I think we've hashed this one out and then some. Time to get back to trains and modeling, fellas.
Thanks,
Tom
https://tstage9.wixsite.com/nyc-modeling
Time...It marches on...without ever turning around to see if anyone is even keeping in step.
LastspikemikeThe biggest "retailer' in the world needs no stock whatsoever. Amazon basically brokers
Somebody has never been inside even a "small" Amazon warehouse.
No stock whatsoever?
-Kevin
Living the dream.
riogrande5761,Stuck a fork in it? If only that were true. Lastspikemike,According to various online dictionaries, Free Market is: "An economy operating by free competition." - "An economic market or system in which prices are based on competition among private businesses and not controlled by a government." - "An economic system in which prices and wages are determined by unrestricted competition between businesses, without government regulation or fear of monopolies."So far, I don't see how this relates at all to this discussion. No government is setting prices, no monopolies are controling markets. Instead, manufacturers set the MSRP (Manufacturer's Suggested Retail Price), and the discounts to wholesalers and retailers are based on that. Hobby companies are not selling $55 items to a wholesaler, they are selling items at 45% off the MSRP.richhotrain,So, why is pre-ordering bad?Doughless,Actually, manufacturers would prefer that all the units would be sold out as soon as they arrive. That gives them the maximum return on the money already invested in that production run. The faster they can turn the money over, the more money they make.You're assuming facts not in evidence about leaving money on the table. Because there have been a few anecdotal posts over the years about people supposedly missing out on something new because they didn't pre-order, the thinking seems to be that there must be a vast reserve of unsatisfied modelers. There's simply no proof of that.I'll give you an example from my club. In 2003, we paid MDC/Roundhouse to make 300 New Hampshire Northcoast open hoppers as a custom club car kit (in two road numbers). http://www.ssmrc.org/past_cars.aspx We sold 'em like hotcakes, and they sold out in less than 6 months. For months after they sold out, we kept getting letters & e-mails from people looking for our NHN hoppers. Wow, must be even more demand than we thought! Great, let's do it again, and we bought another 300 more car kits in one road number and one unnumbered with decals. We sold the first 100 cars in just a couple months...and then sales dried up completely. It took another 5 years to sell those last 200 cars, and to sell them we painted the underframes, put them together, put on the numbers, and we eventually had to get price them at a deep discount just to get them out of the basement. Yes, there was pent up demand for our NHN hoppers and we clearly left money on the table after that first run...but the second run? We figuratively lost our shirts chasing that last dollar.You talk about a series of whiffs, as in there aren't enough pre-orders to make the product and thus no product gets made. Far better to whiff on a pre-order and cancel it than whiff on a production run and go bankrupt.And how else are manufacturers supposed to learn the market without pre-orders? They should just bull ahead and make something without it? Just take a wild guess? How can they possibly use the history of the market when it comes to making something new? When Atlas first made the HH660, no one had ever made one before in injected plastic...ever. Who knew what the market would be for such a thing with zero history to go by?You are assuming pre-orders are thinning the ranks of our hobby based on what?Like puppies for a food dish? Really? Or musical chairs? But that's not how it is at all. In a pre-order system, the manufacturer will make units to fill every order they get. There's no competition, there's no race to the food bowl. If you pre-order, you'll get it (unless your retailer doesn't pay his bills). If anything, the old days led to the "gotta-buy-it-now" rush down to the hobby shop to get yours before they're all sold out. With a pre-order, it'll be sitting there behind the desk waiting for you to pick it up. And your Best Buy example? That's without pre-orders. If they could pre-order their "door crasher" Black Friday deals and pick them up when they want to, no one would be lining up.
Lastspikemike,Our hobby manufacturers come up with an idea to make something. It will then be drawn up sent to a Chinese factory to design the product for mass production. After some back and forth with the design, the Chinese factory tells them the tooling will cost X to make, and that the unit price will be Y based on the number of units made, Z. As Z increases, Y decreases and as Z decreases, Y increases. If these numbers are acceptable, the contract is signed and 100% of the tooling cost is paid for immediately as tooling begins. After tooling is completed and inspected, a test shot is made and inspected. After that passes, 50% of the assembly cost is paid for, and manufacturing begins. Once complete, everything is put in a container and brought to the dock. Before it's put on a ship, the remaining 50% of the assembly cost is paid. Once the check clears, it's loaded on the ship to North America. That's how it works most of the time. All the production numbers are set at the time of the signing of the contract.Have you ever worked retail? There's an old expression that has always remained true in retail: "Pile it high and watch it fly." Not only have I worked in retail for 25 years, I have several fellow club members that have worked as managers for Woolworths, Fanny Farmer, Family Dollar, and many other stores with decades of experience in Boston and around the area. They all say, "Pile it high and watch it fly." Leaving your shelves mostly empty discourages sales. It makes your store looks like it's going out of business, that you can't even afford to stock the shelves. It even applies to train shows, where I've also been a dealer for 30 years. If you only put out one car and leave 29 more in a box under the table, you won't sell many (if any). Put out all 30 cars and you'll sell more. It's a fact.And BTW, one of my local hobby stores has a strict "No haggling" policy with the sign that says, "How would you feel if your boss asked you to do the same for work for less? We feel the same way when you ask for a discounted price." And goodness knows, I've certainly dealt with haggling customers. The price is the price, and if they don't like it, the exit is over there.Sorry, I have to quote you here because there's so much to unpack:
All this talk about production numbers being fixed and preorders determining production just has to be wrong.No. No, it is not wrong. Production numbers are fixed when the contract is signed between the North American company and the Chinese factory. Period. The North American company sets the production numbers based on expected sales, which is based in part on pre-orders and the unit price based on what the Chinese are going to charge them.To start production costs $x. Regardless of quantity. Marginal cost of extra units just has to be tiny. No. No, it is 100% dependant on quantity. Production is incredibly labor intensive as a simple 40' ice reefer can have over 200 parts. Each unit is hand assembled by well-paid Chinese workers (by Chinese standards). These are not built by machines but by actual humans who are quite skilled. Whether they make one or 5000, it takes the same amount of time to build it. Where would you get the idea that extra units are "marginal" in cost?
Production can easily be expanded during or even after a run. No. No, it can't be easily expanded. You can't just turn the tap on and make more come out. If it's a bigger production run, they have to hire more people to shoot the plastic, cut the parts, paint the models, QA checks, final assembly, packaging, etc. Everything is planned out ahead of time by professional Chinese manufacturing engineers to maximize labor use and minimize dead time. They don't even like making Undec. models because it disturbs their production process. I can't imagine their reaction to being told to make another 100 in the middle of a production run would be any better.The key is to pre sell enough units to make the initial investment a sensible risk. Once that point is reached the sky's the limit, literally. Pre-selling is a non-starter in this hobby, and fraught with difficulty. What happens if you don't get enough? Then you have to return the money. It's much easier to pre-order (not take any money). Those moulds aren't going anywhere and cost beans to store if sales dry up. Molds are very heavy and there can be hundreds of molds and slides to store and possibly get damaged. It would not do to let them get exposed to the elements, especially if they are steel, so humidity control would be a must.Even assembly skills just aren't that specialized as witness the very wide variety of assembly skills exhibited by modellers who end up with the product. One piece of model railroading equipment is more or less identical to another from an assembly skill perspective.Ha. That's funny. Just try it. Watch some of the Rapido factory tours and just watch what those Chinese ladies are doing. And not just one car or one engine, but thousands of 'em...day after day for months on end, and the result has to be almost perfect every time. Dip a grab in the ACC and stick it in the #80 holes without getting glue on the surface. Now do it several thousand times. And you say it's not a specialized skill? Ha.
