Hornby 2023 annual results

[Fireline]

23 minutes ago, Clearwater said:

What's interesting to me is the change in strategy since LCD came in.  IIRC, one of the things he came in saying (and I'm paraphrasing) is that H needs to stop its online sales, value retailers etc etc.  Now this report has gone back to talking about the value of the D2C channel.... 

 

 

LCD was talking about the dramatic "sales" that retailers complained about. D2C is a different animal. As far as I can see, the report makes no mention of undercutting retail outlets, or selling tons of stock off on the cheap. The fire sale merchants prior to LCD didn't care about anyone or anything other than money on the balance sheet.

[Clearwater]

23 minutes ago, Fireline said:

LCD was talking about the dramatic "sales" that retailers complained about. D2C is a different animal. As far as I can see, the report makes no mention of undercutting retail outlets, or selling tons of stock off on the cheap. The fire sale merchants prior to LCD didn't care about anyone or anything other than money on the balance sheet.

 

I think both management approaches  are looking to take retail sales directly to Hornby and the margin themselves.  Fire sales are a direct symptom and readily available.  However, I would strongly suspect that retailers, particularly independent non-internet businesses, would not relish their supplier / manufacturer competing against them in the sales market.  Hornby's ability to use Collectors Club and other loyalty programmes is as much a competitive threat to the small model shop as a fire sale.  

 

From Hornby's perspective, why wouldn't they want to squeeze out the large internet retailers and take that margin themselves?  Afterall, those entities compete against Hornby through their own label commissions?  Given Hornby don't really manufacture themselves, I see increasingly little difference between them and the likes of Hattons/Rails/Kernow.

[Covkid]

2 hours ago, The Stationmaster said:

Don't forget that Hornby do appear to sell stuff out of their inventory stockpile every year (as do Bachmann of course).  Their problem is the value, and its cost, in their accounts of what is in their inventory,  That will probably in any case limit the pace at which they can sell it at reduced price apart from any conditions that come with the loans they have taken out.  Plus there is inevitably only so much the market can absorb even if some of the retail prices finish up at 70% discount off RRP.

 

The problem I think lies at the other end, and that appears to be recognised by part of the action Raeburn has instituted.  If you don't get your marketing right in the first place you are not going to keep your surplus inventory under control.   A typical example of this was the Year 2 syndrome of rapidly restocking things which sold well on release but had largely sated the market.  The result was buying in more after demand had shrunk.  And let's not forget that inventory also includes current stock not yet sold or distributed as well as old (effectively surplus) stock that couldn't be sold.

 

Hence putting an emphasis on sales.   But there is still a major need to sort out marketing and make the right stuff in the right ranges ina profitable manner (once they're sorted) in the first place.

 

I am not getting it Mike, although I am focused more on wagons. 

As I mentioned upthread Accurascale announced their 24.5 ton HUO hopper. I have no idea how many they sold but the website suggests every edition is sold out and I am pretty sure there have been second runs.  Not only that, I believe they have only sold a single edition with that number, the second run featuring something different.  No surpluses, no reduced etc etc.  They are simply wagons that folk will buy - and from a "new name" to the hobby.  I am positive that if Hornby got a decent collection of new wagons produced and marketed - in both their scales OO and TT:120 they would sell thousands. he latter scale being ideal for longer trains.  I think a train of 2x20, 32 wagons and a brakevan fits much better in TT:120 but there is your first problem.  Hornby's brakevan is a 1950s - early 1970s design so not really suitable for blue diesels.  

 

I think Hornby have a lot of work to do

[HExpressD]

2 hours ago, Clearwater said:

Given Hornby don't really manufacture themselves, I see increasingly little difference between them and the likes of Hattons/Rails/Kernow.

That's an interesting take, I presume everything in Hornby boxes just sprout out of the ground?

[spamcan61]

2 hours ago, Clearwater said:

 

From Hornby's perspective, why wouldn't they want to squeeze out the large internet retailers and take that margin themselves?  Afterall, those entities compete against Hornby through their own label commissions?  Given Hornby don't really manufacture themselves, I see increasingly little difference between them and the likes of Hattons/Rails/Kernow.

Well for starters they have to fund and warehouse the entire production run themselves (rather than flogging it to the large internet retailers) plus if they're selling direct to Joe public rather than retailers they've increased the size of their customer base, and the consequent processing and support costs, by a factor of 10 or maybe 100.  

Edited June 27, 2023 by spamcan61

[Dunsignalling]

In terms of how the products are manufactured, Hornby really aren't very different from the various commissioners, they just do rather a lot more of it, almost certainly  spread over a greater number of contractors in China. 

