Maxman,
" ...someone will go out of business if their products are not purchased, well, sorry to say this but that's the way it is. They will either need to adjust their costs to be in line with what someone is willing to pay, develop a less expensive product, or go out of business. "
Thats one thing i was trying to avoid. Id hate to see some of our better makers go out. Though i used them as an example in my last post, but I would truely hate to see Athearn go out of business. Your totally right, if this keeps up, someone is gonna loose.
Right now, it's those who are not able to afford them, or choose not to. Eventually, it will be the company. Like you said, thats the way it is. Id like to "bail out" our makers now, before they actually need one.
There has to be a way. I dont like boycotting Athearn. And that is not an example.
PM Railfan
trwrouteThe Athearn RTR stuff is just fixed up BB (for the most part) and they could easily charge roughly what the BB items cost if they wouldn't add any detail parts.
Just fixed up BB stuff? Thats putting it mildly.
Here is an example - the Athearn blue box SD40T-2 was fixed up to the point it looks like brass models of not long ago - newly tooled roof fans, improved tunnel motor grill, see through tunnel motor intake grills, correct snow plow, coupler lift bars, roof antennae, MU hoses, separately applied grab irons all around, correct size fuel tank, retooled cab, MU tray on rear pilot. The SP SD40T-2's have even more detail are really are Genesis models in appearance.
Athearn took the old (similar to blue box) MDC Thrall gons and Ortner 5-bay Rapid Discharge hoppers and upgraded them - now they have newly tooled details and separately applied grab irons and look quite nice - not Tangent models by any means but quite nice. There are some other Athearn RTR cars which are quite nice, like some of the covered hoppers, 62' mill gons etc.
Of course, some of Athearns blue box models have only minor improvements and nice paint jobs, like the CF4740 covered hopper and some of the older box cars.
As far as all the hand wringing and complaining here - personally I don't see it accomplishing anything that will affect the hobby or industry in any measurable or significant way; all thats really going to be accomplished is for people to vent and express their unhappiness with aspects of the hobby - mostly not really a healthy thing unless venting reduces your blood pressure or makes you feel good in some way, but OTOH, it may be raising others BP and/or making them feel more discouraged and hopeless. At least it's being contained in one place - good move by the MR staff.
Rio Grande. The Action Road - Focus 1977-1983
Respectfully, I will try one last time to make my point.
Having actually designed a few products, manufactured them, and taken them to market, I think I have at least some understanding of this - and, I did work in this model train industry at one time.
Today's manufacturers are at the mercy of their factory partners in China. We don't know for sure what the profit margins at the source are, but we do see in the news the various ecconomic and social growing pains China is going through. Enough to suggest that the cost of operating a model train factory has likely increased a great deal since the late 80's or even the mid 90's when most of the US model train industry left town for China.
That said, I know first hand from several of the small manufacturers and a number of retailers that the margins they are working on are not high or excessive.
I will not divulge any specifics of such information, like what each model costs "off the boat", as such was told to me in confidence.
But even if the "big boys" are getting their product done for 20% less than the small manufacturers I have info on, They are not overcharging based on their "cost to produce"
If it costs you $10 to make a product, before your overhead costs, it is generally likely that $50 is a fair market "street" price.
If it cost ATHEARN $.60 to make a box car kit back in 1978 when they sold them for $3, then it is very likely that it costs them $5 or $6 today, and they sell them for how much? $25 to $30
If you can't make enough profit, than you might as well go out of business before you produce a bunch of product that just sits on the shelf?
It is very unlikely that there is much "profiteering" in model trains, simply because if one guy can make it cheaper, then someone else can as well. And the second guy is likely to lower his price to the near minimum return on investment level and undercut the prices of the guy who is trying to make windfall profits.
Yet we see prices that are reasonably uniform from brand to brand.
Even the biggest player from a manufacturing stand point, Bachmann, has consistantly raised prices over the last several years. Since they control a major percentage of the production capacity in China, it would seem if anyone could keep prices lower to increase volume and grab market share, it would be them. But it is not happening.
A clear sign that production costs truly are up, and possibly that sales are down, not just because of high prices, but because of shifts is demographics, more diverse interests within the hobby, etc.
Can the product be made for less money - good question - but I doubt it.