I'll go so far as to suggest that the manufacturers and their client factories very probably make deals among themselves to borrow each other's moulds and assembly facilities. I'm very sure car makers do and have done for decades now. Um, no. No, they don't. There are Chinese factories that make product for many different North American companies. That's true. However, they don't share tooling. Or rather, if they do, they call it theft and lawsuits are a result (see: Lionel vs. MTH vs. Korean Brass).Doughless,The reason why the older companies went to pre-orders instead of flooding the market with large runs like they used to is due to market changes. P2K would crank out generic models painted in their favorite roads and people would buy them. Today that's not the case.I would remind you that Rapido has three (yes, three) different factories in China that they "own" (as much as they can in China, anyways). And ScaleTrains has their own factory in China, as well. I seriously doubt there's any "production window" problems for either company. Oh, and we'll never have production numbers...ever. It's the most closely guarded secret in our hobby.So while I agree that we don't know if more or fewer models are being sold today vs. 1988, just take a look at all the new companies that have come along in the last 10-15 years making quality products. Rapido, ScaleTrains, ExactRail, Arrowhead, Tangent, Moloco, Fox Valley, Spring Mills Depot, and Wheels of Time just to name some. If the hobby was being killed by pre-orders and limited runs, then how are all these new companies continuing to succeed? Especially when you consider that the old companies like Atlas, Walthers, Bachmann, Kadee, et al, are also still around, with Athearn cranking out ~500 loco SKU's every year.
Lastspikemike If demand for factory time is so high then that would explain high costs of production. Pricing rules apply to all input costs as much as to the final product. I remain sceptical that demand for Chinese factory time is at all limited.
If demand for factory time is so high then that would explain high costs of production. Pricing rules apply to all input costs as much as to the final product.
I remain sceptical that demand for Chinese factory time is at all limited.
The factory owner needs contracts for brands to use his factory and labor, so the brands have to compete for factory time. The brands have to plan around production window times more than they have a sales window limits. JMO of course.
- Douglas
mlehmanThese are essentially luxury goods
I had no idea I was making luxury purchases.
That is a fancy way to describe electric model trains.
(I know luxury indicates an unnecessary discressionary purchase for no practical reason, just having fun)
If you're relying primarily on someone's economic theory to explain real world niche markets of objects involving discretionary income, then you'll be baffled by what happens here.
These are essentially luxury goods, so many of the tenets of free market theory are simply useless. People pay what they think something is worth.
How much is a model worth? Consider how many hours it would take to build it yourself, as perfect as they generally roll out of the box. How much is YOUR time worth? Then price that against even high end cars like Tangent, Moloco, etc. Betcha every one of those items is way cheaper than DIY, err, that old fashioned model railroading thing.
So most of this discussion about wringing the last increment of price to "bring value" to the consumer is pretty meaningless. People are getting great value in RTR in most case compared to actually building it. There's no way you can spend 6 to 10 hours building a car, plus paint, etc unless you actually enjoy doing that as some of us still do. You sure can't make money on that once you count your time in. I probably had about five or six hours in each 3000 series I built from a kit that cost $15. My time is worth at least $10, more like $15/hour. I can never do as good a job building it as Blackstone does. That was when the Blackstones hit the market at something like $29.95. No need for exact math here. That's why RTR is popular via the pre-order system. It's the easy road to a decent looking layout. As a build it myself fellow, I'm OK with that, even indulge from time to time strategically when the funds are available.
Markets are notoriously more sloppy than they appear in theory.
Mike Lehman
Urbana, IL
Lastspikemike All this talk about production numbers being fixed and preorders determining production just has to be wrong. To start production costs $x. Regardless of quantity. Marginal cost of extra units just has to be tiny. Production can easily be expanded during or even after a run. ............................... I'll go so far as to suggest that the manufacturers and their client factories very probably make deals among themselves to borrow each other's moulds and assembly facilities. I'm very sure car makers do and have done for decades now. ============= If demand for factory time is so high then that would explain high costs of production. Pricing rules apply to all input costs as much as to the final product. I remain sceptical that demand for Chinese factory time is at all limited.
All this talk about production numbers being fixed and preorders determining production just has to be wrong. To start production costs $x. Regardless of quantity. Marginal cost of extra units just has to be tiny. Production can easily be expanded during or even after a run. ...............................
I'll go so far as to suggest that the manufacturers and their client factories very probably make deals among themselves to borrow each other's moulds and assembly facilities. I'm very sure car makers do and have done for decades now.
=============
To look at your first point, perhaps the marginal cost of producing extra product material from the moulds is tiny. However, the labour in subsequently assembling all the various components to produce the completed model remains the same. The manufacturing is less, but not by a significant amout for the higher end models.
The manufacturers are very unlikely to "borrow each other's moulds". A mould is very specific to a particular model, and can't be simply adapted to something even slightly different. Some manufacturers do incorporate replaceable inserts to allow for some variations in the base model but that will be for variations they plan to make. A different model of locomotive will require all new moulds.
As to your third point (from a later post), a number of prominent manufacturers recently had their planned offerings delayed by more than a year when one Chinese factory suddenly shut down. We are a niche industry and factory time is indeed limited. When one of the Rapido products proved popular beyond all expectations (though pre-orders), it tied up the factory much longer than originally scheduled and other models were delayed.
===================================
And to get back to the general discussion, most seem to be looking at pre-orders as just something done by individual modelers. In fact, the hobby retailers can also pre-order for stock, trying to guess how many of those folks who didn't pre-order will suddenly find they do want one after all. But even the retailer doesn't want to have much product gathering dust for years, eating up shelf space and operating capital.
