Bachmann - why price increases are necessary

[Arthur]

.............I don't think it merited being classed as 'ranty hyperbole'.

Not ranty? no hyperbole?

 

Really?

 

  

"Charles Darwin will win here, Bachmann will not."

 

"All this blarney at accepting 20% year on year prices to keep people in jobs"

 

"I say let the bubble burst. The moulds decay, once the penny drops everything will be reborn under a new name"

 

"We might not want to go back to where we are being told to go now."

 

"at 45593 Kolhapurs digital price I'll just laugh at"

 

"No fat on this operation".

 

"let the lions eat each other we can feast later"

 

 

[Dunsignalling]

Well I'm only still on the 30 April postings!  Someone else has almost certainly drawn attention already but with the £/US$ having strengthened by 5%, 8%? or so over the last year, and with Bachmann Europe contracted to buy from China in US$, doesn't the actual increase amount to 25% or more?

 

I'm of the opinion that these prices will lead to fewer sales.  And really discourage younger members into the hobby.  Bachmann is my preferred choice amongst the RTR manufacturers, and I wish them only well.  But managing any further decline in UK sales volumes will be far from easy.

 

For models of roughly the same quality etc, UK prices have been higher than US (yes, they pay a $ for the £ we pay, ie about 1/3 less expensive) and less than eg Germany (maybe 50-60% higher?).  I've never been persuaded this was all about market size and quantity of product run.  Commercial business usually charge what a market place will stand.  I believe Bachmann may well step back from this 20% position.

If Bachmann have got their sums right, their profit margin will be unchanged. So long as total sales by value don't drop, neither will their overall profit.

 

OK, those of us who only spend what we have before (either out of choice or necessity) will end up with fewer new models, but, from a commercial viewpoint, the monetary value of sales is more important than the number of individual products sold.

 

As for stepping back from the stated position, the only thing that would ensure that would be a threat to market share from a competitor able to deliver plenty of stock at lower prices. I really can't imagine that happening as things currently stand! 

 

John

[Phil Parker]

Add up the cost of paint, transfers, wheels, motor and gearbox and even at the increased price the ready to run models are still a good buy. As for fitting extras I noticed on my Bachmann Dukedog the instructions imply the vac pipes etc have to be fitted whereas they already are, leaving just the coupling hook and screw coupling to be fitted, a clear cost saving could be made without any additional or amended documentation being neeeded.

 

True. The steam loco starter kit is £145 including all the bits apart from paint and glue. Build a big engine and you'll exceed this quickly enough.

 

Anyone who can tool up for 5000 units can easily beat the price of a cottage industry who will be lucky to sell 50-100. On that basis, even at the new prices, RTR is still a very good deal.

 

Looking at the Dukedog, I think Bachmann would need to leave off more than just the vac pipes to drop the price significantly but I take your point. For all the criticism of "design clever", the concept may well be applied more readily in the future. After all, how many people would swap the £15 sprung buffers for a price reduction? I would.

 

Here's a thought - Perhaps there is a market for companies offering to upgrade basic RTR? Bachornapolejan knock out a "Railroad" quality model that is basically correct but with very few seperatly applied parts. A firm, probably in China, buys them in and throws all the trinkets we might like at the basic model producing something very hi-fi. That way modellers have the choice. The numbers opting for the full-fat uprated version at the hgih price won't be huge but might be sufficient to support a small firm.

[gordon s]

If Bachmann have got their sums right, their profit margin will be unchanged. So long as total sales by value don't drop, neither will their overall profit.

 

OK, those of us who only spend what we have before (either out of choice or necessity) will end up with fewer new models, but, from a commercial viewpoint, the monetary value of sales is more important than the number of individual products sold.

 

As for stepping back from the stated position, the only thing that would ensure that would be a threat to market share from a competitor able to deliver plenty of stock at lower prices. I really can't imagine that happening as things currently stand! 