One big problem is the continuing diversifcation of hobby. More different potential products to make for ever smaller groups of specialized modelers.
And now, with some balking at the higher prices of higher detail models, if manufacturers are forced to make a high detail version for $40 and a low detail version for $20, the volume of production for each version gets smaller, driving costs ever higher.
To reduce costs we would need to see larger runs of identical product - product there is not likely an immediate market for, especially since only a few big retailers now keep any real depth of inventory.
Now if someone had deep enough pockets to make tons of stuff at the lowest possible cost of production, and would then sell it via direct distribution only to all dealers at the same price level. And be willing to hold those prices, and "wait" for the next "cycle of demand" for that product, we might see some relief in both price levels and spotty availablity. But that guys acountant is going to tell him he is nuts to leave that money tied up like that - Irv Athearn and Bruce Walthers were just that kind of nuts.
One more point - why are MTH and BLI constantly comming out with same models, or models others already have - like the MTH C&O 2-6-6-6? Are they really that stupid? All they are doing is dividing up an ever shrinking demand rather than looking for new untapped markets.
But what do I know - I'm just a hick with a pickup, some guns, and bunch of little trains without brains.
Sheldon
PS - Steven, is this "on topic" enough, and far enough away from the politics of the issue?
Sheldon,
What is the old saying, you can lead a horse to water, but you can't always make them drink. No matter how much sense we try to bring to the table, some will just never be convinced or will still be unhappy. At some point, our foreheads get flat enough from banging them against a stone wall.
I'm glad to see people talking about actual economics.
Re prices... I repeat, model railroad supplies are a luxury good. And the way you price ANY luxury good, frankly, is "all the traffic will bear." See "total revenue curve."http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=total%20revenue%20curve
http://en.wikipedia.org/wiki/Luxury_goodsManufacturers went to limited runs because the shelves were full of Blue Box Athearn kits that weren't selling. People thought Atlas was nuts in 1994, but then their tank cars flew off the shelves so fast they left scorch marks.When your production run sells out, you raise the price on the next production run. You do this until your revenue curve flattens out.Period. That's how you set pricing for luxury goods. Companies that DON'T pay attention to this are the ones that are going to go out of business, not the ones that do. Notice that Model Power closed and was bought out, and Intermountain was not. There is a lesson there.Don't forget, quiz next class session. Dismissed.
Disclaimer: This post may contain humor, sarcasm, and/or flatulence.
Michael Mornard
Bringing the North Woods to South Dakota!
Bayfield Transfer Railway I'm glad to see people talking about actual economics. Re prices... I repeat, model railroad supplies are a luxury good. And the way you price ANY luxury good, frankly, is "all the traffic will bear." See "total revenue curve."http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=total%20revenue%20curve http://en.wikipedia.org/wiki/Luxury_goodsManufacturers went to limited runs because the shelves were full of Blue Box Athearn kits that weren't selling. People thought Atlas was nuts in 1994, but then their tank cars flew off the shelves so fast they left scorch marks.When your production run sells out, you raise the price on the next production run. You do this until your revenue curve flattens out.Period. That's how you set pricing for luxury goods. Companies that DON'T pay attention to this are the ones that are going to go out of business, not the ones that do. Notice that Model Power closed and was bought out, and Intermountain was not. There is a lesson there.Don't forget, quiz next class session. Dismissed.
Actually, all model trains have always been produced using limited run "batch production".
Athearn, who has had thousands of items since the late 60's, at the peak of domestic production, only had 4 injection molding machines. So they only ran four sets of dies at any one time.
Before discontinuing the Blue Box kits, near the end, they actually published their production schedule. In any one 4-8 week period they never produced more than 3-4 items.
The question is not how you produce them, it is how you market them. The current marketing is partly necessary, and partly flawed.
Today, model train manufacturers have too much competition to see what the market will bear - how many companies have tooling for UP Big Boys? or GG1's? or PRR K4's? or EMD F7's?
Price yourself too high and the other will run a batch and sink you.
