Hornby makes Interim Management Statement 30/1/13

[Ozexpatriate]

... and more detail about the Kader effect at Sanda Kan, which I've not seen anywhere else.

Thanks! I had looked at other ones but somehow missed that one.

 

My guess is that the company that Jason Shron says failed in January 2012 is Creative Master Limited (CML) who I believe also did resin Christmas ornaments for Hallmark. (I haven't joined the CanModelTrains forum to check.)

 

There are bits and pieces of information about Sanda Kan that are readily searchable here.

 

At the time, we discussed the "Sanda Kan culls client list" topic that Jason describes. It has had a lot of ripple effects in the industry.

 

[Godfrey Glyn]

Stationmaster makes a very interesting point-

 

"In some respects this is economically sensible move as it means they stand a good chance - particularly with 'attractive' items such as the 2 BIL - of clearing their entire stock in pre-sales and having nothing left on their hands. However the opposite side of the coin seems potentially to mean that retailers, even on pre-orders alone, will have outsold the production run of a particular, attractive, item. Whether or not Hornby will do the same with Railroad versions of things such as, say, the P2 remains to be seen but more than ever not only does it say you can't even rely on a pre-order for a Hornby item but potentially those retailers who have put in good solid orders in good time might have their allocation reduced in order to supply someone else who is much larger in the retail trade and ordered late - after all the models had been sold."

 

I can easily understand why a manufacturer might want to build up a demand that means their production is fully sold to retailers before it reaches the UK, and I can see in difficult times a they might wish to sell off some through their own website before sending the item out to retailers (at the huge risk of really alienating the retailers and in turn their customers). If I were a retailer and discovered that my allocation had been cut to reallocate them to a 'big customer' I would be apoplectic. Not good business practice in my book.

Godfrey

[autocoach]

The Rapido news blogs/newsletters are truly enlightening. I would guess that Dapol has a similar operation. Hornby obviously is trying to eliminate most of the handrail hole drilling and installation with their new design philosophy. I must assume they have found alternate factories. Bachmann UK production may take up only a fraction of the Kader resources.

 

Changing to making a different product must take an enormous amount of restructuring the production process.

 

Apart from recruiting the DALEKs I doubt Margate will be able to re-enter UK production.

[brushman47544]

I too suspect that we British outline modellers will find it increasingly necessary to pre-order models to ensure we get what we want, as the likes of Hornby move towards productions runs more closely tailored to pre-orders from retailers.

 

This is not new elsewhere. For example LS Models produces excellent high fidelity models of European prototypes in limited production runs and because they are popular in most cases to get one you need to pre-order (I did for my SNCF BB22200 from C&M Models in Carlisle and I am well pleased with it, even if the colours are not quite right). And yes it does mean that you have to trust that the final model will meet your expections. But that's the way it is and modellers are used to it. The difference is that we're not for British outline.

 

One big advantage in the way LS Models operates is that they announce a whole series of numbers and liveries from the outset, so you can decide which version(s) you want. Some may appear years after others but at least you're not having to guess whether or when the version and livery you want will appear. Allowing you to make better choices on which models to pre-order no doubt also helps LS Models decide how many of each version to produce.

 

Hornby (and Bachmann et al) on the other hand announce one or two versions initially with later versions being dependent on initial sales etc. I would probably have preferred a 2-BIL with SYP, but this may be years away and with no certainty of production (BR Blue is for me more likely next year) so I have pre-ordered a plain BR green one.

 

Both approaches have their advantages, but the big question for me is how well it will work until we are used to it. Not only do we as modellers need to get into the habit of pre-ordering, but so do retailers need to make more accurate, or perhaps more educated, estimates of the numbers they will sell in the knowledge they will not be able to re-order when they've sold out. If we don't pre-order, retailers will no doubt also be more cautious withtheirs, meaning fewer of each model being made and some perhaps not being made at all.

 

Certainly Hornby's move to more limited editions and selling others only through concessions suggests a move in that direction. Incidentally, has anyone any concrete information on who these concessions are (preferably by name) so those of us abroad in particular can explore how to obtain those models.

[The Stationmaster]

The pricing policy in Modelzone suggests to me that if they aren't a Hornby concession site they certainly have some very close links with the company as it very interesting to watch how their prices move in relation to 'sale' items on the Hornby website (and to see prices go back up when they cease to be sale items on the Hornby site).

 

 

I think in some respects we may have to become used to pre-orders but if that is to be the case we do need some ground rules to apply to manufacturers.  Ground rules which will not leave us as end customers or the retailers - especially the smaller businesses - in the lurch, viz -

 

1. We need an accurate description and specification for models which might interest us (e.g I have pre-ordered a 72XX tank in BR livery, only to find from the samples that the version in BR livery is not only incorrectly detailed in a significant area but can't even be renumbered because none of the three variants of the class were like the model Hornby appears to be producing).