 

The mechanisms for getting Hornby products to the final customer aren't all that dissimilar either. Direct phone/internet sales, and individual retailers, including some of the bigger ones who also commission. The only channel Hornby use that recognised "commissioners" don't, is the general toy trade.

 

I imagine the likes of Rails and Hatton's utilise the warehousing they already need for their retail operations. In the cases of the largest, Rails ceasing to sell Hornby and Hatton's, Bachmann will have freed up capacity, so commissioning may not have increased their distribution costs.

 

Hornby's only new/extra expenditure over and will be servicing direct sales, but those boost their margins, which should easily cover any costs formerly borne by the retailers they are bypassing.  

 

Yes Hornby probably have much more invested in design/development staff and there's the corporate structure to support, but they already had all that...

 

John 

Edited June 27, 2023 by Dunsignalling

[Legend]

58 minutes ago, spamcan61 said:

Well for starters they have to fund and warehouse the entire production run themselves (rather than flogging it to the large internet retailers) plus if they're selling direct to Joe public rather than retailers they've increased the size of their customer base, and the consequent processing and support costs, by a factor of 10 or maybe 100.  

I think this is getting to the heart of it  . Hornby can’t decide whether they want to sell direct (retaining all margin for themselves) or use retailers to sell . As Spamcam points out , selling direct means the stock stays on their balance sheet , while using retailers means it’s off their books and funded by retailers  . So indecision rules and they have a foot in both camps . You can see that in TT120 . It’s only 8 months since launch and 6 months since goods received and already they are changing the way to market 

 

lack of direction /poor management 

 

Similarly they can’t decide to be full fat ( I will bet there’s a few high priced items in their stores  that’s given them cause to think maybe the public will not continue to accept high prices) or go low cost - the so called “capsule” . What a load of management flannel , they just don’t know where to position themselves 

 

Insistence on big locos . How many people are going to buy Turbomotive ? They’ve made it because it was one of the last Pacific’s to do , and they can’t see past that.  Too many bad choices on models to make =big stock . 

 

Then there is the lack of QC which gives people reason to pause and think do I really need that .

 

Add in that their costs are still too high , partly because they’ve outsourced virtually everything , particularly logistics which must be costing them a fortune .

 

So overall  I’d say this is a poorly managed company and has been for some time . Since the Olympic tat and all the eggs in the one basket that was Sanda Kan  times 

 

I’m not seeing they are making any progress here . At best it’s one step forward and two steps back 

The companies that are succeeding in this industry , Bachmann, Accurascale, Dapol  all have clear plans on price point, where they want to be and how to deliver it . This is lacking in Hornby 

 

 

 

 

Edited June 27, 2023 by Legend

[HExpressD]

I think there's a lot of reaching here, if Hornby aren't a manufacturer then neither are Bachmann, Accurascale, Rapido, etc etc...

[Dunsignalling]

38 minutes ago, HExpressD said:

I think there's a lot of reaching here, if Hornby aren't a manufacturer then neither are Bachmann, Accurascale, Rapido, etc etc...

 

38 minutes ago, HExpressD said:

 

You finally got it.

 

Virtually all manufacturing of UK-outline model trains is outsourced to contractors in China.

 

e.g. On my latest Rapido box "Designed in the UK" on top edge of box but in the data panel below "Made in China".

 

Whatever else Hornby might be (I'd suggest "Brand"), they ceased to fulfil the dictionary definition of a "manufacturer" a good many years ago.

 

John

Edited June 27, 2023 by Dunsignalling

[Ravenser]

7 hours ago, Clearwater said:

 

From Hornby's perspective, why wouldn't they want to squeeze out the large internet retailers and take that margin themselves?  Afterall, those entities compete against Hornby through their own label commissions?  Given Hornby don't really manufacture themselves, I see increasingly little difference between them and the likes of Hattons/Rails/Kernow.

 

The idea that the big boxshifters would become manufacturers in their own right and "cut out the middle men at Margate/Barwell", had a certain currency 5 years ago but the boxshifters are rather fading away.

