Hornby 2014 - A fatal sting for retailers?

[Coach bogie]

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.

 

I find this is already the case and my two local shops have most of my business for some time.  Remove the postage and the price differential becomes more acceptable, especially when you get the added value of a trip out, no expense of a drive to the post office as they try to deliver when you are out,  personal service, great advice, try before you buy and, of greatest importance, tea and biscuits for the regulars.

 

Mike Wiltshire

[Brian D]

I have always enjoyed fantastic service at John Dutfield but a 40 mile round trip can hardly put this dealer in the "local model shop" category as far as I'm concerned and I think therefore that there is a great misnomer about so called local model shops. Their numbers have dwindled over the years (non in central London if you discount Ian Allen at Waterloo now that Modelzone has gone) so "they ain't all that local". Nice if you have one round the corner but the vast majority of modellers, like me, I guess haven't and thus resort to the internet. I guess Hornby are now trying to cut out the middle man and price their own web service competitively by default. Sounds like a recipe for disaster to me.

[PhilH]

 

Nice if you have one round the corner but the vast majority of modellers, like me, I guess haven't and thus resort to the internet. I guess Hornby are now trying to cut out the middle man and price their own web service competitively by default. Sounds like a recipe for disaster to me. 

 

 

If that is the case and Hornby are trying to take advantage of the popularity of internet shopping by selling directly via that medium then surely it's a recipe for success?

[Paul Cram]

Whilst I live around the corner from John Dutfield they stock very few models that I would but. I think the only model I have purchased is a Parkside cattlewagon kit. I have managed to pick up w irons and hand rail knobs with wire but the main purchases are paint and thinners. I usually pick up an MRJ but they haven't had the last 2 issues. Most other purchases are at exhibitions as these tend to be the best places to get the bits I want.

[farren]

Shopping online  is great if you know what you're after but the impulse buying is not so likely. Plus you can so easily stop looking at websites as they don't have what you want time and time and you just stop looking. Before you know your missed something or they gone out of business. 

[micklner]

If that is the case and Hornby are trying to take advantage of the popularity of internet shopping by selling directly via that medium then surely it's a recipe for success?

Only if they sold the items at a percieved bargain price , sadly dont think that will be happening !!

['CHARD]

Is it not true that many local model shops have already been deeply hit by the big discounters and box-shiters, 

 

 

The last-mentioned are presently finding sitting down somewhat uncomfortable.

[Siberian Snooper]

As far as possible I make my purchases from The Model Shop, Exeter, as this is now my nearest proper model shop with all sorts of bits and pieces, this is a round trip of nearly 90 miles by road or 110 by rail. I would have purchased my Stars from him but as the Steam Lode Star more closely represents the Stars as in the '20's, so Steam got the business. If Dave can't source my requirements then my purchases are usually made at ExpoEM, Railex or Scaleforum, with impulse purchases made at any local shows I can get to.

 

If Hornby decide they don't wish to supply my nearest model shop they won't be getting much trade from me, especially of the standard of product is somewhat iffy like the 42XX, 52XX. I was tempted to make purchases of these and also a 72XX although well outside of my time frame, I shall eventually get around to building my PDK 42XX kit.

 

SS

[Mike Storey]

There has been a number of price increases, it's a shame as I used to be able to save up any money I got and I could buy 2 models a year by myself, now it's 1. The Colas 56087 looks tempting but at £147 (off the top of my head) even a Hattons that's £120! I purchased my L/E 47798 for less than that! This economy sound will help the market I think. Even Hornby railroad models aren't that cheap. One thing I am a bit worried about is by upping prices we may be pricing young hobbyists out of the market

 

On the youngsters, I would hope not. When I were a lad, once whippet had been fed, I could only afford second-hand locos and coaches, but that didn't stop us. Plenty of bargains to be had on that new-fangled interweb thingymejig. Seriously, there appears to be far more available second-hand now (or pre-owned as our US cousins and marketing people wish us to say - not necessarily, I think - it might have been nicked), and far more accessible, That can only be good for the hobby, as it allows the grown-ups to part-fund their next, shiny new monster...

