Hornby 2014 - A fatal sting for retailers?

[davidw]

I just had this thread pointed out to me. I am rather stunned by the implications that this makes to the retailer, and the customer. Earler I saw the list from Hattons and considered many items price with little or no reduction on RRP.

 

This policy can't be sustainable - and year on year for many indicates a 20% price hike.

[Andy Y]

From conversations I've had I think it inevitable that you'll see price increases from Bachmann in due course reflecting the rises they're seeing in costs and labour from China.

[robmcg]

It remains to be seen how sales volume is affected by a 20% price-rise, give-or-take, over a year or so. I expect stand alone hobby shops will have to work out how to deal with these changes.  I enjoy shopping for models, and selling them sometimes, and with price inflation selfessly hope that some of my recent purchases will retain their value. <g>

 

But if the market is over-supplied with mint second-hand 'tested' models, maybe I will lose...  Either way I enjoy the hobby. 

 

It can be taken as a given that the cost of supplying UK prototype 00 RTR models has risen greatly, recently. 

[orford]

This one could be a bit contentious - but we ALL find these days that we have to work harder and longer for less reward. And many, perhaps even most, find their income is worth less in real terms month-on-month.  And every day many with their own businesses find that they can no longer continue, perhaps especially in the retail sector.

 

It's utterly tragic for those so affected -  and this might sound rather harsh - but why should Model Railway Retailers be any different to everyone else?

 

They are just going to have to deal with it, rather than moaning that their profit margins are going down.  So are mine - and yours - and his - and hers - and theirs!

 

The good ones with a sound, flexible and adaptable business policy will most likely survive in this current harsh retail envoronment - and capping the ability of the box-shifters to seriously under-cut them can only help that in the longer term.

 

The poor ones (or perhaps the ones who spend their time moaning on the internet, rather than using their time to streamline, adjust and effectively manage their businesses) will disappear.  Just as in every other area of retail life. How many big names have vanished from the HIgh Street in recent years because they simply couldn't (or wouldn't) adjust to changing times?

 

Increasing prices to above RRP in an effort to maintain profit margins, as suggested by some in this thread, will very quickly result in one very simple fact........no sales.

 

It's not Hornby's fault......Whether we like it or not, it's the times we live in.  Period.

[andyman7]

then it's quite simple - Hornby need to find new manufacturers. I don't think profit is a naughty word, but they have to take responsibility for their bad choices rather than trying to pass the damage onto their customers. this isn't just bitterness on my part, but the fact that if they don't sell their models at all then they are worse off than if they made a lower profit than before. as I already mentioned I can't see the Class 60 or HST packs being massive sellers at anywhere near the RRP which is ultimately going to be a problem, and charging £120 for a RailRoad item (which is meant to be the budget range) shows just how bonkers Hornby's pricing strategy presently is. they already played a large hand in the demise of ModelZone with their ludicrous pricing structure. it doesn't look like they've learned their lesson. 

It really isn't as simple as 'bad choices', the issues are affecting every manufacturer. Bachmann prices are going to have to go up too, indeed look at the list price increases between 2012 and 2013. I understand your frustration, but this really isn't  case of one manufacturer making some errors and passing the costs on to customers - in fact all the evidence is of doing their best to try and get prices down (e.g. sound for £140 versus £260, and putting releases such as the Crosti 9F in the Railroad range at £115 rather than as a £150 main range model).  

[PhilH]

There's going to have to be a line in the sand somewhere - despite the 'addiction' threads and the 'must have one of those' posts surely the purchase of models is not exactly a necessiity of life and, again judging by the amount of posters who seem to have to hide their purchases from partners, not the most easy of things to justify.

 

My point is that the willingness to keep paying higher prices for these luxuries is finite for a lot of people. I don't know what the answer is but manufacturers and perhaps retailers have to realise that if push comes to shove people will just do without the latest offering, whether through necessity or choice.

[robmcg]

 

.......

 

 I wonder if we are in fact witnessing the start of a major change in Hornby's marketing philosophy where they will deliver the modellers' aspirations for, basically, a wider variety of potentially less marketable locos but at a price level which will cover the investment through comparatively low sales volumes (compared with the way Hornby have worked in the past) with relatively consistent retail pricing across all outlets?  In other words they are almost working, or aspiring to work, like the model commissioning market as well as telling us that if we want these things we're gonna have to pay their price for them and we can forget pile it high and sell it cheap prices.

 

 

Worth repeating. And it will be interesting to see how Hornby phrases its interim report in 2014.

 

Meanwhile we can watch and see what models hit the shops in the next few weeks.

 

Rob

 

p.s. Stationmaster thankyou for your insightful summary.

[Retro_man]

This one could be a bit contentious - but we ALL find these days that we have to work harder and longer for less reward. And many, perhaps even most, find their income is worth less in real terms month-on-month.  And every day many with their own businesses find that they can no longer continue, perhaps especially in the retail sector.

