Sheldon
Thanks for joining the conversation.
A new Genesis level diesel can have 500 separate parts. Yes tooling costs can exceed $200,000.
John
ATLANTIC CENTRALPricing is always based on the cost to produce plus necessary investment return/profit.
$220K
price is based on willingness to pay, not cost. Of course there's no point in making a product if there is insufficient profit.
greg - Philadelphia & Reading / Reading
gregc ATLANTIC CENTRAL Pricing is always based on the cost to produce plus necessary investment return/profit. $220K price is based on willingness to pay, not cost. Of course there's no point in making a product if there is insufficient profit.
ATLANTIC CENTRAL Pricing is always based on the cost to produce plus necessary investment return/profit.
Respectfully, demand is based on willingness to pay, price is based on need or desire to sell.
riogrande5761 ATLANTIC CENTRAL .......but we are no longer willing to pay the prices that funded standing inventories......... Sheldon Willing, or in the cases of many, able to pay the prices. Don't forget we are slowly coming out of a 6 year recession and wages have stagenated while hobby products have sharply risen. A recent report stated the 46% of the US population would struggle to take a 400 dollar unexpected hit to their monthly expenses. I'll just leave it at that.
ATLANTIC CENTRAL .......but we are no longer willing to pay the prices that funded standing inventories......... Sheldon
.......but we are no longer willing to pay the prices that funded standing inventories.........
Willing, or in the cases of many, able to pay the prices. Don't forget we are slowly coming out of a 6 year recession and wages have stagenated while hobby products have sharply risen. A recent report stated the 46% of the US population would struggle to take a 400 dollar unexpected hit to their monthly expenses. I'll just leave it at that.
Yes, respectfully lets leave it at that, the condition of the economy, and the buying power of the working and middle class are topics that have in the past, and will now come to no good end on here.
Those facts, which I do not dispute, have little to do with the fact that margins, business models, and consumer habits in this hobby have changed and that is why there are few standing inventories and why brick and mortar stores are disappearing.
In the old days, a shelf full of Athearn kits would have been seen as money in the bank, no one would have considered a "clearance sale" on products still in regular production or that had been producted in the last 5-8 years.
Even those discounting back then would have held on to products at their "regular discount price" rather than "clear them out" like today.
The numbers I layed out above are simple facts from the past, and the loss of that business model for whatever reasons, is responsable for many of the changes in the chain of supply in this hobby.
ATLANTIC CENTRALRespectfully, demand is based on willingness to pay, price is based on need or desire to sell. Sheldon
And any manufacturers fear is their customers will start speaking with their wallets when prices become to high.
Seems Scale Trains is covering all bases.
Scale Trains will be selling a plain Jane SD40-2 "Operator" series for $79.00 and a sperate detail parts bag for the operator SD40-2 price is TBA. DCC/Sound operator series SD40-2 is $119.00.
Or you can go full bore with the "Rivet Counter" series SD40-2 with all road specific detail parts applied and DCC/Sound for $199.99
Larry
Conductor.
Summerset Ry.
"Stay Alert, Don't get hurt Safety First!"
BRAKIE ATLANTIC CENTRAL Respectfully, demand is based on willingness to pay, price is based on need or desire to sell. Sheldon And any manufacturers fear is their customers will start speaking with their wallets when prices become to high. Seems Scale Trains is covering all bases. Scale Trains will be selling a plain Jane SD40-2 "Operator" series for $79.00 and a sperate detail parts bag for the operator SD40-2 price is TBA. DCC/Sound operator series SD40-2 is $119.00. Or you can go full bore with the "Rivet Counter" series SD40-2 with all road specific detail parts applied and DCC/Sound for $199.99
ATLANTIC CENTRAL Respectfully, demand is based on willingness to pay, price is based on need or desire to sell. Sheldon
And, it looks as if Scale Trains is going the "no distributor" route. They are selling direct, and taking on "select retailers", again to control pricing.
Single point distribution is future of this hobby. Products will be sold direct to consumers and/or direct to bigger retailers - distributors are dead.
ATLANTIC CENTRALSingle point distribution is future of this hobby. Products will be sold direct to consumers and/or direct to bigger retailers - distributors are dead. Sheldon
Absolutely.Not so long ago it was near impossible to buy direct today its another story. I have ordered detail parts directly from Atlas instead of going through my LHS. I can call Athearn and order any part I need and yes,they do not list all their in stock parts on line.
