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Regarding the RR business
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<p>There is hardly any European model railroading business which has not been or still is in financial trouble. Marklin/Trix, Fleischmann/Roco, Lima, Arnold, Jouef, Rivarossi, those three now being Hornby brands, Faller, Kibri - you will find all the big names on this list. All of them once thriving businesses, which are now just struggling along. Most of them blame a shrinking market for their failure, but I doubt that this is the sole reason, as there are still businesses which are doing quite well.</p> <p>What happened?</p> <p>Marklin, for many decades being the market leader in Europe, made a tremendous development in post-WW II years, in a time, when money was VERY short and people had to struggle to stay alive. Two factors kindled that development:</p> <ul> <li>Marklin produced high quality toys (that term is deliberately chosen)</li> <li>Marklin understood the toy market</li> </ul> <p>Marklin´s trains were always a little more expensive than those of other brands, but consumers were prepared to pay for that to get the quality. Each year, Marklin would release one or two new locos into the market, which were readily accepted. Detail was sufficient not only to attract kids, but even the more serious modeler, yet still crude when compared to today´s standard. New products were ready just in time for the Christmas business, and as catalog items, the were always available - no limited runs, no pre-order, no bargain runs.</p> <p>In the mid 1980´s, Marklin and all others realized that the baby boom years were over and that their customer base would be rapidly shrinking. The industry answered by upgrading their products, increasing the level of detail and adding electronic gadgets and features, thus moving away from a kid´s toy market into the serious hobby market. Prices went up as a consequence. In order to attract more buyer´s in a shrinking market, Marklin increased the number of new products in the market and introduced limited runs to urge the buyers to buy immediately - a policy which led to exploding costs and skyrocketing prices. Moving production out of Germany to low wage countries like Hungary and partly China while at the same time keeping the high price level did not help at all, so the downfall was foreseeable. </p> <p>What went wrong?</p> <ul> <li>Marklin moved their products into a price region where they are competing with other not so cheap hobbies</li> <li>Marklin completely overestimated the size of the collector´s market</li> <li>Marklin completely underestimated the cost of complexity</li> <li>Marklin neglected their heritage</li> <li>Marklin ignored the needs of their customer base</li> </ul> <p>Model railroading is still the # 1 hobby in Germany, with an increasing attractiveness. We even have a bi-monthly TV show exclusively covering model railroading! But it is not Marklin/Trix or Fleischmann/Roco who is capitalizing on this attractiveness, it is the former state-owned East German manufacturer Piko who has developed a budget line of products being sold at prices people still can afford - and buy. Piko still offers high end products, but on a platform of a bread-and-butter business which pays their bills.</p> <p>The lesson to be learned?</p> <p>Don´t offer a Mercedes if the market is prepared only to pay for a Toyota, unless you are prepared to sell the Mercedes at the price of a Toyota.</p> <p> </p>
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