 

It was not an impossible or especially implausible scenario. Go back far enough and the big London model shops like Hamblings , Bonds, and W&H were indeed manufacturers in their own right, and had a significant place in the trade as such

 

But it hasn't really worked out. Hattons were perhaps the boldest. But their 14xx -  done to take on Hornby directly, in collaboration with DJM, turned out to be something of a mechanical lemon, and faded away. (Was the J94  a DJM model exclusively marketed through Hattons or did they have more involvement? I can't quite remember) . Their fully in-house 66 , which was going to be the best diesel model seen in 4mm yet turned out to be more than a little flawed . The immensely long Hattons 66 thread on here (over 220 pages! ) is instructive if you wade through it . For the first hundred pages it's pure shining-eyed high voltage enthusiasm about how the boys from Merseyside are wiping the floor with Bachmann and Hornby and showing us the future of the hobby. Then about 2/3rds of the way through bits start falling off the models, other problems emerge, Hattons are forced to slash their price by a third to shift the remaining stocks, and by the end we have sunk into a twilight zone where they are flogging off broken bodies on ebay for what they can get, and are glumly disclaiming any intention to do another run, while it is noted that the key person for the project has moved on. We subsequently learn that Hattons have sold off the tooling to Accurascale, who are investing in significant modifications to address the model's flaws.

 

It's difficult to see this as a success story. The Hatton's Barclay is a good model, up to the standard of the  Hornby Peckett, and one presumes the project turned a profit. The 66's profitability we will never know. But we do know it cost Hattons their position as Britain's number one box-shifter, because Bachmann cut off supplies soon after, and Hornby dropped them to Tier 3. Was the game worth the candle? They have since done the Genesis generic coaches, but the decision to sell off the 66 tooling and the brief appeareance of the J94 in the EFE range - a Bachmann venture - looks awfully like some kind of retreat from doing their own RTR.

 

Kernow started by doing commissions and working through others. After they took projects off DJM they went direct to the factory and produced a number of RTR models . But many of them have now reappeared through the EFE range . The stated rationale is that Bachmann have far greater distribution capabilities , and that through EFE the models can reach a much wider market . There is now clearly a Bachmann/Kernow relationship of some kind. And whatever the situation with the LSWR 3-car set actually is, I do wonder whether Kernow will actually go out into the marketplace again directly with a new RTR model of their own , sold by themselves, or whether any future RTR activities (as opposed to retailing) will be channelled through EFE and the relationship with Bachmann.

 

As for Rails , I've seen it suggested their Terrier was actually develioped through Dapol. How far they have ever developed a RTR model themselves, in house , I don't know. They are acting as the exclusive retailer for Sonic's A5 , and I think some other models from several sources , but that's rather different from developing your own RTR.

 

So the retailers seem to have two major issues , when compared to the traditional manufactueres:

 

- Their capacity to develop a model themselves - as opposed to going to an existing manufacturer , like the TMC/Bachmann G5 - seems quite limited.. Hornby , Bachmann and Dapol (not to mention Heljan, Accurascale and Rapido) have abundant capacity to develop and manage models in house.

 

- in practice, the boxshifters seem to have quite limited distribution capabilities. The established manufacturers have far greater market reach. Not quite what you expect from a retailer - but apparently quite real.

 

Its also worth noting that the not-traditional-manufacturers have a somewhat patchy record in terms of the models they deliver (I am including KR Models and DJM here, although Kernow have a pretty solid track record) . Things like the 14xx, Hattons 66 and KR Fell would have been regarded as a major calamity if they had happened to one of the traditional-style manufacturers

[BachelorBoy]

10 hours ago, HExpressD said:

I think there's a lot of reaching here, if Hornby aren't a manufacturer then neither are Bachmann, Accurascale, Rapido, etc etc...

 

Bachmann is owned by Kader, a Hong Kong company with lots of factories making toys and trains on the mainland of China  

 

https://www.kader.com.hk/our_business/manufacturing_services.html

 

A few years back, Kader bought Sanda Kan, a contract manufacturer, which was a big problem for Hornby, as Sanda made most/all of its railway models 

 

ab

 

Edited June 28, 2023 by BachelorBoy
added screengrab of Kader website

[Dunsignalling]

8 hours ago, Ravenser said:

 

The idea that the big boxshifters would become manufacturers in their own right and "cut out the middle men at Margate/Barwell", had a certain currency 5 years ago but the boxshifters are rather fading away.