 

It's utterly tragic for those so affected -  and this might sound rather harsh - but why should Model Railway Retailers be any different to everyone else?

 

They are just going to have to deal with it, rather than moaning that their profit margins are going down.  So are mine - and yours - and his - and hers - and theirs!

 

The good ones with a sound, flexible and adaptable business policy will most likely survive in this current harsh retail envoronment - and capping the ability of the box-shifters to seriously under-cut them can only help that in the longer term.

 

The poor ones (or perhaps the ones who spend their time moaning on the internet, rather than using their time to streamline, adjust and effectively manage their businesses) will disappear.  Just as in every other area of retail life. How many big names have vanished from the HIgh Street in recent years because they simply couldn't (or wouldn't) adjust to changing times?

 

Increasing prices to above RRP in an effort to maintain profit margins, as suggested by some in this thread, will very quickly result in one very simple fact........no sales.

 

It's not Hornby's fault......Whether we like it or not, it's the times we live in.  Period.

Yes, the profit margins are going down, but the overheads of a retail store are going up every day. If sales are not increasing enough, then eventually the locks get put on the door...

 

If a retailer needs the full margin to pay his overheads and eke a meagre living, and then the supplier cuts the margin in half, the retailer has to double his sales just to stay even.

 

The only way to increase sales is to gain market share from the box shifters which is a very difficult thing to do...

 

So when last the main street hobby shop closes for the last time, do you think the box shifters will continue their deep discounting? Do you think they will start selling those little bits and pieces of stuff that we can usually rely on them for?

[orford]

Another point here which I think is worth making.

 

Here we are, all moaning about Hornby's new prices... but in the current economic environment Hornby could have been entirely forgiven for saying this morning "Sorry chaps - nothing new for next year...we simply cannot justify the investment, or the outlay in the current climate.  But here's a couple of existing models with new numbers..... ."

 

This would be especially understandable after the somewhat difficult period which they as a complany have recently endured.

 

But what have Hornby actually done?  They've given the hobby what is quite possibly it's best and most exciting 'new release' programme (in my opinion) for some time!

 

Come on guys.  I believe we should be applauding them and encouraging them.....not complaining. 

[orford]

Yes, the profit margins are going down, but the overheads of a retail store are going up every day. If sales are not increasing enough, then eventually the locks get put on the door...

 

If a retailer needs the full margin to pay his overheads and eke a meagre living, and then the supplier cuts the margin in half, the retailer has to double his sales just to stay even.

 

The only way to increase sales is to gain market share from the box shifters which is a very difficult thing to do...

 

So when last the main street hobby shop closes for the last time, do you think the box shifters will continue their deep discounting? Do you think they will start selling those little bits and pieces of stuff that we can usually rely on them for?

 

"The only way to increase sales is to gain market share from the box shifters which is a very difficult thing to do..."

 

.........Which is precisely why capping the box-shifters is an extremely good idea.

 

"Yes, the profit margins are going down, but the overheads of a retail store are going up every day......."

 

My income is going down - and my fuel bills are going up.  What's the difference?  I repeat - unfortunately it's the times we live in and we all have to deal with it as best we can.

[Retro_man]

.........Which is precisely why capping the box-shifters is an extremely good idea.

But if the box shifters can still survive on 5% or 10% of the reduced margin and the high street traders need all of the previous full margin - how is the box shifter being capped and how is this helping the high street retailer?

[Andy Y]

But if the box shifters can still survive on 5% or 10% of the reduced margin and the high street traders need all of the previous full margin - how is the box shifter being capped and how is this helping the high street retailer?

If a box-shifter charges £100 + £4 postage and your local model shop charges £110 that reduced differential may mean more buyers use their local where the additional service benefits may give the added value for more parity than if there were a £20 difference.

[Horsetan]

i do find it amazing that a few days ago people were bemoaning the lack of detail and design clever and saying they were prepared to pay a premium  for detail.Within the course of a day everything is now too expensive. Presumably all those models not yet tooled will now revert to design clever as it is clear people aren't prepared to pay for detail.

 

I'm so glad I only mess around with kits these days....

 

The last new Hornby model I bought (which itself was once in a blue moon) was the Thompson B1, and even that was going at a discount.

[The Stationmaster]

But if the box shifters can still survive on 5% or 10% of the reduced margin and the high street traders need all of the previous full margin - how is the box shifter being capped and how is this helping the high street retailer?

 

That is an interesting question and I suspect that the answer is not quite what you imply.  At the moment - with deep discounting and what would seem to be a high sales volume - Hattons make a nett profit of 3% (on the evidence of their own accounts).  But that is dependent on volume - if they lose the volume they potentially lose the cash flow which could affect their stock financing which could affect the way they clear their invoices ... and so on.  In other words it does not necessarily follow that someone in their position can survive on much reduced margins - because their sales are likely to take a hit as other shops become more price competitive.