Well, yes and no. The only thing where competing on price is the way to go is commodities. Now, to some extent, a given engine... say, an HO scale F7... is a commodity. But each manufacturer is trying hard to distinguish THEIR F7. Or Big Boy, or whatever. A Bachmann F7 is not competing with an Athearn Genesis F7 with road-specific details, a much better DCC controller, and more capable sound unit.Also, maximum revenue curve interacts with price point; Atlas Trainman engines are not the same as their Gold Line engines, but this doesn't mean they are competing with themselves, it means they recognize a variety of price points in the hobby.I'd give a bright shiny penny (or even a dirty old nickel) to see Atlas' demographic and marketing data. They really, really seem to know what they're doing.
Bayfield Transfer Railway Well, yes and no. The only thing where competing on price is the way to go is commodities. Now, to some extent, a given engine... say, an HO scale F7... is a commodity. But each manufacturer is trying hard to distinguish THEIR F7. Or Big Boy, or whatever. A Bachmann F7 is not competing with an Athearn Genesis F7 with road-specific details, a much better DCC controller, and more capable sound unit.Also, maximum revenue curve interacts with price point; Atlas Trainman engines are not the same as their Gold Line engines, but this doesn't mean they are competing with themselves, it means they recognize a variety of price points in the hobby.I'd give a bright shiny penny (or even a dirty old nickel) to see Atlas' demographic and marketing data. They really, really seem to know what they're doing.
Yes, Atlas knows what they are doing so well, they have not managed to sell me a single locomotive, and I have about 130 locomotives.
I understand very well everything you are saying, but the fact is it is even more complex than that. Having spend some serious time behind the counter of several hobby shops, I have seen just how complex this market is.
But a Genesis F7 competes directly with Intermountain, Bowser, MTH, Proto........
PS - I was selling Atlas locos in the late 70's when the very first ones hit the shore.
It is indeed complicated. My personal opinion (not worth the electrons it's written on!) is that the best answer to "Why are the manufacturers doing X" is, "Because they think they'll make money!"Atlas makes the C-424 in Green Bay and Western, so they've got some of my money.
If they ever do an H-1666, they'll have more of it. But that's another thread.
All this complaning about the price of being in the hobby, reminds me of a cartoon that was in MR many, many years ago.
A hobbyshop owner was talking to a disgrundled customer about the price on a brass engine. The caption read; "Do you want a hobby with everlasting challenge, or do you want cheap trains?"
To me that one cartoon has captured the essense of this entire discussion.
Carey
Keep it between the Rails
Alabama Central Homepage
Nara member #128
NMRA &SER Life member
Still looking for suggestions (good, valid ones!) that havent been mentioned yet. These have been beaten to death - to wit: how to model on the cheap, how and where to buy for less, etc etc. Neither of which drops the prices to where they should be.
Oh? And where should prices be? Below the cost of manufacture, transportation and distribution? I can see it now. OK, guys, we're guilty of gouging. From now on, we'll take a small loss on every unit and make it up in volume.
Here's a thought. If you don't like the prices currently being charged, go into the manufacturing business and sell for less. Not only that, don't make production runs of 1,000 units/model. Up that number by a factor of at least 10. Here's an idea. Start off with a model from a very popular prototype. Let's say a Santa Fe caboose: http://www.intermountain-railway.com/distrib/ccs/html/ccs1102.htm Intermountain's MSRP is $49.95. Athearn's RTR (and considerably less highly detailed caboose) has an MSRP of $24.98. Here's your challenge: Produce a kit on a par with the Athearn RTR caboose that has an MSRP of $20 and can be sold at a street price of around $16. Produce 10,000 on the first run (you can letter 'em for roads other than Santa Fe just like Athearn does). Let us know what your unit cost of production is and let us know how fast you turn over your inventory.
If you don't like that, try to compete with the Centralia Shops/Intermountain version. Produce it to have an MSRP of $40 and a street price of around $33-34.
After you do that, manufacture (or contract out) a model of an SW1500. Like this one: http://www.athearn.com/Products/Default.aspx?ProdID=ATH96735 It has to have an MSRP under $100 and it has to be able to be sold at a profit to the retailer for somewhere around $80. It has to run at least as well as the Athearn model and it has to be DCC ready.
I want an SP P-6 4-6-2. After 1937, there were 3 of them on the Coast division. The rest were on the T&NO, with the addition of 3 that were transferred to the T&NO and converted to P-14's. I will pay $600 each for #'s 2453, 2454 and 2458 as they appeared post 1952 and will buy all 3 numbers. You now have a concrete order for 3 engines. You'll have to get other orders on your own. Good luck.
