ruggedpeak

If it's being suggested that both experience of the prototype and access to a local model shop are required to generate new entrants to the hobby, then we have a major problem, because we have areas with lots of real railways and no modelshops, and areas with model shops but limited exposure to real railways

Aaaaaaghhhhh!! I live in the NSE area and commute on tube and train every day. I'm sure I'm not alone in saying that experience is enough to put any sane person off trains for life. Maybe that's the reason there's few model shops in London! I travel on S stock everyday but don't want to see one when I get home!

 

The other argument is the lack of RTR models of the types of trains running in the area. I've considered modelling my own station but the core trains are OHL EMU's (not available) and 66/90 hauled container trains (available). Is it a case of chicken and egg? If a wider selection of NSE area stock was available maybe more would model?

B&Q have a selection of Really Useful boxes in store at the moment with some deals e.g. 2x 18 litres box for £15, 2x 35 litre for £20, 9 litre boxes at £6 each.

 The point about using a post code is that it does not specify a unique address, rather a group of addresses.

Not always.

There is probably some merit for Hornby in a strategy of direct selling, particularly of high-end, low volume products.

Yes, as long as it follows the well proven path of many other manufacturers of products as diverse as Apple to Dartington Crystal.

 

That is sell direct at full price, do not undercut, undermine or cannibalise your existing sales channels, and maintain your focus on marketing to drive sales and your brand across ALL channels.

Nice pic of E5001 pulling NSE liveried EMU's out of Shakespeare Cliff Tunnel in the current (795, WCRC Ban cover) issue of Rail Magazine, on page 64 in the feature on the Dover Sea Wall repairs.

 Yes...but that is already a business model being used by retailers themselves....Hattons and Kernow for instance.Maybe the next step is a consortium of smaller retailers ? Surely in any case Locomotion is an 'independent retailer' who just as the other two mentioned here regularly commission models.Contrast that with Hornby's ongoing  accident prone excursion into the realms of direct sell

Indeed, and as per the quotes above (and the odd picture ) I'm pleased Rapido use retailers and look forward to this occuring in the UK very soon. In terms of risk and commissioning they have a clear model:

 

"With the exception of some accessory items, all Rapido Trains Inc. products are produced strictly to reservations placed before the appropriate order deadlines. Avoid missing out by reserving in advance with your dealer." Clearly de-risking the process. I assume US retailers don't have large quantities of heavily discounted Rapido stock clogging up their shelves......

Pre-pay, pre-order, the fact is if you wanted a non-DCC APT-E you had to pay £50 up front with delivery following on almost a year later, or alternatively pay approx. 22% up front and wait. So the supplier Rapido has the surety of pre-selling the whole run to Locomotion (an entity which is ultimately under written by the tax payer) who then manage their cash flow for the project by charging a significant deposit. Hence Rapido de-risk by manufacturing to order for a commissioning party, that party de-risks by using the deposit to cover a large part of their up front cost. Now don't get me wrong, if the market will accept it then that is a brilliant scenario for the supply chain as the party actually dealing with the factory has minimal risk and the party managing sales minimises both inventory risk and also avoids the very real risk of having to fund development up front and not receive any return until the models are shipped. I don't see anybody else applying such a model, people may not like Hornby, Bachmann, Heljan, Dapol, DJM prices but all those parties are sinking serious money into product development and are running two major risks, one that nobody buys the models produced, and second that they are committing their funds up front which is locked up in the project. To me it is that very risk which justifies their profit and returns as if a business is going to take on such a risk then it is quite right that if they're running the risk of losing £££££'s then they also reap the rewards if it all goes well.

Not great for retail, though, is it? Much as the Rapido business model has brought new models to market, it is undermining independent retailers by cutting them out the value chain.

For those who are looking longer term to the future of the the hobby there are several pertinent articles in the Graun on the wider and social and economic issues. It is a running features on the economic woes of the 'milennials' or Generation Y.

 

"Middle-aged western consumers who are at the peak of their earning potential have been the central plank in the development of the world’s postwar economy. They have been key to purchasing all sorts of goods from washing machines, microwaves, cars and houses, to life insurance, as well as putting money away in savings."

 

Or indeed buying model trains.

 

http://www.theguardian.com/world/2016/mar/07/generation-y-pay-price-baby-boomer-pensions

 

And the lack of wage growth for the younger generation

 

http://www.theguardian.com/business/2016/mar/06/wage-growth-george-osborne-budget-obr-pay

 

Why is this relevant to Hornby? Well for whatever reasons those with decent pensions will be dying off, those with decent wages will retire but with lower pensions, and the workers behind them as a mass have little or no spare cash for leisure activities and no doubt be taxed to death to pay the pensions of the every growing numbers of elderly.

