Hornby 2014 - A fatal sting for retailers?

[brushman47544]

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

 

I suspect that all retailers have been offered the overstocked items at the same discounted rate. However, it is likely that many local (for want of a better word) retailers will still have the item in stock bought at the original price, so will not want to buy in any more with no guarantee of sales and still not be able to shift the higher priced originals unless they made a loss on them.

 

Someone made a point about Railroad models and prices being targeted at 'Dad and the kids'. I'm sure that's right now that we are seeing more new models being produced in both Railroad and standard range specs. I suspect the basic model will be the same out of the moulds and that different levels of detail will then be added depending on the range they're being sold in. This gives the added advantage that the main production run of a minimum number of models can be maintained, but with the numbers of each detailing variant being much less than previously. This reduces the risk of large overstocks, but also means that there may be fewer individual models of each type available and that pre-ordering becomes more important if you want to guarantee you getting it.

 

Good or bad for the hobby and retailers? We'll have to wait and see.

[Fenman]

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

 

And what should those of us do who have already lost our "local" shop?

 

Which doesn't mean I'm not sympathetic: a few weeks ago I returned to Chicago for the first time in a decade and was shocked to discover that all the general bookshops have disappeared. Amazon has destroyed everything around it. No-one could suggest anywhere in Chicago to find, eg, non-blockbuster DVDs.

 

It feels to me like there are huge forces at work, and you can see them reflected all over RMWeb with people complaining about prices being too expensive.

 

Paul

[farren]

I am not to sure if this is too little to late to help the model shops. I can only go on what happened in Leicester. when I was a kid there where 3 model shops and a few shops that had a small selection of Hornby etc. then I came back in to the hobby about 8-10 years ago, there was no full on model shops at all and only one toy shop which and a semi decent  rage RTR brass tools etc.

 

 Then model zone came to town and this took a lot of tried from the other shop but did not sell many locos as the stuck with the RRP. they shut in august the other shop closed in November so that's it the web only or out of town I have to go and post works out cheaper.  As for W,H.Smiths well that shop as been close to closing down a few times any way in the past few years and still not doing to good, so if Hornby dose go ahead with this idea its not going to help ether as smiths tends to be in  town with higher rates to pay. so needs thing to sell fast and make a good profit to make it worth there time.

 I just think this can only make things worse al round and not better. unless Hornby plains are to sell themselves only though the net.

[Retro_man]

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.

Thank you for putting what I was trying to say much more clearly! :-)

[JSpencer]

_{Today Hornby annouce's that there are 10 WHSmiths Modelzone stores (strange they skipped the more profitable Signal Box...).}

 

_{The strategy is clear now, they think Modelzone went to the wall because they were more expensive than most model shops as they sold at RRP. Reduce that and they then look more competitive....}

 

_{That strategy overlooks the following:}

_{1) It is not just price, customer service and product knowledge also play a role. Here MZ was poor with both compared with normal model shops (including Hattons). Only the Signal Box rated well here but....}

_{I have strong doubts that the new members of modelzone will be full of product knowledge and customer service.}

 

_{2) While Hornby can stock it with Airfix, Hornby, Corgi ---> their own brands and dictate the RRP of these. To work they need to convince Bachmann, Dapol, Heljan, Revell, Dragon, Trumpeter, Italeri, Hatt, Armourfast, Plastic Soldier, EFE etc etc to play the same game.}

_{Otherwise they are competitive only in one part and remain expensive elsewhere.}

 

_{3) Other model shops can simply decide that the Margins on Hornby are not worth stocking them (or price them higher). A model shop can choose to focus on more competitive products from other manufacturers. Again this is a backfired strategy unless all other manufacturers follow them.}

 

_{Overall MZ falling flat on its face again + model shops shopping less with Hornby might hammer home that really did not understand their market.}

 

_{What can they do:}

1. _{While China is now expensive, you can switch production to former eastern european countries, Spain and Russia. These countries produce model kits as good as China for half the price (shipping included). They could easily adapt to model railways.}
    
2.  I would get rid of all those reps which travel up and down the country. The ones I met had little product knowledge (I would keep the ones that know what they are talking about).

1. I would not have bothered with the MZ WHSmith adventure. Their role is manufacturing not retailing. Focus on this part.

[Talltim]

Someone made a point about Railroad models and prices being targeted at 'Dad and the kids'. I'm sure that's right now that we are seeing more new models being produced in both Railroad and standard range specs. I suspect the basic model will be the same out of the moulds and that different levels of detail will then be added depending on the range they're being sold in. This gives the added advantage that the main production run of a minimum number of models can be maintained, but with the numbers of each detailing variant being much less than previously. This reduces the risk of large overstocks, but also means that there may be fewer individual models of each type available and that pre-ordering becomes more important if you want to guarantee you getting it.