 

It was not an impossible or especially implausible scenario. Go back far enough and the big London model shops like Hamblings , Bonds, and W&H were indeed manufacturers in their own right, and had a significant place in the trade as such

 

But it hasn't really worked out. Hattons were perhaps the boldest. But their 14xx -  done to take on Hornby directly, in collaboration with DJM, turned out to be something of a mechanical lemon, and faded away. (Was the J94  a DJM model exclusively marketed through Hattons or did they have more involvement? I can't quite remember) . Their fully in-house 66 , which was going to be the best diesel model seen in 4mm yet turned out to be more than a little flawed . The immensely long Hattons 66 thread on here (over 220 pages! ) is instructive if you wade through it . For the first hundred pages it's pure shining-eyed high voltage enthusiasm about how the boys from Merseyside are wiping the floor with Bachmann and Hornby and showing us the future of the hobby. Then about 2/3rds of the way through bits start falling off the models, other problems emerge, Hattons are forced to slash their price by a third to shift the remaining stocks, and by the end we have sunk into a twilight zone where they are flogging off broken bodies on ebay for what they can get, and are glumly disclaiming any intention to do another run, while it is noted that the key person for the project has moved on. We subsequently learn that Hattons have sold off the tooling to Accurascale, who are investing in significant modifications to address the model's flaws.

 

It's difficult to see this as a success story. The Hatton's Barclay is a good model, up to the standard of the  Hornby Peckett, and one presumes the project turned a profit. The 66's profitability we will never know. But we do know it cost Hattons their position as Britain's number one box-shifter, because Bachmann cut off supplies soon after, and Hornby dropped them to Tier 3. Was the game worth the candle? They have since done the Genesis generic coaches, but the decision to sell off the 66 tooling and the brief appeareance of the J94 in the EFE range - a Bachmann venture - looks awfully like some kind of retreat from doing their own RTR.

 

Kernow started by doing commissions and working through others. After they took projects off DJM they went direct to the factory and produced a number of RTR models . But many of them have now reappeared through the EFE range . The stated rationale is that Bachmann have far greater distribution capabilities , and that through EFE the models can reach a much wider market . There is now clearly a Bachmann/Kernow relationship of some kind. And whatever the situation with the LSWR 3-car set actually is, I do wonder whether Kernow will actually go out into the marketplace again directly with a new RTR model of their own , sold by themselves, or whether any future RTR activities (as opposed to retailing) will be channelled through EFE and the relationship with Bachmann.

 

As for Rails , I've seen it suggested their Terrier was actually develioped through Dapol. How far they have ever developed a RTR model themselves, in house , I don't know. They are acting as the exclusive retailer for Sonic's A5 , and I think some other models from several sources , but that's rather different from developing your own RTR.

 

So the retailers seem to have two major issues , when compared to the traditional manufactueres:

 

- Their capacity to develop a model themselves - as opposed to going to an existing manufacturer , like the TMC/Bachmann G5 - seems quite limited.. Hornby , Bachmann and Dapol (not to mention Heljan, Accurascale and Rapido) have abundant capacity to develop and manage models in house.

 

- in practice, the boxshifters seem to have quite limited distribution capabilities. The established manufacturers have far greater market reach. Not quite what you expect from a retailer - but apparently quite real.

 

Its also worth noting that the not-traditional-manufacturers have a somewhat patchy record in terms of the models they deliver (I am including KR Models and DJM here, although Kernow have a pretty solid track record) . Things like the 14xx, Hattons 66 and KR Fell would have been regarded as a major calamity if they had happened to one of the traditional-style manufacturers

The exact split of design/development work between commissioners and "commissionees" is obviously not publicised, and may well vary both between participants and individual projects, depending on the commissioner's level of knowledge at the outset.

 

However, I doubt many of them "start from cold" with a proposal to an established "manufacturer" along the lines of "can you make us a Class xyz". There is presumably at least a "design brief" laying down the required specification, and that will need to be far more detailed and researched (and include at least some CAD work) if commissioning directly with a factory in China as Hatton's or Kernow have. 

 

How much Rails do before Bachmann, Dapol, or Sonic get involved is an unknown and from what has appeared in the modelling press Sonic may be something we haven't seen for some years, an integrated design and production operation based in one nation! However, the usual staged approvals of samples by the commissioner will presumably apply until/unless they launch something entirely independently.  

 

The established and new "manufacturers" Hornby, Dapol, Heljan, Bachmann, Accurascale and Rapido (plus others I'm unfamiliar with), perform design work "in house", so their "commissioning" split kicks in one step further along.

 

From that point, though, the process passes to contractors in the far east for tooling and production, which are what I define as "manufacturing", and are likely to follow similar pathways. An area of possible variability may be how far the design of tooling is advanced (if at all) before the factories take over.

 

John    

Edited June 28, 2023 by Dunsignalling

[meatloaf]

10 hours ago, Ravenser said:

 

 

 

As for Rails , I've seen it suggested their Terrier was actually develioped through Dapol.

