Hornby cuts model shops' allocations of items due summer 2022

[Dunsignalling]

21 minutes ago, The Stationmaster said:

Or things - such as the Class 71 mountain - which retailers aren't prepared to touch because they know the stuff won't sell.

Yes, Hatton's have been trying to flog those for £99 apiece for a few weeks. The website is starting to remind me  of their old Hornby Dublo ads in the Modeller. 😃 

 

They clearly had the good sense not to take all of them, though.

 

How the hell many 71s did Hornby order from the factory?

 

John

 

 

Edited July 7, 2022 by Dunsignalling

[newbryford]

3 hours ago, JohnR said:

 

Maybe they did. We certainly know Hattons (for one) have had recent large deliveries of similar hard to shift items from Hornby, which they are selling at a strong discount. 

 

Maybe whats on the outlet is the leavings left over from that.

 

So the outlet is in Tier 4 then?

[adb968008]

3 hours ago, Dunsignalling said:

 

 

How the hell many 71s did Hornby order from the factory?

 

Enough to ensure DJMs class 71 was not a threat.

[Dunsignalling]

32 minutes ago, adb968008 said:

Enough to ensure DJMs class 71 was not a threat.

But apparently so many as to cause problems of their own for Hornby.

 

Hoist with their own petard?

Edited July 7, 2022 by Dunsignalling

[Michael Hodgson]

I attach little significance to entries in the accounts for company names or goodwill.  It is an accepted accounting practice which happens after takeovers, but it does not represent anything tangible and it's not something they can realistically expect to sell if the business runs into financial difficulties.  Banks would not lend them money to finance new operations on the strength of such an asset.

 

I don't think one should read the £5m as being their valuation of the "Hornby" brand name as such, but rather of various other trading names such as Oxford and some of their non-railway products.

 

 

[Helmdon]

10 hours ago, Michael Hodgson said:

I attach little significance to entries in the accounts for company names or goodwill.  It is an accepted accounting practice which happens after takeovers, but it does not represent anything tangible and it's not something they can realistically expect to sell if the business runs into financial difficulties.  Banks would not lend them money to finance new operations on the strength of such an asset.

 

I don't think one should read the £5m as being their valuation of the "Hornby" brand name as such, but rather of various other trading names such as Oxford and some of their non-railway products.

 

 

Depends on the nature of the financial difficulties - given the bag of brands they've got it's unlikely to that they'd have a sound business case to trade on everything else without Hornby, but if they could/did think like that then selling the Hornby brand could be an asset...

 

 

...thinks of (hilarious) famous case where Vickers sold the Rolls-Royce plant to Volkswagen, then the Rolls-Royce name (on cars) to BMW...

[The Stationmaster]

10 hours ago, Michael Hodgson said:

I attach little significance to entries in the accounts for company names or goodwill.  It is an accepted accounting practice which happens after takeovers, but it does not represent anything tangible and it's not something they can realistically expect to sell if the business runs into financial difficulties.  Banks would not lend them money to finance new operations on the strength of such an asset.

 

I don't think one should read the £5m as being their valuation of the "Hornby" brand name as such, but rather of various other trading names such as Oxford and some of their non-railway products.

 

 

It is a total figure (theirs of course) for all their brands - I thought I'd made that clear so I'm sorry if I didn't.  

 

As there was an addition of £286,000 during the year that would seem to be their 'valuation' of the Oxford brand - I can't think of anything else they have acquired).  I tend to regard intangibles as a handy way of putting some numbers onto the accounts, especially for amortisation,  should they help things along although their figures in respect of the brand valuations are consistent.

 

What the brands are actually worth is a very different matter and would only be established should any happen to be sold for whatever reason.  if what everyone says about the supposedly deeply ingrained public association of model trains with the Hornby brand, and vice versa, is correct then that brand would have a saleable value - probably to a Chinese purchaser - but it would only fetch what someone is willing to pay.

[Legend]

In the event of the demise of this company , and the current management seem to be hell bent on this course , someone would buy the Hornby name .  Who knows it could be Hattons or a Consortium of Model Shops .  At the end of the day Hornby is just a commissioner of models with a famous name , somebody else could do that and take the name over .   The hobby might be all the better for it - especially when it comes to supply .

Edited July 8, 2022 by Legend

[Pmorgancym]

...and cheekily announces a fire sale on facebook

[Dunsignalling]

21 minutes ago, Legend said:

In the event of the demise of this company , and the current management seem to be hell bent on this course , someone would buy the Hornby name .  Who knows it could be Hattons or a Consortium of Model Shops .  At the end of the day Hornby is just a commissioner of models with a famous name , somebody else could do that and take the name over .   The hobby might be all the better for it - especially when it comes to supply .