Andre
The caption read; "Do you want a hobby with everlasting challenge, or do you want cheap trains?"
Yeah, I remember that cartoon. I think we all know the answer to that question. They want cheap trains. What's not stated out loud is that they want cheap trains with absolute prototype fidelity, superb mechanisms and spot on paint schemes.
andrechapelonWhat's not stated out loud is that they want cheap trains with absolute prototype fidelity, superb mechanisms and spot on paint schemes. Andre
One can find that anywhere...some even go so far as to suggest that someone spend their time learning all the DSP programs...that is Digital Sound Processing...and lall that and do everything for free.
Then complain about the time it takes to solve bugs and all else...
You can never satisfy some people.
Any argument carried far enough will end up in Semantics--Hartz's law of rhetoric Emerald. Leemer and Southern The route of the Sceptre Express Barry
I just started my blog site...more stuff to come...
http://modeltrainswithmusic.blogspot.ca/
The same lesson applies in both cases: "this is more than I want to pay" is NOT the same as "this is too expensive."
You're both right and succinct. Athearn already has a large number of items above the price I'm willing to pay. OTOH, those are items that are represent a time after 1955 and what I'm willing to pay is $0. I guess for those items, I'm "boycotting" Athearn.
Right at the moment Athearn does have an upcoming model I am interested in. They want $420 for the sound and DCC version. I'm actually willing to pay full boat, although that shouldn't be necessary. I guess that makes me an Athearn enabler, although I don't understand how that can be since I'm boycotting them on a majority of their production items.
Bayfield Transfer Railway ... But each manufacturer is trying hard to distinguish THEIR F7. Or Big Boy, or whatever. A Bachmann F7 is not competing with an Athearn Genesis F7 with road-specific details, a much better DCC controller, and more capable sound unit. ...
... But each manufacturer is trying hard to distinguish THEIR F7. Or Big Boy, or whatever. A Bachmann F7 is not competing with an Athearn Genesis F7 with road-specific details, a much better DCC controller, and more capable sound unit.
...
Well sometimes they are. Not everyone cares about road specific detail, they just want an F7 with the warbonnet paint scheme. Even an F3 or F9 will do.
I don't think the prices on new stuff are too high because the manufacturers are making a killing. But I do think the prices are too high for a lot of folks who are (or who might want to be) in the hobby.
Frankly, I think the main thing that keeps the hobby going at the level it's at is the collectors. These are people with deep pockets who collect, in every scale not just O and S toy trains. It keeps the market going.
Enjoy
Paul
PM Railfan Still looking for suggestions (good, valid ones!) that havent been mentioned yet. These have been beaten to death - to wit: how to model on the cheap, how and where to buy for less, etc etc. Neither of which drops the prices to where they should be.
Prices are already where they should be. They are dictated by a free market according to the laws of supply and demand. Sellers charge what they do because that is what the buying public has indicated they are willing to pay for their products. Why would a someone sell you something for $100 if he knows you are willing to pay $200 for it?
jecorbett PM Railfan Still looking for suggestions (good, valid ones!) that havent been mentioned yet. These have been beaten to death - to wit: how to model on the cheap, how and where to buy for less, etc etc. Neither of which drops the prices to where they should be. Prices are already where they should be. They are dictated by a free market according to the laws of supply and demand. Sellers charge what they do because that is what the buying public has indicated they are willing to pay for their products. Why would a someone sell you something for $100 if he knows you are willing to pay $200 for it?
And what if $200 really is the lowest price that incudes a reasonable profit?
ATLANTIC CENTRAL Yes, Atlas knows what they are doing so well, they have not managed to sell me a single locomotive, and I have about 130 locomotives.
You are probably not a fair rebutal in that regard if you are modeling a genre that doesn't use engines which Atlas majors in. Atlas is widely recognised for their high quality (as a rule) yet their prices have kept with the market norms - thats the consensus I have anyway.
Refrain from interpersonal kindergarten klopperei please...
Old Fat Robert PM Railfan: You have decided that the oldest, surest method to force manufacturers, distributors, etc., to change their policies won't work in this situation.
PM Railfan: You have decided that the oldest, surest method to force manufacturers, distributors, etc., to change their policies won't work in this situation.