On one hand its convenient especially if you need to drive to another town/city that has a shop on the other its sad because you no longer need a hobby shop since you are your own shop and can get the items just as fast. I order my needs and supplies once a month from one of my on line shops usually on Sunday evening and by the following Thursday its delivered.
Posted on Facebook July 20 by Maine Modelworks in Yarmouth Maine:
"I am now a Scaletrains.com retailer! Pre order with me if you would like! If you order by july 29th on the SD40-2s youll recieve an additional 5% off. Thanks!
-MaineModelworks"
So, I guess we are saying about 20% of MSRP, maybe less, depending upon how its distributed. Or maybe higher if production costs increase while the producer holds the line on MSRP and squeezes out the middleman to keep their dollar profit level.
To get a producer to actually reveal what it costs to produce any specific locomotive will be a challenge, IMO.
- Douglas
Doughless So, I guess we are saying about 20% of MSRP, maybe less, depending upon how its distributed. Or maybe higher if production costs increase while the producer holds the line on MSRP and squeezes out the middleman to keep their dollar profit level. To get a producer to actually reveal what it costs to produce any specific locomotive will be a challenge, IMO.
Yes, about 20%. And yes, detailed numbers are closely guarded, remember, nearly the whole industry is privately held, only two or three publicly traded companies worldwide.
The middlemen have been squeezed out by the discounting, that started decades ago.
Production costs of 20% would be about right and less after the dies are paid for. We will never know how many cars and locomotives that can be produce with a ton of material and unless we are fixing to buy the company we will never know the real production costs.
The final cost to dealers probably around 60% of MRSP and of course there's the small discount for buying by bulk with cash in hand.This pay by cash reward for bulk purchases hurt the Mom and Pop shops since they could not compete with the mail order houses-remember when MR had pages of these mail order ads?
Let's look deeper for models with low production costs.
A example would be Athearn BB cars that now comes RTR would probably cost 5% to produce since the dies has been paid for many times over and hasn't been upgraded..The RTR 40' boxcar looks the sames as it did as a kit exception being it has crisper computer aided lettering.
The upgraded former Roundhouse FMC boxcars would probably cost 10% to produce due to the metal grabs,steps and crossover.Other then that there the same car with computer aided printing.
No, the cost charged by companies like for example Tangent, directly to the few dealers they have, is 80% of MSRP, not the "normal" "customary" 60% of the past model with distributors in the middle.
That is why MBK will only go about 10% (or less) off on Tangent freight cars. They are "splitting the difference" with the buyer, at least until they determine something is a dead item and blow it out for slightly less, maybe 15% off MSRP. Lately they have not been going below about 85% of MSRP, even on a "blowout", at least when I've been looking at their website.
Anyone who got a better deal can feel free to chime in here.
(Every once in awhile Toy Train Heaven was actually making mistakes and selling items for less than they had in them, but that was a couple years back. I'm not sure that they do that anymore, because they had to "nip that in the bud..." That's the cardinal sin that will put you out of business.)
John,That is only one company and we don't know the dealer discount but,by judging the price discount it must be small.
We can see the the other brands of freight cars has a better discount and as we know MBK isn't in the business to lose money or he would have closed his doors years ago when he was a mail order shop..
I'll stand on that 60% of MSRP out the door to the dealers.
if you were going to produce yet another HO Big Boy of equal or better quality than an existing product, why would you price it any less than that product? (why would you leave money on the table)?
PRR8259 No, the cost charged by companies like for example Tangent, directly to the few dealers they have, is 80% of MSRP, not the "normal" "customary" 60% of the past model with distributors in the middle. That is why MBK will only go about 10% (or less) off on Tangent freight cars. They are "splitting the difference" with the buyer, at least until they determine something is a dead item and blow it out for slightly less, maybe 15% off MSRP. Lately they have not been going below about 85% of MSRP, even on a "blowout", at least when I've been looking at their website. Anyone who got a better deal can feel free to chime in here. (Every once in awhile Toy Train Heaven was actually making mistakes and selling items for less than they had in them, but that was a couple years back. I'm not sure that they do that anymore, because they had to "nip that in the bud..." That's the cardinal sin that will put you out of business.) John
John, true, some of the new, smaller companies have some very short dealer discounts. But personally, I don't see that as sustainable as they grow......if they grow.
35% would be a number that might work.
