Over the weekend a poster expressed concerns about our company no longer selling to his local retailer. Since there was a-lot of misinformation in the post which has the potential to negatively affect our business, we feel compelled to respond.
Before we address specific comments, we would like readers to know we did NOT request Model Railroader remove the original thread. The moderators felt like the thread was “way off the rails” and needed to be deleted.
“…taking advantage of the dealer network, for the purpose of getting established, then cutting them off seems rather heartless.”
Since we drafted our first business plan during the Fall of 2013, our channel sales goals have been split between 67% direct and 33% retailer. When we started accepting preorders in November 2014, we sold direct as well as through brick & mortar retailers. We have always been up front with dealers about our direct selling strategy.
“Also at a recent NMRA show, Scaletrains own staff members were overheard saying that they wanted to eliminate brick and mortar hobby shops so that people had to buy directly from them only.”
This statement is absolutely untrue. We have NO plans to stop selling our models through our Select Retailer network.
That being said, we have reduced our dealer base primarily due to retailers who only want to special order and not maintain inventory of our models in their store. When a retailer establishes an account, we are clear about our stocking expectations from the initial stocking order to future releases. Prior to discontinuing our relationship, we have several conversations about our concerns and try to find a solution that works well for both parties so we can continue doing business together.
“Scaletrains is also selling through their own website at the same price at which they sell the product TO the dealers”
This is also completely false.
Our pricing strategy is different than the Industry norm. We have an MSRP, direct selling price, and retailer net. The dealer’s cost is based upon our selling price instead of the retail price. The profit margin is comparable to a retailer discounting 20% to 25% off retail and buying at the Industry standard dealer discount.
If anyone has questions or concerns about our company, we welcome you to contact us directly at Sales@ScaleTrains.com. We’ll be happy reply.
Sincerely,
Shane
Shane Wilson
President
ScaleTrains.com, Inc.
I noticed the topic removed and understand why but I am glad to see you come in and clear up any possible misunderstandings.
BTW, a similar topic posted at Atlas Rescue Forums in the Crew Lounge was recently bumped with a statement that may need to be commented by you Shane.
Cheers, Jim Fitch
Rio Grande. The Action Road - Focus 1977-1983
"The truth is incontrovertible. Malice may attack it, ignorance may deride it, but in the end, there it is."
Winston Churchill
Thank you for shedding light on the matter, Shane. I wish you success in your business ventures.
Regards, Ed
One of my local hobby shops was one of the retailers cut. I tried to order your SD40s through him (I bought a couple of your first run kits from him), and he told me pretty much what you wrote in your post. He wasnt willing to stock/place minimum order, so he's not a retailer. Consequently he missed out on 2 DCC sound equipped SD40-2s that I purchased direct (nearest retailer is in northern Mass), though I do visit the hobby shop in Yarmouth when I get up to Maine.
When they arrive I'll make a decision on a few more, cant have too many SD40s. The fact that your operator DCC/sound SD40-2 beats Bachmann's price is outstanding.
There's two sides (or more) to every story. I think Shane's clarifications tend to undercut the premise of the criticism being leveled at Scaletrains.com, which was that it was undercutting the LHS. Most of the arguments about saving the LHS center around it being the place where you can actually see and handle the product before making a purchase decision.
Scaletrains.com's policy on minimal stocking levels seems to want to make sure that stores have the stock to do exactly that.
It's understandable that some stores won't or can't stock. That's a business decision they have to make. But if the bulk of their business would be as special order for individual customers, there's little incentive to actually keep stock in place to do what many say is what they like the LHS for -- being able to check ouit the stock.
Folks may have to agree to disagree here on some points of the issue. But I think it's clear that Scaletrains is making an effort so that those shopping at the LHS can actually get their mitts on stock.
Mike Lehman
Urbana, IL
mlehman There's two sides (or more) to every story. I think Shane's clarifications tend to undercut the premise of the criticism being leveled at Scaletrains.com, which was that it was undercutting the LHS. Most of the arguments about saving the LHS center around it being the place where you can actually see and handle the product before making a purchase decision. Scaletrains.com's policy on minimal stocking levels seems to want to make sure that stores have the stock to do exactly that. It's understandable that some stores won't or can't stock. That's a business decision they have to make. But if the bulk of their business would be as special order for individual customers, there's little incentive to actually keep stock in place to do what many say is what they like the LHS for -- being able to check ouit the stock. Folks may have to agree to disagree here on some points of the issue. But I think it's clear that Scaletrains is making an effort so that those shopping at the LHS can actually get their mitts on stock.