 

John

 

John, I didn't want to add a 'disagree' without qualifying why.  Maybe I'm misunderstanding what you are saying, but sales volume by value can drop and profit/return will increase.  Perhaps you may wish to read my post 255. (Repeated here)

 

 

I guess it's all been said and those of us who qualify as Seniors have seen this issue time and time again in our lives.  Prices generally will always increase and at the time there will be a reaction, but life goes on and well run companies will always survive.  

 

The major issue for anyone in business is the return on capital and a reduction in volume can prove advantageous.  Take a loco that a manufacturer sells to his customer (generally a Distributor) for £120.  Over time costs increase and margins reduce until they are at an unacceptable level.  Lets assume they come down to 5% or £6 on a £120 loco.  In simple terms the return on capital is then £6/£114 or 5.2% on the sale of 1000 locos.

 

To correct this, the manufacturer considers every aspect of his market place and decides the best solution is to increase his prices by 20%.  He knows there will be a short term backlash and his sales will reduce by 20%.  Sales have now reduced from 1000 to 800, but with an increased price from £120 to £144.  By explaining all the issues to his suppliers, he manages to keep his costs at the same level and the sums now look totally different.  800 locos at a cost of £114 is now £91,200 against the £114,000 when sales were 1000.  His profit is now £30 on every loco and the return on 800 locos is now £30/£114 or 26.3%.  On lower sales his profit has increased from £6000 to £24,000 and he has freed up funds of £22,000. 

 

His sales have reduced, but he is using less cash to finance this part of his business, which could then be invested into more profitable areas or product development.  His return is now very attractive to investors and that in turn could bring more cash into the business.  Six months down the line, the new pricing is accepted and sales start to return to previous levels.

 

Of course this is a simplification, but a well run business will always consider all the options when making an increase of this magnitude.  Short term they may lose some sales, but longer term the business could be on a much stronger footing and that in turn provides job security to many others.

 

Todays increase is often tomorrows discount.  It's not the end of our hobby and six months down the line it will all be different.  Market conditions and technology changes are inevitable and this will all be forgotten in a few weeks. 

[ThaneofFife]

well thats it then if it will all be forgotten in a few weeks lets wrap this whole thread up now....(hold your horses, im only joking about wrapping up the thread).

[Broadway Clive]

The prices of model railway stock has already been inflated by catering for the current fashion trend of adding everything that can be added to each product by way of detail and technology, for no other reason than to avoid being seen as not keeping up.

 

Whilst these extras were not adding too much to the price, the steady increases could be lost within normal inflation, and their effect was of course always played down by those supporting them. Now that prices seem set to continue to go up rapidly against a background of very low level inflation the effect of those extras can no longer be hidden.

 

The one size fits all policy for motive power may increasingly unravel. “Display case” collectors don’t need all the electrical extras and connections, and neither do most analogue users. For example, first generation DMUs with internal lighting and head and tail lights that the prototypes never used in daylight are carrying unnecessary extra costs for most of  those people. Sprung buffers, opening doors, and detail that is unseen from normal viewing angles could also be considered as extras for most layout owners, and some of those parts sold seperately. Indeed it might be possible to identify certain retailers to sell all the extra parts or fit them prior to purchase so that the extra costs are only borne by those who want them.

[wombatofludham]

As someone who has never succumbed to the "Oh I must have one of those it's such a pretty model even though it's not my era or area of modelling" school of buying, for me the price rise will be irritating, but to be honest retail prices seem to bounce up and down more often than a whore's drawers in Portsmouth on a Friday night, depending on whether the retailer has negotiated a good deal with Bachmann or had a good month or not, so as I stick religiously to only buying items appropriate for my chosen layout eras and locations, I'll carry on regardless. If needs be, I'll just buy fewer books, dvds or confectionery, which might actually do my health some good.
 

