Bachmann - why price increases are necessary

[dibber25]

Obviously not my business, but it seems a bit odd to me to allow existing tooling which could be earning an income to gather dust, there's a lot of already sunk development costs there, if you're writing those costs off by decreeing the models to be uneconomic to produce, why not write them off to offset some of the rise and actually still make the profit...

They did go into this in some detail at the meeting. Essentially, it is all about the cost of production. The example of the A4 was used - a model which still employs much of the original Trix tooling and has turned out many thousands of models. In this instance the tooling has long since paid for itself and the bulk of the cost is now in the manufacturing. Also, I guess some tooling made in the days when labour was cheap and lots of extra details were fitted, is now prohibitively expensive to use, so just because the tooling is not recent doesn't necessarily mean that the model is cheaper to make. The reverse can actually be true - hence Hornby's 'design clever' application on recent new tooling.

CHRIS LEIGH 

[Ozexpatriate]

Why are we being nudged towards comparing our prices to European models ?

 

US models seem to be quite nicely priced and largely unaffected..

European models use exactly the same Chinese manufacturing base, so the fact that the models in Europe already sell at a significantly higher price seems a reasonable comparison to make.

 

As far as the US market is concerned, I think it is all about volume, with costs being spread across bigger batches. And of course for some years some US "manufacturers" have been touting round the market to get sufficient orders before committing to manufacture - in China, again. Guaranteed sales lowers the risk factor, making the investment a surer bet.

US models also use exactly the same manufacturing base.

 

They have exactly the same problems and I don't think they really have the volume advantages that people assume. Yes the modelling population here is larger, but the number of railroads is vastly greater and while I haven't done any maths I don't think that the total number of people who would buy a specific prototype is an order of magnitude larger.

 

As Ian says, many US suppliers wait until sufficient orders are placed before starting manufacturing.

 

I recently received models from an order I placed perhaps five years ago. The supplier was one of those de-listed by Kader Holdings after the Sanda Kan restructuring back in 2009. They finally have a new manufacturer on-line and producing in volume.

 

Nicely detailed coaches retail for $74.99 (£44) with observation cars at $89.99 (£53). These prices are very consistent with Honrby Pullman prices. Bachmann coaches at around £25 are a steal! There is no way that the old Bachmann pricing was sustainable.

[dibber25]

[big Snip]

 

Not a good comparison, I'm afraid. The Spectrum K4 tooling has been earning it's keep for Bachmann for upwards of 20 years now.

 

A fairer comparison would be a newer Athearn Genesis model - say a SP Mountain - made in China, announced 2010, only just generally available: list price $299.98. Add $100 to that if you want DCC & Sound.

I don't think one can make 'fair' comparisons with the US market. Bachmann's Barwell operation is autonomous and I assume its US operation is equally able to make its own decisions and set its own prices. We don't know what criteria are used, nor (with respect) do we actually know the size of the US market. We Brits always assume that the US market is HUGE compared to ours, but IS it? One of the questions I asked on Wednesday was 'Does anyone know the value of the British model railway market?' The short answer is No. There is no umbrella organisation to do the research and the best anyone could do was a 'guesstimate'. Without that figure we don't actually know whether the UK market is bigger or smaller than the US. Interestingly, Bachmann sets its minimum run for a limited edition at 500. Hornby at 1,000. At least one major US manufacturer has done limited runs as low as 150. Whether that gives a clue to the size of the potential market or whether it just indicates the flexibility of a manufacturer keen to wring out every possibility of making some dosh, I don't know.

CHRIS LEIGH

[Ozexpatriate]

I don't think one can make 'fair' comparisons with the US market.

Chris, as a purchaser of both US and British outline, I think this is possible to some extent.

 

We Brits always assume that the US market is HUGE compared to ours, but IS it?

It's a good question. The total market is probably much larger. But the market for the SP Mountain ($299 / £178) mentioned above? Not so much.

