What might they be thinking by jacking up the MSRP soooo high

[Anonymous]

Howdy,
I've noticed that in many cases the manufacturers suggested retail price is so far out of line with the actual selling price that its ridiculous.

Case in point - look at the Bachmann ads in Garden Rys. The MSRP is about double the price you can order an item for from many ads in the magazine. Are we so dumb that we're supposed to think, "Geez, this mail order company is giving me such a huge deal!!"

Same goes for basically any version of the Walthers catalog. MSRP = reality x 2. I just don't get the highly inflated MSRP's. I think it tends to scare people away from researching further vs. making them think that vendors are giving great discounts.

Does anyone else have insights or concur?

[Anonymous]

QUOTE: Originally posted by dblstack

Howdy,
I've noticed that in many cases the manufacturers suggested retail price is so far out of line with the actual selling price that its ridiculous.

Case in point - look at the Bachmann ads in Garden Rys. The MSRP is about double the price you can order an item for from many ads in the magazine. Are we so dumb that we're supposed to think, "Geez, this mail order company is giving me such a huge deal!!"

Same goes for basically any version of the Walthers catalog. MSRP = reality x 2. I just don't get the highly inflated MSRP's. I think it tends to scare people away from researching further vs. making them think that vendors are giving great discounts.

Does anyone else have insights or concur?

The only logic I see in such a practice is just what it claims to be, a "suggestion" that allows a huge profit margin. Sales are generated by, dare I say it, the thought that the " mail order company is giving me such a huge deal!?"

So to some degree I concur.

[railman]

I think you're right....A) they make us feel like we're getting a great deal...and B) this way we order through LHS and not them....keeps the profit margins...I don't like it.

[Gary Crawley]

Not only is there a difference in the price from the mail order places, but the big problem I face is freight and handling. (Australia)
It can be double from one place to another.
I have found the smaller specialised places far better.
It pays to shop around.
Gary

[Curmudgeon]

I don't think, I know.
They set a high value, with huge discounts to quantity buyers.
Decades ago discounters figured out they could buy a bunch at the same price distributors paid.
Now originally the tier system allowed every middle man to take his cut, and everybody made a living, distributors by shelling out the big bucks and stocking, hobby shops by buying from distributors in less quantity but for more than the distributor paid, then the final purchaser.
Walthers was/is a distributor in the old sense.
Most of the discounters buy low, have low markup, depend on quanity to keep going, and sometimes play a shell game doing it.
Manufacturers watch the prices discounters advertise, when it hits cost they are dumping, and the market is glutted.
Then they stop production.
I know what some prices to discounters was, know what some of the market indicators are the manufacturers look for, know some things that have had production cancelled when sale price hit cost.
One of the reasosn you see clearance sales. The stuff wasn't moving like the discounters wanted it to, so they dump the price in levels to get it gone.
They have banks to pay.
Nobody pays list unless they're thick, and you know full well a large outfit buying deep in quantity and advertising for at or near MSRP is ripping off the public, or they have costs they cannot get under control.
There are many outfits I will not buy from when I see pricing that due to their size and purchasing indicates they are attempting to make huge profit.
I recall an on-line outfit a while ago had a black #25 Bachmann 4-6-0 less tender (RGS) for more than a new anniversary.
I offered them a fair price (as I had the tender), no response. Hoping for the "sucker".
evil-bay is full of them.
Dealers who advertise, and folks who sell stuff that needs warranty work that only the original purchaser can get done for free.
I deal with them poor folks frequently, with locos they get that are falling apart, cracked, not running.
Some manufacturers have stated policies that warranties do not apply to e-bay purchases due to this problem of "dumping".
Folks HAVE to be smart, to inform themselves of what fair is.
OTOH, there are some aftermarket items that do not have this false MSRP built in, as the stuff costs a lot to produce (no Chinese parts and labor), and these same folks don't understand a 10% discount takes away any incentive to even bother with the line.
Know a guy who wanted to "own" the sales of the line, quoted way low, got the job, and talking to the manufacturer, and the installer who knew what was paid, the sale cost the guy about $500 out of his pocket to try to take the sale away.
Let him.
So there it is, boys and girls, without mentioning any names.
TOC

[Anonymous]

Well done, Curmudgeon! That is pretty clear, pity there is so much economics to our hobby. I still say they should just accept the loss and give us the trains for free! Ha!

