Bachmann Pricing Policy to Retailers

[Lokomotivfuhrer]

I was in my local retailer last week, on Friday the 9th of March,

 

During this time, the Postman came into the shop, and handed me the Mail which I gave to the proprietor who was standing behind the counter.

 

Within the Mail, which my retailer opened in front of me, was a letter from Bachmann.

 

As he read the letter aloud, he was somewhat astonished when he came to part of the letter which went something like this -

"Bachmann Retailers should not discount any new Bachmann product, by more than 15% off the Recommended Price for a period of 8 weeks after delivery".

 

I'm unsure if this letter is being issued to all Bachmann Retailers, or just this particular Retailer, but perhaps other RMWeb Members might have more knowledge of this than I do.

 

It'll be my head between the buffers now, so just have to hope there is an Earth Fault accompanied with the Blue Light Bright and no amps.

 

Here lies Casey Bones, formerly known as Lokomotivfuhrer.

[Mike at C&M]

I can confirm that he is not alone in receiving this letter.

 

It will be interesting to see the reaction to this.

[reevesthecat]

It is mentioned in the blurb on the rail exclusive site from the trade launch.

mark

[BR Blue]

Is this entirely legal in the UK? A manufacturer can obviously charge a retailer what they like but surely its up to the retailer to decide what margin to add?

[AMJ]

What you'll probably find is that the "blue eyed boys" will get away with charging what they want. However most suppliers can't insist what retaillers charge.

 

What will probably happen is they might give some retaillers a delayed or non delivery of items to get them into line. The other method is to change the discounts to the retailler so it costs them more.

[spamcan61]

Is this entirely legal in the UK? A manufacturer can obviously charge a retailer what they like but surely its up to the retailer to decide what margin to add?

 

It does seem disturbingly close to an attempt at bringing back resale price maintenance.

[Bob Reid]

They might not be able to insist AMJ - what they can do though - is to threaten to close your account...

[ScRSG]

It does seem disturbingly close to an attempt at bringing back resale price maintenance.

 

Seems like????

[Ian J.]

As I understand it (which isn't very well) the laws on price maintenance are against using alternative methods to enforce a price restriction. However, my knowledge is scant, and I dare say there are various such methods that have yet to be challenged legally to get them properly 'outlawed'. Bachmann may find themselves in trouble over this if enough retailers gather together and back a challenge to it.

[D605Eagle]

There must be somebody on here who is knowledgeable in these matters? If they can give us some advice, and it shows that Bachmann are breaking the law, then they need reporting to the Office of Fair trading. Last thing we need is this sort of behaviour. I've heard wispers of another manufacturer trying this on, but I as I have no proof, I'll not divulge which it is.

[D605Eagle]

This seems to suggest it isn't legal....

 

"In 1955 in the UK, the Monopolies and Mergers Commission's report Collective Discrimination - A Report on Exclusive Dealing, Aggregated Rebates and Other Discriminatory Trade Practices recommended that resale price maintenance when collectively enforced by manufacturers should be made illegal, but individual manufacturers should be allowed to continue the practice. The report was the basis for the Restrictive Trade Practices Act 1956, this specifically prohibited collective enforcement of resale price maintenance in the UK. Restrictive agreements had to be registered at the Restrictive Practices Court, and were considered on individual merit. In 1964 the Resale Prices Act was passed, which now considered all resale price agreements to be against public interest unless proven otherwise. In 2010 in what could be a landmark case The Office of Fair Trading started to investigate allegations of resale price maintenance in the hotel industry. The investigation will focus on allegations that there could be agreements and concerted practices resulting in fixed or minimum resale prices.

In relation to competition, Article 81 and Article 82 of the EC Treaty are paramount over all member states' national laws relating to competition. The ECJ and the Commission have both held that Resale Price Maintenance is generally prohibited. UK law must apply this interpretation when dealing with inter member-state agreements between undertakings"

[Andy Y]

My personal perspective is that this is a laudable move. It's obviously being done to help the smaller retailers out there losing out to the box-shifters on all the initial sales of a product (which has to be good for more of us in the long run I think) as has been the way over the last couple of years. After the 8 weeks is up then further discounts could be applied if the retailer wishes to do so. Therefore if we want stuff cheaper we have to take a gamble on retailers still having stock after the initial period. Hopefully it'll keep a few more local shops in business and keep a wider supply chain in existence.

 

 

 

As to the legalities; I can't say but in practice I think it's a sensible precaution to preserve a necessary trading margin. The effect of 'our' constant bargain hunting in the hobby on new releases isn't much different from the farmer who will be up in a couple of hours time to make a penny from a litre of milk whilst the retailer dictates the price.

[Andy Y]

Collective Discrimination - A Report on Exclusive Dealing, Aggregated Rebates and Other Discriminatory Trade Practices recommended that resale price maintenance when collectively enforced by manufacturers should be made illegal, but individual manufacturers should be allowed to continue the practice.