 

RTR steam modelers in Britain have four primary 'roads' to choose from in terms of unique prototype designs - with some livery variants. Five if you count BR standard designs.  The list for the US is much much bigger: UP, SP, GN, NP, WP, AT&SF, C&NW, B&O, CB&Q MILW, NYC, PRR, C&O, N&W, SP, (I'm getting tired now and hopefully you get my point). We could even throw in a couple of Canadian roads (CN, CPR) and expand this to North America. And these are just the class 1 roads - we haven't even started on short lines.

 

In the old days and to some extent today, manufacturers 'cheated' with lots of fake liveries on 'generic' / 'representative' models. With coaching stock from Pullman or Budd this is even somewhat feasible, but they don't do this nearly as much today with locomotives. Our standards for acceptable RTR fidelity have changed.

 

The number of people who will want to model a specific road is probably not an order of magnitude greater than it is in the UK. Can I back this up with hard numbers? No, in full accordance with your post I don't have real data.

 

The relatively large size of the US market does benefit the makers of scenic items and structure kits.

 

As you pointed out earlier:

Essentially, it is all about the cost of production.

This is exactly the same for UK and US manufacturers.

[Fenman]

They did go into this in some detail at the meeting. Essentially, it is all about the cost of production. ... In this instance the tooling has long since paid for itself and the bulk of the cost is now in the manufacturing. Also, I guess some tooling made in the days when labour was cheap and lots of extra details were fitted, is now prohibitively expensive to use, so just because the tooling is not recent doesn't necessarily mean that the model is cheaper to make. The reverse can actually be true - hence Hornby's 'design clever' application on recent new tooling.

 

I have no proof, but you might be able to see some evidence of this in some of Hornby's pricing:

 

The "old" (and presumably labour-intensive) Schools 4-4-0 is RRP £134

The new (and presumably "design clever") D16 4-4-0 is RRP £110

 

The "old" B17 4-6-0 is RRP £149

The new K1 4-6-0 is RRP £130

 

Paul

[gordon s]

It can be quite misleading to compare products in one country against another, simply by using currency exchange rates.  I retired from a large International business a few years back and we always used Purchasing Power Parity figures as the basis to set prices for our own products in each market.  What you want to consider is how much a loco will cost in that market, when purchased by a resident of that country, who is employed in that country and pays local taxes etc.  To take that price and then compare it against a product in another country with totally different taxation rates and income levels is not a true comparison and the result is certainly open to conjecture.

 

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

 

http://data.worldbank.org/indicator/PA.NUS.PPPC.RF

[Lochinvar]

A thought occurs (not a daily event). In view of the substantial number of attractive models that have been announced but not yet released (the Stanier Portholes,for one),the big retailers are likely to be sitting on a fair number of advance orders taken on a "price promise" basis. Sure,they may well have anticipated some degree of pricing increase in setting their "promised " prices,but I wonder if they have contemplated having to absorb increases of the magnitude discussed here. Might we be about to find out how firm a price "promise" is - or perhaps even see an end to price promises when the inflationary outlook for Chinese production is quite so high??

 

DR

[Ozexpatriate]

It can be quite misleading to compare products in one country against another, simply by using currency exchange rates. ... To take that price and then compare it against a product in another country with totally different taxation rates and income levels is not a true comparison and the result is certainly open to conjecture.

Gordon, I respect your perspective, but for me as a purchaser of both UK and US items the price is essentially the only variable. My personal economic situation is a constant whether I purchase a UK or a US model.

 

The manufacturing costs for similar products made in China are identical irrespective of where they are sold.

 

A random arbitrary data point from today:

Amazon.com Samsung Galaxy 3 Tab 7" (White): $179.00 (£106)

Amazon.co.uk Samsung Galaxy 3 Tab 7" (White): £109.99

[Downer]

As an unreconstructed socialist I'm happy to see the state intervene to regulate markets and cap the prices of essentials like rent or energy.  But I doubt whether Derby Lightweight models qualify in this regard, and I think we have to accept that the various market forces at play here dictate a substantial price rise.  For the good of both industry and hobby we can only pray that Barwell and Margate pitch the new prices high enough to make themselves a profit, but not so high that their sales collapse.