 

That was what my impression of what Design Clever was, Not simplifying models (as many seem to think), but designing them to allow for as much use of moulds for different models as possible

[sub39h]

Well, given the small size of the model railway market there isn't exactly a line of people wanting to enter the business of making the models, Chinese or otherwise.

 

It, for the most part if not all, is not Hornby passing damage on to their customers.  Costs in China are rising quickly and it is something all the hobby companies are facing everywhere.

 

Hornby, Athearn, Atlas, etc.. and even Bachmann are being squeezed between rapidly increasing costs and the perceived (real or otherwise) limit of what their customers are willing to pay.

 

In the US Exactrail stopped selling to hobby shops and went to selling everything on their own website in an effort to keep prices to the hobbyist down by eliminating the retailer discount from the equation.

 

Others have continued to increase prices, not because they are greedy, but because they have no other options.  And I will point out to those who claim it is time to move production somewhere cheaper, if it could be done it would have been started by now.  The other options are either more expensive, or don't have the infrastructure needed - its not just cheap labour but all the supporting services that a manufacturer rely on that simply don't (yet?) exist elsewhere.  

 

I'm afraid we'll have to agree to disagree. Hornby moved to China primarily out of greed, and the result was a mess. Undoubtedly the quality of their models has increased, but I do not feel they are worth the sorts of prices that Hornby are commanding for them. You are right that other manufacturers are having issues, but if Hornby moved to China to reduce costs, but instead models are costing more and are having supply and manufacturing issues, then what's stopping them moving back to Margate?

 

Unfortunately £25 is now the going rate for a coach and we'll just have to live with that, but I do not feel that £140+ (the Hattons price for the new 60s) is a reasonable price for any locomotive (perhaps barring sound locos), and this is especially true of one that doesn't even come DCC fitted! £120 for a standard range model is fair enough nowadays, but £120 for a RailRoad item again is just madness. 

[Free At Last]

Another Duchess, "City Of Bradford", announced for 2014 whilst there is still the 2013 "City of Liverpool" and 2012 "Duchess of Abercorn" to come.

 

Just looking at Hattons prices...

R3241 City of Bradford @ £131.40

R3195 City of Liverpool @ £108.00

R3119 Duchess of Abercorn @ £106

 

There's quite a price difference between what hasn't even been released yet, or am I living in hope of getting my Duchess of Abercorn that I pre-ordered in March 2012.

[steventrain]

Another Duchess, "City Of Bradford", announced for 2014 whilst there is still the 2013 "City of Liverpool" and 2012 "Duchess of Abercorn" to come.

 

Just looking at Hattons prices...

R3241 City of Bradford @ £131.40

R3195 City of Liverpool @ £108.00

R3119 Duchess of Abercorn @ £106

 

There's quite a price difference between what hasn't even been released yet, or am I living in hope of getting my Duchess of Abercorn that I pre-ordered in March 2012.

 

 

R3241 £123.95 from Rails.

 

There is list of 2014 less price that hattons!

[steventrain]

Marklin did back in 2011 with 10% discount limit but the orders is very slow and too much overstock in Warehouse.

 

Marklin lift to 20% plus discount in late 2011 to clear out of warehouse!

[Pandora]

My question is Will Bachmann follow suit with their RRP and margins to the retailers?

 

I also think it is time to Hornby to abandon railways and sell their railway  tooling to Bachmann, 

[Free At Last]

R3241 £123.95 from Rails.

 

There is list of 2014 less price that hattons!

 

But R3119 is £115.95 at Rails.

 

What I was pointing at was 3 basically the same locos, still to be made and delivered, at different prices. How does this affect the trade price and margins?

[Paul Cram]

I'm afraid we'll have to agree to disagree. Hornby moved to China primarily out of greed, and the result was a mess. Undoubtedly the quality of their models has increased, but I do not feel they are worth the sorts of prices that Hornby are commanding for them. You are right that other manufacturers are having issues, but if Hornby moved to China to reduce costs, but instead models are costing more and are having supply and manufacturing issues, then what's stopping them moving back to Margate?

 

Unfortunately £25 is now the going rate for a coach and we'll just have to live with that, but I do not feel that £140+ (the Hattons price for the new 60s) is a reasonable price for any locomotive (perhaps barring sound locos), and this is especially true of one that doesn't even come DCC fitted! £120 for a standard range model is fair enough nowadays, but £120 for a RailRoad item again is just madness. 

