Hornby cuts model shops' allocations of items due summer 2022

[sidmouth]

4 hours ago, KeithMacdonald said:

We reap what we sow.

 

A few years ago, someone started an online business called Amazon. Some said it was a passing fad and high street & retail shops had nothing to fear.  Roll on a few years ... I don't know about you, but my high street is beginning to look like a ghost town. About half of the retail shops have gone, replaced with charity shops and coffee shops. The retail shops that have gone could not compete with online and direct sales.

 

Hornby is one producer in what is (dare I say it) a relatively minor industry that is irrelevant to 95% of the UK population. What's happening to retail model shops is just one instance of a much wider malaise that affects the whole of the UK retail industry.

 

Personally, I don't plan on buying anything from Hornby anyway. I have enough locos and rolling stock already, a shelf full of kits still to be built, and the Accurascale/Bachmann/Heljan/Rapido models (and ScaleScenes scenery) appeal more to me.

 

yes and no . I get the argument but what amazon predominantly sold was books and CD/DVD . Niche interests like ours still benefit from access to retail outlets and I buy things from a model shop because seeing something for real is often enough to swing my interest in buying . I also have a good friend who is a model shop owner so in my case I like to support him 

 

 

[drt7uk]

Absolutely disgraceful behaviour from Hornby yet again. Fully suspect the 1 item I pre-ordered from Derails (a carriage) won't be fulfilled by Hornby.

 

Last time this happened to me, some people said Hattons were at fault cos they supposedly over-ordered their allocation...well whether or not that was true, I don't see how that can be put against Derails as they assured me they never do this. Hornby 100% at fault.

 

[newbryford]

12 hours ago, Hroth said:

The tv series is feelgood advertorial waffle, with some mild peril (will the models be produced in time?) . And lots of misinformed babble from SK.

 

Things that won't be mentioned might include:

Reduction of allocations to retailers

A description of how the tier system works

Why models announced for mid-2021 may now arrive mid-2023

Why so few obviously popular models are made at a time

The Titfield Thunderbolt/Lion...

 

I'll watch it, but not believe a word of it, its just the usual Reality TV cr@p.

 

 

But - unfortunately - some will lap it up.

 

How many of us have been asked by our non-modeller friends "did you see the program about Hornby? Wasn't it good?"

 

My usual reply puts them straight about the antics of the company.

[newbryford]

11 hours ago, Willie Whizz said:

It’s all very well moaning on here - and being effectively ignored by Hornby - but I wonder whether their major shareholders are aware of what is going on?  I assume that, absent any other feedback, and not themselves being modellers presumably, they are only hearing the Company’s explanations, whatever those might be, and hearing an alternative point of view might induce them to start asking some pertinent questions. 
 

So maybe find out, and write to them as well/instead!

 

Buy one Hornby share and attend the AGM and kick off there. That would be entertaining!

[newbryford]

10 hours ago, cctransuk said:

I believe that Hornby's current trading practices can be summed up in one word - arrogance!

 

I publicly challenge Simon Kohler, (with no expectation of success), to explain here the company's position vis-a-vis retailer and direct sales. He has, after all, made much of the company's virtues on that most public of platforms - television.

 

At least we would then be in a position to take a balanced view as to whether we wish to purchase Hornby products or not.

 

John Isherwood.

 

There's probably good reason why SK won't explain here in preference to TV.

Television doesn't answer back.

[Clearwater]

11 hours ago, Willie Whizz said:

It’s all very well moaning on here - and being effectively ignored by Hornby - but I wonder whether their major shareholders are aware of what is going on?  I assume that, absent any other feedback, and not themselves being modellers presumably, they are only hearing the Company’s explanations, whatever those might be, and hearing an alternative point of view might induce them to start asking some pertinent questions. 
 

So maybe find out, and write to them as well/instead!