[gordon s]

Gordon, I respect your perspective, but for me as a purchaser of both UK and US items the price is essentially the only variable. My personal economic situation is a constant whether I purchase a UK or a US model.

 

The manufacturing costs for similar products made in China are identical irrespective of where they are sold.

 

A random arbitrary data point from today:

Amazon.com Samsung Galaxy 3 Tab 7" (White): $179.00 (£106)

Amazon.co.uk Samsung Galaxy 3 Tab 7" (White): £109.99

 

..but then you have to add exchange rate charges, shipping costs and import duties to the US price before you compare the price of a UK model to what you would be paying to have that model in the UK.  Yes, you can take the US price, but you won't be able to enjoy that model until it is in your hands in the UK….

[rembrow]

I think I've just had the answer to the concern I raised yesterday about the effect on pre ordered commissioned model prices of Bachmann items. I've had an e-mail from Invicta Models advising that the twin Post Office BG set is in, and will be at a revised increased price due to these price increases. They also advise that the new prices will affect other Bachmann commissioned models. Invicta are not subject to distance selling rules I think, as although they give a guide price, the order screen shows £0 and the deal is to be finalised when the model is in stock. Was that set stock waiting in Bachmann's warehouse until after the announcement. In theory they also have the PCA flat top cement tankers and the LNER/BR Fish Vans. Went to John Duttfields at Chelmsford today and bought 3 Cambrian kits and last night started to build 3 Dapol twin silos, also looked Parkside cattle vans from the back of the cupboard. I've always built model rail items from kits as well as buying rtr, but I think the level of kit building will now increase.

One thought on the debate about where is more cost effective to build rtr items. This year I bought a new TV and a new DVD recorder, the tv from a well known South Korean manufacturer and the DVD/HD recorder from a well known Japanese manufacturer, however both were marked as made in Slovenia. Presumably electronic components are made in China/Korea/Malaysia etc and for markets outside the Far East, shipped in that form, at lower cost, to manufacturing sites in other Regions of the world. I'm assuming Slovenia is basically an assembly operation for electronic goods distributed within Europe. By not shifting the fully produced product from the Far East, there must be significant savings in shipping costs. As I recall Heljan used to produce their rtr loco bodies in Denmark and had the chassis produced in China. There could be savings made if the assembly was carried out in Europe, reducing the volume being shipped and therefore shipping costs.

Bachmann has a problem with the idea of reducing detail to save cost, certainly in respect of its coach and multiple unit items, as apart from a few exceptions (Blue Pullman) it did not make coaches with a significant amount of added on detail to the bodies, unlike Hornby. Most coach and mu bodies had tooled in door handles; guard grab rails; ventilators etc, so it is only with chassis components that they can make savings on manual fixings. Hornby have already gone down that road with the new BR Mk 1 coach and the proposed Mk 2 coach and I suspect that Bachmann's Mk 2 is intended to be less detailed. I believe that will be acceptable as I suspect many modellers were unaware that Bachmann coaches had such a high level of moulded on detail, the deception being due to very good detail tooling and very good printing of rails and door items. Hornby has shown with the BR Mark 1 that detailed underframes can be tooled in one component

[Ozexpatriate]

..but then you have to add exchange rate charges, shipping costs and import duties to the US price before you compare the price of a UK model to what you would be paying to have that model in the UK.  Yes, you can take the US price, but you won't be able to enjoy that model until it is in your hands in the UK….

I don't pay VAT, so the total cost with shipping works out to about the same as the price listed that includes VAT. In Oregon we don't pay sales tax so the list price is a very good comparison point for me. Discounting levels from list are roughly comparable.

[Roy P]

In discussions regarding Hornby's recently stated approach, many suggested that they were "spoiling the ship for a hap'worth of tar" but now we are seeing the actual cost of tar It has got me wondering. As one who would pay the extra for something that is more of a pleasure own, I would like to have that choice.