 

2. We need to know that a firm pre-order will translate into something which the shop will actually receive for sale to us.  It is quite understandable that strictly limited editions such as the 'Great Gathering' A4s could not be guaranteed in this way, but for what we believe to be 'normal production' models I think we are entitled to believe and find that if we play ball with the manufacturer he will play ball with us (and not do to us what could well be going to happen with the 2BIL where production took place before retailer orders could be placed).

 

3. I would hope that the manufacturer could offer us an accurate expectation on price because it is up to him - not you & me - to manage his business and its finances (while we would obviously give him leeway in the event of, say, a sudden oil crisis etc which would hit his costs).

 

4. Equally I would not expect to pay in advance - you show me that the goods are delivered to specification and I will pay you for it.  If you want working capital go to a bank, I am not a bank.

 

5. (Debatable) If the goods are to the specification and are accurate and match the description against which I pre-ordered I would consider it not unreasonable for a retailer to charge me a small fee if I cancel the order and I cannot demonstrate that achange in my financial circumstances prevents me paying for what I had ordered.

 

6. Unless the manufacturer shows that the production of the model will be 'subject to sufficient orders being received' I consider it reasonable that he will carry on and produce it irrespective of how many pre-orders he actually receives.  After all he chose to model a particular prototype in the expectation that it would sell, it's up to him to manage his marketing - not me.

 

7. (possibly a bit contentious) If a manufacturer introduces a chanhge in his product design and manufacturing techiques he would need to understand that pre-orders might no necessarily be forthcoming and it is entirely up to him to make accurate market predictions to ensure reasonable supply levels of the item.(e.g. I'm not going to pre-order the new Hornby 'Hall' until I can see what I might be getting for my money in comparison with the Bachmann item).

 

I think that will do for now

[Paddy]

It is good to see Hornby making progress as I wish them well.  If the news from DapolDave about them having their own factory is correct then what an excellent move.  Not only does it give them control of production but such an investment shows a long terms commitment to the market.  Well done Hornby.

 

Paddy

[Godfrey Glyn]

The pricing policy in Modelzone suggests to me that if they aren't a Hornby concession site they certainly have some very close links with the company as it very interesting to watch how their prices move in relation to 'sale' items on the Hornby website (and to see prices go back up when they cease to be sale items on the Hornby site).

Mike, some time ago I had a conversation with one of the lads in my local Modelzone and I gained the impression that Modelzone did not own their Hornby stock, it was still owned by Hornby and Hornby controlled the prices of their stock in the shop. He has worked there for some time so he wasn't just a new temp.

Godfrey

[Trains4U]

 

 

I've decided to remove my comment for the time being.

I'm communicating with Hornby about it.  

 

Hopefullyit can be sorted out.

 

 

Gareth - Trains4U ltd

[stewartingram]

All this talk about Hornby now having their own company..

 

Is this Hornby Hobbies (the parent company), or Hornby Trains (the UK model train division)?

I suspect the former. From the top of my head (I'm not in a position to check right now for precise accuracy of names), one of the diecast bus manufacturers failed in recent times (Northcord? someone will correct this?). I believe the bus production is now revived, with the factory in new hands - could this be Hornby? If so, then Hornby Hobbies now owns a factory, and would be able to produce the Corgi range. What impact on Hornby Trains though?

Just my 2+2=5, but may be relevant?

 

Stewart

[YesTor]

4. Equally I would not expect to pay in advance - you show me that the goods are delivered to specification and I will pay you for it.  If you want working capital go to a bank, I am not a bank.

 

I fail to see the relevance of this point as none of the major retailers charge in advance when pre-ordering any forthcoming items

 

5. (Debatable) If the goods are to the specification and are accurate and match the description against which I pre-ordered I would consider it not unreasonable for a retailer to charge me a small fee if I cancel the order and I cannot demonstrate that achange in my financial circumstances prevents me paying for what I had ordered.

 

The suggestion of customers being placed in the position of having to justify changes in their personal circumstances in order to cancel an order seems absurd.

 

6. Unless the manufacturer shows that the production of the model will be 'subject to sufficient orders being received' I consider it reasonable that he will carry on and produce it irrespective of how many pre-orders he actually receives.  After all he chose to model a particular prototype in the expectation that it would sell, it's up to him to manage his marketing - not me.

 

No manufacturer is going to pursue production of any product which in advance demonstrates itself to be non-profit making.  Businesses operate to make money and are not charities for consumers.

[Legend]

Wasn't that Rapido newsletter an excellent way of a manufacturer communicating. Hornby could learn from this. Giving customers a wider appreciation of their predicament would help attitudes toward the company which I perceive are at a low at the moment after the 4Vep debacle. People aren't quite sure what they are getting and are approaching per ordering with a degree of trepidation rather than ordering with confidence.