Later, eh...opps...sorry that's not mine...I meant to say...
Have a good one, Y'all!

Capt Carrales

[Anonymous]

Their are three small dealers near where i live , they are out of hand with their prices, I drive 50 to 75 miles from home, to a little bigger dealer , for a box of 3 foot track , their price is 30 dollars more then this bigger dealer', when you buy two boxes thats sixty dollars savings .Ben

[vsmith]

I saw a new reissue Chloe engine and car set at my LHS, they wanted $550+ for it, I went to a another shop that operates more like a discounter and found the same set for $275.... Why is it so much higher at my LHS? They get most of their stuff direct from Walthers, not direct from the manufacturer. It doesnt take a rocket scientist to figure out which way the business is going to go, or where I will be buying from. I try to support my LHS as much as I can but $550 vs $275 ????

Would you pay $30,000 for the same Toyota that you could get farther down the street for $15,000?

[kstrong]

There is something to be said for supporting the local hobby shop, and the level of "personal" service you get dealing with them vs. the anonymous mail order places. But that can only account for so much. I used to work for a now-defunct hobby store chain that located themselves in touristy or exclusive malls and charged list+ for a majority of their items. Our primary client base? Tourists or the casual uninformed consumer and impulse shopers. All anyone would have to do would be to look in the ads in the magazines on our shelves to see how outrageous our prices were.

Fairness is all a matter of perspective. If I have an item that someone is willing to shell out twice the reasonable amount for, then who am I to stop them? We can call such a seller a slimeball if we want, but if we saw the same item for half the reasonable amount, how many of us would offer more? We'd write a check for the asking price and be out the door before the ink dried.

From an economical perspective, it makes no difference to sell 1 item at $300 profit or 3 items at $100 profit. I've seen this scenario play out to: Three dealers at a train show. Two of them get in a price battle, blowing out their stock of item X for very little profit. They run out. The third dealer now has the only remaining stock--and no competition. He may sell less volume, but because he didn't play "cut-throat" with the pricing, he's walking away with a large wad of cash.

I'm not advocating fraud by any means. Misrepresentation and "bait and switch" schemes should be punishable by public humiliation, being tied to the railroad tracks, or becoming the designated liason between the hobby manufacturers and the Union Pacific. But each of us has our level of comfort for what we're willing to pay, and how much the various benefits or hassles of dealing with one retailer vs. another weighs on our decision.

MSRP is typically arrived at by a formula--a certain percentage above the manufacturer's costs. This allows the manufacturer, distributor, and dealer to make a profit. A set production cost can be plugged into this formula and spit out an MSRP that allows each party along the way a fair profit. Retailers and distributors are usually under no contractual obligation to stick to these formulaic profit margains. If a distributor wants to sell volume, it cuts its prices to move more product. The dealers can then take this cheaper price to them and either keep their asking price the same, or lower it because they've already "made" some money by acquiring it cheaper in the first place.

As TOC stated, some discounters are able to buy directly from the manufacturer at identical or similar pricing as the distributors. This arrangement typically results in the distributor becoming quite PO'd at the manufacturer because his clients can't compete with the deep discounters. This arguement has merit from the distributor's perspective, but if said distributor buys 5,000 units while the deep discounters buy 10,000, it's easy to see how those waters get real muddy real fast. (And there have plenty of instances where the local hobby shops buy from the deep discounters instead of the distributors.)

It's all a bit confusing, but in the end, it's all basic economics. The market will dictate what people are willing to pay. We'll each individually assess how far afield we're willing to stray from the "street" price when shelling out our own cold hard cash.