Is it really about wanting product on the shelves, stocking, or is it that the LHS needs to buy enough volume to get the low price or else its not worth STs trouble? And the retailer doesn't want to hold a product on the shelf for a potential customer when the customer can buy a single item directly from ST for a lower retail price.
Nothin wrong with that. That's the traditional equation, where in order to get the desired price per unit, you have to buy enough product. I don't know if any seller cares if the product sits on the retailers shelves or not, but I'm not in the hobby business.
- Douglas
mlehman There's two sides (or more) to every story. I think Shane's clarifications tend to undercut the premise of the criticism being leveled at Scaletrains.com, which was that it was undercutting the LHS. Most of the arguments about saving the LHS center around it being the place where you can actually see and handle the product before making a purchase decision.
Yes, that is clear enough. I understand that many people want to keep an institution (the LHS) and are being dragged kicking and screaming into a new age of commerce and are not happy. It reminds me of other changes in the world, some present and some past, which have caused hew and cry. Some have turned it into an ethics or morals arguement which ultimately caused the last topic to be removed. I expect that discussion won't go away for a while either.
The way I see it, part of the big picture is this: we are well into the ermerging age of online buying and model trains are no exception. As much as we hear the (post of the week) message lamenting the loss of hobby shops, it's part of the re-alignment of most genre's to the modern day on-line commerce model. As is usually the case, change is not easy and is particularly difficult for some.
Scaletrains.com's policy on minimal stocking levels seems to want to make sure that stores have the stock to do exactly that. It's understandable that some stores won't or can't stock. That's a business decision they have to make. But if the bulk of their business would be as special order for individual customers, there's little incentive to actually keep stock in place to do what many say is what they like the LHS for -- being able to check ouit the stock. Folks may have to agree to disagree here on some points of the issue. But I think it's clear that Scaletrains is making an effort so that those shopping at the LHS can actually get their mitts on stock.
Yes, and as mentioned or implied above, it's a cost benefit thing for ScaleTrains in effort to have a reasonable business model that isn't going to nickel and dime them constantly for a plethera of small special orders but have a compromise that can be managable for them. That sure seems reasonable to me.
At the end of the day, this is going to be one of those, "you can please some of the people some of the time, but you can't please all of the people all of the time" situations. Those who aren't pleased are going to be vocal about it but I think our friends at ScaleTrains can sleep at night knowing they are doing the best they can.
There's also precious little incentive for the individual modeler to continue to support any hobby shop that won't carry the inventory. The individual modeler can "special" order any item either directly from the manufacturer/importer or from an online store that actually does keep inventory. If an LHS can't/won't carry the inventory, they have no reason to expect any loyalty from potential customers.
Andre
DoughlessAnd the retailer doesn't want to hold a product on the shelf for a potential customer when the customer can buy a single item directly from ST for a lower retail price.
This is incorrect. The dealer can undercut the online price, but it will cut into his profit margin.
BMMECNYC Doughless And the retailer doesn't want to hold a product on the shelf for a potential customer when the customer can buy a single item directly from ST for a lower retail price. This is incorrect. The dealer can undercut the online price, but it will cut into his profit margin.
Doughless And the retailer doesn't want to hold a product on the shelf for a potential customer when the customer can buy a single item directly from ST for a lower retail price.
Thanks, that's what I was wondering. I couldn't figure what the complaint was.
Not sure I still do, since the LHS can still make a profit on the item even if he undercuts the direct price.
Oh well, carry on...
And the retailer doesn't want to hold a product on the shelf for a potential customer when the customer can buy a single item directly from ST for a lower retail price.
Just so we're all on the same page, Select Retailer's can make a reasonable profit by matching our online selling price.
I certainly appreciate Shane's clairfication of STs policy. For any retail endevor, be it lettuce or locomotives, you can't sell from an empty shelf.
I really wish my LHS would actually give its customers a survey as to what they model and want to see on the shelf. I see a lot of local roadnames that sit and sit in the store.
Then again, they can't even manage to keep bulk packs of #14 couplers in stock, which is just irresponsible / lazy.
I'm glad to see ST reply and be so transparent. If my layout wasn't 6x12 I'd have their GTEL :)
Julian
Modeling Pre-WP merger UP (1974-81)
riogrande5761The way I see it, part of the big picture is this: we are well into the ermerging age of online buying and model trains are no exception. As much as we hear the (post of the week) message lamenting the loss of hobby shops, it's part of the re-alignment of most genre's to the modern day on-line commerce model. As is usually the case, change is not easy and is particularly difficult for some.