You don't have to buy them. Hornby moved to China to avoid going out of business at a time when labour in China was cheap. Now labour costs have risen so have prices. It is still cheaper than to produce in the UK. If you care to do a little research you will find this to be true. Presumably you will be giving up buying rtr when Bachmanns prices approach this level. A kit still cost a lot more and you have to build it.

[Western Dave]

WARNING Many of you will not like this!

 

First let me assure you that I have nothing to do with the model railway trade or anyhting associated with it, I do however run a business that imports from Europe and China as well as sourcing UK products and I employ staff and we sell products to the trade for them to resell and part of my business is a direct to market box shifting website!!

 

Secondly many of you writing comments here need to get a grip with reality. I have no idea what Hornby's or any other compnaies aim is going for forward but everyone in busienss has to realise that we are ALL going to be doing more for less in the future. The reason box shifters do so well is because "us the customer" have drivern the price ot the floor in part and the trade (like most trades) has not adapted to the challenges of technology or taken into account we are in a rapidly shrinking hobby. The truth is there is not enough business for all the current model shops. The small model shops cannot or will not place large orders with manufacturers the box shifters by nature will. If you want to stop the box shiffters great but you are not going to change very much you local model shop is still only going to place small orders (maybe more frequently meaning higher carriage costs to be passed on to us the customer). The small model shops will still have to contend with high rent, rates and insurance and parking charges and we will soon moan because they dont have the item we want. People compare the box shifters to big supermarkets and if we curb them everything will go back to how it was, REALLY!! can you imagine going back to the local corner shop and being happy to have limited choice and higher prices?

 

Let me assure you I dont want ANY local model shops to close but the reality is some will have to becuase this hobby cannot support them all now let alone with a lack of new young blood coming in.

 

Ther eis also loads of maons about how the box shifters have it easy becuase there overheads are lower, I cant see that Both Hattons and Rails ahve substantial retails sites that have to pay a lot in rent and rates and employ many staff and lets be honest any exisitng model shop could become a box shifting empire if it wanted to becuase it is very easy now to put up a full ecommerce website and trade from it, maybe like in my trade their is an apathy (thats why I had to build a direct market face, if I relied on my dealers I would not have stayed in business).

 

with regards to cost increases from China get used to it, they are a rapidly growing economy and their costs will increase and our buy prices will increase as well. You can dream of moving back the manufacturing to the UK but the cost of doing do will prevent it. i know beucase I have looked at it. Do I or anyone really want to take a punt on buying from 8000 miles away and having to forcast today what i need in 5 months for off the shelf products let alone new lines that need designing and tooling start think 12-24 months for them, of course not but the alternative is make it in the UK and read a forum like this one about how expensive it is to buy a (for example) UK made HST pack for £325 from a box shifter.

 

Like I said many of you will not like this post but it is the reality.

[Brian D]

I am a consumer of model railway locos and never buy anything at RRP. I shop around, often using the Hattons, Rails and the former Signal Box (at Rochester) internet sites as well as the nearest model shop to me, John Dutfield, approx. 20 miles from where I live. Whilst I have some sympathy with traders, I vote with my wallet, as I can't just walk round the corner to purchase a loco. It seems to me that (relative to Bachmann) Hornby prices are rising at a disproportionate rate if these latest announcements are anything to go by and if there is no discounting then I fear for Hornby's continued existence in the model railway market.

[phil gollin]

.

 

Whilst it is not simple, Hornby and local retail shops are NOT the whole story.

 

Bachmann also sells to local retailers and has anyone heard if they are similarly squeezing the simple profit margin ?

 

Simplistically. local retailers must look to Bachmann to be, AT THE VERY LEAST, more prominent in their shops.

 

It may be that the Christmas Hornby Train set gets children hooked on the hobby, but that Bachmann extras keep the hobby going.

 

.

[Legend]

I think the policy now looks quite clear

 

Faced with falling margins (higher costs from China, need to pay top buck to secure scarce manufacturing  capacity, and resistance from UK on pricing) Hornby have decided to secure a larger slice of the overall cake for themselves. To do this they are selling direct to public via their website or through concessions. This means they keep the profit that the retailer was making as well as the profit they previously made. We know that it is their stated ambition in their accounts to make more direct sales. Where they have been clever (or at least they think so)is in increasing prices to retailers but without increasing rrp. At one stroke they are levelling the playing field between their concessions and retailers as these retailers can no longer afford to deep discount like they did. There is not a remarkable difference between the cost of the new Mk2Es from concessions ,assuming the price quoted of £29.99, is correct and the price you can get them from hattons at £27.80(might you not have expected them at £25.50-£26.00 before?). You really need to be buying 3 to save taking into account postage instead of trotting to your nearest Modelzone/WH Smith.