 

Well there's your answer then; on that evidence it's only illegal if more than one manufacturer adopted the policy in consort with other manufacturers. That reads as though a single manufacturer can determine their own approach.

[D605Eagle]

Right, i'm kind of with you there, but this bit seems to imply you need permission to do it?

"The report was the basis for the Restrictive Trade Practices Act 1956, this specifically prohibited collective enforcement of resale price maintenance in the UK. Restrictive agreements had to be registered at the Restrictive Practices Court, and were considered on individual merit."

I'm not clude up on legal matters hence my request for a legal eagle

[Black Sheep]

Is this entirely legal in the UK? A manufacturer can obviously charge a retailer what they like but surely its up to the retailer to decide what margin to add?

 

I was under the impression that it can be made as part of the trade agreement between supplier and stockist.

 

I currently work in an independent bookshop, we often get books in before they're published and we're not to put them on the shelves of publicise that we have them in stock until the publication date.

[Ian J.]

This bit comes after the 1956 part, and effectively nulls the 1956 Act:

In 1964 the Resale Prices Act was passed, which now considered all resale price agreements to be against public interest unless proven otherwise.

 

While I kind of understand the heart overuling the head when it comes to trying to protect the smaller individual retailers, that isn't of itself a basis for breaking the law.

 

However there are arguments to get that law changed, but that brings up politics as it would pretty much require us leaving the EU in its current form. It's also unlikely to happen if we were to do that as the only political parties to consider it wouldn't be on the side of a restricitive practice such as this. Don't forget that it would apply to all goods and services, not just model railways.

 

As to the legality of Bachmann's move I believe that would need to be tested in the courts, creating profit for solicitors and barristers, etc, etc and taking it away from both the retailers and Bachmann.

 

As I believe the restriction on discussing politics on RMweb is still in force, this thread will probably end up locked in the not to distant future.

[40F]

Do you honestly think that Bachmann did not take considerable legal advice BEFORE publishing/issuing this letter. I think you will find that they did.

[Ian J.]

That I don't doubt for a second, but it will still be an interpretation of the law, and as such subject to scrutiny.

 

I've just had a thought (not fully thought through but I'll posit it here for consideration and burning down in flames):

 

It would surely be better, with the idea of protecting smaller resellers, for the bigger companies like Bachmann to even-handedly 'restrict' supply, rather than try anything that might amount to price fixing. If Bachmann produced 5000 of locomotive A and they have 1000 retailers who they supply, then initially only supply a maximum of 5 to each retailer, regardless of the size of retailer. That way, if the box shifters sell out, the remaining supply is with the smaller retailers. If they can't sell their allotment and return unsold items to Bachmann, then those could be sent back out to the box shifters for further selling. Obviously some buyers would simply put on hold their purchases until the box shifters had them at a lower price but that could be months, years, or possibly never, so that would be for the buyer to risk.

[Pannier Tank]

There are a few RMweb insomniacs if this discussion is anything to go by!

[Kris]

I don't think that's it unreasonable to ask retailers not to discount by more than 15% for the first 8 weeks after a models launch. After that it the retailers are free to discount by what ever they want. If you want a cheap model you might just have to wait an extra couple of months.

[Oldddudders]

15% off RRP is not a bad discount for a brand-new product fresh to market. It may not match some of the box-shifters' norms - I really don't know - but is still significant on 3-figure items. And it's only for 8 weeks. Not a few on here have indicated that after one or two recent high-profile lemons, they will be keeping their wallet furled until other purchasers give the thumbs up. So there's a few weeks gone, perhaps.

 

Try living in a country where a shop may not hold a sale except in prescribed periods of the year!

[brushman47544]

Do you honestly think that Bachmann did not take considerable legal advice BEFORE publishing/issuing this letter. I think you will find that they did.

Do you work for Bachmann 40F? I ask because a couple of your recent posts have been phrased in a way that implies you have first hand knowledge of Bachmann's position. If so, welcome aboard - it's good to know what we say on here will be heard, even if not always agreed with or acted upon.

 

As far as the subject at hand is concerned, I do have some sympathies if one of the objectives is to encourage buyers to use their local model shops rather than the box shifters. Before I moved to Portugal, by and large I bought from one of my local retailers, which one depending on the price of individual models. Whether reducing the potential price differential between RRP and the discounted price will help (in many cases I suspect only a 5% difference - reducing the discount from 20% to 15%) remains to be seen as there are plenty of model shops who cannot offer much of a discount at all. And as others have said, except perhaps for the most popular of models will buyers simply wait until a higher discount is allowed knowing it will come if the model doesn't sell at the higher price because buyers are holding off? By and large I look at the discount as paying for the postage.

 

There is another aspect too. If I can only pre-order at the higher price and I don't know how popular a model will be, I am more likely NOT to pre-order and instead wait and see. Living abroad now, I normally buy using the internet. Many retailers now have their websites linked to actual stock levels, so you can check in regularly and see how sales are going. If the number still available of a model drops to near selling out, then I may well buy at the higher price, but if not I will be tempted to wait on the assumption the price will drop after the restricted period. If big drops in pre-ordering became widespread, Bachmann might find shops themselves ordering fewer of an item until they see how sales go, which might affect cash flow for both Bachmann and the retailers. And potentially leave Bachmann with more stock for longer.