 

Model trains won't die, but running a profitable £50m t/o model company could get a bit tricky over the next 10-15 years. I suspect the more collector and wealthy customer  orientated business models of the Continental and North American firms, especially getting some commitment from punters before spending on design etc is going to be the norm. This may not be good for us modellers (if you don't have the dosh you miss out) or retailers. But people will still be modelling.

I thought the consensus was that those "endless sales" are a result of a desperate need for cash and to bail excess stock overboard ASAP, rather than a result of a lower price policy?

 

 

Possibly a further indication that they are producing too many models and more volume than the market can sustain?

That might suggest that they should rationalise what they are offering; e.g. reduce the production runs of the more detailed and expensive models and raise prices accordingly and, if they wish to maintain a budget offering, rationalise the Railroad catalogue to a smaller, more clearly defined and focussed range.

That might just introduce the sort of differentiation between high detail main range and Railroad, that so many people have been calling for.

The problem could be that such a course of action might require Hornby's domestic model train arm to be downsized into a slightly smaller business. Will their need to recover from debt allow that?

 

 

Surely nobody is going to set out to be "semi-profitable".

That's a sure fire road to ruin.

Hornby's pricing activity has led to a perception of lower prices, even if that was not the intention. Brand and product value has been eroded in the eyes of customers and retailers alike.

 

The excess stock is a direct result of various factors, a key one being the absence of a proper understanding of the market and its customers, as I have explained pursued a digital/IT and direct sales strategy that has damaged relationships with customers and retail channels, undermined the brand and failed to capitalise on the most basic marketing opportunities that generate actual sales rather than tweet or Facebook likes that generate the square root of zero cash. Shrinking the business does not ovecome a fundamental inability to make and sell stuff people want.

 

As for semi-profitable (not a technical terms), some times a company has to run at a loss e.g. cover its variable costs of production and some of its fixed costs to stay afloat. Hornby seems to be approaching that position where it will have to (again) forget profitability and focus on cashflow to keep it afloat, pay its bills and loans and sub-contractors etc.

Who would be a model railway marketing analyst??

Personally this gets to the nub of it. I have studied Hornby and its last recovery strategy as part of an MBA I am doing. Quality data and info is hard to come by, hence more opinion than fact. More importantly the other half is a marketing consultants to global brands, doing all sorts of market and consumer intelligence as well as product innovation. Her expertise is the qualitative side, understanding what people actually want and will pay for (which is often different from what they say when asked!). She knows her stuff and I worked with her for a while so have some understanding of the processes.

 

What is clear is that there is very little good data on the model railway market, as it is treated as a subset of toys. It is not really big enough for the analyst firms to produce reports on as there are few companies who can afford the £500+ reports cost. Hornby appear to have made an attempt, but it seems that either this was not done properly, or they ignored it. I am of the view they may be lacking a proper marketer who understands trains and modellers and people who buy toys on their staff (or at least not in a senior position). Certainly there seems to be insufficient engagement by Hornby in the marketplace visiting retailers, talking to customers, attending shows etc to build that non-data 'feel' for the market (as others have said above). That is what sits alogg side the qualitative data. I believe by employing an ex- major corporate accountant as head of sales, they have lost the non-numerical information they need to make good decisions, such as making products that people want and will buy at a reasonable price.

 

This case study reinforces my view that Hornby has gone far too digital and got lost in a sea of IT, data and spreadsheets:

 

http://www.matillion.com/case-studies/Hornby-aligns-strategy-to-execution-using-matillion-bi-sales-analysis/

 

As I keep saying, social media and spreadsheets don't sell anything - hard graft and basic sales skills do that, along with a strategy aligned to a well understood marketplace. Time for Mr S and his team to roll up their sleeves and be seen at model stores and shows across the UK rather than hiding behind screens.

 

The major manufacturers need to get a much better understanding of the market, but with customers spread across the full spectrum from those fully digital to those reading the odd mag and popping down their local club, and parents or grandparents looking for presents, this woud require a reasonable investment, which I don't think the big players can afford right now. However proper in depth research seems to be required.

Hi Bennyboy,

 

Yes - This was:-

 

BR 56356 Class 101 DMU: Driving Trailer Composite Lavatory built 1958

 

http://www.cs.vintagecarriagestrust.org/se/CarriageInfo.asp?Ref=3060

 

This is part of the Bachmann 2016 releases:

 

39-005                  BR Mark 2A + Class 101 DTCL ‘Highlander Pack’ with Passenger figures

 

Edit to bring forward the release date by 90 years!

