Hornby Tier System- An Update.

[Roy Langridge]

22 minutes ago, Phil Parker said:

 

Which is odd, since I'm sure I've read on a popular web forum, that we are in cahoots with the manufacturers...

But Phil, these pages are like Wikipedia, if it is stated here, it must be true 😉.

 

Roy 

[ERIC ALLTORQUE]

It would appear the tier system has created more tears than joy, the TV add would be more i am confused ,strum strum......as with everything now,making things better usually does the opposite.

[Roddy Angus]

1 hour ago, Robin Brasher said:

It appears that the box was damaged in the post between Hornby and my local model shop.

Forgive me if I am being dense, but why did you accept the wagon with the box in that condition?  Could you not have asked for another one, or if that was the only one, and you wanted it that badly, you could have checked the condition in the model shop.  To be perfectly honest, I am surprised that the shop even offered it to you in that condition.  To cause that much damage to the box, there must have been a lot of other damaged boxes/models in the parcel from Hornby and I would have thought that the shop would have had to return a significant amount of stock.

 

I don't know where the fault lies but it is nothing to do with the Hornby tier system but is more about why your local shop is selling obviously damaged goods.

 

Regards

 

Roddy

[Phil Parker]

58 minutes ago, Robin Brasher said:

I look forward to reading about the tier system in the magazines.

 

Only when we decide to bore the readers to death. 

[Gilbert]

23 minutes ago, Phil Parker said:

 

Only when we decide to bore the readers to death. 

Go on...go on....go on...

[Oldddudders]

"Y'know y'will,  y'will, y'will, y'will, y'will,"

[adb968008]

But is everyone ordering from Hornby ?

 

R3171 P2 Cock of the North was released September 2014, and is still in stock.

https://uk.Hornby.com/products/lner-p2-class-2-8-2-2001-cock-o-the-north-era-3-r3171
thats about 8.5 years since release.

 

A quick look shows golden oldies like J15, K1, B17, B12, Q6, D16, J50, S15, King, Radial and even class 71 …

Even more recent releases dont seem to have wowed… the GWR 800’s flew out the door, yet LNER ones, at a much higher price have not, APT also has hung around, the Blue MN is still in stock.

 

The hobby is a fashion industry, if you miss the trending period it can be very hard to move later. in the past it was the retailers problem, now its Hornbys.

 

its all good directing everyone to their website, but it is also their warehouse it sits in and their balance sheet it occupies, and it feels to me the list of “in stock” items appears to be getting longer as time passes.

 

I no longer feel I “have” to order Hornby or risk missing out… look at the VTEC 91.. in the past this would have been dust in days.. 2 months out its still there, compared to the NR DBSO which is gold dust and its not even released.

 

 

 

Edited May 5, 2022 by adb968008

[The Stationmaster]

Clearly everybody is not ordering from Hornby (Hornby's own figures prove that!) and why would they if they are 'careful' shoppers there are remaindered bargains to be had if they suit what you want.  B12s - clearly 'remaindered' from Hornby - can be found for £100 (less a penny).   I recently acquired a B2 Peckett at what I would describe as a 'show special bargain price' (at Ally Pally)  and Class 71s have been available at much reduced prices from one retailer for ages.

 

No need to traipse the 'net to find these prices - either see what your local model shop can do (if you have one of course) or look through the ads in the magazines because even there you'll find some notable differences in prices for the older Hornby stuff which has obviously been cleared out of the warehouse in order to no doubt bring in some sales revenue and reduce the warehousing bill.   I'm sure that there won't necessarily be the very thing that you need for your layout area but you won't know unless you look.

 

And - as I've said already - tiers appear to have no influence at all on the availability of some of these models or (within a 10-15% range in some cases) on their retail price.  If you look you might even find exactly what you need.

[Ruffnut Thorston]

18 hours ago, Robin Brasher said:

I am sorry if I am going off topic again but, based on my experience with the R60032 BR Conflat A. Tri-ang I would not be confident of receiving anything in one piece directly from Hornby.

 

It appears that the box was damaged in the post between Hornby and my local model shop. If this is the case it would not have reached me in perfect condition if I had ordered it directly from Hornby.

 

All the other models I have received from Hattons, Rails or Kernow have arrived with the boxes undamaged so it looks like the model shops check the boxes for damage first and then pack them securely so that they arrive with the consumer in good condition.