The only decision i have made is that prices are too high, and .... came here to ask - what can be done about it to lower them where they should be? I havent decided on anything that will or will not work. I am asking what can! Pretty simple question i thought.
As stated, the do it yourself method is the easy way out. Doesnt help the newbies who have not the experience to "do it themselves", nor does it drop the high prices. So they are forced into paying the high prices right off the bat. What a way to be welcomed into a new hobby huh!
andrechapel Here's a thought. If you don't like the prices currently being charged, go into the manufacturing business and sell for less.
Here's a thought. If you don't like the prices currently being charged, go into the manufacturing business and sell for less.
I already make my own cars from the trucks up. NOT because of the pricing, but because of all the accurate models available now a days that you folks seem to think exist. NOT!!!
My road doesnt exist in the mainstream (or any other) market. So in order to have a PM car that is actually a PM car (not a repaint of a Southern Pacific car), I have to make my own. And no, it isnt that expensive at all. Your barking up the wrong tree on this one.
riogrande5761 Adding "credentials" to posts isn't going to sway people who have their own strong opinions, IMO - this forum seems proof enough of that!
Adding "credentials" to posts isn't going to sway people who have their own strong opinions, IMO - this forum seems proof enough of that!
I keep asking for suggestions, but this is all i keep getting. Comparisons from a billion different worthless inflation calcs, resume's, rehashes of yesteryears price listings, and even funnier yet..... more questions NOT relavent to the topic or suggestions i make my own stuff.
How boycotting a company (plus modelling on the cheap/making my own stuff) will keep them in business and drop prices i will never know! I suppose thats easier to do than JUST DROP THE PRICE.
I will check back and see if anything happens to the good.
ATLANTIC CENTRAL jecorbett PM Railfan Still looking for suggestions (good, valid ones!) that havent been mentioned yet. These have been beaten to death - to wit: how to model on the cheap, how and where to buy for less, etc etc. Neither of which drops the prices to where they should be. Prices are already where they should be. They are dictated by a free market according to the laws of supply and demand. Sellers charge what they do because that is what the buying public has indicated they are willing to pay for their products. Why would a someone sell you something for $100 if he knows you are willing to pay $200 for it? And what if $200 really is the lowest price that incudes a reasonable profit? Sheldon
Is there such a thing as an unreasonable profit? Let's say that seller profits $50 on that $200 sale. If he thought there would be enough buyers at $300 to sell his inventory, why wouldn't he do that? If a seller sets his price too low, he minimizes his profit. If he sets it too high, not enough people will buy it and he will be stuck with unsold inventory. Somewhere in between there is an optimal price point that will maximize his profits while selling his inventory. Sometimes of course, a seller will put a high price on an item knowing that a few will pay a premium price, then lower it to a point where it will have broader appeal. All part of doing business.
It's really very simple. If you think somebody is charging too much for an item, don't buy it. If you do buy it, it means the item is worth what the seller is offering it at.
jecorbett Prices are already where they should be.
If that was the case, this thread wouldnt exist. Plainly alot of folks here must think there is alot of magic that goes into making a model. And therefore, must be worth hundreds of dollars. You keep thinking and paying that! I know better, a loco doesnt cost $250! Nor will i pay that. But you are more than welcome to. Please, go right ahead and enable the hobby to just skyrocket in price.
I spose next year when that very same loco goes up another $100 you will be fine with the price. How about another $200? $300? How about $1000 for an HO F7-A for example. More power to you!!!! They already got you paying $250! And that makes me , but not at the manufacturer.
No suckers in this household!
PM Railfan jecorbett Prices are already where they should be. If that was the case, this thread wouldnt exist. Plainly alot of folks here must think there is alot of magic that goes into making a model. And therefore, must be worth hundreds of dollars. You keep thinking and paying that! I know better, a loco doesnt cost $250! Nor will i pay that. But you are more than welcome to. Please, go right ahead and enable the hobby to just skyrocket in price.
Perception is not necessarily reality. This thread exists because a lot of people THINK prices are too high.
Retail prices are set by what the public is willing to pay. What it cost the seller to make is secondary. If I could dream up some magic gizmo that I could produce for $10 a piece that the public wanted so badly they were willing to pay $1000 a piece, do you think I would sell it to you for $20. I would only do that if I thought I could sell 100 times more of them at $20 than I could at $1000.