Given the ownership structure of the group, the principal shareholders will be very aware of the trading being directly or indirectly represented on the board.  They appointed the CEO and I’d be gobsmacked if there was not a regular dialogue.  I’m afraid, though, that the shareholders will care about one thing and one thing alone which is whether the overall net profit (and operating cash flow) metrics are being met.  
 

it’s perfectly possible for sales to fall and for `Hornby to increase both their absolute and net margins.  They’ll also be in a position to directly see what the sales figures are by each channel, how these sort of decisions impact overall profit on a given production run etc.  They also know where the relative balance of power sits between them and retailers.  It will be different between one of the larger box shifter firms and with single shops with low retail presence.  They’ll have a view that maybe they need two not three,  by way of illustration, of the three principal retail outlets.  Having one outside that group will help increase Hornby’s bargaining position with the others.  With smaller shops, if they want the product, then they have to come back to Hornby.  
 

It may be the case that Hornby know they can sell the Dublo models (more expensive, poss greater margin and certainty a higher absolute unit profit margin) and want to insource those to their sales channel but maybe not some other ranges.  They may be trialling different pricing/sales strategies and taking the data to see what makes them the most money.  It wouldn’t surprise me, for example, if something like the Dublo brand became a web exclusive to them.  Merely because it’s always been custom and practice to offer thr full range to all retailers doesn’t mean it has to continue like that.  Say they lose a few retailers?  If a consumer still wants a Bugatti P2, they’ll go elsewhere.  Demand is relatively inelastic.

 

Taking th example above, switching to an exclusive sales model adds the retail margin and possibly cuts the distribution costs (customers to pay p&P)?  Could therefore widen both absolute and percentage margin. if I was a Hornby major shareholder/ director, I’d have specialist third party pricing consultants engaged to look at these types of question.  This is a low margin, fast moving business.  A relatively small increase in sales margin will translate to a big bottom line impact…

 

David

[Miss Prism]

 

[64F]

Sent to Hornby customer services this evening:

 

Dear Hornby,

 

As a customer who regularly spends a significant amount on Hornby products I would like some guidance from you as to how I am supposed to buy these, because over the last couple of years your company seems to have intentionally made it difficult for me to part with my money.

 

After the shambolic introduction of the new "tier" system for dealers last year, when I had most of my pre-orders cancelled and had to shop around looking for new suppliers, I understand that you have now done the same thing again by telling even the Tier 1 dealers that you will not be supplying them with anything like the number of models that they have ordered.

 

Currently I have six Hornby locomotives and sixteen carriages on pre-order from three suppliers, with a combined value of about £2,500.  The carriages are two complete trains where I either want all or none of them.  None of the dealers know whether they will receive enough stock to fulfil their pre-orders.  What do you suggest that I do in these circumstances?

 

I am extremely reluctant to unnecessarily cancel pre-orders with reputable dealers who have given me good service in the past, so if you have no intention of honouring your dealers' orders, then perhaps you would be good enough to inform them of that.  That way, the dealers could pass this information on to the many disappointed customers who have inconvenienced your company by trying to purchase your products without having correctly guessed the secret formula which governs their supply.  Once so informed, such people would have the opportunity to guess again at where they might or might not be able to give Hornby their money, assuming that they have not been so disgusted by your company's behaviour that they no longer wish to do so.

 

It is possible that I am being a little harsh, and that the failure to supply your dealer network arises from factors outwith your immediate control, such as difficulties with supply or quality control at your Chinese suppliers.  If that is the case, might I suggest that some sort of press release explaining the situation would be beneficial to your company's image and reputation?  On the other hand, if this is (as it appears to be) an intentional strategy to maximise direct sales by deliberately sabotaging your dealer network, then I can only observe that the underhanded nature of this strategy and the contempt towards customers which it displays are seriously imperilling the goodwill of this particular consumer towards your business.  If you are only prepared to supply pre-orders as direct sales, then for goodness sake tell everyone that - preferably before you announce the products!  

 

I look forward to your advice on what I should be doing about my pre-orders.