And therein lies the issue.  I realise not everyone is in my relatively lucky position financially, but I doubt model purchasing is the only discretionary or semi-discretionary spending for most people.  Rising prices are a fact of life and most households are adept at swapping budgets and cutting back in areas to prioritise others.  So, if your "must have" loco is now more expensive, there must be other areas of expenditure you can postpone, or do without.  Smokers, give up.  Drinkers, imbibe less.  Drivers, think wartime and is your journey really necessary or can you link trips and save a bit of juice.  Am I guilty of teaching the elderly how to suck eggs?  Being a bit patronising?  I probably am, but seeing some of the posts on here you'd think the sky was about to fall in, the four horsemen of the Apocolypse were planning a nationwide tour and people were being forcibly evicted from the modelling fraternity by dictat of a Politbureau.  It's a price rise on a luxury item that has been candidly explained when, to be honest, there was no commercial reason for them to do so - they could just have hiked the prices in stages and no-one would have been any the wiser. 

 

One final point, I'm old enough to remember a time before easy credit, and when electricals and white goods were so expensive people had to save up for them.  I wonder if as a result of this price increase whether local small retailers might be able to set up some sort of "savings club" whereby people pay a deposit to allow the retailer to order a number of items based on deposits received, then holds the item whilst the remainder is spread over a period of time?  I can see the downsides for the retailer being a need to hold stock whilst the buyer completes their payments, plus of course having to fork out the full cost of the item whilst only receiving the final amount in dribs and drabs, but there again, retailers must be used to having some stock sitting on their shelves with no definite buyer in view, whereas a savings scheme buyer will eventually shift the item off the back room shelf.  More to the point, it might be a way for small local retailers to hit back at the big box shifters and win back some sales.  Back in the 70s a lot of general retailers had such schemes which were almost entirely wiped out by the growth of credit cards.  Perhaps it's time to go back to the old fashioned ways again?

 

[Kris]

The one thing that the forthcoming increase has caused me to do is some pre-ordering. If the budget would take it I would have been looking to order more items. These will still be bought in the longer term, though the time scales for these will be longer than it probably would have been to start with. 

['CHARD]

Fair enough!  I accept your point. But 20 % is 20 %..and it's alot! I speak as I find myself..and I am struggling to stay in this wonderful hobby of ours with price rises on this level.

 

It's hardly 'struggling to stay in this hobby' though, is it?  If we really had revenue expenses to pay when modelling railways I could see it.  

 

I can envisage 'struggling to stay in' short circuit oval racing with rising fuel, licencing costs and ever more stringent preparation/ safety regulations for your car, to give one example.  But it's not as though we have to renew our model collections annually.  

 

I am aware that I'm in an extremely fortunate position, as my loco fleet is substantially complete for the very fixed parameters of my chosen subject, and future spend is going to be mainly discretionary.  I won't be able to acquire Class 40s and centre-twin headcode Peaks as quickly as i might have wished, but their new wagons will still be affordable in fleet quantities, and the box shifters will no doubt still be deep-discounting on multi-pack purchases.

 

I reckon that apart from the 'need one of every class' collectors, the remainder of us will carry on pretty much as we always have, in accordance with our means, making adjustments accordingly.  New entrants will still have access to discounts and second hand items: young starters are less likely to be as discerning as older returnees to the hobby, who will in many cases have adequate disposable income; as others have said, which matches some of the demographics on this very forum.

[Jol Wilkinson]

Wombatofludham,

 

I was totally with you until you got to the bit about drinking less.

 

Otherwise very sensible suggestions which will probably be generally. One further idea for some people, drive more slowly, i.e. stick to the speed limits, that'll save fuel.

 

Perhaps Bachmann, in their desire to be open and honest, missed a trick. Had they announced their new models at the same time, much of the energy that has gone into this topic would have been spent on frothing, if onlys and more wish listing. The pricing issue might have got a little less attention. 

[Revolution Mike]

All this blarney at accepting 20% year on year prices to keep people in jobs will fade away when the low quality stuff hits the street.