 

2 problems. If I was Hattons or similar I'd be seriously hacked off . This must lower their volume. Maybe they are on some sort of volume rebate scheme to compensate.  Maybe they've decided in the light of the current famine from Hornby that they really need to diversify into second hand , or to make their desired profit they have to stock second hand to make up for the shortfall on Hornby margins. I don't know but clearly there is something going on given Hattons renewed emphasis on second hand and low rates of discount on Hornby

 

For the independent retailer I at first assumed this was bad because it lowers their profit margins with rates and heat &light going up, it can't be easy running a shop. Andy pointed out that the pricing structure did give more of a level playing field with the box shifters , and while this is true, there is still no escaping the fact that overall they still make less from Hornby. Added to that Hornbys policy of offering exclusive models through their collector club and concessions (although there are only 10 MZs in WHS now I think they are looking to increase this to 30)then it looks like the independents are now seriously disadvantaged. This again leads to the conclusion that Hornby has decided its route to market is primarily direct but will continue to supply those retailers that can hang on at a higher price.

 

Whyyshould we object to this? Is it any of our business?  Yes we should: Prices are going up and although model railways may retain a presence in the high street (WHS), the well stocked model shop we all love going into  will have gone!

[Andy Y]

Like I said many of you will not like this post but it is the reality.

 

You're right; some of us may not like being talked down to. There are many of us who understand exactly how the world is changing and I feel there is a place for the local model shop who can stock a reasonable selection at a fair price and is accessible. The concerns are that some of those shops may not get supplied with a reasonable selection, not be able to promote a price to the customer any different than the customer can get from the manufacturer directly and can have a sustainable business to feed their families and employ their staff.

 

Some may disappear and some may deserve to but we don't just want Amazon for Trains.

[87012]

As a retailer, this is an interesting lead, but very contradictive by certain members (those who want the local shops, but then buy from hattons and rails!,

 

Everyone is missing a massive and very important point....

 

Hornby already squoze the retailers this year, cutting there margin by 8%...whilst instructing the public about how great they were for not incresasing RRP's.. (they didn't need to as they had already robbed the margin from the shops. and we took the 'hit')

Hornby are already 15% less attractive for us to buy as retailers, and it is showing by stock levels in shops. The key point is that they have no money, and are desperate to make some... the best way of doing that is to increase price's and cut out the middle man 'ala n gauge brighton belle'. 

When the 2 BIL came out, Hornby only released them to Modelzone to as they knew they would sell them at full retail (Modelzone at that point that was already in trouble, and had lost their credit insurance with many suppliers). when the sales stopped they then released them in reduced number (after they had already creamed the profit!) to the retailers who had to explain to the customers that they were cut short by Hornbys underhand tactics. 

 

This was not only wrong for the retailers, but again put Hornby shareholders at risk, and Hornby subsequently lost another £250,000 of shareholders money when Modelzone finally popped.

 

Hornby deserve everything they get. they've made their bed, whilst they were supporting Modelzone knowingly going bust, the smaller shops that were Hornbys safety net when Modelzone shut were shutting because of the lack of support.,

 

I for one put my money where my mouth is. I stock less Hornby and more Bachmann, Heljan, Dapol and others,. they really support the shops, and there is no talk of any of them cutting trade discounts to the point where will just not stock Hornby and along with other shops.....the brand will die,.

There are plenty of other makes out there,  Hornby just cant survive on their own, no matter how big they think they are... and I'm sure Bachmann, Dapol, Heljan and the likes are hovering to pick up the pieces....

 

By the way, the guy behind Hawkins bazaar, is the guy that started Modelzone....

 

Hornby have quoted to their shareholders, that the business from Hawkins and WH Smith, will replace the Modelzone business that they have lost.....

this is utter make believe, and i feel sorry for those people with Hornby shares.....

[Gerald Henriksen]

I'm afraid we'll have to agree to disagree. Hornby moved to China primarily out of greed, and the result was a mess. Undoubtedly the quality of their models has increased, but I do not feel they are worth the sorts of prices that Hornby are commanding for them. You are right that other manufacturers are having issues, but if Hornby moved to China to reduce costs, but instead models are costing more and are having supply and manufacturing issues, then what's stopping them moving back to Margate?

All you have to do is read this thread, and many others, to see why Hornby moved to China - people want their models cheap.

 

Simply put, anything that requires manual labour has moved to China because locally produced items cannot compete against Chinese made items because almost no one is willing to pay the extra for locally made.