I think it would be a hasty assumption to think that everything will soon be online, though. After all, Amazon is starting to venture into brick and mortar. And while I tend to be indifferent to the argument that I want to hold it in my hands before I commit to a sale because I usually have a good idea of what I'm getting into, there are still and probably will be people willing to forgo the deepest discounts for that privilege. Not to mention that being able to walk in and buy a needed item always adds value to my day when I'm in the middle of something.
That all costs some amount of money. Hobby shops are almost always small, very small businesses. Decisions to invest in stock are a lot like keeping the lights on and other expenses, as they are necessary to getting people to wlak through the door. But stock purchases are more flexible in that the owner makes the timing of the decision.
But they have to make it work in their universe, as well as knowing something about what their customers want. Some folks can manage all of that and make money enough to make it worth their while. Others have more trouble. The state of the local economy is also critical. It's a tough biz, but one that people nonetheless make the commitment to.
Mfg's like Scaletrains have an even tougher job of forecasting, a longer lead time of investment, and greater risk. Obviously, their product won't be in every store, but where you find it you should find plenty to choose from. And the product is available regardless, even if you're not lucky enough to live near a stocking dealer. All those complaints about not being able to get something suddenly gone? Hard to say, because sales of really hot stuff may exceed even the most optimistic production runs. But so far, people who want the product seem to be getting it, something which deserves a lot of credit and respect in this hobby.
mlehman riogrande5761 The way I see it, part of the big picture is this: we are well into the ermerging age of online buying and model trains are no exception. As much as we hear the (post of the week) message lamenting the loss of hobby shops, it's part of the re-alignment of most genre's to the modern day on-line commerce model. As is usually the case, change is not easy and is particularly difficult for some. I think it would be a hasty assumption to think that everything will soon be online, though.
riogrande5761 The way I see it, part of the big picture is this: we are well into the ermerging age of online buying and model trains are no exception. As much as we hear the (post of the week) message lamenting the loss of hobby shops, it's part of the re-alignment of most genre's to the modern day on-line commerce model. As is usually the case, change is not easy and is particularly difficult for some.
I think it would be a hasty assumption to think that everything will soon be online, though.
Waaaait a minute here Mike. You, replaced one word in a statement I made above and then used it to make an arguement rebutt me. That is not fair. I didn't say "everything", I said "most". But if it pleases you, I'll change it to "many", whatever, I'm easy.
I think the argument that there is a re-alignment of most/many genre's to the modern day on-line commerce model is undeniable. Heck even products that seem like you should have to visit a B&M store like cloths (because you have to try them on to be sure of a good fit, traditionally), are selling on-line. My wife, who is very old fashioned by the way, has taken to ordering cloths online quite often in the past year or so.
To drive the point further that there is a market re-alignment, there have been some major news articles on NPR and other news outlets which provide more and more evidence of this pervasive trend away from traditional sales to online. You mentioned Amazon. Well, they are primarily on-line it is arguable and it was reported they may be the first TRILLION dollar company - that speaks very loudly.
On the other hand, Shopping malls, the bastian of B&M shopping, is an endangered species and some of our best known anchor stores are poised to go bankrupt - names like Sears, Macy's, JC Pennies, K-mart etc. It's fine to give an example of a B&M retail outlet like what Amazon is doing; heck, I've heard vinyl phonograph records have made a bit of a come back but is it going to take over digital music or even make a sizable dent into it? Probalby not.
Anway, please listen to the "spirit" of my point and I think it's valid and applies to our hobby as well. Obviously it's not an all or nothing situation and isn't absolute that all B&M shops, be-it hobby or otherwise are destined to close down. That's not an argument I would make. But the trend toward the online commerce model is indeed major and having it's affect on many parts of the retail market, and for the purposes of this discussion, the model train market.
BMMECNYCOne of my local hobby shops was one of the retailers cut. I tried to order your SD40s through him (I bought a couple of your first run kits from him), and he told me pretty much what you wrote in your post. He wasnt willing to stock/place minimum order, so he's not a retailer.
I think I'm confused by all this. As I understand, ScaleTrains has a MSRP, a direct selling price they use if you order on-line, and a retailer net price they charge brick and mortar dealers. That's three different prices, correct?
So, for reasons unknown to anyone but me, rather than order on-line I go to the local hobby shop and ask them to order me a locomotive. Loco comes in and local shop charges me what they want, up to MSRP. Are we saying that the local shop is not a brick and mortar shop and cannot obtain loco at dealer net because they don't stock ScaleTrains items? Or is the issue that anyone could claim to be a "hobby shop" and wanting them to stock items proves they are "real"?
riogrande5761Anway, please listen to the "spirit" of my point and I think it's valid and applies to our hobby as well.