[Ozexpatriate]

Wasn't that Rapido newsletter an excellent way of a manufacturer communicating.

Indeed so.

 

This from Broadway Limited is nice too. Sure, it's a moving target at times but at least it is a effort to communicate with customers. (They've had their delivery problems too and had to cancel a number of projects.)

[The Stationmaster]

I fail to see the relevance of this point as none of the major retailers charge in advance when pre-ordering any forthcoming items

 

 

The suggestion of customers being placed in the position of having to justify changes in their personal circumstances in order to cancel an order seems absurd.

 

 

No manufacturer is going to pursue production of any product which in advance demonstrates itself to be non-profit making.  Businesses operate to make money and are not charities for consumers.

At least one retailer has sought deposits in advance while another has taken full credit for the goods off my card (not that they should have done - but it happened).

 

If you make an agreement to buy and then back out of your agreement why should you get away with it and leave the retailer holding the debt?  Such business should be on trust but in the present economic climate people can quite legitimately and fairly suddenly suffer a major drop in their income and no longer be able to justify hobby expenditure - that strikes me as quite a good basis for having to change a previously made agreement.

 

I'm sorry but if a manufacturer makes a decision to make something it is their business decision - and that and its cost are down to them.  If they say production is subject to receiving sufficient pre-orders then fair enough - their position is clear.  If they say they are going to make something then get on with it or say you are not going to make it - but as they only decide to make something after extensive (?) market research and development & production costing - that is when they make the decision, not X months down the line.

[The Stationmaster]

Indeed so.

 

This from Broadway Limited is nice too. Sure, it's a moving target at times but at least it is a effort to communicate with customers. (They've had their delivery problems too and had to cancel a number of projects.)

I have seen a similar format list from Heljan but it might be something that is restricted to retailers (I was looking at it yesterday with the retailer for the codes for pre-ordering a couple of items).

[Mel_H]

At least one retailer has sought deposits in advance while another has taken full credit for the goods off my card (not that they should have done - but it happened).

 

If you make an agreement to buy and then back out of your agreement why should you get away with it and leave the retailer holding the debt?  Such business should be on trust but in the present economic climate people can quite legitimately and fairly suddenly suffer a major drop in their income and no longer be able to justify hobby expenditure - that strikes me as quite a good basis for having to change a previously made agreement.

 

I'm sorry but if a manufacturer makes a decision to make something it is their business decision - and that and its cost are down to them.  If they say production is subject to receiving sufficient pre-orders then fair enough - their position is clear.  If they say they are going to make something then get on with it or say you are not going to make it - but as they only decide to make something after extensive (?) market research and development & production costing - that is when they make the decision, not X months down the line.

Mike: Neither you, nor anyone else, should be either paying in advance or placing deposits for mainstream manufacturer's models - there are plenty of retailers that don't do this. In the case of specials and one offs, made by small-scale operations, then that's different, but the customer then stands the risk (even with a credit card, although eventually you should get your money back). Mel

[Mel_H]

Wasn't that Rapido newsletter an excellent way of a manufacturer communicating. Hornby could learn from this. Giving customers a wider appreciation of their predicament would help attitudes toward the company which I perceive are at a low at the moment after the 4Vep debacle. People aren't quite sure what they are getting and are approaching per ordering with a degree of trepidation rather than ordering with confidence.

To be fair to Hornby, it has communicated problems, although not in such great depth. Rapido has the advantage that it is a privately-owned 'one man band'. Hornby is a PLC quoted on teh London Stock Exchange and there are very strict rules about what can be said and when. Also, the trouble with the city in most markets is that they don't understand any of the detail, so a comment or statement can be taken the wrong way and adversely affect the share price. It's for this reason that quoted companies make regular management statements, pre-close, and close statements.

[Miss Prism]

I agree with many points of Stationmaster Mike's 'code of practice', and I think the real casualty of Hornby's direct selling will be its relationship with ordinary stockists, who will be miffed at the prospect of not being able to obtain further stocks (i.e. further to their pre-order quantity) of new items at the same time Hornby is still advertising the item as being available direct from Hornby.

Sounds like Hornby is desperate for cash.

Where production quantities are being pared to the bone and are sufficient only to cover pre-orders, most model shops will be relegated to dumping grounds for items that are either not selling well or where Hornby has overproduced.

[stewartingram]

I can remember going to exhibitions with a Bachmann stand, where they would NOT sell new releases, in case it upset the very dealers they had sent deliveries to! Times change....