 

Regards

 

[Update - response received from Hornby, see page 16]

Edited July 25, 2022 by 64F
update to say response received

[mdvle]

12 hours ago, KeithMacdonald said:

A few years ago, someone started an online business called Amazon. Some said it was a passing fad and high street & retail shops had nothing to fear.  Roll on a few years ... I don't know about you, but my high street is beginning to look like a ghost town. About half of the retail shops have gone, replaced with charity shops and coffee shops. The retail shops that have gone could not compete with online and direct sales.

 

Has Amazon impacted the retail environment?  Absolutely.

 

But Amazon has also become a convenient scapegoat to blame for every retailer that fails and every high street that turns into a ghost town thus avoiding uncomfortable truths from needing to be dealt with.

 

Despite what it appears physical retail is still quite strong - but they frequently aren't located on the high street anymore.

 

High rents, high local taxes, costly parking fees, failures to modernize the business, etc. are all just as much to blame as Amazon.

 

 

Edited July 5, 2022 by mdvle

[Legend]

6 hours ago, 64F said:

Sent to Hornby customer services this evening:

 

Dear Hornby,

 

As a customer who regularly spends a significant amount on Hornby products I would like some guidance from you as to how I am supposed to buy these, because over the last couple of years your company seems to have intentionally made it difficult for me to part with my money.

 

After the shambolic introduction of the new "tier" system for dealers last year, when I had most of my pre-orders cancelled and had to shop around looking for new suppliers, I understand that you have now done the same thing again by telling even the Tier 1 dealers that you will not be supplying them with anything like the number of models that they have ordered.

 

Currently I have six Hornby locomotives and sixteen carriages on pre-order from three suppliers, with a combined value of about £2,500.  The carriages are two complete trains where I either want all or none of them.  None of the dealers know whether they will receive enough stock to fulfil their pre-orders.  What do you suggest that I do in these circumstances?

 

I am extremely reluctant to unnecessarily cancel pre-orders with reputable dealers who have given me good service in the past, so if you have no intention of honouring your dealers' orders, then perhaps you would be good enough to inform them of that.  That way, the dealers could pass this information on to the many disappointed customers who have inconvenienced your company by trying to purchase your products without having correctly guessed the secret formula which governs their supply.  Once so informed, such people would have the opportunity to guess again at where they might or might not be able to give Hornby their money, assuming that they have not been so disgusted by your company's behaviour that they no longer wish to do so.

 

It is possible that I am being a little harsh, and that the failure to supply your dealer network arises from factors outwith your immediate control, such as difficulties with supply or quality control at your Chinese suppliers.  If that is the case, might I suggest that some sort of press release explaining the situation would be beneficial to your company's image and reputation?  On the other hand, if this is (as it appears to be) an intentional strategy to maximise direct sales by deliberately sabotaging your dealer network, then I can only observe that the underhanded nature of this strategy and the contempt towards customers which it displays are seriously imperilling the goodwill of this particular consumer towards your business.  If you are only prepared to supply pre-orders as direct sales, then for goodness sake tell everyone that - preferably before you announce the products!  

 

I look forward to your advice on what I should be doing about my pre-orders.

 

Regards

I doubt you’ll get an answer . In circumstances like this Hornby adopt the Ostrich approach to management …..head in sand .  However in the event you do receive an answer from a minion then I suspect it will say order from us direct to ensure you receive the full train . 
 

Good letter though . Suspect you spent a lot more time writing it than they will reading it 

 

Good luck 

[PaulRhB]

8 hours ago, Miss Prism said:

 

So as the spare cash dries up so the toy market hits harder times. Not the time to irritate your customers by cancelling their orders to try and force them direct to your own site with no explanations. Hornby may well be in trouble as the last two years sales bubble bursts but this is the time you need customer loyalty to spend their shrinking pot with you and not the competition. 
To be honest they’ve already lost all my loyalty. I could understand getting competitive with other manufacturers but increasingly it was looking like spite from the outside and that came to a head with Titgate. Hornby no longer has the image of the core brand of the hobby just the bully to other manufacturers, shops and customers. 
PR disaster area, when they could have said we need to change our business model and warn shops and customers up front instead of mucking everyone around. 