 

Although Bachmann and Hornby aren't exactly in a two horse race, the comparisons are fair. So Imagine if over any given period, an individual may have bought 12 model locos and they were 6 Bachmann and 6 Hornby; This person may now perhaps only buy 10. What should Bachmann do (this topic is looking at Bachmann's issues, not Hornby's) in order to maintain their volume (6 locos - and reduce Hornby to 4) and not just their market share (now only 5 each in this scenario). This is what will be interesting to see.

With other companies offering higher spec. models to those who want or can afford them (most of which we will have to reserve judgement on for the time being) I do hope that Bachmann don't find themselves confused regarding which slice of the market they believe they should be targeting.

They have been getting it pretty much spot on over the past few years. Of course any price rise is regrettable but Bachmann have enjoyed a reputation for generally delivering more than acceptable models at an acceptable price. When Hornby get their suppliers sorted and we have seen new products from DJM, Dapol, Rapido and Heljan, I hope we can continue to hold Bachmann in the same regard.

 

(maybe wait for Heljans O2 rather than take the Garratt as an example of their future output and then ask them for Q6 - If it really was someone flying a kite, the wind might be picking up a bit!) 

 

RP

[gordon s]

I don't pay VAT, so the total cost with shipping works out to about the same as the price listed that includes VAT. In Oregon we don't pay sales tax so the list price is a very good comparison point for me. Discounting levels from list are roughly comparable.

 

Sorry, I'd missed you were in the US.  I'd mistakenly assumed you were in the UK hence my comments.  Of course that means you are looking at it from a US perspective (income and taxes etc) so the results may be totally different to that for us in the UK.

 

There are some more interesting stats here including the Big Mac and iPad indices...

 

http://en.wikipedia.org/wiki/Purchasing_power_parity

 

If an iPad costs $499 (no tax) in the US the equivalent UK price would be $638.81, some 27.8% higher for a UK citizen purchasing in the UK on a UK salary and paying UK taxes.

 

Apologies that we have wandered off the original topic, but I spent years on calculating the correct market price in every country we sold our products.  Of course that was simple before the internet, but once the world opened up a whole new set of rules came into play.  Setting local pricing is a whole new challenge when with a few clicks of a mouse you can source a product from India, even though you are located in the UK or US.  

 

That really is a challenge with exclusive Distributor contracts...

 

I digress, lets move on…. 

[Revolution Mike]

They did go into this in some detail at the meeting. Essentially, it is all about the cost of production. The example of the A4 was used - a model which still employs much of the original Trix tooling and has turned out many thousands of models. In this instance the tooling has long since paid for itself and the bulk of the cost is now in the manufacturing. Also, I guess some tooling made in the days when labour was cheap and lots of extra details were fitted, is now prohibitively expensive to use, so just because the tooling is not recent doesn't necessarily mean that the model is cheaper to make. The reverse can actually be true - hence Hornby's 'design clever' application on recent new tooling.

 

Chris

 

I think Martyn's point was that if you are going to effectively write off tooling costs by not producing any more because production is expensive, then why not continue to write off the tooling (because production is expensive), produce some models and make a profit from them? In both cases you have written off the tooling costs, but if you actually produce something you can at least make some money!

 

Mike

[Oldddudders]

So Imagine if over any given period, an individual may have bought 12 model locos and they were 6 Bachmann and 6 Hornby; This person may now perhaps only buy 10. What should Bachmann do (this topic is looking at Bachmann's issues, not Hornby's) in order to maintain their volume (6 locos - and reduce Hornby to 4) and not just their market share (now only 5 each in this scenario). This is what will be interesting to see.

 

In purchasing terms, I think most of us are tarts. Announce - and, hey! actually produce! - the model we lust after, and we are there. Those 10 models will be the best fit for my layout, whoever and wherever made.

[Roy P]

In purchasing terms, I think most of us are tarts. Announce - and, hey! actually produce! - the model we lust after, and we are there. Those 10 models will be the best fit for my layout, whoever and wherever made.

Very true. But those who only buy what fits will more likely be able to accept the price rises for the one or two models a year. The collectors or collector/modellers who make up a large part of the target audience will be the ones who may have to be yet more discerning.

