Why did K-Line fail and what lessons can be learned from this?

[cnw1995]

OK, Jim, I'll bite - who do you think is next to fall?

Frankly, I don't understand the copy-cat products.

[Jumijo]

K-Line was doing fine offering less expensive trains because the tooling was already there. They didn't have to pay for new tooling. They might have tweaked it a little, but it was the old Marx tooling. When they started making new tools for the higher priced stuff, they spent too much too quickly and didn't see a sufficient return on investment. All the large O gauge train manufacturers (K-Line, MTH, Lionel) are guilty of this to some extent, but it spelled the end for K-Line. I honestly wouldn't be surprised to see one of the big 2 end up like K-Line, and sooner rather than later. You might be surprised by which one I think it will be.

RMT uses old tooling as well to produce their Beeps and Buddy cars. They can sell for such a low price because of the volume they are doing. The difference is, so far you don't see RMT getting in over their head with new tooling costs. They are building a positive cash flow using old but tweaked tooling to produce their products. Whether or not that money will ever be put into new tools for new products is anyone's guess.

Of all the O gauge train companies, I like Williams. They make nice simple products and make them well. From what I've heard, they stand behind their product. That's very important to me. They have a business model that works - make a small number of items at a time and wait for the stock to deplete before making more. It's less expensive to pay for smaller runs and there is no large access, unsold inventory sitting in a warehouse. They make enough to turn a profit, then make some more. Less speculation and risk to deal with that way.

K-Line and Krispy Kreme Donuts. Two N.C. companies that tried to grow too big too fast. Too bad. Both had a lot to offer their customers.

Jim

[EIS2]

K-Line failed because they entered the murky world of industrial espionage. The company engaged in illegal patent infringement activity and were rightfully caught.

K-Line's demise is a loss for our hobby and an even greater loss for the many K-Line employees that had no part in the illegal activity of a few.

The K-Line employees and Lionel employee involved in the conspiracy deserve to be in jail. To the remainder of the K-Line and Lionel employees, our sympathies are with you.

Regards...
Earl Staley

[Bob Keller]

Bad decision making had as much (or more) to do with the mess as did the market, over production, or trying to create a market for high-end K-Line products out of thin air and on a timetable.

[laz 57]

DAVE,
About a year and a half ago K-line fired most of there reps so one would have to guess something was a miss?
My thoughts are why in most catalogs we see every company copy the other guys merchandise? Case in point with the Berkshires all the companies ran there versions,and they were trying to outdo the rest. How do they know what the other companies are putting out?
Spies, dumb luck what gives?
laz57

[FJ and G]

Doug,

EXCELLENT point!

I failed to mention RMT's Beep.

The guy that did that, Walter, or something, did his homework.

1. A similar shorty model (critter?) is a big seller in G. And, not even prototypical. If they can do it in G, why not in O, where there also is a whimsical following.

2. Limited offerings

3. Walter promoted his product on the other forum and got a lot of feedback as far as roadnames go (he also picked up a bunch of sycophants along the way). (What other toy train leader sticks his head out on a forum, with exception of that TCA company or something that makes electronics components for trains)

4. He offered low prices and mass produced the product

5. He indicated ship times, etc to keep lines of communications open

6. He listened to feedback early on as to problems navigating turnouts and retooled the product

etc etc (need I go one!?)


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(now, if I had the business acument to make an open auto rack, prototypical, that holds 18 cars on 3 levels (cars that scale 1:48). Then, offer different model cars....

hmmmmmmmm

[cnw1995]

I think you hit the nail on the proverbial head here: low prices - not enough revenue - and wide offerings - higher expenses? - coupled with Lionel's lawsuit - cash for lawyers - finally caused the boat to swamp?
O gauge is really a niche within a niche hobby. I think you have to find a product you can ride for a while (RMT's Beep) or be extremely selective (like some of the brass offerings) or less effectively, enjoy a reputation (Lionel)

[FJ and G]

And, how come we didn't see it coming?

K-Line's latest catalogs looked beefy with really innovative stuff such as the cars moving down the highway. You'd a thought they were poised to take over the industry with their low prices and wide offerings.

Or, could the low prices and wide offerings, coupled with Lionel's lawsuit, finally caused the boat to swamp?

More importantly, what lessons can be learned from all of this?

On the following, I'm generalizing and may be off on a couple of points since I don't follow the whole thing as closely as some of you.

Would Williams, perhaps, be a good business model?

1. Good prices
2. Good guarantees
3. Limited (but manageable) offerings

Or MTH?

1. Reasonably prices at the low end but high prices at the premier end
2. No lifetime guarantees but good service
3. Fairly wide offerings
4. Many investments tied up in DCS but limited takers
5. Pending UP lawsuit
6. Delving into other scales so eggs not all in 1 basket

Or Lionel

1. similar to MTH but slightly higher prices
2. Recent UP AND MTH lawsuits
3. Takeover of K-Line, with all its baggage
4. Delving into other scales so eggs not all in 1 basket

Or Atlas

1. high prices
2. limited offerings (such as no steam)
3. great quality and detailing
4. very good line of track
5. well settled into other scales

Or 3rd Rail

1. high prices
2. quality
3. limited offerings

or possibly Weaver, which I'm not familar with except for their low-priced but well-detailed reefers, which I snapped up.

I would have to think that Atlas, Williams, and 3rd Rail have a lower risk business plan, while at the other end, MTH and K-line have been much less risk-aversive.

Your thoughts?