[sub39h]

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.

 

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.

 

Forgive me if I'm oversimplifying things, but as we are a developed economy our labour costs have been much more stable than China's have in recent years. If Hornby went to China to make models more cheaply, and now they are more expensive than we ever saw in the UK then the logical conclusion (at least to me) would be that bringing production back home would be better both financially and in terms of Hornby's control on manufacture. It would also have lower and more predictable shipping costs.  

 

I can't comment on your comparisons because I am not familiar with the US market, but the general impression I get is that their models are less likely to have errors than ours and and generally higher detailed but I am happy to be corrected on this. 

[Mike Storey]

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.

 

Where were the model shops in NE London?? I lived in Finchley/Barnet in the sixties and early seventies and the only model railway shops I recall were Beatties at Southgate and a small one in Hornsey, plus a mixed hobbies shop in Mill Hill. Otherwise you had to go into Central London (Marylebone High Street or Holborn) or out to Leyton or South of the Thames. There may have been others in West London but I never went there then, and there were many more independent toy shops in those days, but they rarely had anything of interest beyond Airfix kits and the odd train set for Christmas. Did I miss one or two in NE London?

[andyman7]

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.

 

I have sympathy with your position, but I think your assessment of the Modelzone situation is wrong - well before MZ went under the Hornby/Scalextric stock was supplied on a concession basis so there was no risk (and only upside) to pushing out short-supply models through them. It did not increase their exposure to losses subsequently realised through via Airfix/Corgi stocks.

 

Back in the 50s if you wanted Hornby Dublo, you had to go to the officially-appointed Meccano concession in town. Naturally, Tri-ang was stocked by competitors. We may be returning to the situation whereby rather than one shop having all the agencies, you find them in different shops on the high street.

[Mike Storey]

Forgive me if I'm oversimplifying things, but as we are a developed economy our labour costs have been much more stable than China's have in recent years. If Hornby went to China to make models more cheaply, and now they are more expensive than we ever saw in the UK then the logical conclusion (at least to me) would be that bringing production back home would be better both financially and in terms of Hornby's control on manufacture. It would also have lower and more predictable shipping costs.  

 

I can't comment on your comparisons because I am not familiar with the US market, but the general impression I get is that their models are less likely to have errors than ours and and generally higher detailed but I am happy to be corrected on this. 

 

This issue was debated at length on another thread last month. Chinese labour costs, despite having risen over 100% in the last few years, are still only 20% of average European labour costs. Shipping rates have gone down, not up (although long term forecasts see them going up again significantly). The Chinese also have an historical culture of mass production of items requiring repetitive but intricate manual work, which is not so much the case in, say, India, or other SE Asian countries. Hence, China is still the economic location of choice for mass model train manufacture (most US trains are made there too), but the situation may change sooner than some people think, due to other factors (ageing population, labour shortages, competing industries, such as Apple Inc.,drawing away existing labour at higher wages, more attractive, profitable products, such as plastic kits, requiring less labour, water shortages etc.) but not in the immediate future.

 

I have sympathy with your position, but I think your assessment of the Modelzone situation is wrong - well before MZ went under the Hornby/Scalextric stock was supplied on a concession basis so there was no risk (and only upside) to pushing out short-supply models through them. It did not increase their exposure to losses subsequently realised through via Airfix/Corgi stocks.

 

Back in the 50s if you wanted Hornby Dublo, you had to go to the officially-appointed Meccano concession in town. Naturally, Tri-ang was stocked by competitors. We may be returning to the situation whereby rather than one shop having all the agencies, you find them in different shops on the high street.

 

it was £150k in their accounts, just for the record.

[tetsudofan]

The late departed George of Hythe (Kent) Models must be chuckling in his grave if he gets round to reading this thread. I recall a conversation I had with him about 10 years ago when he said all of what has been said in this thread would come to pass. It's taken 10 years.......but he was right, it has come to pass.