John
mlehman Doughless I'm responding to the notion that companies produce items in batches that can be sold in a three month period. That means the timeline is driving the number of units, and not the demand. The timeline driving the number of units and not the demand is what we see when we read comments about consumers wanting to get a new model, but can't get it because its sold out everywhere. Profit was left on the table. I think the timeline is being mangled here badly. The mfg is generally NOT building for the demand over the three months an item is typically available if it's not an immediate sell-out. When an announcement is made for a popular road with a large following that will see runs of other items from it before and after is the only time that the number produced in a run comes close to the concept that it's being produced to satisfy immediate demand. Mostly, items produced are for roads with less numerous fan clubs. Then that batch that will be produced will need to satisfy pent up demand, current demand, and (if they are wise) future demand of consumers who realize that one unit that the Podunk & Lost Sheep owned will likely NEVER be rerun no matter how much whining from the Peanut Gallery happens. Given that part of the process of pre-orders is publicizing their potential availability within a window after which production numbers are finalized, if you're interested in new production cars and you're asleep at the wheel when it comes to announcements, then it behooves you to pay attention to things so you can order in a timely manner. I have a feeling these people are the grandchildren of those who complained that the LHS was out of a popular item that was just announced as on the shelves last month. "Why, how could they not make enough to satisfy my need now! They surely could've anticipated I would need some now even if I didn't need it a few weeks ago." I think mfgs have enough on their hands trying to produce accurate and affordable models in countless variations. Expecting them to also be mind-readers is probably asking a lot.
Doughless I'm responding to the notion that companies produce items in batches that can be sold in a three month period. That means the timeline is driving the number of units, and not the demand. The timeline driving the number of units and not the demand is what we see when we read comments about consumers wanting to get a new model, but can't get it because its sold out everywhere. Profit was left on the table.
The timeline driving the number of units and not the demand is what we see when we read comments about consumers wanting to get a new model, but can't get it because its sold out everywhere. Profit was left on the table.
I think the timeline is being mangled here badly. The mfg is generally NOT building for the demand over the three months an item is typically available if it's not an immediate sell-out.
When an announcement is made for a popular road with a large following that will see runs of other items from it before and after is the only time that the number produced in a run comes close to the concept that it's being produced to satisfy immediate demand.
Mostly, items produced are for roads with less numerous fan clubs. Then that batch that will be produced will need to satisfy pent up demand, current demand, and (if they are wise) future demand of consumers who realize that one unit that the Podunk & Lost Sheep owned will likely NEVER be rerun no matter how much whining from the Peanut Gallery happens.
Given that part of the process of pre-orders is publicizing their potential availability within a window after which production numbers are finalized, if you're interested in new production cars and you're asleep at the wheel when it comes to announcements, then it behooves you to pay attention to things so you can order in a timely manner. I have a feeling these people are the grandchildren of those who complained that the LHS was out of a popular item that was just announced as on the shelves last month.
"Why, how could they not make enough to satisfy my need now! They surely could've anticipated I would need some now even if I didn't need it a few weeks ago."
I think mfgs have enough on their hands trying to produce accurate and affordable models in countless variations. Expecting them to also be mind-readers is probably asking a lot.
Mike, agreed for the most part. My problem is not with the pre-order process as a means to gauge market demand. It shouldn't be the sole factor though. Nobody is suggesting that a company just build 5,000 units when a pre-order process wont attain 2,000 units (assume 1,000 leass than break even).
The issue with me is the concept that they want to set the pre-order window for the amount of product they think they can sell out in three months after production. That smells more like a production limitation problem than a profitability concern.
What I'm complaining about is seeing product that is already sold out. I'm not complaining about not getting enough orders to produce the product in the first place. So I see the pre-order process as helping to create a get-in and get-out as quickly as possible mentality that can often short the actual demand.
Athearn just announced the new GP15 with TS2 sound decoder and LED lights and cut off the pre-order window short as of June 2020....to be available not until 2021, one year in the future. The announcement is still on the website with a pre-order period 30 days expired now. I assume Athearn and hobby chatter will advertise and talk about the new run, so I would think Athearn is well prepared to produce significantly more units than what they got during the pre-order window. Compare that to the company who limits production to the amount of pre-order units plus a few extra for spares. The latter is less risky, but leaves profitable sales on the table, even if there is an incremental cost to holding some inventory as time passes.
DoughlessI think when companies that would compare to Life Like, Atlas, Athearn, MDC,etc back in the day turn to a pre-order process, whereas those kinds of companies didn't do in the past, its a sign of either a dwindling market, or dwindling access to dwindling or more centralized production facilities.
Or ... a much wider variety of models, prototype- and era specific variations (unheard of back in the day), etc. Not to mention 60 years of more new real-life equipment since the "good old" 1960s when drives were rubber bands and every GP7 was the same, no matter the livery. And too wide, to boot.
DoughlessReduction of total units would be a sign of a dwindling market, but I have no data on the number of total units sold in the hobby in 2018 compared to 1988.
Right.
Layout Design GalleryLayout Design Special Interest Group
Lastspikemike All this talk about production numbers being fixed and preorders determining production just has to be wrong. To start production costs $x. Regardless of quantity. Marginal cost of extra units just has to be tiny. Production can easily be expanded during or even after a run. The key is to pre sell enough units to make the initial investment a sensible risk. Once that point is reached the sky's the limit, literally. Those moulds aren't going anywhere and cost beans to store if sales dry up. Even assembly skills just aren't that specialized as witness the very wide variety of assembly skills exhibited by modellers who end up with the product. One piece of model railroading equipment is more or less identical to another from an assembly skill perspective. I'll go so far as to suggest that the manufacturers and their client factories very probably make deals among themselves to borrow each other's moulds and assembly facilities. I'm very sure car makers do and have done for decades now.
All this talk about production numbers being fixed and preorders determining production just has to be wrong. To start production costs $x. Regardless of quantity. Marginal cost of extra units just has to be tiny. Production can easily be expanded during or even after a run. The key is to pre sell enough units to make the initial investment a sensible risk. Once that point is reached the sky's the limit, literally. Those moulds aren't going anywhere and cost beans to store if sales dry up. Even assembly skills just aren't that specialized as witness the very wide variety of assembly skills exhibited by modellers who end up with the product. One piece of model railroading equipment is more or less identical to another from an assembly skill perspective.
Yep. Factories and labor is expensive to hold 24/7 365, and are often owned/controlled by third parties serving multiple brands. The brands have a production window problem more than they have a sales window goal. JMO of course.
cuyama Doughless I'm assuming that the pre-order process is beginning to thin out the number of people wanting to participate in the hobby. Since pre-orders have been around for many years, on what data do you base this assumption? We get that you don't like it, but the pre-order process has brought the greatest variety of products ever to the hobby, as well as a number of new manufacturers.
Doughless I'm assuming that the pre-order process is beginning to thin out the number of people wanting to participate in the hobby.
Since pre-orders have been around for many years, on what data do you base this assumption? We get that you don't like it, but the pre-order process has brought the greatest variety of products ever to the hobby, as well as a number of new manufacturers.
DoughlessI'm responding to the notion that companies produce items in batches that can be sold in a three month period. That means the timeline is driving the number of units, and not the demand. The timeline driving the number of units and not the demand is what we see when we read comments about consumers wanting to get a new model, but can't get it because its sold out everywhere. Profit was left on the table.
DoughlessI'm assuming that the pre-order process is beginning to thin out the number of people wanting to participate in the hobby.
