BLI is gaming the system, a 10% incress is less as only the cost of good is affected and then maybe not even that. Anyone know the HS/HTS code for their stuff ?
drgwcs In a bit of a stranger take on tarriffs- About two months ago I stepped into a hobby shop in a different city. (This place kind of looked like a hoarding problem with a hobby shop but I digress.) I had been in there once or twice before when I had been in the area. I picked up a car in a box near the front to look at it and started to ask the price. He said that was part of a bunch of stuff he had just bought and that he was waiting to price everything until he heard what was going on with the tarriffs. (Mind you the other two times I had been in there it looked just as much of a mess with stuff like this) The car I had picked up had been made in the 60's in the US mind you- wow. Looked around a few minutes and found everything way overpriced. All the while I heard a speel about all of the hobby shops closing and how tarrifs were affecting everything. (Most of the stuff he had sure wasn't going to be affected by tarrifs except track etc.) Can you guess how much I bought- Zero Zilch Nada
In a bit of a stranger take on tarriffs- About two months ago I stepped into a hobby shop in a different city. (This place kind of looked like a hoarding problem with a hobby shop but I digress.) I had been in there once or twice before when I had been in the area. I picked up a car in a box near the front to look at it and started to ask the price. He said that was part of a bunch of stuff he had just bought and that he was waiting to price everything until he heard what was going on with the tarriffs. (Mind you the other two times I had been in there it looked just as much of a mess with stuff like this) The car I had picked up had been made in the 60's in the US mind you- wow. Looked around a few minutes and found everything way overpriced. All the while I heard a speel about all of the hobby shops closing and how tarrifs were affecting everything. (Most of the stuff he had sure wasn't going to be affected by tarrifs except track etc.) Can you guess how much I bought- Zero Zilch Nada
I agree that this sort of thing is annoying, and it sounds like his particular actions don't make alot of sense.
That said, margins in retail are low and expenses can be high. If tarrifs drive prices up a bit across the board, it makes sense to price everything up a bit. Even used stuff as there's a chance you can get a higher for used stuff from in a situation where buyers are looking for a bargain compared to the (now higher) price of new product.
A slightly related story about the increasing "value" of older trains compared to new items:
My local shop is absolutely packed with NOS kits and such, much of it going back a decade or two. Generally great prices with most at what they were priced when he first received them. When I first started shopping there some items seemed a bit high in price when compared to train shows or newer, improved versions. However, every time prices hike up, his prices (which almost never go up) seem better and better.
Sure, I might be able to do better if I wait a month and drive out to the "GMTShow" but being able to go into his shop anytime and walk out with a new BB/EMC/Roundhouse/etc kit for $8-12 feels great compared to what I'd pay for even the most basic new-production railcar.
Visit the Chicago Valley Railroad for Chicago Trainspotting and Budget Model Railroading.
rrebell BLI is gaming the system, a 10% incress is less as only the cost of good is affected and then maybe not even that. Anyone know the HS/HTS code for their stuff ?
Good point. Technically, the tariff would be applied on the cost price from China, not on MSRP.
I think we assume the tariff would result in a 10% increase in retail price, when a tariff essentially is applied before retail markup, if I understand it correctly.
- Douglas
Doughless rrebell BLI is gaming the system, a 10% incress is less as only the cost of good is affected and then maybe not even that. Anyone know the HS/HTS code for their stuff ? Good point. Technically, the tariff would be applied on the cost price from China, not on MSRP. I think we assume the tariff would result in a 10% increase in retail price, when a tariff essentially is applied before retail markup, if I understand it correctly.
The problem is that the retailer has to pay that extra 10%. This means he has to borrow more to buy the stock and thus pay more interest. Or, if he's using his own money he buys less stock and needs the higher margin per piece to cover his expenses and whatever salary/profit he makes.
So yes, I would expect that a 10% tariff will raise our prices 10% unless the retailer absorbs part of the cost - something small operations like model railroading may not be able to do.
Paul
Using the old business model from this industry, an item with a MSRP of $100 typically left the factory for about $38 and had a cost to produce not counting overhead of about $20.
If we assume the factory overseas is delivering the product for that price, a 10% tariff would increase the landed price to $22.
At the same margin it would now leave the manufacturer here for $41.80, and again, at the same margins that would translate to a new MSRP of $110.00, or a 10% increase.
The manufacturer, and the distributor/retailer will have to lay out this extra money, any good bean counter would say it needs to be marked up, not passed thru.......
Sheldon
There’s actually a real problem with the speculation that the 10% tariff would raise retail prices 10%. BLI actually raised prices only 7%.
It's in the first post as part of BLI’s official announcement.
Andre
andrechapelon There’s actually a real problem with the speculation that the 10% tariff would raise retail prices 10%. BLI actually raised prices only 7%. It's in the first post as part of BLI’s official announcement. Andre
It suggests that they are concerned about the effect of higher prices on sales, and they are willing eat some of the markup on the increased landed cost.
They have always operated as if they are cash poor, quickly dumping surplus inventory when sales slow down. That's how I bought every piece of their product I have, deeply discounted after the "new" wore off.
I think they are worried, is anyone else in the industry in this panic?