When Athearn first went to single point distribution, they increased the dealer discount to all dealers, nearly to the old wholesale level, but rising costs have forced them to back off that big discount some.
But no matter the discount, nearly equal discounts to all dealers, with no distributors, has already helped stablize prices.
I laughed at those who said single point distribution would kill Athearn, actually it saved them.
gregc if you were going to produce yet another HO Big Boy of equal or better quality than an existing product, why would you price it any less than that product? (why would you leave money on the table)?
Why would you invest $400,000 in tooling to compete with four or five other good existing products? The choices of models produced is a whole other topic.
Back in the day, Athearn and Roundhouse purposely targeted different segments of the market, there was very little over lap in their lines.
Even today, Bachmann has only a few items that have been recently offered by others. And where they do overlap with other brands, they are often in a different price point.
Let MTH and BLI beat each other up for the same group of customers, not good business in my view.
ATLANTIC CENTRALWhy would you invest $400,000 in tooling to compete with four or five other good existing products? The choices of models produced is a whole other topic.
a comparable product: another 4-8-4, tank car, DCC command station of similar quality and features -- something you can make an educated guess at what people would pay for your product.
the point i'm trying to emphasis is that a realistic prices is not simply cost plus.
For the record, my local dealer told me the Tangent discount to him is only 20% off MSRP. That much I am able to confirm.
Also, for some larger ticket items, the BLI discount to the dealer is now only 25% off MSRP. That is a recent change, and not something used to gain market share when they were just starting out.
It does appear to me, as an observer, that BLI and MTH like to fight over the same bunch of customers.
The Tangent margin must be very thin because MBK only discounts by about a dollar on single car.
Rio Grande. The Action Road - Focus 1977-1983
BRAKIE Scale Trains will be selling a plain Jane SD40-2 "Operator" series for $79.00 and a sperate detail parts bag for the operator SD40-2 price is TBA. DCC/Sound operator series SD40-2 is $119.00. Or you can go full bore with the "Rivet Counter" series SD40-2 with all road specific detail parts applied and DCC/Sound for $199.99
This is something that Athearn BB/RTR should have done long ago. Their later tooled models were quite accurate and crisp and make a good basis for superdetailing, which a lot of modelers did. Skip the RTR line and offer either BB or Genesis.
Also, this concept could offer young people the chance to develop a taste for model building.
I'm glad to see that ScaleTrains is trying the concept.
I may have to buy a couple just to support their effort.
ATLANTIC CENTRALBack in the day, Athearn and Roundhouse purposely targeted different segments of the market, there was very little over lap in their lines.
I heard it said a number of times that Irv Athearn and Clarence Menteer (from Roundhouse) were good friends and had lunch every week. That made it pretty easy to not duplicate each other's products.
Jim
ctyclsscs ATLANTIC CENTRAL Back in the day, Athearn and Roundhouse purposely targeted different segments of the market, there was very little over lap in their lines. I heard it said a number of times that Irv Athearn and Clarence Menteer (from Roundhouse) were good friends and had lunch every week. That made it pretty easy to not duplicate each other's products. Jim
ATLANTIC CENTRAL Back in the day, Athearn and Roundhouse purposely targeted different segments of the market, there was very little over lap in their lines.
Yes, they also did various types of tooling work and manufacturing work for each other, based on the strengths and weaknesses of each others production capablities.
They worked together to build a strong market for their products and to make the hobby better. Rather than working against each other like so many today.
DoughlessAlso, this concept could offer young people the chance to develop a taste for model building.
I will mention Scale Trains "Operator" model freight cars are kits.
I would do it to corner the market not to price compete with existing Big Boys.
There is a great need for a accurate SD40-2 and Scale Trains stepped up to the plate at very competitive pricing.
Then on step farther they have the plain vanilla SD40-2 with or without sound for us more budget minded modelers-another smooth move. We can later buy the detail part bag and detail our SD40-2 at our leisure on those coming cold winter nights..
I been wanting a DCC/Sound SD40-2 and at $119.00 I will have two.
Gregc,
So are you saying that you think they are simply charging "whatever the market will bare"?
Well, for limited times, especially when new manufacturing methods are introduced, that does happen for a while. But eventually competition drives prices to the lowest profitable level.
There is always the guy who will sell at the lowest profitable level to gain market share, or keep market share.