Their website is still up. Just found this in a pile of old modelling instructions and manuals. Complete catalogue with highlighter marks of stuff I was going to or did order! Not dated but well over 20 year old.

 

With Bachmann having to move their UK prices upwards to be more in line with their Lililiput "European" ranges, will Hornby decide in favour of a similar course of action to make their own UK product lines more profitable?

I think we all hope not, and Hornby pricing has gone the other way with endless sales. A key issue seems to be a very large amount of stock that will not sell even when discounted. A photo from a recent show showing one of Hornby's concessions showed tables full of suprisingly large numbers of discounted Hornby items. Hornby have to make more stuff that sells promptly at a reasonable and at least semi-profitable price before it starts thinking about premium pricing.

There were some comments earlier about not underestimating kids, and to follow that up, I can assure you that there are children who consider it important that a passenger train has a brake coach. 

Question is are there enough of them to sustain a business? And how best do Hornby reach them?

I wonder if there is anyone at Frizinghall from about 20-25 years ago? Pride of my fleet has always been this Hornby 37, which I think is about 25 years old. Long before it was common for locos to be commercially reliveried, as a teenager I saw this in Railway Modeller and got it for my birthday or Xmas. I remember it being delivered by the postman after days of excited anticipation. The idea of a repaint of a Hornby 37 into Highland colours was a dream come true for me at the time. It is still running, albeit not as smooth as it used to, and all I have done is paint the buffers, reglaze and add the Scottie dog transfer (liked it too much to do a full detailing upgrade). Clearly a quality job as it has had a lot of use as my "best" loco.

 

 

And completely contemporary as it is back running in this livery (last time I looked!) on the NYMR

Got a call to say thier green and cream Mk1s have arrived in stock today. Just in time for Glasgow show.

A set has just arrived here . Very pleased, lovely models. Very well packaged too.

 

As bought a couple of these as I couldn't resist (another Harburn commission).

 

 

Very nice

 

For info the Harburn coaches are Mark 1's and are totally different livery to the Mark 2's in the Bachmann "Highlander" train set.

I'll be the grumpy one then! It is great that Nat and his son went and he has written about it.

 

The counter is what was the Hornby marketing plan to capitalise on probably the biggest train related news day (global coverage) of the year? Especially with a warehouse full of Scotsman models.

Precisely my point: Given the amount of unsold Great Western stuff piled up in Newcastle they are obviously not tailoring their stock distribution.

 

Conversely of course we've had this silly business of manufacturing equal numbers of suburban coaches despite everybody at this end of the food chain knowing that for some trains all you need is a brake composite and that for bigger trains you need a brake composite at each end. Instead we find a world shortage of brake composites and Hornby effectively saying they're fed up telling people there's no demand.

It's easy to miscalculate demand for coaches - a friend who runs a well-known firm manufacturing brass kits told me that when he first started out, he realised he could fir three coaches on to one etch - so he did a brake, a composite and a restaurant car. Of course, he wound up with loads of restaurant cars left over! He never made that mistake again!

Coaches must be a nightmare, as Hornby's recent discounted packs have shown. Take the Arriva mk3's, the 3 standard coaches are still available yet the restaurant car is not. And the DVT's are rare but the 67's not. How do you predict the right number to make? How many people like me will want to buy a full set and only a full set (and in my case only if discounted significantly) versus those who may only buy one or two, and if they what do they buy? One standard and one restaurant or two standards? Or one standard?

 

On indie shops getting together, this has been tried in many other sectors. Unfortunately it requires time and cash to set up and operate and today's margins preclude it being viable in my view for most stores. However a decent real as against digital sales force could fulfil some of this function.

 

On Hornby and their profits, their much vaunted ERP was supposed to help with some of this. More concerning is the marketing and sales process. To be blunt their entire process, based on what we see and hear in the public domain is not up to scratch. They have damaged existing channels and clearly achieved little as a result. I have no time for social media like Twitter and Facebook personally or commercially. They can build brand awareness but it is entirely ephemeral and is wasted money unless you do it continually. Hornby have gone up a blind alley at large cost for little visible gain IMHO.