 

I've always supported my local shops but they get further and further away.... First all the shops in Folkestone and Cheriton closed, then Hythe (Kent) Models closed and now my "local" shop is The Hobby Shop at Faversham which involves a 52 mile round trip. This is not to say that I don't use the box shifters or specialist shops like Kernow MRC or DC Kits - but these outlets are only used I can't get these items from The Hobby Shop.

 

Times are difficult, we all have to adjust but I hope things work out both for us and the shops.

 

Keith

[Andy Hayter]

Some thought on the change in pricing policy.  In some cases I will repeat what others have said, but it is clear from some posts that these points do need repeating.

 

There is no doubt that Hornby's move will change the market dynamics.

The local model shop has had its margin cut significantly, but so has the box shifter - in fact in percentage terms they may be more heavily  influenced.

As has been stated this will narrow the gap between the local shop and the box shifter prices and may help increase the turnover of the smaller store.  But probably not enough to regain the loss.

 

What this means in simple terms is that we will pay more for our models.  Our suppliers (shop or box shifter) will make less money on each sale.  We in turn see the increased prices as a disaster and declare that we will have to buy fewer models - and I suspect for many this is not just a statement of frustration, but the reality.

 

Out of this I predict casualties and this is likely to include some of the deeper discounters as well as the local model stores.

 

Will all of this lead to a switch to Bachmann?  Maybe in some aspects, but largely no.  If you want a Claud then you will buy Hornby.  If you want a Wainwright C then you will buy Bachmann.   The only question is can you afford to buy either.

 

We have seen a number of price comparisons between these companies but frankly these are all flawed since they compare the 2013 (or earlier) Bachmann price to the estimated 2014 Hornby price.  So what will Bachmann do with pricing in 2014?  Well Kader announced a loss on its model railway items in its last annual report and the biggest and lowest cost (therefore probably lowest margin) sectors for Kader are Bachmann US and Bachmann UK.  Bachmann are due to announce 2014 prices after the Chinese New Year, when the 2014 labour costs will be set.  I leave you to draw any conclusions.

 

Do Bachmann operate similar discounting limits to those proposed by Hornby?  I do not know, but the similarity of pricing between box shifters when the LYR 242 tank was announced suggests strongly that there is an effective limit set - if only be virtue of a maximum discount available.

 

Also some thoughts for those who propose that Hornby bring back production to "cheap" Eastern Europe, Roco use factories in the Slovak Republic and Hungary for much of their current production.  Current prices for a BB electric - 250€ or £215.  Their admittedly superb Chapelon Pacific was around 400€ - £320 (both prices for the simple DC versions).   That is the reality of moving production to "cheap" European locations. 

 

We may howl about the price increases to come but the prices we will pay are still well below the world market average.

[Western Dave]

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.

Andy

 

I totally agree with you, but the model shops themselves need to move with the times, they are in a prime position to do so as they can easily bring "added value" to the "box" sale.

Human nature now is that we want our home made cake, and not only eat it but be spoon feed it and someone else clear up later.... hence why "box shifters" (in all trades) do so well. The future is difficult to predict not just for the model shops but for the manufacturers, the days of making 1600 class 47's in one livery and shipping them to maybe 200-300 modelers are gone for good. Everyones margins are squeezed from the from the manufacturer (the Chinese factory of choice) to the specifier/product license holder (in this case Hornby) to the distributor be it a box shifter or a corner model shop and nobody wants to be stuck with stock they cant sell. Thats part of the reason I think Hornby (and others will follow) are taking more control of getting the sale because product runs will be smaller and whatever the product it has to be successful.

 

we have had this conversation on here many times but reality is now arriving support your local model shop or it stnads no chance of survival, and if your a model shop and have not already started to adapt them please wake up quickly because SADLY you cannot all survive.

 

Believe me I know my business has turned countless degrees to adapt and change in the last 8 years and today we are doing ok and make a profit (much less margin than before)mbut have to keep adapting and offering something different.

[Gerald Henriksen]

Do Bachmann operate similar discounting limits to those proposed by Hornby?  I do not know, but the similarity of pricing between box shifters when the LYR 242 tank was announced suggests strongly that there is an effective limit set - if only be virtue of a maximum discount available.