 

However there is another side of the coin for all retailers and that is the simple matter of gross profit (simplistically the margin between what they pay for stock and what they sell it for) and nett profit/loss.  If gross profit shrinks due to smaller trade margins from the manufacturer but their costs remains constant their nett profit will decline; if their costs increase then their nett profit might well become a loss.  Somewhere in the retailer's business plan there might come a point at which they can simply no longer afford to offer manufacturer H's goods at a competitive price without incurring a loss on every sale, so they stop stocking it or give up their lease etc.

 

Thus in protecting (so it could appear) their own position in order to suit a different type of market what Hornby might have done  is put their retailers in an invidious and potentially disastrous position.  There is clearly a gross margin below which a business cannot survive -- end of story.

[peteskitchen]

What worries me is every year there are quite significant prices rises, always above inflation. These may be avoidable or not, but the gap between models and other things kids like to buy is forever growing bigger. How long before the lack of new blood in the hobby starts to effect sales? Reduced market means bigger prices, a never ending spiral.

[rodger5591]

I'm speculating but I think the impact of the easy availability through the internet of second hand models must also be a factor in Hornby/Bachmann/Dapol pricing and production calculations in recent years. In the past a model, especially locos, would likely have 1 owner in its life time, and before the rise of the internet, it was harder for second hand sellers and buyers to find each other in significant numbers. So production runs were longer and the numbers in a run quite high to meet market demand. Now its easy for a loco to have several owners in its life time, most sold person to person. Those which are sold second hand while still being offered new in the catalogue are lost sales to Hornby/Bachmann/Dapol and the model shops.

[darren01]

I would not bank on Bachmann delaying their price rise until the summer. I think it will come through in March as usual. I do hope I am wrong.

Hi 

 I have heard that we are looking at a 20 to 25% price rise next year!

[Oakydoke]

What worries me is every year there are quite significant prices rises, always above inflation. These may be avoidable or not, but the gap between models and other things kids like to buy is forever growing bigger. How long before the lack of new blood in the hobby starts to effect sales? Reduced market means bigger prices, a never ending spiral.

Is that the reality though? Hasn't that flow of young kids already dried up some years ago?

I have rarely seen a youngster in any of the specialist model shops, with or without parents, unless accompianied by a railway modelling Dad or Grandad, who was buying for themselves.

Maybe the retailers on the forum can provide an insight into their customer demographics?

[phil gollin]

.

 

I remember the early 90's when there SEEMED to be a bit of a war between the manufacturers and the "box hifters"  -  does anyone know the details of the who, where, what, when of that scuffle and whether it has any lessons for people nowadays ?

 

. 

[arran]

HI All

 

While discounts to ALL retailers may be the same, early settlement of account discounts are not.

 

Regards Arran

[Unknown Warrior]

Hornby were very wise to start the Railroad Brand, this at least gives Dad and the Kids a chance. As I said last night I think the rest of us will have to be more selective and stop buying everything we want!

[Mike70]

When you compare some of Hattons prices against the prices on Hornby's website, it is possibly worth joining the Collectors Club to qualify for 10% discount, then buying direct from Hornby.

 

That might be good for Hornby, but not local model shops.

 

It assumes the prices hold and don't increase on Hornbys website.

 

If stuff doesn't sell, you might see discounts later in the year. But then you risk missing out on more popular items.

[JimC]

While discounts to ALL retailers may be the same, early settlement of account discounts are not.

 

In my days in the motor trade there was much more to it than that. There were, for example, end of year bonuses for shipping more than x items, for shifting stock that the suppliers especially wanted to clear and so on. All of those were so large that box-shifter equivalents sold for something closeto costs and made up on the bonuses. But the boxshifters got lower prices anyway. Whether its the same in the model trade and nowadays I have no idea.

[charliepetty]

Those who create the monsters, should not moan about them!

 

If an item is overstocked at the manufacturer, is it not fair to offer 'Every Stockist' the product at a heavily reduced rate, not just ring the big three and let them dump them out at silly prices?

 

Take Blue Pullmans and East Coast HSTs.  WHY has not every stockist got them cheap?    Funny that.

 

You cannot pick on the little people while leaving the powerfull alone,

 

A policy of FIXED discounts should apply, but ask yourself this question:  Small shop orders £1000 at trade and Larger Shop orders £100,000.00 at trade, who gets a better deal!

 

Sadly we all know the answer.  You have to be fair with everyone  and not create giants who WILL wipe out the little people.

 

We all need local shops, small retailers, friendly advice.  PLEASE support them, or loose them.

 

Charlie

[Talltim]

 

  PLEASE support them, or loose them.

 

 

Into the wild?