A very realistic assessment of exactly what Hornby is nowadays. The cosy image of what they used to be is, of course, what they are eager to perpetuate, though the marketing and  design/development functions are all that really remains of what once was. 

 

It must also be said, though, that Airfix will be the first name that pops into the heads of those who don't buy plastic aeroplane kits in the same way Hornby does among those with no contemporary knowledge of model trains....  

 

John

Edited July 8, 2022 by Dunsignalling

[scottystitch]

1 minute ago, Dunsignalling said:

 

 

It must also be said, though, that Airfix will be the first name that pops into the heads of those who don't buy plastic aeroplane kits in the same way as Hornby does among those with no contemporary knowledge of model trains....  

 

John

Agreed, and I was about to say the same.  Ditto Scalextric with regards slot cars, although perhaps the awareness of slot car system in modern culture doesn't match that of old, nor that of model railways and/or plastic kits.

 

Airfix have some very good models in their range (24th scale F6F, Typhoon, et al)  and the tooling, if they own it, would certainly be of value to any potential buyer, but possibly not as much as the name, even globally.

 

Best

Scott.

[Clearwater]

17 minutes ago, Legend said:

In the event of the demise of this company , and the current management seem to be hell bent on this course , someone would buy the Hornby name .  Who knows it could be Hattons or a Consortium of Model Shops .  At the end of the day Hornby is just a commissioner of models with a famous name , somebody else could do that and take the name over .   The hobby might be all the better for it - especially when it comes to supply .

 

I agree.

 

If you take a step back, what we're seeing across the model rail business in the UK is a convergence of sales and "manufacturing." (recognising that manufacturing is really design and commissioning of a factory in China who actually manufactures).  What you've got are businesses coming at the issue from different ends of the telescope.  Those with their home in retail / direct internet sales who covet the extra manufacturing margin.  Maybe they're operating a leaner model than Hornby and maybe they have one less leg of distribution charges to pay as they bring goods from container port to warehouse and then direct to customer whereas Hornby bring to warehouse, send to retailer and then retailer sends to customer) and the "manufacturers", new and old, who offer both direct sales through their own web channel at full RRP and via retail shops.  Inevitably that causes commercial clashes, for example Rails/Hornby.  However, the likes of Hornby can't yet cut their reliance on selling via third parties.  

 

It wouldn't surprise me if Hornby are looking at the proportion of their sales that come from shops with and without online sales channels.  There will come a point where a logical move for them is to no longer sell to the retail trade and run all sales through their own channel.  If I were one of those retailers who rely on Hornby, I'd have my plans ready to buy the brand and IP and move into the space.

[rembrow]

13 hours ago, adb968008 said:

Enough to ensure DJMs class 71 was not a threat.

Also cheap enough to use the running chassis with the Silver Fox body and underframe parts, to make a Class 74, the one we hoped Hornby or DJ would produce after the 71. I have a Hornby Fox 74, great little runner.

[Miss Prism]

19 minutes ago, Clearwater said:

If I were one of those retailers who rely on Hornby, I'd have my plans ready to buy the brand and IP and move into the space.

 

Your post was making excellent sense until that last sentence, which I don't understand - 'buy the brand'?

 

[john new]

2 hours ago, Clearwater said:

 

I agree.

 

If you take a step back, what we're seeing across the model rail business in the UK is a convergence of sales and "manufacturing." (recognising that manufacturing is really design and commissioning of a factory in China who actually manufactures).  What you've got are businesses coming at the issue from different ends of the telescope.  Those with their home in retail / direct internet sales who covet the extra manufacturing margin.  Maybe they're operating a leaner model than Hornby and maybe they have one less leg of distribution charges to pay as they bring goods from container port to warehouse and then direct to customer whereas Hornby bring to warehouse, send to retailer and then retailer sends to customer) and the "manufacturers", new and old, who offer both direct sales through their own web channel at full RRP and via retail shops.  Inevitably that causes commercial clashes, for example Rails/Hornby.  However, the likes of Hornby can't yet cut their reliance on selling via third parties.  

 

It wouldn't surprise me if Hornby are looking at the proportion of their sales that come from shops with and without online sales channels.  There will come a point where a logical move for them is to no longer sell to the retail trade and run all sales through their own channel.  If I were one of those retailers who rely on Hornby, I'd have my plans ready to buy the brand and IP and move into the space.