Here is a real world example. About 20 years ago a friend gave me a stock tip about the company that produced the Breathe Right nasal strips. I didn't bite right away but a short time later I was listening to Rush Limbaugh during my lunch hour and he endorsed the product. I immediately got on my computer and bought a good sized lot for a fairly low share price. In a short amount of time, the stock nearly quintupled in price and I sold it at a significant profit. I could have made a nice profit selling it at twice what I paid for it but why would I do that if the public was willing to pay five times what I paid for it. Whether the stock was overvalued at that point was not of concern to me. If someone was willing to pay that much for the stock, that stock was worth that much to them.
I spose next year when that very same loco goes up another $100 you will be fine with the price. How about another $200? $300? How about $1000 for an HO F7-A for example. More power to you!!!! They already got you paying $250! And that makes me , but not at the manufacturer. No suckers in this household! PM Railfan
That's the beauty of free markets. I as a buyer get to decide what a particular item is worth to me. If a product is worth more to me than the dollars the seller is asking for than I buy it. If I am not fine with a price increase, I simply won't buy it. It is a fair price if both a buyer and a seller agree to it. If you decide the asking price is more than what you are willing to pay for it, you don't have to buy it, but that doesn't mean the seller's asking price is too high because there are some who are willing to pay it. A seller's asking price is too high if few are willing to pay it. In that case he will lower it to what more people are willing to pay.
Model trains are not some new whiz bang invention that some manufacturer can take a short term windfall profit on because he is the inventor and sole producer.
Those kinds of business models don't last long, and don't apply here.
Here is the proof. In the late 80's/early 90's when LifeLike came out with Proto2000 they did have some "extra" profit in their retail prices. They tried to share that profit with dealers buy selling direct to dealers at deeper than traditional discounts.
Rather than holding retail prices higher and making extra profit, it only took a few years for a large percentage of dealers to decide to go the deeper discount route as well, lowering the street prices of locos with $100 MSRP to $55-$60. Almost all the discounting in the business to that point had been limited to about 20-25% off MSRP.
Those locos were so ahead of the curve in detail and performance that is was easy to justify their higher price - Atlas and Model Power/Roco locos were already $60-$80.
Similar pricing structure failures are why Bachmann products are typically available EVERYWHERE for 30-40% off retail - but that is changing - another sign that production costs are up in a serious way.
Short term windfalls aside - EVERY business eventually finds the lowest price/highest profit matrix and stays there most of the time.
But quick turnover was more important to many than higher profits - it is hard to get both in any business.
More about LifeLike.
Before being bought by Walthers, LifeLike trains was a division of Life Foam Industries, the worlds largest manufacturer of sytrofoam coolers and such.
Model trains was just a "sideline" to them.
They seriously over produced those early Proto2000 engines, likely to just what I sugested earlier, get the lowest cost of production and feed the demand as it came along. This is marked by the fact that still now, 25 years later, it is easy to find these locos "New Old Stock", on Ebay or at train shows.
Rather than the 3,000 or 5,000 piece runs of today, they made 10's of thousands of everything. But to a company as big as Life Foam, that was peanuts.
LifeLike sold the model train division to Walthers not because it was not a good business for them, but rather the owners were retiring, and Life Foam was up for sale. The other players in the styrofoam business that wanted to buy Life Foam did not want the model train division.
Prices of durable goods always seek the lowest price/minimum acceptable profit matrix.
A model train is largely a durable good - marked by the fact that while stuff may go out of fashion, those "NOS" LifeLike engines come out of the box and look and run just as good as they did 25 years ago - maybe with some new $3 gears......I know I'm still buying them.
Sellers who do not need a quick turnover can simply wait and get their price.
Just take a look at Ebay.
And,
If you borrow a million dollars and start a business, you have to think and operate a curtain way.
If you have your own extra million dollars, you can start a business and operate somewhat differently - and you are likely to be way more successful.
I can see a business model involving a subscription fee. You can rent the loco of your choice for a specific period of time then, when you finish whatever you can mail it back...and etc...
j/k j/k
blownout cylinder I can see a business model involving a subscription fee. You can rent the loco of your choice for a specific period of time then, when you finish whatever you can mail it back...and etc... j/k j/k