as saving peoples lives.

No, but those customers who can't/won't pay enough for the producer to make an adequate return shouldn't be surprised when they move even further upmarket in search of better margins, whether that be Dapol shifting their emphasis from N to O or somebody eventually deciding to get out of model trains altogether.

 

John

Edited September 19, 2018 by Dunsignalling

[blueeighties]

Strange question, one that should be addressed to Hornby.

I'm just sharing 30 year's experience in brand marketing.

As a consumer, not very keen on manufacturers attempting to keep prices artificially high.

Apple amongst others seem to have done very well.

[NINJA]

Higher prices for excellent models I am prepared to pay i.e. Rapido's offerings, SLW 24's, etc, but I do think it is taking the p--- when manufacturers are asking £50 for a mk1 Pullman coach which had been in the catalogue since 2004 when it was first mooted no matter how good a model it may be.

[JSpencer]

But I don't think the retailers would agree that it would help to achieve the goal.

 

If the goal is to help support the retail network by allowing all your retailers to benefit from a reasonable profit margin for the first 6 weeks, then how does removing that profit margin from the bottom differ from having to remove it from the top by price matching?

They could alternatively offer a reward (credit) to shops 6 weeks later but only if they paid their bill on time and once said item was cleared out of Hornby's warehouse. Hornby are still good value compared to everyone else so have room to add a percentage on top that becomes a shop reward for the sales.