 

I say let the bubble burst. The moulds decay, once the penny drops everything will be reborn under a new name just as they did before, but in a more real price made some place else.

 

Sorry but no one from Bachmann has mentioned 20% year on year price increases - you seem to be confusing 20% wage increases to 2019 with price rises.

 

I'd love to know where this mythical high quality, low price factory will be - Vietnam, Bangladesh, India?  Somewhere else to "benefit" from someone else's poor living standards and low wages - if that is what it takes ie someone else to suffer then I agree, let the bubble burst, though in my case the bubble is rampant consumerism based on low wages elsewhere in the world.

 

Cheers, Mike

[Coombe Barton]

Tend to disagree, LNWRmodeller. The more froth, the more the Bachman name is in people's minds. The more threads, the more froth.

 

Marketing, I understand.

[Andy Y]

I'd love to know where this mythical high quality, low price factory will be - Vietnam, Bangladesh, India?  Somewhere else to "benefit" from someone else's poor living standards and low wages - if that is what it takes ie someone else to suffer then I agree, let the bubble burst, though in my case the bubble is rampant consumerism based on low wages elsewhere in the world.

 

Another consideration for a consumer goods manufacturer is that they would have to pay people to be out of the existing business procuring and establishing the new 'cheaper' facility before it could come on stream so would add to costs before saving anything.

[bigherb]

 

I'd love to know where this mythical high quality, low price factory will be - Vietnam, Bangladesh, India?  Somewhere else to "benefit" from someone else's poor living standards and low wages - if that is what it takes ie someone else to suffer then I agree, let the bubble burst, though in my case the bubble is rampant consumerism based on low wages elsewhere in the world.

 

Cheers, Mike

But you could be giving someone a better standard of living with a job rather than no job at all.

[ThaneofFife]

since when did the members of this forum become caring sharing philanthropists all of a sudden? im surprised by the amount of comments that have suggested an apparently laid back acceptance of the status quo and denounce the very idea of moving production away from china in order to save those in developing countries from themselves. maybe i underestimated the beneovlence of our membership or they just hid it rather well until this thread started. im not going to lose much sleep over the rises per se but i do find some of the claptrap about considering the effect on daily lives and the financial welfare of those in india, vietnam etc nausiating. i dont recall the same levels of outrage or doubts when Hornby first moved production to china. maybe there was outrage in the uk at the loss of uk jobs but were people up in arms suggesting it was bad to capitalise on chinese workers' low wages?

im playing devils advocate of course.....as im sure an answer to all the worlds ills will be trotted out here shortly

[James Makin]

I've not really got a strong view on the topic but I did note that, say, a loco RRP might go up by 20%, perhaps equivalent to say £20 or so...I'm not made of money but in real life, it's really very, very easy to spend that on other stuff that is much more disposable, ever made the mistake of buying a round of Costa's at work or a round of painful shots down you're local Wetherspoons on a Saturday night?

 

No one can afford to chuck away money but in the grand scheme of things, we all pay a lot more in real life without even thinking about it -  £20 won't get you that far in the car these days or just even buying a pot of emulsion at B&Q...at least here you've got another loco to add to your collection, a start of a new modelling project and something you can cherish for years to come! 

 

I'll add a disclaimer to say I've no loyalty to any model railway manufacturer, I wreck everyone's products equally

[The Stationmaster]

 

 

One final point, I'm old enough to remember a time before easy credit, and when electricals and white goods were so expensive people had to save up for them.  I wonder if as a result of this price increase whether local small retailers might be able to set up some sort of "savings club" whereby people pay a deposit to allow the retailer to order a number of items based on deposits received, then holds the item whilst the remainder is spread over a period of time?  I can see the downsides for the retailer being a need to hold stock whilst the buyer completes their payments, plus of course having to fork out the full cost of the item whilst only receiving the final amount in dribs and drabs, but there again, retailers must be used to having some stock sitting on their shelves with no definite buyer in view, whereas a savings scheme buyer will eventually shift the item off the back room shelf.  More to the point, it might be a way for small local retailers to hit back at the big box shifters and win back some sales.  Back in the 70s a lot of general retailers had such schemes which were almost entirely wiped out by the growth of credit cards.  Perhaps it's time to go back to the old fashioned ways again?

