Prices

[SteveM6]

Every time a new loco is released we get the same threads regarding prices and usually with the same commentators, making the same points ad nauseam (myself included before anyone thinks I am having a pop at them).

All retail items have a price point that delivers a level of sales to recover costs and deliver a level of profit to the manufacturer. After a while, and a good few sales, that same price point, adjusted with inflation, will deliver a higher proportion of profit over cost recovery per item. That is perhaps more relevant to long production runs rather than limited editions but there is a point in every batch where the costs have been covered and every additional sale puts money into the profit line for the company.

Its that profit that allows the company to reinvest to develop the next new model etc. To suggest that items should be cheaper once they are a bit further away from their release is just deluded and fanciful thinking. It is not the way the economy of any company works.

And now we have the suggestion that we should base our purchases on the great Sam’s arbitrary judgement of whether something is ‘value for money’?

Give me strength!

[DarkRedCape]

One thing you don’t mention each time this thread is revived SteveM6, is something that’s as old as time. Greed. Price gouging. Are Hornby just raising prices because they can?

The way you describe it is logical and I think largely the truth of the price rises, but I also think there is an element of raising the price for the sake of raising the price.

[SteveM6]

Greed is undoubtedly a factor in many pricing structures - you only have to see that with the obscene levels of dividend payments and bonuses paid in so many industries - gas, electricity, water, petrol etc but I don’t believe that is the ‘driver’ for Hornby.

Their prices are not so dissimilar to others in the same market - yes there are variances, that’s just the way of the world and probably reflects many underlying factors. In Hornby’s case, years of loss making have to be accounted for so maybe in some way we are still funding the mistakes of others in previous years.

Remember also that the price of something will always be set by what people will pay and manufacturers will always set their price point at what they think someone, not necessarily everyone, will pay. That’s economics, not gouging.

Another factor also comes into play and that is the objectives of the company.

Although this has changed since the introduction of the 2006 Companies Act, it used to be the case that when setting up a company, the directors would have to state the ‘objects’ of the company in the company Memorandum and Articles of Association. Basically if your company makes models you don’t set out its objects or purpose as anything other than that.

The way the objects were worded gives a clue as to the mindset of any company and it’s directors - the objects or purpose, of the company are listed in order of priority. You would think that the priority for Hornby would be to make models and that would be its prime object, but you would be wrong. The prime object of a company and it is always listed in first place on the list, is to make a profit and give a return to its investors or shareholders. The secondary object, ie making models, is how they intend to achieve it.

Accordingly, the directors cannot knowingly make decisions that will undermine its prime objective of making a profit and more importantly avoiding losses.

Once you realise that, you will understand why the call for cheap models once the R&D and production costs are paid for will never get any traction. Having said that, Hornby have, to all intents and purposes tried that with RailRoad.

Can you imagine your gas supplier saying halfway through the year - it’s ok, we’ve covered our costs so your gas is free for the rest of the year.

It ain’t gonna happen.

[ColinB]

SteveM6 we all know exactly how a business operates, we are still entitled to complain about the prices. Many industries have lost touch with their target buyers and paid the ultimate price. Currently it is Wilkinsons previously Woolworths and BHS and I am sure they were big enough to do decent cost analysis, but according to the articles I have read they just took their eye off the ball. Actually the thread was about the high price of coaches nothing to do with locos. As I have said before Hornby and Bachmann can charge what they want but it doesn't mean they will sell them at that price. Hornby can charge a high price for their teaks as there seems to be a hug demand but eventually the market will saturate as most people will have a set. High prices, late models, sound familiar, the demise of the British Bike Industry.

[SteveM6]

SteveM6 we all know exactly how a business operates, we are still entitled to complain about the prices.

Actually the thread was about the high price of coaches nothing to do with locos.

 

 

Well Colin, judging from many of the comments on here (and other forums), I would suggest that your initial assertion is somewhat flawed.

As for complaining, regrettably that seems to be your default behaviour.