 

This is one reason why I would order from a tier 2 model shop rather than directly from Hornby which I assume is in tier 1.

 

 

 

We "pre ordered" our Tri-ang Conflat from Hornby, in January 2021, to hopefully guarantee getting one. (Reference the tier system...)

We have the original 1963-1971 models, so this will go in with them. 🙂

 

A side effect of this has been that, due to the long lead time (over 1 year) the price has risen at other retailers, but we have paid the original price at the time of our "pre order".

 

The wagon arrived safely.

The boxed wagon was wrapped in bubble wrap, then  loosely 

in thick brown paper as padding, in a substantial shipping box, with the paperwork.

 

Delivery by DPD. Delivered as stated, to the correct place. 🙂

 

Other's mileage may vary, of course...

 

 

 

Edited May 5, 2022 by Ruffnut Thorston
Typo

[stewartingram]

One point I fail to see here is the "warehouse clearance" sales reducing cost of warehousing. If they have a building, either their own, a subcontractor's, or one they rent, it will be a given size and presumably never bulging at the seams. (If it normally was, they would have a larger building?). So if we say it holds 1000 items (just a number) and they 'clear 5-600, the building then has a bit more space, but its costs are the same surely? What I do realise however is stock on the shelves has been paid for; they need to move it on to get cashflow. But don't forget, in business R&D of an item is money spent, you look to recoup those costs within the early sales (which can be at trade price, or direct (higher)priced) retail sales); after that magic figure is passed the profit zone is reached. So to clear stock, prices can be reduced, often quite substantuly, but still remain in profit. Cashflow at lower prices is often better than hanging on at full price hoping for a sale.

[woodenhead]

I would guess their warehousing is rented not owned and the amount of space can be flexed.

 

That being the case having unsold stock in warehousing with new items arriving may result in increased costs to lease space, conversely, storing stock beyond a reasonable shelf life incurs a cost to lease the space they occupy.  So a warehouse clearance can result in savings on warehousing costs.

[Andy Hayter]

31 minutes ago, stewartingram said:

One point I fail to see here is the "warehouse clearance" sales reducing cost of warehousing. If they have a building, either their own, a subcontractor's, or one they rent, it will be a given size and presumably never bulging at the seams. (If it normally was, they would have a larger building?). So if we say it holds 1000 items (just a number) and they 'clear 5-600, the building then has a bit more space, but its costs are the same surely? What I do realise however is stock on the shelves has been paid for; they need to move it on to get cashflow. But don't forget, in business R&D of an item is money spent, you look to recoup those costs within the early sales (which can be at trade price, or direct (higher)priced) retail sales); after that magic figure is passed the profit zone is reached. So to clear stock, prices can be reduced, often quite substantuly, but still remain in profit. Cashflow at lower prices is often better than hanging on at full price hoping for a sale.

 

We know that Hornby have outsourced their warehousing.

 

A typical warehouse contract (I have worked with many) will include:

A charge for bringing goods into the warehouse

A charge for each order item despatched from the warehouse

A charge for the space used in the warehouse - usually so much per stock location used at a fixed date each month.

 

What that means for Hornby if they have a similar contract is:

1.  Inbound costs.  If a container arrives full of just one product, they pay a single fee.  If the container has 10 products in it, they pay 10 inbound fees.

2.  Outbound costs.  An on-line customer buys a single loco.  Hornby pays one outbound fee.  On the other hand, a trader buys 50 identical locos.  Hornby pays one outbound fee.  An on-line customer buys one loco, one brake third coach and one composite coach.  Hornby pays three outbound fees (one for each item).  A trader buying 50 locos, 100 brake thirds and 75 composite coaches also lands Hornby with three outbound fees.

3.  Storage.  Each pallet or box of goods takes up a storage location in the warehouse.  As a commercial warehouse the owner will be selling space to a range of customers and alongside Hornby you might well find medical face masks, 25kg bags of flour, sunflower oil etc.  The contract will probably have an upper limit on the maximum number of storage locations open to Hornby although if they need more then by negotiation, they might become available if the owner believes he is not going to jeopardise his other customers' needs.  Hornby will pay for each location in use at the agreed time period.  A location might contain a full pallet load of one particular item.  A location at the other extreme might contain a large cardboard box with just one pack of track pins at the bottom.  The charge will be the same for each because each fills one warehouse location.  