 

 

There is another string to the 'saving up' bow as well - most new items are tending to reach the shops long after they are first announced so even if you shove some cash in a jar on the mantelpiece or put it in a piggy bank during the time you are waiting arrival you could probably save the required sum by the time the item appears.  With one fairly recently arrived loco I think I could have bought at least two if I'd put away only £1 a week between the date they were first announced and the date they arrived - and that wasn't at box shifter prices.

[AngryMeerkat]

Having been in a local model shop today, I couldn't help but think of this thread.

 

I was looking for 'something' to buy, something nice and shiny and new. I had a price in mind that I wouldn't go over, but below that anything was game.

 

The problem I had wasn't "how much" each model cost, but that there wasn't anything on the shelves that I actually wanted to buy! And I think here is the big problem for the hobby. Prices can go up or down by any figure you like, but the fact is the price is totally irrelevant if there is nothing you want to buy!

 

Bachmann, and by the same token Hornby, missed out on my £120 simply because they didn't have models on the shelf.

 

Mark

[trisonic]

I’ve always appreciated “things” more when they have been difficult to obtain or make. In any case I learned years ago that too many things do not make you happier...Ymmv, of course.

 

Best, Pete.

[Downendian]

Above inflation price rises are always a bitter pill to swallow, but Bachmann have made this easier to swallow with a transparent approach. For sure we have had a purple patch of high quality, but relatively low cost models, that appears to be moving into a different pricing policy. All you have to do is look at the costs of European HO models to see how cheap we have been, most are in the 300-400 Euro bracket.

 

Personally though I think my decision to go with preorders (despite the risks buying an unseen model) has reaped dividends. I recently received two preorder Bachmann 40s at £62 each (on the long term list for a couple of years), and have several Bachmann models on my list still frozen in price. Whether the likes of Hattons can economically afford to offer this "discounting" we shall see, and I've noticed a few recent price rises (e,g. Class 101 DMU). I suggest those that want to make savings get in there quick before we get a bigger and inevitable increase this summer.

 

Neil

[Andy Y]

since when did the members of this forum become caring sharing philanthropists all of a sudden?.........................  denounce the very idea of moving production away from china in order to save those in developing countries from themselves. maybe i underestimated the beneovlence of our membership or they just hid it rather well until this thread started................ claptrap about considering the effect on daily lives and the financial welfare of those in india, vietnam etc nausiating.......................suggesting it was bad to capitalise on chinese workers' low wages?

 

 

 

Please refer to http://www.rmweb.co.uk/community/index.php?/topic/85287-Bachmann-why-price-increases-are-necessary/?p=1438876

[Dunsignalling]

John, I didn't want to add a 'disagree' without qualifying why.  Maybe I'm misunderstanding what you are saying, but sales volume by value can drop and profit/return will increase.  Perhaps you may wish to read my post 255. (Repeated here)

 

 

I guess it's all been said and those of us who qualify as Seniors have seen this issue time and time again in our lives.  Prices generally will always increase and at the time there will be a reaction, but life goes on and well run companies will always survive.  

 

The major issue for anyone in business is the return on capital and a reduction in volume can prove advantageous.  Take a loco that a manufacturer sells to his customer (generally a Distributor) for £120.  Over time costs increase and margins reduce until they are at an unacceptable level.  Lets assume they come down to 5% or £6 on a £120 loco.  In simple terms the return on capital is then £6/£114 or 5.2% on the sale of 1000 locos.