[Iskra]

9 hours ago, Miss Prism said:

 

That's a very selective snippet of information you have provided there. Switching to 5 year view, it simply shows a return to business as usual after the lockdown hobby boom.

 

 

[The Stationmaster]

14 hours ago, pete_mcfarlane said:

But how many of those 36 models did the factory actually produce? 

 

It sounds like Hornby order (made up number) 500 models to sell direct, and another 500 for the shops. And the factory only delivered 550, so there's only 50 for the shops..... 

Or are we back to the simple fact that Hornby oversells to the retail trade (which also gives them nice juicy 'advance order' numbers to put in their RNS announcements etc)?  Basically we don't know if it is down to incompetence - e.g overselling and failure to match what they sell to what they have on order from the factories - or to what would once have been called 'sharp practice' where they are diverting goods which have been ordered by retailers to their own direct sales channel.  Similarly - although unlikely in their present financial situation - it might just be that they are reducing their original orders with the factories after they have taken orders from retailers for those products.  Whichever it might be, or a combination of them, it indicates to me that there are clearly managerial problems and they need to be sorted or at least explained.  If there is no other reason for doing that they at least need to understand that they are driving away customers and trashing their reputation with a section of the matrket

 

As fas as product delays are concencerned they are in no different a situation from anybody else - everyone is suffering delays due to various problems in China plus increased costs in the post-pandemic period.  It's just that Hornby whie sticking to their 'big bang' annual announcement way of doing things make all these problems worse for themselves ranging from missed delivery dates to possibly even the overselling problem because so many orders are being placed at the same time which could make reconciliation difficult.  Maybe they need to appreciate - if nothing else - that you can only sell something once.

 

[JohnR]

It sounds very much like a company that still has major problems with its supply chain. If they are having to cut these orders because of a lack in supply, thats a bigger problem than just restricting supply to their own direct sale outlet. 

[Legend]

2 minutes ago, JohnR said:

It sounds very much like a company that still has major problems with its supply chain. If they are having to cut these orders because of a lack in supply, thats a bigger problem than just restricting supply to their own direct sale outlet. 

 

But the items are still available direct .  It could be supply chain issues , but wouldn't a reputable company then divert production it had to satisfying existing orders with retailers , rather than keeping production to themselves ?  Remember these retailers have already accepted orders from their customers (you and me) based on what they were told in Jan/ Feb . 

 

 

[wombatofludham]

If it is supply chain related, surely it would be better to wait until sufficient have been made to release the full order, or advise retailers they will be getting their full order but in two or more batches, and leave their direct sale batch until last?  To just baldly announce retailers are getting nothing, or next to nothing, whilst "mysteriously" having full stock on their own retail site suggests something else rather than supply chain issues.

On the day they've had to embarrassingly announce the end of "Titgate" it's beginning to look like Hornby are losing the plot and I do wonder if the shareholders/investors might be getting a bit twitchy.

[JohnR]

6 minutes ago, Legend said:

 

But the items are still available direct .  It could be supply chain issues , but wouldn't a reputable company then divert production it had to satisfying existing orders with retailers , rather than keeping production to themselves ?  Remember these retailers have already accepted orders from their customers (you and me) based on what they were told in Jan/ Feb . 

 

 

 

Well, yes, but its a natural, maybe even understandable reaction for Hornby to think that they should ensure fulfilment of their direct orders before those of even Tier 1 retailers - they make more money that way. Unethical, yes, but understandable.

 

My point is the wider one about supply issues from China. If Hornby's suppliers cannot be relied upon to deliver what Hornby have asked for, thats a bigger issue. 

[The Stationmaster]

1 hour ago, Iskra said:

That's a very selective snippet of information you have provided there. Switching to 5 year view, it simply shows a return to business as usual after the lockdown hobby boom.