Paul3 richhotrain,I'm still trying to see the downside to pre-ordering. Why is that so bad in your eyes? What I'm seeing so far is that pre-ordering is bad because it is bad. Why? Sheldon,According to the BLS, $2.00 in 1971 = $12.95 today.And the 1971 Athearn BB is not what you're buying today with Athearn RTR. The paint is superior and there have been improvments made (no more red washers, metal wheels, better couplers, fit and finish is better, and some have tooling improvements).FWIW on houses, in 1968 my folks built a Cape (3 bed, 1 bath, full unfinished basement) for $16k in Massachusetts, the cost of land not included.Lastspikemike,The consumer determines the selling price only in the most general way. The seller sets the price and customers choose to pay it or not. If they don't, the seller has the option of changing the price but he doesn't have to. The seller may just wait for someone else to sell it to.In a perfect free market world, everything would be sold via auction where the consumers literally set the price. But that would be a pain. Doughless,If a company was continuously making product, the break even point would be important to note because then you could adjust production accordingly. But remember that our hobby is batch production. Each model costs the same to make, no matter if it was the first one or the last one. And no, it's not a good thing to sell a product 3 years after making it. Yeah, great, you finally sold it, but that money you invested in that unit was doing nothing for three years when it could have been making you more money invested in something else. You lost the money you could have made by warehousing a product for 3 years.
richhotrain,I'm still trying to see the downside to pre-ordering. Why is that so bad in your eyes? What I'm seeing so far is that pre-ordering is bad because it is bad. Why?
Sheldon,According to the BLS, $2.00 in 1971 = $12.95 today.And the 1971 Athearn BB is not what you're buying today with Athearn RTR. The paint is superior and there have been improvments made (no more red washers, metal wheels, better couplers, fit and finish is better, and some have tooling improvements).FWIW on houses, in 1968 my folks built a Cape (3 bed, 1 bath, full unfinished basement) for $16k in Massachusetts, the cost of land not included.Lastspikemike,The consumer determines the selling price only in the most general way. The seller sets the price and customers choose to pay it or not. If they don't, the seller has the option of changing the price but he doesn't have to. The seller may just wait for someone else to sell it to.In a perfect free market world, everything would be sold via auction where the consumers literally set the price. But that would be a pain.
Doughless,If a company was continuously making product, the break even point would be important to note because then you could adjust production accordingly. But remember that our hobby is batch production. Each model costs the same to make, no matter if it was the first one or the last one. And no, it's not a good thing to sell a product 3 years after making it. Yeah, great, you finally sold it, but that money you invested in that unit was doing nothing for three years when it could have been making you more money invested in something else. You lost the money you could have made by warehousing a product for 3 years.
I'm responding to the notion that companies produce items in batches that can be sold in a three month period. That means the timeline is driving the number of units, and not the demand.
The timeline driving the number of units and not the demand is what we see when we read comments about consumers wanting to get a new model, but can't get it because its sold out everywhere. Profit was left on the table. There is no guarantee that the other product that was produced in its place sold with more profit or sold at all. Lessing the sellout time...IOW not meeting total demand... merely limits the risks of loss of capital, not the maximization of profit (the accretion of capital).
It comes down to knowing your market. If a company continues to do only pre-orders, what happens if they don't get enough? Then the next, then the next. A series of whiffs means you produce nothing at all, and sell nothing at all, so they have to have some level of knowing the market before they even entertain the notion of a pre-order. And knowing the market even better would allow them to meet demand and not just cut it off after a three month sell out period.
I'm assuming that the pre-order process is beginning to thin out the number of people wanting to participate in the hobby. I know MBKlein seems to run out of inventory quickly. I think when producers/retailers resort to tactics that places one consumer over another like puppy dogs running to the food dish or like musical chairs, by having to sign up to get product announcement alerts to place your order in a short time or belong to a gimmicky sales club that gives you an advantage, other consumers who take their shopping less seriously (but still have plenty of money to spend) eventually just move along because they cant ever find the product. Getting customers to line up to buy product like BestBuy sells cheap TVs on Black Friday leaves many potential customers going elsewhere or simply learning to do without.
deleted. See below.
If I didn't know better, I would swear that Paul is the OP of this thread!
Rich
Alton Junction
I think Paul3 pretty much put a fork in it!
... and Bob's your uncle!
Rio Grande. The Action Road - Focus 1977-1983
Doughless,If a company was continuously making product, the break even point would be important to note because then you could adjust production accordingly. But remember that our hobby is batch production. Each model costs the same to make, no matter if it was the first one or the last one. And no, it's not a good thing to sell a product 3 years after making it. Yeah, great, you finally sold it, but that money you invested in that unit was doing nothing for three years when it could have been making you more money invested in something else. You lost the money you could have made by warehousing a product for 3 years.With your comparison to Bachmann vs. Rapido, and Honda Civic vs. Ferrarri, the prices just aren't that different between the models to justify that kind of hold on a product waiting for some high roller to walk through the door. The new Russian Decapod from Bachmann has a retail price of $579 with sound. The Rapido Royal Hudson with sound went for $699. A Honda Civic starts at $20k while a Ferrarri is $260k to $330k...literally 13 to 16 times the cost. To put that in perspective, the Rapido Royal Hudson would have to retail for $7,500 to $9,500 in comparison to the $579 cost of the Bachmann 2-10-0 to match the Ferrarri vs. Civic price differential.As for the 1st sale over BE and not the 201st sale, that assuming that they're all going to sell. There's no promise of that. It could just as easily be 201 unsold units just sitting there, literally forever. If it was your money, which side would you rather err on? The one that makes you sightly less profit that you can recoup on a second run, or the one that puts you out of business?And yes, even Rapido makes more than they have pre-orders for, if nothing else to handle warranty replacements. Maybe 10% over pre-orders for a typical run? I don't know. I do know that about 6 months after our 8600 coaches and parlor cars were delivered, Rapido offered to sell us about 30 to 50 NH cars they still had on hand and we bought them. They didn't offer to sell us any more diners this time because we still have 300 of them; instead they sold them to their dealer network.No manufacturer wants to "fly blind" into the marketplace...which is why they take pre-orders in the first place. Without pre-orders, the would be flying blind.
Douglas and others--
Some of the "assumptions" about accounting and the model train business are flawed. Trust me, they are not ascribing different values to the 201st item sold if 100 was "break-even". Also, they have to pay ONE price for an entire product run. If that run includes 100 undecorated diesels, packed differently than all the factory finished models, then those undecorated units are amortized over the entire product run. The added extra cost of making undecorateds is generally not broken out separately. It's a "hidden" cost; undecorateds when made are more a "customer service" gesture, at least on the part of some.
As others above have tried to explain, the importer has to pay for all the items before they leave China. They need to recover their investment quickly, because they want to make something else next. They want a quick sellout--3 weeks, not 3 months. That is how it is, period.
There is NO consideration of market "down the road" other than potential for x number of reruns. The whole production scheme is geared toward sellout or very near sellout within 3 weeks. That is it. It was already pointed out above that Athearn's literally hundreds of diesel items over just the last couple years would represent millions of dollars if a few of each were left in inventory for "future". It just ain't going to happen. Nobody has that kind of money to tie up on a "wishful sale".