 

 

I am well aware that the price of a particular coach was being discussed. I merely tried to put the pricing decisions of any product into some sort of context by demonstrating some of the many factors and pressures a company has to consider when pricing products. And I’m pretty sure one phrase that is never heard at Hornby Towers is “we can’t charge that much, Colin won’t like it.”

 

 

[ColinB]

That was totally uncalled for SteveM6 if I have said that I would probably been banned. So sit back have a long think and cut it out. I may complain but I also highlight the things that are good, if you were to bother looking at my posts very many of them are helping people find alternative parts and fix various issues. As I said tone it down, I thought this forum was for discussion which is what I was having. As to Hornby Towers you may not have noticed but I have said frequently that if that is up to them how they run their business.

[AndyMac1707817969]

Business have to make money where they can to pay for the times when they can't or part of a business that is failing to make money. You just can't look at a single item in isolation. Not all products are successful so the successful ones have to make enough to cover the unsuccessful ones. Yes people might complain about companies such as BP making huge profits one year but ignore that the same company posting the biggest loss in corporate history only 2 years before and on top of that having to write off 10 to 20 billion from investments in Russia. Companies have to make profits else what is the point of being in business and indeed if they don’t then they won’t be in business for long.

There are two parties in any buying / selling transactions, not one so it’s up to both to decide on a fair price. Buyers seem to think they can dictate this, if buyers are allowed to do this on their own then you will just end up with a very unfair price for sellers. Was always taught both the buyer and seller need to go away from a deal happy else one will not be back. You see what happens in the renting market when too many laws are made in favour of just the renter. Landlords walk away from the market, number of available properties falls and prices go up, no party wins. Fair has to be fair for both

[Moccasin]

Having taken a look, the quality of the teak effect finish looks excellent and they have fully detailed interiors. Given that a similarly detailed Maunsell coach retails at £60, I presume the manufacturing cost of the teak coaches to achieve the teak effect is higher, hence the £67 cost.

[ColinB]

All we were doing was commenting that the price of Hornby teaks was a bit high. I don't know if the rest know I but definitely know all you are talking about AndyMac, that is why if you tax a company too much they declare their profits somewhere else, my company regularly did it. At the end of the day if you think they are too expensive then don't buy them. The original post was about their high price in relation to a Coronation coach, which is a fair comparison as the Coronation coach has working lights. So that means it has leds and pickups which would normally add to the base cost. Both of these coaches are new releases of an old design so no additional design costs. I have both of them from getting old ones off Hereford models so why certain individuals have to go diving into high level finance and personal abuse amazes me. It was a simple comparison on cost, I imagine the original post was searching for a reason why the teaks were so expensive.

[DarkRedCape]

This is off topic, but what was the size of a rake of teak coaches? I’ve noticed that in hobby form and real life they’re never that long.

[Going Spare]

LNER expresses could load to well over 10 bogie coaches & at least 1 van - there are photographs of The Flying Scotsman with 15-on - and during the wartime period, considerably over that on occasions.

[Yelrow]

How nice it was to see a bit of dissent, allowed, without the moderation which normally accompanies it. The old forum posters, who have gone elsewhere, would have enjoyed it. These days, coach prices have become ridiculous in my view. I don’t blame Hornby. They are in the hands of China. They send a specification and are given a production cost. Shipping plus a modicum of profit is added. We then arrive at £66. They then have to decide to go ahead and place order, or back off. Hence initial runs.

[96RAF]

LNER expresses could load to well over 10 bogie coaches & at least 1 van - there are photographs of The Flying Scotsman with 15-on - and during the wartime period, considerably over that on occasions.

 

 

I enjoy reading the memories of the footplate crews during the ‘bad years’ and some of the trains they were expected to haul. I seem to remember one guy being told - ‘16 on and 700 tons ‘. All in a days work but maybe down to walking pace over the big hills.

[My name is Bond]

Not forgetting VAT at 20% but this is relative as all manufacturers have to include this in their list price and retailers have to include this in their shop prices.

Just pointing out that a fair wad of what is paid for coaches goes directly to HMRC.

[ColinB]

Yes Yelrow you are entirely right, Hornby are entirely dependant on China. The sad reality is beginning to dawn on my businesses.