There is also the parallel with previous instances of new companies rocking the boat by bringing in the extra competition. One or more then fails; the hobby therefore seemingly has periods where it appears there have become too many manufacturers and a slimming down becomes inevitable*.

 

Example 1 - Tri-ang - H Dublo - Trix and then Playcraft (Joef) and Graham Farish. Hornby Dublo failed to change fast enough and was then the first big-one to go bust to be bought by Tri-ang's owners for the name.

 

Example 2 - T/Hornby (Possibly just badged Hornby by this point) - Mainline - Airfix - Lima etc. In this scenario it was T/H that survived and the others failed and/or got bought out.

 

Currently - several new independents have emerged seemingly having found the current market desires plus two biggies in Hornby & Bachmann and other companies like Dapol & Heljan.. The pond is shrinking and the modern legacy successor of the Tri-ang range (now badged as just Hornby)  this time around appears to be the vulnerable one (unlike in example 1). Their behaviour over the last couple of years seems to be exacerbating the issue by effectively shooting themselves in the foot. 

 

*For example, Trix (Uk), Playcraft, Wrenn, Mainline, Grafar, Airfix, Lima & DJM are names we have lost from OO over the years, even if elements of their ranges still exist having been absorbed elsewhere. (These are just the one's I can remember).

 

Edited July 8, 2022 by john new
A spelling correction.

[spamcan61]

11 minutes ago, Miss Prism said:

 

Your post was making excellent sense until that last sentence, which I don't understand - 'buy the brand'?

 

I assume they mean buy the rights to use the Hornby name.

Edited July 8, 2022 by spamcan61

[The Stationmaster]

7 minutes ago, Clearwater said:

 

I agree.

 

If you take a step back, what we're seeing across the model rail business in the UK is a convergence of sales and "manufacturing." (recognising that manufacturing is really design and commissioning of a factory in China who actually manufactures).  What you've got are businesses coming at the issue from different ends of the telescope.  Those with their home in retail / direct internet sales who covet the extra manufacturing margin.  Maybe they're operating a leaner model than Hornby and maybe they have one less leg of distribution charges to pay as they bring goods from container port to warehouse and then direct to customer whereas Hornby bring to warehouse, send to retailer and then retailer sends to customer) and the "manufacturers", new and old, who offer both direct sales through their own web channel at full RRP and via retail shops.  Inevitably that causes commercial clashes, for example Rails/Hornby.  However, the likes of Hornby can't yet cut their reliance on selling via third parties.  

 

It wouldn't surprise me if Hornby are looking at the proportion of their sales that come from shops with and without online sales channels.  There will come a point where a logical move for them is to no longer sell to the retail trade and run all sales through their own channel.  If I were one of those retailers who rely on Hornby, I'd have my plans ready to buy the brand and IP and move into the space.

The question which interests me in all of this is how could Hornby reliably move everything to direct sales?  On their most recent published figures model railways are the laggard among their various brands when it comes to direct sales and even slipped back after growth (for obvious reasons) in 2020.

 

But to put their entire model railway range into direct sales means they. or rather their contracted warehouse, will be shipping a lot of fresh air for things other than locos and rolling stock.  And. even more important, will the sale of any 'nice little add ons' decline because they are often impulse purchases in shops?   Hornby's big market strength is its breadth of markets and the ranges which serve those diverse markets but will that work as well for everything with selling direct?  To get all of that on direct sales is a major task in getting the right software and handling/despatch organisation where they seem at times to currently be falling short with, for example, poor packaging, poor availability of spare parts or after sales servicing and repairs (which seem to to be done by a couple of people who also have other work?).  

 

When it comes to locos - which, along with some rolling stock, are the simplest things to market and sell directly to the end customer  there is a financial element which allows attractive deals ('free' postage for purchases over £50 etc) which might not work so well for somebody who wants three platform sections where the work content/costs in relation to revenue earned starts to look a lot less impressive.

 

And to cap it all they didn't even bother to go to people with all the real experience in every aspect of selling model railway items by mail/online.  Probably for the simple reasons that they either saw them as competitors or they arrogantly assumed that if Hattons, Rails, Kernow, ,et al could do it then they could too.  After all they are already selling a good proportion of Corgi diecasts (to name but one area) that way so trains would be just as easy (don't mention W1 in the same breath).  Hornby undoubtedly look to increased direct sales but it seems they still have a lot to learn

[andyman7]

2 hours ago, Legend said:

In the event of the demise of this company , and the current management seem to be hell bent on this course , someone would buy the Hornby name .  Who knows it could be Hattons or a Consortium of Model Shops .  At the end of the day Hornby is just a commissioner of models with a famous name , somebody else could do that and take the name over .   The hobby might be all the better for it - especially when it comes to supply .