Pre-order real world case in point: Athearn offered an inexpensive (old body) F-7 diesel in a famous paint scheme and made it available in entry level train sets, and then another manufacturer, who was NOT privy to Athearn's plans roughly concurrently offered the same scheme on a more detailed higher-end F-7. The other manufacturer only received about 40 (or less) actual reservations/pre-orders, and the model was cancelled at that time.
A couple years later, the same F-7 paint scheme was re-advertised, received enough pre-orders to get made, and is currently in production.
There are certain months of the year that are NOW known by the manufacturers to be HORRIBLE months in which to make a major new announcement. Generally they are summer months. Walthers has been burned when announcing new passenger trains in those months, and then subsequently cancelled production.
So--you can pick the wrong calendar time of the year to make an announcement, and, because generally speaking, new products are kept secret, you can have the misfortune of making virtually the same item as somebody else at the same time, and losing sales there, too.
Also, Atlas especially, and some other companies DO communicate behind the scenes to other manufacturers "don't bother making that because we are already making the tooling". This saves money so that others do not waste it on something brand new that is already in the pipeline. So there IS a sort of "gentlemen's agreement" where certain new product knowledge is actually shared, to avoid duplication of product lines...but that doesn't seem to extend to paint schemes on existing products.
Atlas and Intermountain both offering modern autoracks at roughly the same time: they both are selling well, and they do represent different cars from slightly different eras. I actually own both and am happy with both; the new Intermountain racks are exceptionally well done regarding the fit of the metal panels on the body. Much better than first runs...and the Atlas car just looks and runs great, at a lower price point. The Intermountain captures the "real metal" look exceptionally well, because it is.
tstage John, Pre-orders still do not guarantee delivery. I've seen pre-orders get cancelled because there wasn't enough interest to meet the unspecified minimum quota in order to make the run financially viable for the manufacturer. It does happen on occasion. Tom
John,
Pre-orders still do not guarantee delivery. I've seen pre-orders get cancelled because there wasn't enough interest to meet the unspecified minimum quota in order to make the run financially viable for the manufacturer. It does happen on occasion.
Hello Tom--
Fully aware, pre-orders are not a guarantee, indeed (though in my real world example, BLI states the Santa Fe mikado has enough orders to be a go, and they have begun work on the tooling, and they plan to make a re-announcement to generate more sales). I made reference above to cancelled products and Athearn combining pre-orders into the one that they actually made...
Sometimes brass dealers require a deposit on reservations, which are still essentially "pre-orders". A brass dealer kept my $50 deposit on an Overland Models caboose that Overland never made.
dti406 Doughless A successful entreptrenuer would not have to resort to that, nor would they not have an understanding for the demand for a potential product only until he set up a pre-order window. How long they been doin' this? I think there is a distinction here that I've been trying to make. While a company like Athearn may set up a pre-order window, I get the sense that they feel they are going to produce the item anyway because they already have a good sense of what the market demands. They wouldn't bother entertaining the idea of setting up pre-orders unless they felt strongly they could hit their break even without them. They certainly understand the model train business. I don't what kind of accounting degree you got, but many of the things you have said make no accounting sense. The 5,000 items left in inventory do not have a lower unit cost than the items already sold. When an item is costed it is the entire batch of products and that sets the cost of all the items in the batch. As a matter of fact those items left, have a much higher cost than the items sold, as you then have to factor in the cost of storing that item including the insurance, and the cost of money tied up in inventory that is not sold. Hobby shops back in the 70's could afford to stock every car that Athearn made, a $2.00 car cost the hobby shop $1.20 and there were a limited amount of different road names, now with a car costing $30.00 the hobby shop now has to pay $24.00 and then offer a discount of MSRP to sell it. Can't stock the same amount of cars as back when they were $1.20 versus the $24.00. Back then Athearn also batch processed car and some would only be run every three years so they had to have enough to last that period, but with their cost to produce a $2.00 car about $0.50 you could eat the storage costs. MBA's have determined that it is not cost effective to keep a large inventory, so the manufacturer only produces what he knows will sell, so they produce the pre-order quantity plus a small percentage for opportunity sales. They have shifted the inventory from the manufacturer to the dealer, in many cases the wholesalers have dropped out of the product stream, many have closed and there are only a few left like Walther's. Not only that many are going to direct sales like Exactrail and for the most part Tangent and Scaletrains. Back in the 70's the hobby shop I worked for, the CPA that did their books told them that any item still in stock after 3 years was costing them money (especially in Ohio where the inventory was taxed as personal property). I am sure that with the increase in costs that the time frame has shrunk and they would have a fire sale after one year. And, by the way the Southeast railroads and NYC does not sell for the manufacturers, which is why so few are built. Like Rapido's B36-7's, the SP and ATSF ones outsold the CSX ones even though CSX had the most prototype B36-7's. Rick Jesionowski
Doughless A successful entreptrenuer would not have to resort to that, nor would they not have an understanding for the demand for a potential product only until he set up a pre-order window. How long they been doin' this? I think there is a distinction here that I've been trying to make. While a company like Athearn may set up a pre-order window, I get the sense that they feel they are going to produce the item anyway because they already have a good sense of what the market demands. They wouldn't bother entertaining the idea of setting up pre-orders unless they felt strongly they could hit their break even without them. They certainly understand the model train business.
A successful entreptrenuer would not have to resort to that, nor would they not have an understanding for the demand for a potential product only until he set up a pre-order window. How long they been doin' this?
I think there is a distinction here that I've been trying to make. While a company like Athearn may set up a pre-order window, I get the sense that they feel they are going to produce the item anyway because they already have a good sense of what the market demands. They wouldn't bother entertaining the idea of setting up pre-orders unless they felt strongly they could hit their break even without them. They certainly understand the model train business.
I don't what kind of accounting degree you got, but many of the things you have said make no accounting sense.
The 5,000 items left in inventory do not have a lower unit cost than the items already sold. When an item is costed it is the entire batch of products and that sets the cost of all the items in the batch.
As a matter of fact those items left, have a much higher cost than the items sold, as you then have to factor in the cost of storing that item including the insurance, and the cost of money tied up in inventory that is not sold.
Hobby shops back in the 70's could afford to stock every car that Athearn made, a $2.00 car cost the hobby shop $1.20 and there were a limited amount of different road names, now with a car costing $30.00 the hobby shop now has to pay $24.00 and then offer a discount of MSRP to sell it. Can't stock the same amount of cars as back when they were $1.20 versus the $24.00.
Back then Athearn also batch processed car and some would only be run every three years so they had to have enough to last that period, but with their cost to produce a $2.00 car about $0.50 you could eat the storage costs.
MBA's have determined that it is not cost effective to keep a large inventory, so the manufacturer only produces what he knows will sell, so they produce the pre-order quantity plus a small percentage for opportunity sales. They have shifted the inventory from the manufacturer to the dealer, in many cases the wholesalers have dropped out of the product stream, many have closed and there are only a few left like Walther's. Not only that many are going to direct sales like Exactrail and for the most part Tangent and Scaletrains.