It was deffo made by Dapol

[Graham_Muz]

11 hours ago, Ravenser said:

. Hattons were perhaps the boldest. But their 14xx -  done to take on Hornby directly, in collaboration with DJM, turned out to be something of a mechanical lemon, and faded away. (Was the J94  a DJM model exclusively marketed through Hattons or did they have more involvement? I can't quite remember) . 

 

Kernow started by doing commissions and working through others. After they took projects off DJM they went direct to the factory and produced a number of RTR models . But many of them have now reappeared through the EFE range . The stated rationale is that Bachmann have far greater distribution capabilities , and that through EFE the models can reach a much wider market . There is now clearly a Bachmann/Kernow relationship of some kind. And whatever the situation with the LSWR 3-car set actually is, I do wonder whether Kernow will actually go out into the marketplace again directly with a new RTR model of their own , sold by themselves, or whether any future RTR activities (as opposed to retailing) will be channelled through EFE and the relationship with Bachmann.

 

As for Rails , I've seen it suggested their Terrier was actually develioped through Dapol. How far they have ever developed a RTR model themselves, in house , I don't know. They are acting as the exclusive retailer for Sonic's A5 , and I think some other models from several sources , but that's rather different from developing your own RTR.

Re the J94 this was totally a DJM model and Hattons only commissioned, like others did, livery exclusives.

 

KMRC still market new exclusive models under their own brand e.g. the new tooling 0 gauge D1410 LSWR covered vans and CDA  hoppers (developed with Dapol) have both been announced in the last 9 months) and will continue to do so, watch this space.
This in addition to any models developed for the EFE Rail brand. 
 

Re Rails of Sheffield the Terrier was indeed commissioned via Dapol, they have not yet developed any RTR models directly in house. 

Edited June 28, 2023 by Graham_Muz

[Clearwater]

18 hours ago, spamcan61 said:

Well for starters they have to fund and warehouse the entire production run themselves (rather than flogging it to the large internet retailers) plus if they're selling direct to Joe public rather than retailers they've increased the size of their customer base, and the consequent processing and support costs, by a factor of 10 or maybe 100.  

 

Their sales are already over £8m in the "D2C" channel.  Rails don't publish turnover in their accounts.  Hatton's turnover is c.£12.5m (all brands).  As such, I'd wager Hornby is already the largest seller of Hornby in the UK.

 

Note in their extract they talk about the greater control over sales price/gross margin in the D2C segment.   I'd suggest that they already have the scaleable infrastructure to be able to take on extra distribution staff.  I don't think a factor of 10/100 is a reasonable estimate of the increased distribution costs.  In any event, they directly recharge that to customers.  Given that goods come in from China and will then be distributed intra UK from their warehouse, they've already funded a warehouse to take a larger amount of stock that they sell directly.  

[Clearwater]

4 hours ago, Dunsignalling said:

The exact split of design/development work between commissioners and "commissionees" is obviously not publicised, and may well vary both between participants and individual projects, depending on the commissioner's level of knowledge at the outset.

 

However, I doubt many of them "start from cold" with a proposal to an established "manufacturer" along the lines of "can you make us a Class xyz". There is presumably at least a "design brief" laying down the required specification, and that will need to be far more detailed and researched (and include at least some CAD work) if commissioning directly with a factory in China as Hatton's or Kernow have. 

 

How much Rails do before Bachmann, Dapol, or Sonic get involved is an unknown and from what has appeared in the modelling press Sonic may be something we haven't seen for some years, an integrated design and production operation based in one nation! However, the usual staged approvals of samples by the commissioner will presumably apply until/unless they launch something entirely independently.  

 

The established and new "manufacturers" Hornby, Dapol, Heljan, Bachmann, Accurascale and Rapido (plus others I'm unfamiliar with), perform design work "in house", so their "commissioning" split kicks in one step further along.

 

From that point, though, the process passes to contractors in the far east for tooling and production, which are what I define as "manufacturing", and are likely to follow similar pathways. An area of possible variability may be how far the design of tooling is advanced (if at all) before the factories take over.

 

John    

 

I suspect its part of the normal sales / market development conversations between commercial parties.  "are you interested in furhter commissions?" "yes - what have you got?" "this or this"  "hmm maybe but I'd be more interested in y as we think a gap" " well we could do that but we'd need this from you to cover development costs" "in that case we'd need the tooling to be exclusive to us" " ah ok, but for what time period?"  " we would like an exclusive livery of your tooling but we want to be the only retailer doing that variant" etc etc.