 

This thread from 18 months ago indicates Bachmann places restrictions on discounts for the first 8 weeks after a model is released - http://www.rmweb.co.uk/community/index.php?/topic/53592-Bachmann-pricing-policy-to-retailers/ - the implication is certainly that the terms between Bachmann and the retailer remained the same in terms of wholesale discount, I haven't seen any threads to suggest otherwise.

 

 

[robmcg]

I think with increases in new model prices the second-hand market will be interesting for people who indulge in it, including such as Rails and Hattons and no doubt some others.  There will be some large collections of quality models out there which have been or will be sold as a job lot, and not all will have their value fully realised by Ebay  or other single-sale ads.

 

But of course such activity does not always help sales of new models, and it's a bit off-thread. No shortage of quality models on the market, though.

[87012]

HI All

 

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

 

Arran

All retailers got offered the East Coast HST's once Modelzone went bust. 

they were even sold through the Hornby wholesaler, to allow the 'weekend warrior' traders to get them...

[Pacific231G]

I was talking to a small independent retailer a couple of days ago (I won't name the shop but some do still exist) who told me that if you were small fry it was very hard to get the stock you needed out of Margate and they definitely favoured the large multiples. Bachmann were somewhat better but the one company they said that treats independent retailers well is Peco and whatever they ordered from Seaton usually arrived within a couple of days.

I think if you take the model shops out of the equation then yes those of us well established in the hobby will know where to get what we need but will the newbie modeller building their first layout?

Peco probably rely a lot more on the odd item sales than those producing mainly rolling stock. If I suddenly find I've run out of track joiners or need an opposite handed turnout because I've changed the track layout I want it now while the shops are open not in a few days from an online shop so local retailers are probably more important to them. They are also a private company so, provided they are not actually making losses, can maybe afford to take a longer view than can a plc.

 

BTW does anyone know what happened with HobbyCraft and Hornby?  I buy the artists stuff like paints and brushes that I need for buildings and so on there but, though Hornby's UK range is not relevant to me, I've noticed that they used to stock it but no longer do.

[Gerald Henriksen]

Forgive me if I'm oversimplifying things, but as we are a developed economy our labour costs have been much more stable than China's have in recent years. If Hornby went to China to make models more cheaply, and now they are more expensive than we ever saw in the UK then the logical conclusion (at least to me) would be that bringing production back home would be better both financially and in terms of Hornby's control on manufacture. It would also have lower and more predictable shipping costs.

But this assumes that nothing changed in the UK in the intervening years to drive prices up as well.

 

If you haven't seen it before one manufacturer explains the details here - http://rapidotrains.com/rapidonews39.html#anchor7 - and at the current exchange rate that 11RMB works out to £1.12 per hour.

 

Unsaid in that posting is the external costs we demand and are happy to overlook China ignoring - environmental issues in particular.

 

 

I can't comment on your comparisons because I am not familiar with the US market, but the general impression I get is that their models are less likely to have errors than ours and and generally higher detailed but I am happy to be corrected on this.

 

Depends.

 

One one hand there are some very accurate models if you luck in and happen to model that exact prototype, but the fragmented nature of the real railways in North America is such that there are a lot of differences even in what seems to be a generic prototype.  Most (almost all?) of the manufacturers release "foobies" to help cover the costs of being in business, "foobies" being models released in paint schemes that the real thing never had, either because it is deemed close enough, or because people will buy it because there are no other options available.

 

On the other hand the manufacturers do sometimes make mistakes.  Athearn had to retool parts of their Genesis GP7/9 due to errors, and even now there are still issues I believe.  Intermountain got the slope of the nose wrong on on their SD40-2W.

[87012]

I have sympathy with your position, but I think your assessment of the Modelzone situation is wrong - well before MZ went under the Hornby/Scalextric stock was supplied on a concession basis so there was no risk (and only upside) to pushing out short-supply models through them. It did not increase their exposure to losses subsequently realised through via Airfix/Corgi stocks.