Back in the 70's the hobby shop I worked for, the CPA that did their books told them that any item still in stock after 3 years was costing them money (especially in Ohio where the inventory was taxed as personal property). I am sure that with the increase in costs that the time frame has shrunk and they would have a fire sale after one year.
And, by the way the Southeast railroads and NYC does not sell for the manufacturers, which is why so few are built. Like Rapido's B36-7's, the SP and ATSF ones outsold the CSX ones even though CSX had the most prototype B36-7's.
Rick Jesionowski
I'm not sure the exact terminology I used in previous posts, but my point was that the 201st sale of an item after Break Even provides for a greater Total Sales/ Total cost ratio than the 1st item sold after BE. Yes, long inventory holding costs can change that ratio by raising the BE point. (And there is a difference in what BE means for a produce than a retailer, which gets more confusing because the producer is acting more like a retailer these days)
A company always wants to achieve maximum sales in the shortest time possible, but it also does not want to leave sales on the table for a given batch (maximizing the batch sizes to more quickly amortize capital investments). That was my main point here about the topic. Even still, as long as that long-held item still sells at a profit, even after three years produced, its a good thing.
And higher end products can have a longer hold period than basic products. A used car lot will keep a Ferrari on its lot for over a year where it will take a Honda Civic to auction three months after its aquired to free up lot space for another car that might sell quicker. The reason this works is that buyers for higher end products don't come around as often as buyers for basic items. You have to give them time to acquire the interest, find the product, or aquire the funds.
A Rapido item should have a longer profitable shelf life than a Bachmann. It needs to be that much better of a product. It shouldn't just be priced higher, it should be on the shelves longer too. Expecting it to turnover as quickly as a more basic item is missing the market.
If the company is gauging their total sales possible over the profitable shelf life by simply looking at the amount of pre-orders during a short window, IOW, the demand that exists right now to sell out 3 months after production, they will probably only achieve that 1st sale over BE and not the 201st. JMO.
I'm assuming that all companies intend to produce more items than they get pre-orders for to allow for increased demand during the year long production cycle and after the item first hits the shelves. Free youtube reviews can attract interest and the producer wants to have an item in inventory to accomodate this new demand.
And few pre-orders might say that the total demand over that longer holding period might not be enough. Not questioning that.
In the end, its still about the producer understanding the market before they decide they want to produce something. Not flying blind and just making as many items as you have orders for, which I think has been implied.
On a personal note, I received my accounting degree over 35 years ago, but I've never been a practicing accountat. Apologies if I butchered some technical terms. My experience is more about understanding bigger-ticket business risks and not general retail, especially not the model train business. I assume the concepts of higher end products having a longer sell out period and longer period for the market to acquire a demand (possibly after seeing the actual model) holds for the model train business.
ATLANTIC CENTRALYes distributors are dead, that is the part of the margin that now stays in the consumers pocket..
I've wondered about this. If the importer no longer needs to give the distributer a cut, why don't they pocket this themselves?
You are correct on all but one point. Yes, there are many more item numbers today, for a number of reasons I have explained over and over.
But, $2.00 in 1970, is more or less, $20.00 today adjusted for inflation. The the inflation adjusted value of each piece of rolling stock (at least using Athearn RTR as the example) is pretty similar.
Forget the fancy government inflation calculations:
gas in 1968 $0.30, gas in recent times, $3.00 = 10x
"average" auto in 1968 $2,800, today $28,000 or more = 10x
Simple 2,000 sq ft home on modest lot in 1968 $35,000, today $350,000 - more or less = 10 times
Athearn blue box kit $2.00 or RTR version offered about that time for $2.49, recent RTR car from that same design/tooling $25.00
Are there other factors that effect the "value" of that money invested in inventory? Sure, but it is not a function of the "higher" numerical price.
Again I will suggest that people running these sorts of businesses on borrowed money at the "mercy" of bankers or bean counters don't stand much of a chance of getting out from under these "problems".
I have been self employed most of my life. My various businesses have had little or no debt. That is part of a formula for success.
Want to start a business? Need money? Earn it first or find an investor who gets what you want to do and who is able to be in for the long haul.
I worked in hobby shops in the 70's and early 80's too, managed the train department in one of them. We saw most of these changes coming back then.
Yes distributors are dead, that is the part of the margin that now stays in the consumers pocket.........and they still want it cheaper.......
Sheldon
Paul3 richhotrain,One thing that hasn't been explored well yet on this thread is why not have pre-orders? What's the downside?
richhotrain,One thing that hasn't been explored well yet on this thread is why not have pre-orders? What's the downside?
richhotrain In my view, there is really no good reason for continuing this discussion since the whole issue of pre-order is mostly academic. Manufacturers are gonna do what they want to do. And a few here are going to continue the argument over the supposed virtues of pre-order, when in fact we should all hope that it is not the future of model railroading. Rich
In my view, there is really no good reason for continuing this discussion since the whole issue of pre-order is mostly academic. Manufacturers are gonna do what they want to do. And a few here are going to continue the argument over the supposed virtues of pre-order, when in fact we should all hope that it is not the future of model railroading.
Rule 1: This is my railroad.
Rule 2: I make the rules.
Rule 3: Illuminating discussion of prototype history, equipment and operating practices is always welcome, but in the event of visitor-perceived anacronisms, detail descrepancies or operating errors, consult RULE 1!
Reading perhaps sells of of proportion because we have a big C630 that still runs. And a C424.
The Monopoly property helps raise awareness, too.
--Randy
Modeling the Reading Railroad in the 1950's
Visit my web site at www.readingeastpenn.com for construction updates, DCC Info, and more.
maxman richhotrain If a manufacturer thinks that a specific model is such a good idea, then build it. That is what capitalism is all about. That's what entrepreneurs do. Ummm, no. Capitalism is about making money. And part of being a good entrepreneur is making decisions about supply/demand/cost and so forth. It is not about laying out a bunch of one's own money to obtain product to store in a warehouse hoping that enough of the fickle populace will purchase (eventually) so that I can break even.
richhotrain If a manufacturer thinks that a specific model is such a good idea, then build it. That is what capitalism is all about. That's what entrepreneurs do.
Ummm, no. Capitalism is about making money. And part of being a good entrepreneur is making decisions about supply/demand/cost and so forth. It is not about laying out a bunch of one's own money to obtain product to store in a warehouse hoping that enough of the fickle populace will purchase (eventually) so that I can break even.
I view the pre-order as an opportunity to gin up interest..not to reach break even but to go beyond it, for DEALERS to secure enough inventory for their shelves, whether retail LHS with minimal inventory or the online shops with higher inventory. For customers, the ability to secure an item they want before it sells out. For companies like Athearn, the pre-order process is not a market demand gauge as to whether or not to produce the item in the first place. JMO.