 

So where does this lead?

In warehousing costs, it is cheaper to supply volume orders to the trade than individual items to their on-line customers.  However they get a lot more money per item from the on-line customer than the trade customer.

Slow moving stock does block storage locations and does cost Hornby money.  At some point, it does make economic sense to sell blocks of slow moving stock to traders (at a discount I would expect) and so incur single outbound costs per trader, than to wait month on month (and pay storage month on month) for the more lucrative on-line orders to arrive that are likely to include many multiples of outbound costs.  

[Michael Hodgson]

It's not primarily the cost of warehouse space, it's working capital tied up in stock, especially if manufacture/purchase was financed using borrowed money as is usual for most businesses.  Interest rates have gone up again today and are expected to do so again, money tied up in this way is not available to fund the next project a firm wants to do

[Andy Hayter]

Very good point @Michael Hodgson but don't discount warehousing costs which overlay the working capital and cash in use arguments.

[Legend]

3 hours ago, stewartingram said:

One point I fail to see here is the "warehouse clearance" sales reducing cost of warehousing. If they have a building, either their own, a subcontractor's, or one they rent, it will be a given size and presumably never bulging at the seams. (If it normally was, they would have a larger building?). So if we say it holds 1000 items (just a number) and they 'clear 5-600, the building then has a bit more space, but its costs are the same surely? What I do realise however is stock on the shelves has been paid for; they need to move it on to get cashflow. But don't forget, in business R&D of an item is money spent, you look to recoup those costs within the early sales (which can be at trade price, or direct (higher)priced) retail sales); after that magic figure is passed the profit zone is reached. So to clear stock, prices can be reduced, often quite substantuly, but still remain in profit. Cashflow at lower prices is often better than hanging on at full price hoping for a sale.

 

Thet might pay by unit so that if theyve got lots of unsold units in warehouse it costs them money, hence reason for sale to keep numbers down . We dont know the warehousing and distribution agreement in place , there are all sorts , but I've had them before where you pay by pallet space utilised .  It is not their warehouse so the size of it is irrelevant . They are probably paying storage charges and a cost for picking packaging and despatch .  Hornbys overhead costs are still relatively high , so the warehousing cost could be significant .

Edited May 5, 2022 by Legend

[boxbrownie]

I always presumed Hornby had their warehousing facility in Margate in the old factory unit, a massive building which they own and always seemed empty on the TV programme, so much so they had room for the “museum” which we saw proposed during the programme.

[AY Mod]

19 minutes ago, boxbrownie said:

I always presumed Hornby had their warehousing facility in Margate in the old factory unit,

 

No, it's a warehouse belonging to Global Freight Management about 10 miles from their offices - https://maps.app.goo.gl/377qtR7qN6VyVPpJ9 and 
https://maps.app.goo.gl/z99MAn5FuFmavqfr7

[Robin Brasher]

Sorry to go off topic but I think that is where Hornby does its repairs as well.

[tetsudofan]

Yes, I've been there a couple of times on my way home after some retail therapy at The Hobby Shop in Faversham. I didn't just drop by but did so with the pre-approval of Hornby.

 

The drive home from Hersden was cross country (the territory of the East Kent Railway) and made a change from using the A2/A260

 

Keith

[The Stationmaster]

2 hours ago, Legend said:

 

Thet might pay by unit so that if theyve got lots of unsold units in warehouse it costs them money, hence reason for sale to keep numbers down . We dont know the warehousing and distribution agreement in place , there are all sorts , but I've had them before where you pay by pallet space utilised .  It is not their warehouse so the size of it is irrelevant . They are probably paying storage charges and a cost for picking packaging and despatch .  Hornbys overhead costs are still relatively high , so the warehousing cost could be significant .

Their inventory has crept up considerably since the present regime took over.  From 2001 - 2007 year end inventory as a percentage of the year's sales (by value) stood below 20%, it popped up to about 22% in 2008 and rose further to about 24% in 2009 but was back just below 20% in 2010.  But the following year went over 25% and was up to around 27% in 2012.  It then varied over a range from c. 20% to just over 25% bi ut overall showing a path towards reduction up to 2017 when it was back to sitting a tad above the 25% line - almost certainly an ongoing gradual decrease owing something to fire sales as well at the normal fluctuation of stock levels.