In the late 70's and early 80's Athearn had lots of new competition, who all had higher production costs. Athearn could have rasied prices to the level of the Walthers plastic kits and others who entered the market at that time. But instead they chose to keep their prices lower than the new competition.
When LifeLike Proto and Bachmann Spectrum were created 25 years ago, yes they priced them based on their new value added features, not on cost to produce, but that did not last long, as l explained above. As soon as they shared some of that "windfall" profit with dealers and distributors in the form of deeper discounts, many dealers simply lowered the street prices to increase volume and create higher turnover, rather than hold out for higher profits at the higher prices.
What if no one had ever discounted a piece of Proto2000? At one point before Wathers bought Proto, LifeLike was selling that stuff at 65-70% off retail. But that was before the big cost increases in China.
But if you do the math, the street prices were 35-40% below retail, so the real prices had the same 35-40% dealer profit I talked about above.
The Bachmann situation was similar, but is changing rapidly now.
BRAKIE Doughless Also, this concept could offer young people the chance to develop a taste for model building. I will mention Scale Trains "Operator" model freight cars are kits.
Doughless Also, this concept could offer young people the chance to develop a taste for model building.
Larry. Check again. I think you'll find that only their Evans boxcar is a kit, shake the box at that. The tank and airslides are assembled, but with less detail and printing than the rivet counter series.
ATLANTIC CENTRALSo are you saying that you think they are simply charging "whatever the market will bare"?
of course. Why would a manufacturer leave money in your pocket? (not you personnally)
of course price affects demand (price elasticity). If increasing the price results in a reduction in demand, but overall profit increases, then it makes sense to increase price. Similarly, it may make sense to decrease price when demand declines.
the price that the "market will bare" maximizes overall profit. Unless they are trying to buy market share (if that makes any sense) or just get rid of excess inventory, why would they charge anything less?
riogrande5761,
Out of Curiosity, what will it cost to make a plastic version of Chesapeake & Ohio's "M1 Steam Turbine" ?
gregc ATLANTIC CENTRAL So are you saying that you think they are simply charging "whatever the market will bare"? of course. Why would a manufacturer leave money in your pocket? (not you personnally) of course price affects demand (price elasticity). If increasing the price results in a reduction in demand, but overall profit increases, then it makes sense to increase price. Similarly, it may make sense to decrease price when demand declines. the price that the "market will bare" maximizes overall profit. Unless they are trying to buy market share (if that makes any sense) or just get rid of excess inventory, why would they charge anything less?
ATLANTIC CENTRAL So are you saying that you think they are simply charging "whatever the market will bare"?
Because they are not selling refrigerators at Sears, or Ipads at Best Buy, they are selling something only about 500,000 people in the whole country are even intersted in buying and that nobody "needs". They have to attract their customers, 50% of whom are introverted tech nerds, who would be offended by the preditory pricing games played in other markets.
And the nature of this niche market requires at least the appearance of stable prices, that's why they have always published list prices, even in this age of discounting.
Back in the day, the prices were factory printed on the end of the box, that's how "stable" the pricing structure was. It was not until the wild inflation of the early 80's that the manufacturers in the hobby industry, record industry, and others, stopped putting MSRP price codes directly on their product packaging.
Manufacturers leave money in my pocket all the time.......your theory assumes they can always make the product when they need it, and at the lowest possible cost - like an Ipad - not the case here as has been discussed at length earlier in this thread.
I know you think you have this all figured out based on some MBA schooling, I can tell by the terms you are using. But trust me, this niche market is not like the marketing they were talking about in school.
If I need a new TV or regfrigerator, sure I will shop price and features, but ultimately I need it now and will buy something. I don't shop for model trains that way........
The big manufacturers like Bachmann or Athearn seldom have "sales", but some, like BLI are known for needing to get their cash out of a batch of product quickly and "dump" product after the "new" has worn off and sales slow down.
Now, they are trying to not make any more than what is already sold in advance because they are cash poor and costs are rising in China.
Tell you what, start a model manufacturing company and let us know how you do.
Remember, I've stood behind a counter and sold model trains, been responsable for ordering the inventory of a model train department - and ran my own businesses for more than 30 years. Nobody in the model train business is "getting rich", most are doing it because it is their passion.........
DoughlessLarry. Check again. I think you'll find that only their Evans boxcar is a kit, shake the box at that. The tank and airslides are assembled, but with less detail and printing than the rivet counter series.
You are correct..I thought the Airslides was kits and forgot about the tank car.