John,We're more than willing to help you out with all your NH stainless steel dining car needs! Although I have to say that, technically, they aren't "Warm Orange" as on the NH PA's, FA's & DL-109's, plus various hood units of the 1940s-early 1950s. The stainless steel fleet was painted what we call NH Serial #406 Orange-Red under the direction of NH Pres. Patrick B. McGinnis in the Summer of 1955. Before that, the cars were all Hunter Green. The eras are:Hunter Green: 1948 - Summer 1955Orange-Red (skirted): Summer 1955 - Autumn 1957Orange-Red (unskirted): Autumn 1957 - 1969 (see: gmpullman's Myles Standish)gmpullman,Thank you for you purchase! Even if you didn't get it from us, thanks. I also see a parlor and a parlor-lounge behind the diner. Nice. And I like the extra details inside. Very nice. If you ever need to know proper NH passenger train consists, let me know. Actually, here's a link to a 1962 NH consist book available for free and matches your skirtless cars: http://www.alphabetroute.com/nynhh/equipmentlists/NH%2010-1962%20PCNST.pdf
Just looking through it, Myles Standish was assigned to Train 6 (Mayflower) and Train 33 (Sundown), which each had a parlor-lounge, the diner, and 3 to 5 8600 coaches (depending on the day of the week).richhotrain,Actually, I like pre-orders. I can plan my purchases well in advance. I can save up or sell something older in order to get what I want. For example, I sold my two Overland FL9's so I could purchase 3 Rapido FL9's with sound.One old adage in capitalism is to find a need and fill it. Well, how do you know what that need is without pre-orders?If there were no pre-orders and no limited runs, we'd only be getting the most popular locos in the most popular railroads because who would take a chance on making a C-430 or an FL9 without limiting the risk of failure?maxman,Let's just say it's a darn good thing that the NHRHTA is a non-profit group that isn't reliant on a steady weekly cash flow like a brick & mortar retail business. We're fortunately still able to go ahead with the County combine cars without having to sell all the diners first.And I agree that pre-pay is a non-starter.Lastspikemike,I think the problem here is that some think that the way to sell more model trains is to just make more model trains, but that's not the case. You have to sell the right number of trains. If the market will only support 1000 units of X, you better not make 1001 units. It's far better to make 999 units and leave 1 person annoyed than make too many and go bankrupt.
maxmanI see a difference between pre-order and pre-pay.
Yeah, collapsing the two together misunderstands and misstates the issues.
The mfg who is asking for pre-orders is simply doing the market research as best they can in the nearly total absence of R&D budgets or depts. What better thing to do than ask those who might buy them is do they want it?
And what is the alternative? Sending company reps to train shows to pass out surveys to the crowds? Expensive and not practical right now anyway. Cold calling model railroaders if you could somehow get their numbers? That won't be popular either. Waving one's hands around in the air then throwing a dart at a list of choices? Cheap but hardly conclusive.
Thus the idea of simply asking if you want one was born.
I've NEVER been charged for a pre-order.
I suppose there could be circumstances that if you didn't respond to a pick-up order from a vendor that might result in some degree of disgruntlemnt on their part, but I think they'd probably just sell it to someone else. Ask beforehand if that might be an issue for you.
Now, people who want things sign up for pre-orders and there is the chance that the numbers won't add up. Bummer. But we're better off to get a little cancellation bad news from time to time than we are to just always count on customers "showing up" based on a hunch, leading to the failure of businesses that we all hope would otherwise be around in the future so long as they watch their budget and sales.
I want pre-orders!!!!!!!!!!!
I want to know for certain that I'm going to actually receive the road pilot version and the switching pilot version of BLI's upcoming Santa Fe 2-8-2, in the road numbers that I've researched and know that I want based upon where they actually operated and when (my thanks to the hysterical society).
I want to know the price I'm going to pay (dealer already told me) so that I have time to save up for several mikados. Plus my dealer will also allow a layaway even on pre-ordered items and I will still get the same discount as if I pay cash immediately on arrival (though I would rather pick them up immediately).
I am not going to have to worry about my dealer being SHORTED on his order because some item is hot and only went to the biggest most powerful dealers as STILL happens far too often in other scales! I am not going to worry about missing out on the product as it turns up (surprise) without my even knowing about it, and then gets bought out from under me by others. In the old days, new products just plain showed up. YOU the customer likely had absolutely NO IDEA the new product was coming, because advertising in advance was much more limited than today. You didn't even know what year the product was coming, and sometimes even then they advertised products for 5 years and never actually produced and sold them. I cannot tell you the countless number of times I actually unloaded 100 cases of trains off a truck to then have my boss be totally surprised at what showed up (it had been so long that he forgot what he ordered, and we were actually a distributor, not just a store).
EVEN THEN (40 years ago) the manufacturers were also using dealer reservations. You could only get certain models at the biggest selling dealers. Some were actually allocated based upon a points system to reward the "best" dealers (Pacific Fast Mail).
Reservation or pre-order...I don't care what you want to call it. It is NOT new. Apparently some of you never had to deal with Lionel orders, either.
Finally, items like Athearn bluebox freight cars that we take for granted today ONLY arrived once every year or every other year, whenever they felt like making them again. Then they sold out right away, and if you missed it, tough, it is gone till next time a year or two from now.
richhotrainIf a manufacturer thinks that a specific model is such a good idea, then build it. That is what capitalism is all about. That's what entrepreneurs do.
To use the New Haven group's car as an example, it looks like they tried to do it correctly. They had an idea and tested the waters. Had they just gone with the pre-orders they would have made out okay. But then it appears that they made a poor business decision. So right now they have snatched defeat from the jaws of victory.
I see a difference between pre-order and pre-pay.
If someone wants to ask for pre-orders and is using that to gauge demand, what's so bad about that? Right now Rapido is looking for pre-orders on PC X72 and SP B-100-40 half-waffle boxcars. Would you be interested in one of those? Probably not. Would Sheldon be interested? Absolutely not. Am I? Absolutely yes.
I have no problem pre-ordering, so long as there is not any pre-payment involved. I don't need whatever it is tomorrow. And if the item turns into vapor-ware, so what? Since it wasn't going to be made anyway, then that's no skin off my nose. And FWIW, I have never been asked for pre-payment.
Yes, I know that some of the limited run items will eventually show up on ebay, hoswap, and elsewhere. But time is also money. I don't want to waste a bunch of time and energy searching for something just to save a couple dollars.
Let's be honest, no one likes pre-orders. No one looks forward to pre-orders. No one wants to see model railroading turn into a pre-order business model.
If a manufacturer thinks that a specific model is such a good idea, then build it. That is what capitalism is all about. That's what entrepreneurs do.
What a pre-order is really all about is a manufacturer who throws out an idea and then sits back and waits to see how many modelers beg him to build it.
What pre-order does is to turn the concept of supply and demand on its head and reverse the concept into one of demand and supply.
PRR8259I see some of the diners have the warm orange on them...