I'm not sure about a consortium, I mean committees have such a great reputation for their focused management... 

[andyman7]

34 minutes ago, The Stationmaster said:

The question which interests me in all of this is how could Hornby reliably move everything to direct sales?  On their most recent published figures model railways are the laggard among their various brands when it comes to direct sales and even slipped back after growth (for obvious reasons) in 2020.

 

But to put their entire model railway range into direct sales means they. or rather their contracted warehouse, will be shipping a lot of fresh air for things other than locos and rolling stock.  And. even more important, will the sale of any 'nice little add ons' decline because they are often impulse purchases in shops?   Hornby's big market strength is its breadth of markets and the ranges which serve those diverse markets but will that work as well for everything with selling direct?  To get all of that on direct sales is a major task in getting the right software and handling/despatch organisation where they seem at times to currently be falling short with, for example, poor packaging, poor availability of spare parts or after sales servicing and repairs (which seem to to be done by a couple of people who also have other work?).  

 

When it comes to locos - which, along with some rolling stock, are the simplest things to market and sell directly to the end customer  there is a financial element which allows attractive deals ('free' postage for purchases over £50 etc) which might not work so well for somebody who wants three platform sections where the work content/costs in relation to revenue earned starts to look a lot less impressive.

 

And to cap it all they didn't even bother to go to people with all the real experience in every aspect of selling model railway items by mail/online.  Probably for the simple reasons that they either saw them as competitors or they arrogantly assumed that if Hattons, Rails, Kernow, ,et al could do it then they could too.  After all they are already selling a good proportion of Corgi diecasts (to name but one area) that way so trains would be just as easy (don't mention W1 in the same breath).  Hornby undoubtedly look to increased direct sales but it seems they still have a lot to learn

I don't think that is tenable. But I could see a model whereby premium new releases are sold direct only, with a dealer network providing an outlet for stock items and the general range. Of course the terms of such an arrangement would need to be mutually beneficial (and stable enough for retail businesses to be able to reliably know what they are going to get).

[Clearwater]

7 minutes ago, Miss Prism said:

 

Your post was making excellent sense until that last sentence, which I don't understand - 'buy the brand'?

 

 

Sorry, let me elaborate.  Hornby has a market valuation in the tens of millions.  That strikes me as being way beyond the ability of even the largest retailers to be able to buy Hornby as a trading entity.  However, if the entity was insolvent and the IP/toolings/brand name were being sold by a liquidator, then the entry price to buy those would be way lower.  As others comment above, there is value in the Hornby name - whether it is more or less than the Intangible Asset figure is a matter of debate however if you were a shop and wanted to buy the name and market your designs as "Hornby", then it might make sense to be prepared.  If a shop didn't already have a manufacturing arm and relied for say 60%+ of its turnover on selling Hornby, then Hornby disappearing is a key risk to your business.  Hence, you might want a plan.  As @Legend suggests, a consortium of shops may choose to act collectively.

[Clearwater]

@The StationmasterI don't disagree with your points.  It depends on the numbers such as relative sales.  If you're only making 1% of your turnover/margin from the bits and pieces then so it may be a price wroth paying against securing a larger margin on a loco.  Even if you make 50% margin on a £3.99 (RRP) so say £2 wholesale platform extension, you may only be making say £1 per unit.  For a loco with an RRP of £200 and a retailer margin of £10, you can "afford" to lose 5 platform sales before you lose breakeven.  I'd also suggest that how you price offers for free P&P can help drive small item sales.  Eg if free posting comes at £200, a loco priced at £195 encourages the purchaser to spend more money...

 

If you're looking at the Hornby strategy, you might think you can perhaps segment and take what you want to sell direct in house and leave others to your traditional model.  You could dispose of those elements of the business.  I'm afraid it all comes back to the numbers and how the owner maximises the profit figure.  I agree that a team up/JV with one of the large retailer would make sense.  Use their expertise and leverage that. 