 

The only items that are now moving back to the western world from China are those things that now (thanks to automation) need little to no workforce to get out the door.

 

Model trains still require a great deal of manual labour, in a large part because there is no economy of scale available - you can't (affordable) automate the assembly because production runs are too small.

 

Unfortunately £25 is now the going rate for a coach and we'll just have to live with that, but I do not feel that £140+ (the Hattons price for the new 60s) is a reasonable price for any locomotive (perhaps barring sound locos), and this is especially true of one that doesn't even come DCC fitted! £120 for a standard range model is fair enough nowadays, but £120 for a RailRoad item again is just madness.

So for some fun let us look at North America, Athearn announced a Genesis ES44AC model in September. The list price for this model - no sound or DCC - is $200. At todays exchange rate that works out to £123, now add in the VAT and you get an equivalent list price of £148.  So Hornby, selling into a smaller market, is only £10 more expensive?  Sounds like a good deal to me.

 

Or how about a passenger coach - Walthers has an 85' coach for the Empire Builder - list price is $70., converts to £52 included VAT.

 

You can feel the prices are unreasonable, but they are the going rate for model trains.  China is getting expensive, but is still much cheaper than the alternatives.

 

[Gerald Henriksen]

As a retailer, this is an interesting lead, but very contradictive by certain members (those who want the local shops, but then buy from hattons and rails!,

 

 

This, and variations of it, sums it up entirely.

 

In many cases those of us who understand the value that a local retailer (or manufacturer) offers are simply outnumbered by those who simply want it as cheap as possible, and don't care about what the long term consequences are for either the hobby or their community.

 

As for your comments about Hornby, I fully agree they are playing with fire, and have said as much earlier this year when Hornby was playing games with (not) supplying their retailers.  I said at the time retailers would turn against Hornby, you are now confirming it.

[Dunsignalling]

Many local retailers have suffered a hefty loss of turnover in the last two years through non-delivery of Hornby products. This will have contributed to the closure of those that have ceased trading.

 

Those that have survived must have done the maths to assess whether they would survive without Hornby and many will have concluded that they can.

 

With only their own direct sales outlet and a handful of "concessions" Hornby will struggle to maintain their public profile and, if they end up with a disgruntled network of ex-dealers pushing the competition for all they are worth, I don't fancy their chances much in the long term. 

 

John

[Jonboy]

It is interesting to compare the model train world to that of dolls houses, that my partner has got into over the last year or so. Almost all of the dolls house shops have a big stock of the small furniture, dolls, wallpaper etc.etc. All the big ticket items such as the houses themselves on the other hand are sold by having a sample in the shop and item delivered directly from the supplier the next day if you want one. At the between £100 and £200 mark it is a similar price mark to the loco's of our world and I wonder if it will be long before model railway retailers have to consider if they want to hold the stock (and corresponding capital tied up).

 

(most of the dolls houses are supplied flat pack as well, so space is not likely to be the biggest issue).

[arran]

I suspect that all retailers have been offered the overstocked items at the same discounted rate. However, it is likely that many local (for want of a better word) retailers will still have the item in stock bought at the original price, so will not want to buy in any more with no guarantee of sales and still not be able to shift the higher priced originals unless they made a loss on them.

 

Someone made a point about Railroad models and prices being targeted at 'Dad and the kids'. I'm sure that's right now that we are seeing more new models being produced in both Railroad and standard range specs. I suspect the basic model will be the same out of the moulds and that different levels of detail will then be added depending on the range they're being sold in. This gives the added advantage that the main production run of a minimum number of models can be maintained, but with the numbers of each detailing variant being much less than previously. This reduces the risk of large overstocks, but also means that there may be fewer individual models of each type available and that pre-ordering becomes more important if you want to guarantee you getting it.

 

Good or bad for the hobby and retailers? We'll have to wait and see.

HI All

 

The Eastcoast HSTS were Modelzone products and the general trade had non so that blows that theory out the water.

 

Arran

[micklner]

I live in NE London there NO model shops in my area other than one which has non existent stock. Sadly the days of Model shops are long gone in my area.

As to Hattons it appears to be biting already they are listing LNER A3 Book law at £10 less than rrp of £154 (unbelievable the model exists and its simply a change of number and livery with a already existing Tender )  hardly a great bargain to buy from them as you have to add postage to that price too. Which as a stand alone puchase equals £6 off rrp.

 

Hornby will have to change their attitude it is not the customer fault that they have lost money on trying to sell tat. They will simply will not sell items, as in the current world most people simply cannot afford them.

They can announce rafts and rafts of models and perhaps make them BUT  without customers that raft sinks without trace and so will they.