 

 

Not quite.  The Hornby share price usually - and definitely in recent years - shows a peal around about late December/January.  That peak is followed by a gentle decline until it picks again when various financial statements are issued.   This year the pattern continued but the fall was steeper and quicker.  The very interesting recent situation is that after repoirting good numbers for their most recent trading year the price hasn't really picked up and is now stuck in the doldrums around 30p and in the ast few trading days is showing signs of dropping back to its 52 wek low (which came earlier this year).

 

People have previously made the valid point that the overwhelming percentage of the shares are held by two significant backers - one of whom has a board presence in the company.  But even fully acknowledging that point the essential thing is that the shares rose significantly, with some big trades, towards the end of 2021 and have subsequently dropped steeply - the price slightly more than halved between 4 January and 12 Hay falling from a high of 52.50 to a (52 week) low of 26.10 although a big trade got it back to 30.50 the next trading day then steadying at 30.  But very significantly the price only rose by 1.50 when the results were announced in June and it was back down within a couple of days.  Clearly those who are in the market for what amounts to the tradeable c.10% of the company aren't showing much interest at present - last year the annoucement of result saw the price at 59, this year with ostensible better results the price managed to briefly hit 31.50..

 

The major shareholders, especially Phoenix, are in there for the long game and are probably not particularly concerned about the low share price provided they are getting the sort of results noted by 'Clearwater'.

[Graham_Muz]

Can I just point out that talk of the 'factories' not suppling the quantities that a manufacture / commissioner  has ordered on them is totally unfounded and such issues are not something that I have seen any evidence of.  

[Dunsignalling]

The good ship Hornby heading for the rocks, yet again?

[JohnR]

29 minutes ago, Graham_Muz said:

Can I just point out that talk of the 'factories' not suppling the quantities that a manufacture / commissioner  has ordered on them is totally unfounded and such issues are not something that I have seen any evidence of.  

 

I would say it was a reasonable and logical explanation for what has happened. Why else cut the supply of pre-ordered items now to shops? And by such large amounts? If Hornby knew they had more orders from shops than they could fulfil, why did they not say so back in January when those orders were placed with them?

[Graham_Muz]

2 minutes ago, JohnR said:

 

I would say it was a reasonable and logical explanation for what has happened. Why else cut the supply of pre-ordered items now to shops? And by such large amounts? If Hornby knew they had more orders from shops than they could fulfil, why did they not say so back in January when those orders were placed with them?

 

Except it is not a reasonable or logical explanation, I can assure you that a factory does not accept a Purchase Order for 'x' amount and then decide to only make 'y' They will make what is ordered and paid for...

[Matt C]

7 minutes ago, JohnR said:

 

I would say it was a reasonable and logical explanation for what has happened. Why else cut the supply of pre-ordered items now to shops? And by such large amounts? If Hornby knew they had more orders from shops than they could fulfil, why did they not say so back in January when those orders were placed with them?

 

 

Left Arm. . . . . . . .Right Arm. . . . . .big empty space in the middle. Until someone did the figures and realized you can't keep taking orders and sell 500  models direct (1000...?)  And Also supply 500 Models to your retail outlets, when you've only ordered 500 in the first place

Edited July 5, 2022 by Matt C

[Legend]

So its boiling down to Incompetence : they've taken too many orders for the amount they've ordered from factory (This really is basic)  or Greed they are cancelling retailers orders and re directing stock to their direct channel as they will make more money that way , stuff the retailers. 

 

Either way , not a company anyone would chose to deal with .  Sad that such a great name is being tarnished in this way .

Edited July 5, 2022 by Legend

[Chris M]

The way of business is that Hornby will order a batch of a certain size to be made and the Chinese factory will make a batch that size. There is no reason for them not to. If you are going to run a batch of anything there are significant set up costs and it would be very bad business to not make a batch of the agreed size.