It doesn't just apply to our hobby, it applies in spades. It has already been pointed out that without inventory on hand to examine, the LHS provides no value. Couple that with the fact that the selection we have to choose from is far more than any LHS could afford to stock, it is obvious that the online market is the only reasonable choice.
I have the right to remain silent. By posting here I have given up that right and accept that anything I say can and will be used as evidence to critique me.
riogrande5761Waaaait a minute here Mike. You, replaced one word in a statement I made above and then used it to make an arguement rebutt me. That is not fair. I didn't say "everything", I said "most". But if it pleases you, I'll change it to "many", whatever, I'm easy.
Jim,
Nah, didn't mean to imply that was what you said, just wanted to note it's not an inevitability that the internet takes over from here. There are thriving businesses that offer something the internet doesn't and people willing to patronize them. They co-exist with retailers who are obviously struggling with the changes you note. Those that are successful are doing so because their customers find value in what they do. Those that are unsuccessful may have the internet to blame or issues aside from that. Your basic point that everyone has to compete with the internet is true in general, it just won't be universal that the internet takes it all.
maxman BMMECNYC One of my local hobby shops was one of the retailers cut. I tried to order your SD40s through him (I bought a couple of your first run kits from him), and he told me pretty much what you wrote in your post. He wasnt willing to stock/place minimum order, so he's not a retailer. I think I'm confused by all this. As I understand, ScaleTrains has a MSRP, a direct selling price they use if you order on-line, and a retailer net price they charge brick and mortar dealers. That's three different prices, correct? So, for reasons unknown to anyone but me, rather than order on-line I go to the local hobby shop and ask them to order me a locomotive. Loco comes in and local shop charges me what they want, up to MSRP. Are we saying that the local shop is not a brick and mortar shop and cannot obtain loco at dealer net because they don't stock ScaleTrains items? Or is the issue that anyone could claim to be a "hobby shop" and wanting them to stock items proves they are "real"?
BMMECNYC One of my local hobby shops was one of the retailers cut. I tried to order your SD40s through him (I bought a couple of your first run kits from him), and he told me pretty much what you wrote in your post. He wasnt willing to stock/place minimum order, so he's not a retailer.
According to some of the responses, the LHS can still make a profit if he sells his inventoried items at the direct online price. That tells me that the lowest price ST sells to anybody is to the dealers in what they call net pricing.
Isn't this just the same as anything else in retail? In order to get the lowest per unit price, you have to buy enough volume.
maxmanBMMECNYC One of my local hobby shops was one of the retailers cut. I tried to order your SD40s through him (I bought a couple of your first run kits from him), and he told me pretty much what you wrote in your post. He wasnt willing to stock/place minimum order, so he's not a retailer. I think I'm confused by all this. As I understand, ScaleTrains has a MSRP, a direct selling price they use if you order on-line, and a retailer net price they charge brick and mortar dealers. That's three different prices, correct?
Not exactly, they also give bulk discounts for orders over a certain number of the same item, to both retailers and individuals.
maxmanSo, for reasons unknown to anyone but me, rather than order on-line I go to the local hobby shop and ask them to order me a locomotive. Loco comes in and local shop charges me what they want, up to MSRP.
My shop always is less than MSRP. I would have ordered/bought from him directly if he was going to carry ScaleTrains.com.
maxmanAre we saying that the local shop is not a brick and mortar shop and cannot obtain loco at dealer net because they don't stock ScaleTrains items?
No, what I am saying is that I would have ordered these from my LHS, if he was a select retailer. Since he is not, and there is not a retailer in my area, I ordered the locomotives direct.
maxmanOr is the issue that anyone could claim to be a "hobby shop" and wanting them to stock items proves they are "real"?
I don't think that this is the issue at all. See Shane's response below, copied from the original post.
ScaleTrains.comThat being said, we have reduced our dealer base primarily due to retailers who only want to special order and not maintain inventory of our models in their store. When a retailer establishes an account, we are clear about our stocking expectations from the initial stocking order to future releases. Prior to discontinuing our relationship, we have several conversations about our concerns and try to find a solution that works well for both parties so we can continue doing business together
It seems reasonable to me for a small company to not want to deal with a bunch of little accounts that sell ones and twos. ScaleTrains.com have a distribution network (30 something percent of sales) through dealers who are interested in carrying their products. My local shop did not wish to carry their products (understandibly so, he has shelves full of Athearn UP models that no one is buying, and plenty of SD40-2s to go around). He also is kinda out of physical space at the moment, he has a really good inventory. I generally am able to find anything that I need or want there in the form of diesel locomotives and freight cars.