Yes. The cost of the product would include whatever shipping/distribution costs were included at the port. Costs to distribute etc. within the US should not go up, so total MSRP on the shelf should not increase a full 10%. There is nothing extra to mark up once it arrives at port.
I was speaking in general terms, not necessarily agreeing that BL1 was gaming the system.
ATLANTIC CENTRAL andrechapelon There’s actually a real problem with the speculation that the 10% tariff would raise retail prices 10%. BLI actually raised prices only 7%. It's in the first post as part of BLI’s official announcement. Andre It suggests that they are concerned about the effect of higher prices on sales, and they are willing eat some of the markup on the increased landed cost. They have always operated as if they are cash poor, quickly dumping surplus inventory when sales slow down. That's how I bought every piece of their product I have, deeply discounted after the "new" wore off. I think they are worried, is anyone else in the industry in this panic? Sheldon
Who, in their right mind, pays full MSRP? BLI sells the bulk of their product to 3rd party vendors, who base the pricing on what BLI charges them, which can be somewhat less than the calculated wholesale price given direct distribution and a volume discount.
In any case, discount retailers still have pricing leeway even if it turns out that the percentage differential between the increased MSRP and the vendor’s actual selling price is slightly less than before.
Example follows, pricing based on what I actually paid 2 years ago.
Bought an Athearn engine from MB Klein for $320. MSRP was $400. That’s a 20% discount. Let’s say 10% tariff imposed, and Athearn only raises MSRP 7% to $428, but MB Klein raises selling price 10% to $352. Thats a 17.8% (rounded up very slightly) discount to the new MSRP. It’s also a 12% discount to the original MSRP.
Of course, the above assumes the landed price exclusive of the tariff add on has remained the same since 2017. From the looks of the BLI price list, MSRP’s had already been raised due to other factors, including wage increases in China and there was probably already some slop built in for contingencies. In any case, BLI’s revenue doesn’t depend on direct retail sales to the end customer any more than Bachmann’s, Atlas's, or Athearn’s do. Bachmann’s MSRP’s in the US approach the downright comical.
I also worked in retail for a few years when I was younger, albeit in auto parts, so I do have some idea how it works.
Agreed, nobody pays retail, but the MSRP is used to backwards calculate the various price levels. Cost levels were always discussed/calculated in terms of percentage of the retail price, as in 40% off, 60% off, etc.
In my example I used percentages from the 60's/70's, when most production was still here. Discussions of current percentages are frowned on........
Back in the day of the mom and pop shop, manufacturer sold the $100 item for $38/$40, mostly to regional wholesale distributors in case lots, wholesale distributor sold ones and twos to small shops for $58/$60. Shops asked retail or very close to retail.
Discounting started when big shops/mail order outlets starting buying at the distributor level, and giving all or part of that 20% to the customer.
Today, it is all changed...........and I'm not telling, but you are right, MSRP is not what it once was.
rrebellAnyone know the HS/HTS code for their stuff ?
9503.00.00
Tricycles, scooters, pedal cars and similar wheeled toys; dolls' carriages; dolls; other toys; reduced-size (scale) models and similar recreational models, working or not; puzzles of all kinds
ATLANTIC CENTRALI think they are worried, is anyone else in the industry in this panic?
Atlas, Bowser and Scale Trains have made similar postings concerning increased tariffs. Perhaps others but you might have to be one of those Facebook/Twitter users to find out.
https://www.scaletrains.com/blogs/company-news/upcoming-tariff-on-model-trains
https://shop.atlasrr.com/b-a-statement-regarding-the-possible-trade-tariffs.aspx
Cheers, Ed
Doughless andrechapelon There’s actually a real problem with the speculation that the 10% tariff would raise retail prices 10%. BLI actually raised prices only 7%. It's in the first post as part of BLI’s official announcement. Andre Yes. The cost of the product would include whatever shipping/distribution costs were included at the port. Costs to distribute etc. within the US should not go up, so total MSRP on the shelf should not increase a full 10%. There is nothing extra to mark up once it arrives at port. I was speaking in general terms, not necessarily agreeing that BL1 was gaming the system.
Businesses need to work on a total gross margin per dollar invested. Having managed a model train department in a hobby shop, sold Matco hand tools, manufacturered and sold custom tractor parts, and also being in the construction business, I think I have some experiance here.
If the wholesale cost of my product goes up, I need more cash to operate, period. I still need for my gross profit before overhead to be above the 30%-35% mark.
Micro managing "overhead per unit sale" is not practical, not even in today's information age.
During my professional life, I did quite a lot of business with Chinese manufacturers. My company was dealing in bespoke precision castings for various industries. Most of them were rather complicated parts, quite similar to the complexity of a model locomotive. The cost for these parts were around 30% of the final retail price. For a $300 part, we paid about $100 until the part hit our warehouse. A 10% duty on that price would result in a cost of $110, and the final retail price would have come to $310 and not $330, the increase amounting to 3.33% and not 10%.
I would not consider it to be a wise move for anyone along the chain of distribution to capitalize on the tariffs levied to the product and try to pocket the additional $20 as per the example described.
Happy times!
Ulrich (aka The Tin Man)
"You´re never too old for a happy childhood!"