 

I give 2 examples. When I had a web retail and distribution business there was only one communication medium that had a dramatic and sustainable as well as highly cost effective impact on sales - TV. Forget websites, paid adverts etc, TV is it. Proper guerilla tv marketing, old school marketing like Mr Kohler writes about still works far better than this digital stuff when it comes to the bottom line of selling models. I had great TV benefits like giving product to sponsor SARDA dogs who were featured on BBC news, big lift in sales. Even better the Gadget Show called me for product to test to destruction. Our product won this against competitors on the Show and for £25 I got national TV coverage. And get this, ITV's ad revenue growth recently has been mainly web companies. Yes, the mighty web co's like Google, EBay, Amazon and Netflix are having to pay for TV ads to compete in the Internet sector. Quite telling in my view.

 

One question, what was the Hornby presence at Kings Cross for the Scotsman run? Given they have a warehouse full of Scotsman models (including discounted Corgi models) surely they'd have a stall or stand or something to capitalise on it? If not why not? TV cameras everywhere and surely a Hornby banner could have been snuck in somewhere or attached to a line side fence at a key point? Apologies if this was done but I saw no Hornby marketing in the Scotsman coverage. I fear the marketing department thinks sitting in front of a PC screen is more effective than actually meeting punters and retailers and filling hire vans with stock and promo material and touting them around the country. As the results are showing, its doesn't seem to be working.

 

Edited for bizarre iPad predictive text nonsense. Never had that problem with Stone Age carvings!

Hornby have the 3 standard Arriva mk3's in their Last Chance pages. The Arriva 67's and DVG can be found elsewhere, but as big Jim says the buffet is rare. But might be worth trying Chester Model Centre, they had some at the end of last year, because that's where I got mine after Hornby sold out. I have the full Arriva set

 

Goes with my WSMR set and looking forward to Hornby's Arriva 153.

Hornby NSE 121 at less than £50, tested as usual, quick delivery. Great service.

I have a friend who works for a local authority. This authority is refitting its telephone system, and has been doing so for nearly three years!

Funnily enough I work in the public sector too............

 

I think you are seriously underestimating the complexity of Hornby's business now, given it is based across four different countries plus China, and across at least five different and significant product ranges (railways, plastic kits, car racing, toys, paints etc), retails across three continents and in four different re-sale channels (retailers, concessions, warehousers and direct) and uses outsourced production at five different factories and an outsourced logistics operation. In that scenario, your analysis is invalid. ERM is essential.

 

You could argue that this complexity is its downfall, in which case ERM would not be necessary in a much simplified series of separate operations. But that would be contrary to the bulk of current city analysts, who seem to be saying that Hornby should broaden its base even more, in order to succeed. I have no idea who is right on that score.

Possibly, but I disagree. Having run my own web business that imported, retailed and distrubuted products I have some idea. As a Luddite and having run and successfully outsourced my logistics operation (from inbound to despatch), the fact that it is on 3 continents and multiple channels and several factories does not in itself require fancy IT. You only need the fancy IT when you have a business need for high levels of effective interfacing between those elements, often based on timing or complexity or risk. Well trained staff with clipboards, spreadsheets and email can fulfil the same function for next to nothing in a normal warehouse. There is nothing invalid about my analysis since nothing you have suggested provides any justification for a complex, risky and expensive IT system since Hornby do nothing in their business which is properly high risk, complex or time critical AFAIK. There core UK operations are the design, sales & marketing, plus box shifting in the warehouse. The lead times are huge and key elements of their supply chain are sufficiently fluid as to make timings very flexible.

 

I'm more than happy to be proved wrong, that Hornby do have a degree of criticality on their business operations that justifies the risk and cost of this system (which still doesn't work), but I can't see it. Where is the added business value and ultimately extra profit it will generate? Does saving a day or two in the production to retail shelf process generate sufficiently enhanced profits to pay for such a system? Not selling model trains it doesn't.

 

When their production processes were fully sorted, when their direct sales route was operating properly and profitably, when they actually had some idea what their stock levels were (which does not require any IT at all), then perhaps look at some system, but before that you are diverting business finance and resource away from the core activity of flogging trains, kits and paints to punters at decent margins. This is one of the fundamental problems with ERP implementation, it takes management's eyes off the ball. Hornby sells models. It's focus should entirely be on that, and as we've seen with even the basic operation of the website, they have lost focus on that. ERP will never overcome poor strategy, botched marketing or a less than ideal supply chain. Remember the bulk of Hornby's sales (70 odd %) are in the UK. That's less than 30% everywhere else. And 40% [EDIT over 70%  - correct figures from earlier post "UK sales make up 79% of Hornby group revenues (2015 Annual Report)(up from 71% in 2014), and 40% of all sales is model trains, plus 23% Scalextric (2014 Report)."] of overall sales are trains, so as I've pointed out before the core business of Hornby, the driver of revenue (and presumably profit but we don't have figures) is selling model trains in the UK. Everything else is peripheral, so investing in some expensive IT system to help you sell stuff in the US or France is arguably nuts, since it is a tiny and probably not very profitable area of the business. The UK design, marketing and box shifting doesn't require it. Overseas was seen as a 'growth' area, but again my argument is you put in the fancy system when your core business is stablised and producing the cash to fund it, and/or the growth areas are actually growing sufficiently to justify the resource. Not before, and drain the business of cash and management time trying to get it to work.