Later,

K

[railman]

QUOTE: Originally posted by Curmudgeon

I don't think, I know....
So there it is, boys and girls, without mentioning any names.
TOC

Well said!

[Anonymous]

I have voice my opinion to the LHS about just carrying G scale stuff or more of it, I feel their missing the market being if one of them would take the plunge they would corner the "walk in" market here in Columbus, Ohio. However they are not willing to try to compete with the mail order places prices. The closest one to me is G scale junction, smaller outfit but reasonable prices, if they were closer to me I know I would be a regular walk in patron.

[Anonymous]

TOC is again on target and great aim.
Another out look I have been looking at as this hobby line grows so will the prices unless we have a person that is willing to take a cut for us the hobby people that make him money unlike the larger companys that just like the wad of cash.
I do think the G Scale hobby is growing but there sticking us with the whole bill.

[kstrong]

QUOTE: I do think the G Scale hobby is growing but there[sic] sticking us with the whole bill.

True, but who else should get stuck with it? We're the end users, and when the manufacturers charge the dealers more, that cost ultimately gets passed along to us. If things cost more to produce, they will cost more to buy.

The reality, though, is that things are cheaper now than they really ever have been in this hobby. Walk into a hobby shop 20 years ago with $300 in your pocket, you'll walk out with an LGB 0-4-0 loco and perhaps two box cars. (And that's 1980s dollars.) Walk into the same shop with $300 today, you can leave with a well-detailed 4-6-0 or a medium sized diesel and at least 4 or 5 cars to go behind. Adjust the $300 for inflation, and you've added an additional 3 or 4 cars to your train today. And the level of detailing you get for your dollar is unparalleled. (That's true across the scale spectrum--not just large scale.)

We've got two forces at work in terms of pricing right now. First, there's the force of inflation which keeps prices going up. At the same time, we've got technological improvements that make product design and development much cheaper than it was "back then." Right now, the improvements seem to be driving down prices a bit faster than inflation is raising them, which is what allows us to have locos as detailed as the B'mann consolidation or the Aristo Dash 9 for $300. My dad paid $350 for the first generation LGB mogul back in the 80s. I much prefer today's marketplace. I'm not saying this is the cheapest hobby, but it's certainly more affordable today than it's ever been.

Will the lower cost benefits of technology continue to outpace inflation? Who knows? Every time I think "it can't get any cooler than that," it does. As for inflation rates? If you have the answer to that, I'll write your name on the ballot in 2008.

Later,

K

[Anonymous]

They say I am too young for 2008. But when you count them (years out I will be passed 35.
And yes I would run for President.

[Anonymous]

Prices do seem a bit high lately and they keep going up [V]
What bothers me the most is the delivery times. Almost always now new products are running a couple months behind minimum. One manufacturer hardly has ANYTHING out for this year which he said would be new for 2004 [:(] Makes me wonder when his "2005" models will show up, 2007 maybe [:O][V] I just hate to wait for something that was said to come out then never shows for X amount of months. And in the mean time, I end up spending the funds ear marked for that model(s) on something else [8)] I think it'd be much better to say a product would come out at the longest period of time, then show up early. That'd make alot of us happy, right [?][;)][:)][^] My 2 cents worth.

[Anonymous]

QUOTE: Originally posted by Bluebonnet - 71

They say I am too young for 2008. But when you count them (years out I will be passed 35.
And yes I would run for President.

The White house does have the room for a Garden R.R. , That rose Garden'd just begging for it.[:D]

[Anonymous]

Fudge Factor

[Anonymous]

New High End Tooling.........yeah that is Y.

[Anonymous]

QUOTE: Originally posted by carpenter matt

QUOTE: Originally posted by Bluebonnet - 71

They say I am too young for 2008. But when you count them (years out I will be passed 35.
And yes I would run for President.

The White house does have the room for a Garden R.R. , That rose Garden'd just begging for it.[:D]

Guess this would mean I could get all my buddies together and come up with a plan for this, that is when I am in the Oval Office.
Just fly every one there [:D][;)]