[Yelrow]

Bachmann, of course, are in exactly the same position. Once you relinquish production and become purely a designer/ supplier, you have to accept the result. With no competition on production costs, you have to either accept model, or abandon it. Which, in my view is why both companies have so many models which have never seen the light of day. I am sure moving production to china, was initially good for both companies, until the chinese realised what they had got. Absolute control . Once the penny dropped, wages rose and both companies are now regretting loss of control. As for a solution, where is lego made?

[Moccasin]

I think Lego are in a very different position as their design and some manufacturing is done in house and their individual components can be manufactured in multiple locations to their specification.

India might be an option for some Hornby products, but that country has its own issues. Diversifying production is probably something Hornby are looking at, but it will be a medium term solution as the skills, experience and quality needs building up in those new locations.

[Yelrow]

My Lego reference was only made in the knowledge, you provided of new Head of Marketing. I imagine, one of his first jobs will be to look at ways of changing or moving production. He is on a hiding to nothing, as it is.

[Moccasin]

My Lego reference was only made in the knowledge, you provided of new Head of Marketing. I imagine, one of his first jobs will be to look at ways of changing or moving production. He is on a hiding to nothing, as it is.

 

 

I doubt that will be in his job scope. His focus will be on marketing rather than operations. I think Mawer will have his hands full with improving Group Marketing. While Simon seemed to do a great job, it also seemed like he was getting involved in lots of things and focused on the model rail side. The impression I got from A Model World was that Lyndon Davies ran the business and kept an eye on other individual brands but gave SK a fair bit of freedom on model railways, but who knows what the truth was. There’s a Head of Strategic Delivery shown on LinkedIn who is probably more focused on diversifying suppliers across the Group.

 

 

Anyway, that’s a bit off topic, though does affect prices obviously.

[Pendragon Sailing]

Perhaps its time for Hornby, Bachmann, etc to start rethinking where they manufacture. There’s no doubt that the cost of Chinese production is going up and of course shipping costs add considerably to the final cost.

Maybe, just maybe, UK or European manufacturing is now a more viable (and predicable) option.

It would also help to reduce the West’s ridiculous (and some might say, unhealthy) over-reliance on China for manufacturing capacity.

Food for thought !

[Aussie Fred]

To Yelrow, Lego is manufactured in Billund in Denmark, Nyíregyháza in Hungary, and Monterrey in Mexico. They are also looking at China.

[Yelrow]

Fred, well now, given the new Marketing guys background, you never know. Thanks for that.

[Rallymatt]

As Bachman is a Chinese company (Kader Holdings) and they bought out Sanda Kan, the key Hornby Chinese manufacturer for 20 years (in 2015) it’s unlikely that they would move from China. In addition to basic labour costs Hornby would also have to consider the skills market. Model production is still very labour intensive and highly skilled, China dominates the component supply used in models so any move would have to be planned well in advance and heavily financed to bring skills up to speed in UK before the final switch, expect models to triple in price. A move to India or Vietnam etc would still incur heavy training costs.

[ColinB]

I notice Rails are doing a deal on Bullied coaches, their initial price was £74 so £66 looks cheap compared with that. As I first said though, they are in the Rails sale with 26% off so obviously not many takers at the original price. Vietnam is probably ok for production but if you think QA is bad now, just see what it would be like in India. A lot of autoparts get made in Eastern Europe but I suspect with their membership of the EU, their prices are rising.

[Moccasin]

I notice Rails are doing a deal on Bullied coaches, their initial price was £74 so £66 looks cheap compared with that. As I first said though, they are in the Rails sale with 26% off so obviously not many takers at the original price. Vietnam is probably ok for production but if you think QA is bad now, just see what it would be like in India. A lot of autoparts get made in Eastern Europe but I suspect with their membership of the EU, their prices are rising.

 

 

One of the contributing factors to the current auto trade component supply problems is the Ukraine war. This affects their supply chains and as you say that is likely compounded by trade and cost uncertainties.

I think those not already using Eastern European suppliers will be steering well clear for a while yet.