 

Stewart

[Legend]

Dont forget Hornby are making a lot more money selling direct than selling at wholesale prices to model shops. I really dont like this development. Already you can see a scare being started that 2BILs are out of stock (at Hornby)so buy now at full price. This is exactly what Hornby wants, us all rushing around for product that they are getting max £ profit for. Company wise its a very clever marketing strategy, design clever to get cost down and sell direct to get max profit. Its not good for consumer though, and going to accelerate demise of the model shop.

[Ron Ron Ron]

Just speculating....

 

Maybe the low volume of sales through the traditional model shop, no longer suits a volume toy producer, who needs to start shifting product and restoring cashflow.

Higher volume sales channels such as the "box shifters", in-store concessions and direct sales by e-comerce may now be perceived as the primary sales points.

[The Stationmaster]

Just speculating....

 

Maybe the low volume of sales through the traditional model shop, no longer suits a volume toy producer, who needs to start shifting product and restoring cashflow.

Higher volume sales channels such as the "box shifters", in-store concessions and direct sales by e-comerce may now be perceived as the primary sales points.

Very likely I would think Ron.  And you only have to read you way through a succession of statements from Hornby to begin to get a grasp of their views on selling in this way and the benefits they perceive it to have brought to them and their intention to further develop that approach to selling some of their products.

 

An interesting point in all of this is also the question of 'volume'.  Hornby have undoubtedly seen the way in which the various commissioned models have been sold and it's not impossible to consider that they have seen such marketing and selling as successful.  They might not have a vast amount of information about the volume of such sales but they definitely know how many they have done as commissions for Steam and they inevitably will also know what those models were sold for.  An accountant looking at those numbers would immediately draw - possibly incorrectly - a very simple conclusion, i.e. if 'they' can sell a reasonable volume at that sort of price surely there are buyers out there who are ready and able to pay and what's more they're prepared to do so without seeking big discounts on from RRP level.  And if I've got the message right the man about to take over at Hornby Group is an accountant.

 

What this might portend for the future I don't know - might be something, might be nothing; what is happening so far with the 2BIL might be a one-off, it might not work - only time and the market will tell.  But if it does anything to undermine the position of retailers I think it could be very bad for the hobby.

[Ron Ron Ron]

....... And if I've got the message right the man about to take over at Hornby Group is an accountant.

 

There is now a new Chairman, as of Feb 1st...and a new Finance Director, as of Jan 14th.

IIRC, the CEO is also due to retire sometime in the near future too, so I expect with all this change, there is going to be a bit of a shake-up.

[brushman47544]

Just speculating....

 

Maybe the low volume of sales through the traditional model shop, no longer suits a volume toy producer, who needs to start shifting product and restoring cashflow.

Higher volume sales channels such as the "box shifters", in-store concessions and direct sales by e-comerce may now be perceived as the primary sales points.

 

But if it does anything to undermine the position of retailers I think it could be very bad for the hobby.

 

Living abroad I rely on on-line retailers, be they box shifters or shops with a strong internet presence, for the overwhelming majority of the items that I buy. I am not that concerned about finding the rock bottom price for individual items, but I will try and buy a number of items at once to minimise postage costs. Overall I would like to pay no more including postage than RRP if I went in a shop. For low cost items, postage can be excessive if not combined with other items. So for me, it is important that I can buy different products from one source as you would expect from a local model shop.

 

If Hornby does increasingly seek to sell directly, this could have quite a deleterious effect not just on the retailers themselves but also the smaller manufacturers and the wider cottage industry that rely on sales through those retailers. I agree this cannot be in the wider interests of our hobby.

 

As an experiment I googled "Hornby eurostar" as a set appealing perhaps more to the train set market to see which retailers topped the list. Amazon, Hornby and Modelzone...hmmm. Not even Hattons in this case, which often comes up when searching by product code. Not exactly scientific but with more and more people buying online, purchasing choices are being driven away from local model shops, which will rarely get enough search hits to climb into the Google Top 10 or so.

 

But to a certain extent, future developments are in our hands. Yes, Hornby may try and persuade us to buy directly by implying we may not be able to get a model if we don't because it's "sold out", but we don't have to accept what they say. How many new models do we really need "now"? Wait until they arrive with our retailers of choice and buy only from them. Hornby will only pursue the direct sales and via concessions approach if it works - and concessions only models this year is clearly part of a strategy to encourage us in that direction. But we don't have to buy from them, at least not yet.

[Matabiau]

This apparent favouritism afforded to Modelzone seems very dubious. Has Hornby agreed an exclusivity with Modelzone that was offered to all of their retailers? Has Modelzone simply bypassed the standard Hornby distribution methods in order to get hold of this item before everyone else? I don't think we have enough information yet to make any accusations so hopefully with time this will become clearer. At the moment it all seems very anti-competitve.

[stewartingram]

I'm still confused about the mention of "concessions" - or have I missed something?

 

Stewart