[Mike Harvey]

1 hour ago, The Stationmaster said:

 

 

And to cap it all they didn't even bother to go to people with all the real experience in every aspect of selling model railway items by mail/online.  Probably for the simple reasons that they either saw them as competitors or they arrogantly assumed that if Hattons, Rails, Kernow, ,et al could do it then they could too.  After all they are already selling a good proportion of Corgi diecasts (to name but one area) that way so trains would be just as easy (don't mention W1 in the same breath).  Hornby undoubtedly look to increased direct sales but it seems they still have a lot to learn

I believe that the Corgi direct sale operation was contracted out for a very long time using the same contractors as Oxford Diecast in Southampton. Oxford now carry out their own mail-order operation, which seems to be efficient (speed of dispatch, packaging, updates on shipments) and has the scope to embrace Corgi Diecast mail order.

[jjb1970]

It all feels like going back to the future. A couple of Hornby management teams ago it was clear that they saw their future in direct sales from the Hornby website. That was a time when they were regularly selling stuff at huge discounts while retailers were lumbered with trying to sell the same models after buying at the regular trade price. Then they did a u-turn and returned to supporting retailers, although they kept their direct sales channel they stopped the fire sales. Now there is an outlet on their website and it seems they are having another go at re-orientating to primarily being about online sales.

I think either method (supporting retailers or direct sales) can work. As with many things any idea can be done badly or done well. I guess I should declare an interest in saying all my model trains come via online sales, although there are several excellent model kit shops for paints, adhesives, tools etc I can visit any trains come via the mail. 

I think one of the biggest challenges to good direct sales is that to do it well needs a lot of effort. People take it for granted that online ordering just works. I know a lot of people hate Amazon but Amazon have set a standard, I order stuff on Amazon and whatever people might say about them the online experience and delivery is first class. A lot of things can be delivered same day. Once people get used to that they expect a similar slick service and reliable ordering across the board, but to do that needs investment in sales platforms, warehousing, distribution etc and the expertise to put it all into action and do it profitably. I haven't ordered from Hornby direct for a long time but when I have done it in the past I found the experience pretty decent, not the best but it was acceptable. 

That said, I think companies need to make a decision which way they want to go, as it is difficult to try and do both. If you want to work with retailers then you can't expect them to keep faith if you undercut them directly, hold back stock, keep high demand items for your own channel etc. Similarly if you go direct then do it but then you accept you lose the retail shop window. Which way to go is a commercial decision.

[spamcan61]

52 minutes ago, Clearwater said:

@The StationmasterI don't disagree with your points.  It depends on the numbers such as relative sales.  If you're only making 1% of your turnover/margin from the bits and pieces then so it may be a price wroth paying against securing a larger margin on a loco.  Even if you make 50% margin on a £3.99 (RRP) so say £2 wholesale platform extension, you may only be making say £1 per unit.  For a loco with an RRP of £200 and a retailer margin of £10, you can "afford" to lose 5 platform sales before you lose breakeven.  I'd also suggest that how you price offers for free P&P can help drive small item sales.  Eg if free posting comes at £200, a loco priced at £195 encourages the purchaser to spend more money...

 

I recall Simon Kohler has stated on more than one occasion that he wants Hornby (overall, not necessarily direct only)  to be a 'one stop shop' for all buyers' toy train needs, but I question the financial sense of having large quantities of low value, probably low margin, sales items. Last time I bought a catalogue, 2008 IIRC (peak Hornby?) the included price list ran to more than 8 sides of A4 in a pretty small font, that struck me as being an awful lot of items to manage profitably.

[Halvarras]

4 hours ago, rembrow said:

Also cheap enough to use the running chassis with the Silver Fox body and underframe parts, to make a Class 74, the one we hoped Hornby or DJ would produce after the 71. I have a Hornby Fox 74, great little runner.

 

I was just thinking the same - all of these 'spare' Class 71s will have to find a home eventually and the running chassis is obviously perfect for a Class 74 of which, due to its single plain livery in a largely unpopular period (1967-77), I feel we are unlikely to ever see an RTR model. Perhaps Silver Fox should consider ramping up production of their kit in readiness, if they haven't already*, and maybe placing some 'reminder' ads in the modelling press, as this combination may satisfy what demand there is for a model of this loco. I have a few SR locos set around 1968 so I'm seriously tempted myself. I've built SF Class 22 and D600 Warship kits and rate them highly for what they are, which is over the hills and far away from MTK and Q Kits (shudder)....

 

TBH the only thing stopping me is the constantly nagging voice in my head telling me to 'STOP ADDING STUFF!' to my ever-growing pile of projects. I've been ignoring it for years though, why start listening now?!🤪

 

*Just checked, currently sold out. Permanently, or......?

Edited July 8, 2022 by Halvarras
SF 74 stock check