 

How many City analysts have actually run a logistics operation or a business? They know no more about Hornby's operations or how to improve them than my cat does. In fact most of them can't even run a bank (not actually difficult) or count, as we all found out in 2008. Didn't see many of the complaining about Ames' strategy a couple of years ago, yet here we are with £1m stock loss, growing financial losses etc.

I'm generally marvellously ignorant on IT matters - still have no idea what ERP stands for - but know a little about developing new systems. More than twenty years ago, Mike Storey and I were involved in development and roll-out of a major new system which incorporated many existing modules. Mike had been one of the specifiers, then worked with me on roll-out. The complexity of the system and the internal machinations of BR as it approached the Private Sector made the whole shebang a nightmare, and there was huge resentment (not from Mike!) when I introduced a full UAT team, and they drove a coach and horses through the in-house supplier and his methods.

 

New systems make a huge demand on resources, and existing feathers get ruffled. Successful implementation requires hearts and minds to be won over. I wonder whether Hornby failed to get that aspect right.

Enterprise resource planning

Enterprise resource planning is a business management software—usually a suite of integrated applications—that a company can use to collect, store, manage and interpret data from many business activities, including: Product planning, cost Manufacturing or service delivery Marketing and sales Inventory management Shipping and payment ERP provides an integrated view of core business processes, often in real-time, using common databases maintained by a database management system. ERP systems track business resources—cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. The applications that make up the system share data across the various departments that provide the data. ERP facilitates information flow between all business functions, and manages connections to outside stakeholders. Enterprise system software is a multi-billion dollar industry that produces components that support a variety of business functions. IT investments have become the largest category of capital expenditure in United States-based businesses over the past decade.

https://en.wikipedia.org/wiki/Enterprise_resource_planning

 

In other words a very big, complicated and expensive computer system that pretty much does everything in the business. If (big if) it works then management can all sorts of real time reports on all sorts of stuff. However the complexity and cost can crash the entire business. This is well documented. One very simple question at the outset is do we need all this stuff, and if we invest £x million in it will we get a decent return on that investment?

 

If you are running a large car factory with Just-in-Time parts supply and every vehicle made to customer order, you definitely need a good ERP, and I've supplied components to a well known van maker who turned their parts warehouse into fully RFID and ERP controlled, with forklift drivers directed wirelessly by PDA's to specific parts at the time required by the production line, whilst simultaneously monitoring stock levels and notifying suppliers of new orders etc.

 

Do you need it for a model train supply chain in China where it takes weeks to arrive by ship (so plenty of warning) and orders are via normal warehouse processes and not time critical as one late order does not shut down an entire factory? Personally I think not, not if it costs a lot of money you don't have. Nice to have but does it deliver additional profits ultimately from that costly functionality?

 

IT in the wider economy is arguably holding back producitvity as so much money is being wasted on IT systems that don't work, rather than investing in training and skilling staff and getting competent management. But the current trend is staff are bad and costly, IT is good and shiny, despite volumes of evidence to the contrary.

I think it is just too easy, when you are not part of the management of the company, to write judgement especially if not party to any of the information within the company that led to that decision being taken. Perhaps a valiant effort that did not work out as planned - us outsiders just do not know.

That's what discussions and forums are for. We don't know the full facts, and as investors know, getting the full truth out of management can be very difficult, so frankly no one knows exactly what is going on, perhaps even those with sizeable shareholdings in the company. Given the surprise £1m write off, do even the management? It doesn't mean we can't comment based on available information. That is exactly potential investors and commentators have to do all the time.

Will it cost twice as much as it did last year?

not according the National Bureau of Statistics of China

 

 

http://www.tradingeconomics.com/china/labour-costs

Stop trying to stir with the Evil Hornby bu..sh... If they were SO good at being the evil empire you try to make them, they would not be in the financial situation they are in.

Evil doesn't pay. Every time the Empire has nearly finished the Death Star it gets blown up. Must be costing them a fortune. Bet they won't get insurance on the next one.