 

RP

[newbryford]

The full price list should be due out sometime next week but it's my understanding that wagons and coaches may generally be affected, in percentage terms, more than a loco. Simplistically it costs as much to stick a 'bit' on or print a number on a loco as it does a wagon but it obviously forms a larger percentage of the cost on the wagon due to its lower base cost.

 

I've had the Kernow newsletter earlier today and they were also intimating a larger %age rise on wagons and coaches, so now's the time to stock up on those rakes of HTA's and autoballasters [*]

 

Cheers,

Mick

[*] The autoballasters are possibly the best wagon ever produced and I still can't get over how cheap they are were.

[Ian Hargrave]

In purchasing terms, I think most of us are tarts. Announce - and, hey! actually produce! - the model we lust after, and we are there. Those 10 models will be the best fit for my layout, whoever and wherever made.

Love the imagery....trying to envisage it !

[railroadbill]

In purchasing terms, I think most of us are tarts. Announce - and, hey! actually produce! - the model we lust after, and we are there. Those 10 models will be the best fit for my layout, whoever and wherever made.

Only 10? 

[APOLLO]

Around February last year I bought a couple of excellent Bachmann blue Brush 4's D1547 from Hattons for around £50 each.

 

Today a second hand one in the same shop is £92, though it is DCC fitted (mine weren't)

 

http://www.ehattons.com/76129/Bachmann_Branchline_32_805_HX_Class_47_4_D1547_in_BR_blue_Pre_owned_DCC_fitted_Like_new/StockDetail.aspx

 

World's gone mad, both new & S/hand.

 

China is ready to explode soon also.

 

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100027199/chinese-anatomy-of-a-property-boom-on-its-last-legs/

 

Brit15

[Ozexpatriate]

There are some more interesting stats here including the Big Mac and iPad indices...

 

If an iPad costs $499 (no tax) in the US the equivalent UK price would be $638.81, some 27.8% higher for a UK citizen purchasing in the UK on a UK salary and paying UK taxes.

 

I digress, lets move on….

I'm happy to move on too. I didn't think your comments were off topic at all and I understood where you were coming from with 'purchasing power parity' as a metric to help determine 'what the market will bear' in terms of pricing versus cost.

 

Model railway pricing was upside down compared to those indices in that British outline model railway items were actually cheaper than comparable US items, particularly if you factor in the parity indices, but we're now seeing that change toward more equity. As you say, globalization and the internet changes things and I think we are seeing this. The Samsung tablet was an arbitrary datapoint.

 

It persists with other consumer items - like the price a tin of soft drink, which I would still expect to be much cheaper in the US.

[gc4946]

Now the implications of Bachmann's price rises are sinking in, how many of us have actually cancelled pre-orders with retailers and/or having second thoughts about what you're buying or pre-ordering as a result?

 

I don't pre-order but may decide not to buy the forthcoming LMS Porthole carriages: BTK and/or CK.

 

However I pre-registered for a Kernow Models 2-car Hampshire DEMU in blue made by Bachmann several years ago which hasn't appeared yet and if it's released in the future would, I suspect, cost more than the £139.99 they're offering for the three existing versions on sale. I'm still deciding on whether to cancel my pre-registration or not.

[Oldddudders]

Only 10? 

Simply seeking to follow on from Roy P's point about increased prices meaning the same budget would now buy 10 locos instead of 12. In practice I'm not sure I've bought 10, still less 12, in any recent year. But my memory is increasingly unreliable.

[phil-b259]

For the sake of pedantically confirming your maths, I make it about 26%.

 

Pity about the grey/blue Pullman: that would have been the one I'd have bought.

 

Paul

 

A question for those in the trade as regards the Blue Pullman. If a new release of a complete set is financially unacceptable because of the end price of a full 6 car set, is there any mileage in replicating the Hornby setup with the Brighton Belle (or Javalin set)? i.e. sell say a 4 car set (the two driving cars plus one kitchen and one intermediate saloon) with a second coach pack available separately (and possibly produced in a smaller quantity than the main set in view of the price and also the space a full 6 car rake takes up) for those who wish to make it up into a full rake.