[The Stationmaster]

1 hour ago, Clearwater said:

 

Their sales are already over £8m in the "D2C" channel.  Rails don't publish turnover in their accounts.  Hatton's turnover is c.£12.5m (all brands).  As such, I'd wager Hornby is already the largest seller of Hornby in the UK.

 

Note in their extract they talk about the greater control over sales price/gross margin in the D2C segment.   I'd suggest that they already have the scaleable infrastructure to be able to take on extra distribution staff.  I don't think a factor of 10/100 is a reasonable estimate of the increased distribution costs.  In any event, they directly recharge that to customers.  Given that goods come in from China and will then be distributed intra UK from their warehouse, they've already funded a warehouse to take a larger amount of stock that they sell directly.  

Hornby might well be the largest singleseller of all Hornby brands but is it the largest seller of the model railway brands?   I suspect that TT120 sales might possibly have put it there but model railway direct. sales dropped back considerably in the year after lockdown (when they'd risen dramatically).  The growth in direct sales in Q3/Q4 almost exactly matches the value they have quoted for TT120 sales so did a good part of the Q1/Q2 growth also come from railway brands - which were. in any case a long way behind the other brands.  And has the inclusion of Oxford also made part of the 2022/23  growth?

 

Until (hopefully) we see a breakdown of route to sales percentages by brand  year on year we don't wholly know where the growth has come from apart from TT120

 

1 hour ago, Clearwater said:

 

I suspect its part of the normal sales / market development conversations between commercial parties.  "are you interested in furhter commissions?" "yes - what have you got?" "this or this"  "hmm maybe but I'd be more interested in y as we think a gap" " well we could do that but we'd need this from you to cover development costs" "in that case we'd need the tooling to be exclusive to us" " ah ok, but for what time period?"  " we would like an exclusive livery of your tooling but we want to be the only retailer doing that variant" etc etc.

The usual procedure wherevet I have seen anything of it is than the commissioning clinet issues a spec to the factory, or factories in oorder to obtain a price and potential delivery dates.  The spec will include the amount of work required, to whatever standard, as in a number of cases the commissioner does all the research and design. 

 

Acceptance of teh factory's quote is then part of the decision process of whether or not to go ahead with the project.  Yes - factories have touted for work but in some cases they have been newcomers to the market with no real provenance so have been ignored.  and of course in the case of Sonic it has worked the opposite way round with Chinese designer starting the process although I don't  know at which point, or by whom, the subjects of his models were selected.

 

In most cases as far as I'm aware subject selection, research, specification, and design CAD work is done in Britain/by the  British brand for most brands in the British market although KR appear to have placed design at the factory end (as did DJM to some extent - but not always - as various common Chinese model railway engineering and assembly practices appeared in DJM models)

[JSpencer]

On one hand, I am surprised at the increase in digital sales from Hornby as my own (admittedly few) personal experiences have been way short of what I get with retailers. On the other hand, with a lions share of new products held for their own online sales, and retailers getting very few of those... has probably created pressure to shift sales from retailer to Hornby direct.

It would be interesting to see what actually sold through it. My hunch, this is most likely those all new, newly tooled models that people are most likely to desperately want, afraid of missing out on (cannot be pre ordered securely through a retailer anymore!) so go direct to Hornby biting their nails.....

 

If so, Is it something to celebrate though? 

 

In general, retailers seem perfectly apt at securing stock they want for their customers with relative ease and comfort from other suppliers, yet Hornby can cancel orders at the last minute, shift it to direct sales and then "yippee look at the success we get here".

Retailers too can adapt and with at least 2 newcomers growing their range fast, Hornby may find themselves less and less in the model shops. To the point that even more mundane supplies (track etc) may shift entirely away from them.

 

A niche they still cover well, are entry level models. At least for locos.... but seriously they need to look at those railroad wagons, most being former Triang-Hornby on stretched 70s generic chassis priced well above their value still with the giant tension locks.... At this moment, I can buy Dapol's Made in Wales wagons with Nem pockets that are cheaper, to scale and far better value for money than Hornby's railroad!

 

The problem will eventually be where will they sell their railroad models? Toy shops no longer seem to hold them, and model shops may be less inspired to stock Hornby as the tier systems and supply issues makes them loose too much time. They can sell railroad via direct sales, but these are not fast in and fast out lines (unlike all new items). Stock here taking two years to shift is perfectly normal. Can they support that?