 

But from 2017 it rose steadily year-on-year from being a tad over 20% to reach a peak of c.37% in 2020 (i.e. the end of the 2019-2020 trading year).  The pandemic then contributed with an increase in sales during the first lockdown and by the end of the 2020-2021 reading year the inventory level was back down to c.31/32%.    With what has clearly being going on recently, and depending very much on what deliveries arrived near the end of the trading year but hadn't been despatched before the year I think it will show a further decline this year - we shall see.

 

But the amounts sitting in the warehouse are not trivial in financial terms.  Sales in year end 2021 were £48.5 million so what was there in inventory would amount to c.£16 million although much of that was obviously going to be stock moving through.  The more crucial bit - which isn't available - is just how much of that £16m had been there and growing since 2017.   It's also important to remember that we are talking about moving levels of stock and the inventory is just a snapshot.  Thus if a few container loads arrive in time to become inventory but haven't been moved on by the end of the accounting period the number will be inflated.

[Vistisen]

On 04/05/2022 at 19:11, Phil Parker said:

 

Which is odd, since I'm sure I've read on a popular web forum, that we are in cahoots with the manufacturers...

Wot! Mods going off topic? 😇

[Matt]

57 minutes ago, The Stationmaster said:

Their inventory has crept up considerably since the present regime took over.  From 2001 - 2007 year end inventory as a percentage of the year's sales (by value) stood below 20%, it popped up to about 22% in 2008 and rose further to about 24% in 2009 but was back just below 20% in 2010.  But the following year went over 25% and was up to around 27% in 2012.  It then varied over a range from c. 20% to just over 25% bi ut overall showing a path towards reduction up to 2017 when it was back to sitting a tad above the 25% line - almost certainly an ongoing gradual decrease owing something to fire sales as well at the normal fluctuation of stock levels.

 

But from 2017 it rose steadily year-on-year from being a tad over 20% to reach a peak of c.37% in 2020 (i.e. the end of the 2019-2020 trading year).  The pandemic then contributed with an increase in sales during the first lockdown and by the end of the 2020-2021 reading year the inventory level was back down to c.31/32%.    With what has clearly being going on recently, and depending very much on what deliveries arrived near the end of the trading year but hadn't been despatched before the year I think it will show a further decline this year - we shall see.

 

But the amounts sitting in the warehouse are not trivial in financial terms.  Sales in year end 2021 were £48.5 million so what was there in inventory would amount to c.£16 million although much of that was obviously going to be stock moving through.  The more crucial bit - which isn't available - is just how much of that £16m had been there and growing since 2017.   It's also important to remember that we are talking about moving levels of stock and the inventory is just a snapshot.  Thus if a few container loads arrive in time to become inventory but haven't been moved on by the end of the accounting period the number will be inflated.

Will inventory be higher if H are moving more into direct sales rather than quickly dispatching (and presumably being paid by) retailers?  I believe their franchise stock counts as inventory too doesn’t it?

[RAF96]

On 04/05/2022 at 18:11, Phil Parker said:

 

Which is odd, since I'm sure I've read on a popular web forum, that we are in cahoots with the manufacturers...

 

Just putting it there - https://www.facebook.com/groups/177371052954488/permalink/983793612312224/

[JohnR]

3 hours ago, boxbrownie said:

I always presumed Hornby had their warehousing facility in Margate in the old factory unit, a massive building which they own and always seemed empty on the TV programme, so much so they had room for the “museum” which we saw proposed during the programme.

 

They dont own the old factory, the whole building was sold off, and they now rent the offices from the new owner, who uses the old factory space to store his collection of 1:1 scale locomotives. 

[adb968008]

Surely the best situation is to have no warehouse, and cash in the bank.

 

look at Accurascales class 37’s… all sold out and not even arrived yet. Retailers look set to do well as well, as they will be the only ones left with supplies when it’s delivered, and clearly demand is there.

 

If stock is on the retailers shelves, it’s advertising the brand and filling the balance sheet. Of course sales reps giving retailers a nudge to give a bit more shelf space helps too. 

 

However if the customer has no urgency to buy, why should the retailer, just order to demand, and leave the stock management and cash flow as Hornbys problem., it’s not as if loyalty is worth anything.

 

 

 

 

Edited May 5, 2022 by adb968008