 

Back in the 50s if you wanted Hornby Dublo, you had to go to the officially-appointed Meccano concession in town. Naturally, Tri-ang was stocked by competitors. We may be returning to the situation whereby rather than one shop having all the agencies, you find them in different shops on the high street.

How much did Bachmann loose when Modelzone went pop......   £0.00.

[bennyboy]

Forgive me if I'm oversimplifying things, but as we are a developed economy our labour costs have been much more stable than China's have in recent years. If Hornby went to China to make models more cheaply, and now they are more expensive than we ever saw in the UK then the logical conclusion (at least to me) would be that bringing production back home would be better both financially and in terms of Hornby's control on manufacture. It would also have lower and more predictable shipping costs.  

 

I can't comment on your comparisons because I am not familiar with the US market, but the general impression I get is that their models are less likely to have errors than ours and and generally higher detailed but I am happy to be corrected on this. 

 

You seem to forget that the quality of Hornby's models increased markedly when production moved to China, that was why they started to produce state of the art models such as the Merchant Navy locos. If you want a reminder of the quality of Hornby locos in pre-China days then have a look at the older Railroad models. Also it costs relatively very little to have a container of models shipped from Chin so moving production to the UK would save next to nothing on transport costs.

[87012]

A couple more things to think about, 

 

Question, why can't a 'shop' compete with a box shifter, 

Answer, they can, we all buy at the same price, but we all run our business' in different ways, 

I built my business over the last few years competing with the box shifters at shows and on the web, but i also have a very healthy shop.

We have grown over the last 5 years, and in a recession, continue to do so.. We work harder, but make the same profit on 4 items, that a standard shop might make selling just 2.

 

Question, Do Bachmann look after their retailers better than Hornby, Is that why Shops have more Bachmann stock?

Answer, 18 months ago, Bachmann enforced a 'capped' discount (xx% off RRP) for the first 8 weeks after a model was released, there was no increase in trade price, and standard settlement terms to shops remained the same, 

The reason they did this was to control the pricing in the market, and allow the "shop" to play on the same playing field as the 'box shifters' 

It meant that for 8 weeks after a model was released, the price was fixed throughout the country, allowing retailers of all sizes to start making a respectable 'margin' on their sales. Something that allowed the retailers to take confidence in purchasing from Bachmann, and use the profits to reinvest in the shops we love.

 

It worked, and is still working well, with most retailers still sticking to the prices, even after the 8 week window is over. (it tends to only be the 'cash chasers' that are discounting even more after the 8 weeks).

 

More importantly, i do not feel like Bachmann are trying to 'steal' my customer base (along with my margin) to try to get you guys to buy directly. (impossible for Bachmann to do so at the moment, as they do not retail directly.) 

 

Hornby have lost control of their pricing, and are loosing the confidence of their retailers, Bachmann have a system that works, and the retailers love it, 

 

The void left by Modelzone, can easily be filled if Hornby support the shops instead of insisting they have to have 'High Street' presence.

An example was the East Coast HST. When MZ finished, the sales of the HST had almost slowed to nothing. The Sets get released to the general trade and within 2-3 weeks the whole lot had gone....... It shows that the UK shops have more pull if used correctly that MZ ever would have had. ( From the Manufacturers point of view that is! ) 40 shops will never outsell 400, no matter if you are on the high street or not... it really is that simple.

 

All Hornby have to do is grow some, take a look at what the competition are doing, and do the same, (before they run out of time). 

[Pacific231G]

But this assumes that nothing changed in the UK in the intervening years to drive prices up as well.

 

If you haven't seen it before one manufacturer explains the details here - http://rapidotrains.com/rapidonews39.html#anchor7 - and at the current exchange rate that 11RMB works out to £1.12 per hour.

 

Unsaid in that posting is the external costs we demand and are happy to overlook China ignoring - environmental issues in particular.

 

Interesting comment that "there are fewer than half a million model railroaders in North America" That sounds to me like a pretty healthy sized market and I wonder how it compares with the UK or even the EC as a whole.