 

There are some challenges ahead as:

• New makes produce better full fat models than Hornby's own full fat range (classes 31,50,56,60 in danger)
• Provide all new wagons in abundance with multiple running numbers and livery from day one
• retailers position themselves better to protect their bottom line

 

On the niche one-off loco front, Hornby has a great opportunity. The main rival - fortunately for them - not being up to Hornby standards yet.

And coaches remain brilliant - if we could more easily order them.

 

Finally - blue tooth HM DCC is real winner here with no rival in sight right now.

 

 

[woodenhead]

Hornby are following the Apple ecoshere approach - keep your customers close and keep them trusting you - they do this through keeping the app store secure, more secure than Google's and offering new products under their own name, making all their products talk to one another with ease so you buy more and bringing out lots of new developments all the time to keep people excited.

 

By taking TT120 to market via a direct to customer selling it did re-risk the launch but it also gave Hornby better control, it got a lot more data about it's purchasers, got a bigger slice of profit and kept prices lower as no middlemen to pay and stopped those entering newly into model trains from seeing other company's products.

 

As soon as a prospective Hornby customer steps inside a model shop they see Bachmann, Accurascale, Dapol, Heljan, Peco, Zimo, ESU etc and the £ that they intended to spend on Hornby might go to another company.  Now clearly a lot of Hornby customers also buy from other companies but the more they can keep you out of the model shop and on their website the more chance you buy their products.

[JSpencer]

55 minutes ago, woodenhead said:

Hornby are following the Apple ecoshere approach - keep your customers close and keep them trusting you - they do this through keeping the app store secure, more secure than Google's and offering new products under their own name, making all their products talk to one another with ease so you buy more and bringing out lots of new developments all the time to keep people excited.

 

By taking TT120 to market via a direct to customer selling it did re-risk the launch but it also gave Hornby better control, it got a lot more data about it's purchasers, got a bigger slice of profit and kept prices lower as no middlemen to pay and stopped those entering newly into model trains from seeing other company's products.

 

As soon as a prospective Hornby customer steps inside a model shop they see Bachmann, Accurascale, Dapol, Heljan, Peco, Zimo, ESU etc and the £ that they intended to spend on Hornby might go to another company.  Now clearly a lot of Hornby customers also buy from other companies but the more they can keep you out of the model shop and on their website the more chance you buy their products.

 

That might work for apple where my intention is to have only one telephone at a time (and the apps are obsolete in a couple of years, so hardly tangible items I will cling on to....), I doubt this is their strategy and it is hardly one that will fit this market.

 

In the 1950s, people into OO were generally stuck with one make or another. Triang 2 rails, Dublo 3 rails and DC, Trix 3 rails and AC. The products offered by each was enough to do a text book model railway (an express loco, a mid range loco, a frieght loco, and a shunter). By the 70s, the market was sufficiently standardized (through bankruptcy of some and the appearance of new players) to allow you to run any loco, from any make, on 2 rail track with the same controller. 

 

A newcomer to TT is - for the moment - mostly stuck with Hornby. But these will be a small part of the market for at least the next 20 years. Plenty of time for others to join in if they see fit.

 

The bulk of the market is all us diehards. We are well aware of all these other brands and the fact their website does not have them, is enough to keep us more in model shops and away from their website! And it will be both fool hardy and futile to try otherwise. We buy products that we think most benefits us, not because they are simply there.

 

 

[woodenhead]

@JSpencer Nevertheless I think it is what they are aiming for especially with TT120.

 

It is a hark back to the 1950/60s when you picked your poison and hoped they did the engines you liked.  The launch plan in 2022 was they were doing 'everything' in TT120 iirc enough for Gaugemaster and Heljan to step back from doing their own models.  TT120 was not just about existing modellers, it was about going outside traditional routes, finding new modellers via grandparents remembering  their youth and introducing the grandkids to table top trains.  Those purchasers if attracted to the Hornby website could be kept within the ecosphere and not see other alternatives, in the ideal Hornby TT120 world - your track, control, buildings, locomotives and coaches all come from Hornby - what else would you need?

[Dunsignalling]

1 hour ago, woodenhead said:

@JSpencer Nevertheless I think it is what they are aiming for especially with TT120.

 

It is a hark back to the 1950/60s when you picked your poison and hoped they did the engines you liked.  The launch plan in 2022 was they were doing 'everything' in TT120 iirc enough for Gaugemaster and Heljan to step back from doing their own models.  TT120 was not just about existing modellers, it was about going outside traditional routes, finding new modellers via grandparents remembering  their youth and introducing the grandkids to table top trains.  Those purchasers if attracted to the Hornby website could be kept within the ecosphere and not see other alternatives, in the ideal Hornby TT120 world - your track, control, buildings, locomotives and coaches all come from Hornby - what else would you need?