 

So however laudable the idea is, I think it is may have its down sides. We shall see.

[6959]

Regarding Recommended Selling Price (RRP), it is deliberately set high by manufacturers of all kinds of products, not just toys, knowing that it will be discounted to a reasonable price in mainstream shops. During the past 40 years or so I have noticed in UK and Canada that RRP is charged by the expensive shops only but most shops sell at about 15 to 20 percent less than RRP. When there is a surplus of a particular item or end of line, the manufacturers offload stock at lower trade prices and the secondary market kicks in to put it out for the best price it can get. After that, the sharks buy up residual stock and sell on as a 'collector's item' at several times more than RRP.

 

In retail trade it is easy to be a busy fool chasing negligible margins and you need only to think how many independent petrol filling stations have gone out of business since the 1960s. When all petrol stations are owned by the oil companies or supermarkets we shall have to suffer very high prices at the pumps. In the 1970s I looked around to buy a shop to set up a model railway business but could not find a shop in the right place at the right price and that was suitable for bringing up a family (garden to play in). Maybe it is just as well it did not work out and I stayed in employment with a large company which now pays my pension. I still go to toy fairs occasionally and see the same traders who have been working seven days a week since the 1970s running a shop Monday to Saturday and selling on a stall on Sundays. I do not know of a model railway trader who has a home in the Bahamas.

 

The prices asked by a box shifter in the North West have risen in the past year or so and doing a quick check of 85 percent of RRP on current production I notice that, for example, a Hornby Hawksworth coach comes out at about 32 Pounds and a Bachmann MK1 coach at about 22 quid so Bachmann's letter is not that far off course. After the initial rush to get new releases has passed, the prices do come down a bit more.

 

For years I have been in favour of the free for all on prices but I am thinking now that a return to Retail Price Maintenance at a fair and reasonable price would be of benefit to sellers and buyers. The problem with that is the term 'fair and reasonable' is unknown to some people in business.

 

To go back to the original post, I think this is already happening regarding Hornby and Bachmann. We have just got confirmation by sight of the Bachmann letter of what many have suspected for a long time.

[40F]

Do you work for Bachmann 40F? I ask because a couple of your recent posts have been phrased in a way that implies you have first hand knowledge of Bachmann's position. If so, welcome aboard - it's good to know what we say on here will be heard, even if not always agreed with or acted upon.

 

As far as the subject at hand is concerned, I do have some sympathies if one of the objectives is to encourage buyers to use their local model shops rather than the box shifters. Before I moved to Portugal, by and large I bought from one of my local retailers, which one depending on the price of individual models. Whether reducing the potential price differential between RRP and the discounted price will help (in many cases I suspect only a 5% difference - reducing the discount from 20% to 15%) remains to be seen as there are plenty of model shops who cannot offer much of a discount at all. And as others have said, except perhaps for the most popular of models will buyers simply wait until a higher discount is allowed knowing it will come if the model doesn't sell at the higher price because buyers are holding off? By and large I look at the discount as paying for the postage.

 

There is another aspect too. If I can only pre-order at the higher price and I don't know how popular a model will be, I am more likely NOT to pre-order and instead wait and see. Living abroad now, I normally buy using the internet. Many retailers now have their websites linked to actual stock levels, so you can check in regularly and see how sales are going. If the number still available of a model drops to near selling out, then I may well buy at the higher price, but if not I will be tempted to wait on the assumption the price will drop after the restricted period. If big drops in pre-ordering became widespread, Bachmann might find shops themselves ordering fewer of an item until they see how sales go, which might affect cash flow for both Bachmann and the retailers. And potentially leave Bachmann with more stock for longer.

 

So however laudable the idea is, I think it is may have its down sides. We shall see.

 

I do not and never have worked for Bachmann. All I am saying is is it any of our business and do we know the exact contents of said missive and not just the exract quoted by the OP.

Also as regards the legal bit any self respecting company will check ,check, and double check before issuing such a letter. If I recall correctly another Model Railway manufacturer adopted a similar policy a few years ago were by the discount to retailers was reduced if they crucified the prices.

[40F]

"For years I have been in favour of the free for all on prices but I am thinking now that a return to Retail Price Maintenance at a fair and reasonable price would be of benefit to sellers and buyers. The problem with that is the term 'fair and reasonable' is unknown to some people in business."

 

I have been thinking along those lines for sometime as well. The danger is that you end up with one large supplier who then can charge what they like. FAIR competion is one thing severe price cutting for the sake of it is another. Lets be honest the day of the genuine sale in shops has long gone with either permenant sales or goods are specially brought in for the"sale". A return to RPM would certainley ensure some stability and we might actualy discover the true cost of items.