 

To correct this, the manufacturer considers every aspect of his market place and decides the best solution is to increase his prices by 20%.  He knows there will be a short term backlash and his sales will reduce by 20%.  Sales have now reduced from 1000 to 800, but with an increased price from £120 to £144.  By explaining all the issues to his suppliers, he manages to keep his costs at the same level and the sums now look totally different.  800 locos at a cost of £114 is now £91,200 against the £114,000 when sales were 1000.  His profit is now £30 on every loco and the return on 800 locos is now £30/£114 or 26.3%.  On lower sales his profit has increased from £6000 to £24,000 and he has freed up funds of £22,000. 

 

His sales have reduced, but he is using less cash to finance this part of his business, which could then be invested into more profitable areas or product development.  His return is now very attractive to investors and that in turn could bring more cash into the business.  Six months down the line, the new pricing is accepted and sales start to return to previous levels.

 

Of course this is a simplification, but a well run business will always consider all the options when making an increase of this magnitude.  Short term they may lose some sales, but longer term the business could be on a much stronger footing and that in turn provides job security to many others.

 

Todays increase is often tomorrows discount.  It's not the end of our hobby and six months down the line it will all be different.  Market conditions and technology changes are inevitable and this will all be forgotten in a few weeks. 

I think you are making the exact same point i was driving at; so long as the +20% prices generate the same margin as before, Bachmann will derive the same cash profit from five £120 locos as they would have from six selling at £100 each.

 

Numerical sales can therefore fall (due to consumer resistance or whatever) without harming their bottom line so long as the decrease does not exceed that proportion.

 

If it proved possible to do that whilst developing fewer new products (two instead of three, maybe), maintaining income from lower tooling costs would actually improve their profitability.  

 

John 

[Ian Hargrave]

My father and I have a collection going back 60 years, in three locations (including a few of my grandfathers railway items).

We are lucky to have worked in the industry, my father was 20 years in the industry (and many retailers, indeed most, will probably know him)... You can't have people in the hobby that long without acquiring a few, indeed we have a few that never got round to production too, price isn't necessarily the barrier.

The collection Is in the thousands of locos, I don't know exact.. Its kind of hard to count, but it was over the 1000 mark in the 90's not all British, not all made in the last 10 years. Indeed I have about 6 this week arrived. Mad.. I call it a family passion..my wife thinks the former.

I know if we cleared out it would be enough to impact the prices of the s/h market for a short while, right now we are thinking that we have a few too many and some maybe dumped. (Your fairly decent model shop will hold a similar stock level and it's not uncommon to see £100k of stock held by a retailer...indeed consider that when they sell a you a £15 item made in China retail at £100 and they only make £5 off it.. After being on the shelves 6 months.

I stand by what I believe, We've Seen it come and seen it go.

China is not the end of the earth, Bachmann / Hornby are not the epistle of the industry, uk models have always been cheaper than Europe.. The world was ending back in the 90's when I worked on the factory floor of Dapol and Hornby at the time Lima busted...but there's still stuff coming from those moulds now.

On that note I'm going to retire out of this thread as to me its obvious that maybe this thread is not as balanced unbiased as it could be.

Time will be thy judge.

Hallelujah!

[Oldddudders]

since when did the members of this forum become caring sharing philanthropists all of a sudden?

I cannot possibly speak for any other member, but if my purchase helps someone in the Third World have a fractionally better lifestyle, then that's just fine with me. I would hope more than a few others feel the same way.

[stewartingram]

There is another string to the 'saving up' bow as well - most new items are tending to reach the shops long after they are first announced so even if you shove some cash in a jar on the mantelpiece or put it in a piggy bank during the time you are waiting arrival you could probably save the required sum by the time the item appears.  With one fairly recently arrived loco I think I could have bought at least two if I'd put away only £1 a week between the date they were first announced and the date they arrived - and that wasn't at box shifter prices.

Exactly what I do. Any 50p or £2 coin in my change - not too frequent when you think about it, goes in my piggy bank. Trains4U look forward to me coming in so that their till gets stocked with change! And I purchase 6-7-8 locos per year this way.

 

Stewart