The unspoken admission is that Hornby's share of the OO market is shrinking due to multiple strong competitors. TT:120 is their plan to create a safety zone for themselves.

 

Problem is, as I see it, is that all the launch effort has been directed at the Hornby faithful and the uninitiated who we are regularly told are unaware that anybody else sells model trains.

 

In most cases, the purchase of any loco involves a choice being made over another one and I suspect that will usually be a Hornby OO loco....

 

John

[Dunsignalling]

8 hours ago, Clearwater said:

 

Their sales are already over £8m in the "D2C" channel.  Rails don't publish turnover in their accounts.  Hatton's turnover is c.£12.5m (all brands).  As such, I'd wager Hornby is already the largest seller of Hornby in the UK.

 

Note in their extract they talk about the greater control over sales price/gross margin in the D2C segment.   I'd suggest that they already have the scaleable infrastructure to be able to take on extra distribution staff.  I don't think a factor of 10/100 is a reasonable estimate of the increased distribution costs.  In any event, they directly recharge that to customers.  Given that goods come in from China and will then be distributed intra UK from their warehouse, they've already funded a warehouse to take a larger amount of stock that they sell directly.  

And Rails don't sell Hornby anyway!

[Ravenser]

5 hours ago, The Stationmaster said:

Hornby might well be the largest singleseller of all Hornby brands but is it the largest seller of the model railway brands?   I suspect that TT120 sales might possibly have put it there but model railway direct. sales dropped back considerably in the year after lockdown (when they'd risen dramatically).  The growth in direct sales in Q3/Q4 almost exactly matches the value they have quoted for TT120 sales so did a good part of the Q1/Q2 growth also come from railway brands - which were. in any case a long way behind the other brands [Emphasis added] .  And has the inclusion of Oxford also made part of the 2022/23  growth?

 

Until (hopefully) we see a breakdown of route to sales percentages by brand  year on year we don't wholly know where the growth has come from apart from TT120

 

 

 

You've picked up on another example of the "everything else is a minor detail compared to OO" mentality that afflicts these discussions. Airfix is clearly a big brand within Hornby Hobbies - and unlike Hornby OO and Hornby International in HO/N/TT, it's a global one. Railway modellers get very parochial - plastic kit modellers are anything but...

 

If Airfix have a substantially  higher percentage of digital sales than Hornby OO, then a large slice of the website sales will be Airfix. That accords with the website itself - there are big stores for Hornby (including TT:120) , Airfix, and then a fragmented nest of brand sites for Hornby International's HO and N/TT  brands. My impression is that the rest of the brands amount to bits and pieces on the shop side 

 

Treating the digital sales as basically all OO simply ignores that....

 

This YouTube video is instructive about the way Airfix is marketed through the Airfix Club , and how the Club locks in digital sales:  Airfix Club 2023 review

 

The core of the offer is a special kit , with digital discounts making up the balance of the membership price - if you buy through the Airfix  website. Given that the kit is a special production for Club members, not otherwise on general sale , I wonder if another item in the "slower-selling items ordered in Q3" was in fact the stock of Airfix Club kits and bumf , ordered in a lump in last quarter 2022 for sales throughout 2023...

 

Hornby - and for that matter Bachmann - have tried something like this with model railways. The trouble is that the Airfix Club kit for the year is a potentially desireable product, of immediate interest to many plastic kit modellers m something clear in the video. Whereas the Club Wagon has tended to be regarded as something of a sick joke and an embarrasment.

 

Hornby have a bit of an issue looming with their TT Club. Offering free membership for the first 3 months after launch resulted in an instant big pool of interested people, a very effective marketting channel and a large scale "followers' discount" scheme. But they got no revenue. On renewal , people will have to pay. What can Hornby offer as a credible TT product that will induce people to buy membership to get it - with the website discounts as the "top-up"?  (A TT:120 van with an exclusive correct W prefix might work in Year 1 - but what do you do thereafter??)

 

 

 

[Mike Bellamy]

 

Just to add a bit of controversy to the numerous comments in this topic - now on page 8, why haven't any of you (except Mike SM) said anything about the Bachmann results ?

 

Just two comments in 24 hours . . . . . . . . 

 

https://www.rmweb.co.uk/topic/180035-Bachmann-europe-2022-results/#comment-5211866

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