Guilty
N-H_diner2 by Edmund, on Flickr
Diner_patrons6 by Edmund, on Flickr
Regards, Ed
Well said Paul.
I see some of the diners have the warm orange on them...contemplating getting one...
richhotrain,All manufacturers are producing limited runs. I hate to break this to you, but we are a niche market. Always have been, always will be. The difference between yesterday and today is that back then folks were either required to model railroads they didn't really want to model, or had to make up a fictional railroad to justify buying the stuff they could actually get. Today, folks can model what they really want (like Tony Koester).What this means is the Balkanization of our hobby. Everyone now gravitates to their own interests, which are as varied as each person is. This means that cheap, generic models just don't appeal to the average consumer like they used to. That has nothing to do with the overall health of the hobby, it's just different.As for our unsold diners, it's actually a perfect case to make in favor of pre-orders. If we, the NHRHTA, had only purchased what our pre-orders were (800) and added another 15% on top of that, we'd be in a good place financially. Instead, we went for the gold and got 1200 to get the best deal from Rapido. Now we have $42k worth of cars sitting around. If we sell them all, we'll make a nice chunk of change, far more than we would if we had only ordered 960...but we have to sell them first. How many years do you think it's going to take? Will it ever happen? Can't you see that underestimating demand is far superior to overestimating demand in this business? Because as you can clearly see, "Build it and they will sell" is false.I don't mind if we automatically rule out 90-95% of the buyers. If there's 250,000 model railroaders in the USA, a mere 5% of them is 12,500. That's over 10 times the number of diners we purchased. And for comparison's sake, we sold 2000 Rapido coaches and 1500 Rapido parlors before we got the diners. 1200 seemed a reasonable risk to take with those other numbers. But, while there are many folks that bought 4, 5, 6 or more coaches and/or parlors, most of our diner sales were 1, 2 or 3. Not due to the cost but rather that a NH train might have, at best, two diners on it while running 5 parlors or 8 coaches.Sheldon,What's funny here is that if someone who does spend $140 on a passenger car, $2400 on a brass steamer, or $50 on a freight car had just said the same exact thing you did about DC layouts, fictional railroads, and Athearn BB's ("That's not my idea of model railroading."), the loud accusations of elitism on this forum would be heard from space. Doughless,How quickly does the manufacturer have to sell the item? Depends. Every company has to spend a bunch of money and then not have any income from it for about 2 months. Where did the money come from? The sooner they get the income, the sooner they can pay it off or re-invest in something else. If they don't keep their mind on the cash flow, they'll prove true the old adage, "The way to make a small fortune in model railroading is to start with a large one."Sheldon,No, the manufacturers do not miss a lot of sales because they don't keep in stock everything they make for years. They advertise the heck out of product for a year or more; in print, online, in person at shows. Anyone who isn't living under a rock should be aware that a product they want is being made. How many more sales do you think there would be? In our case, we've sold another 12% over our pre-orders in the past 8 months. Where's the rest of this large number of sales?Doughless,Um, Athearn takes pre-orders. If you don't recall a huge Athearn pre-order marketing survey, it's because you haven't noticed. Go to Athearn.com right now. On the front page is a GP15-1 in GMTX. In the upper left, it says, "June Announcements - Pre Orders Due: 6-26-2020".Athearn also adjusts their production based on pre-order demand. For proof, look at the NS Heritage units. They announced them and the pre-order response was great. They decided to make more of them to fill the pre-order demand, which actually dropped the unit price. Yes, that really happened! Lastspikemike,The mailing of product to customers and dealers is born by the customer and dealer, not the manufacturer. Therefore, it has no bearing on production costs.Yes, wages overseas are very low compared to here, but then living costs over there are very low compared to here. At Rapido's factories in China, the workers are considered to be well paid.York1, I'm not upset and never have been, just making a point that your discussion about subsidized mail costs were not only off topic on this thread, but off topic to this hobby (while also bringing a whiff of politics). I didn't want people getting confused and thinking that mailing costs from China have any effect on our hobby.Doughless,So you think that manufacturers should stock 3 years worth of spare inventory just in case some one changes their mind and didn't pre-order when they had the chance? How many units would be a 3 year inventory? 10? 50? Do you have any idea how much money that would cost?In the past three years, Athearn has announced over 1500 different diesel loco SKU's. Seriously. Over 20 pages with 72 items per page going back to July 2017. Even if they only kept 10 of each loco (that's 15,000 locos), and they all cost just $100 each (which you know they don't), they'd have to warehouse $1,500,000 worth of inventory just in case a guy 3 years down the road might want something. And that's not counting steam engines or rolling stock.How much money do you think they have?Your point about how "...most profit is made during the time when the last units are sold, because those units have the lowest production costs," doesn't work. Everything is made all at the same time in a production run batch. It costs just as much to make the first unit as it does to make the last unit (and all are 100% paid for before they leave the dock). Where companies can make good money is on the second (and later) runs when all the tooling costs have been paid for by the first run.And don't mistake a quick roadname sell out for being more popular. If Athearn only made 100 CSX engines and have none left while also making 500 SP engines and have 50 left, the SP is still over 4 times more popular than CSX.FWIW, I just went to Athearn's website and they list 3 different Genesis CSX GP40-2's as "In Stock".
slightly off topic, deleted
riogrande5761 This thread is still going on? What John said is how it is. As for want, your expectations have to be tempered with reality. For the past 20 years I've seen people crying for certain engines that were uncommon and of course, we see big boy after big boy manufactured. Manufacturers are going to offer what THEY believe will sell and in numbers they estimate will live them hopefully with little or no leftover inventory.
This thread is still going on?
What John said is how it is. As for want, your expectations have to be tempered with reality. For the past 20 years I've seen people crying for certain engines that were uncommon and of course, we see big boy after big boy manufactured. Manufacturers are going to offer what THEY believe will sell and in numbers they estimate will live them hopefully with little or no leftover inventory.
Just because you don't SEE Athearn talking about pre-orders on their website or facebook page does NOT mean they don't consider them BEFORE making the product. I can give you actual examples where they advertised a Genesis F unit in more than one version (eg. ICG orange and white "creamsicle", with multiple roof fans and grill arrangements), but the pre-orders were just not there, and they ended up quietly converting all orders into just the one version that they did actually end up making. Also, there actually was a public outcry on some forums when they cancelled a Genesis Seaboard Coast Line F Unit, and then made it or a similar version at a later date.
What you are not seeing is they generate the announcements like clockwork, almost on the same date each month, with a relatively limited reservation time window of perhaps a month or a couple. Then the big 6 remaining distributors place their orders. IF the orders aren't there, the item isn't getting made. It will be cancelled. They don't make a big deal about cancellations; they don't announce them to the world. The cancelled item numbers just quietly disappear (and no, I'm not smoking crack, you can go back and find the actual product announcements and see that the items just disappeared at a later point in time). Usually it's just one version out of several that were offered, when it happens.
With Athearn, it does seem to be less likely than some others.
SeeYou190The thing is, it is not just a matter of skill, but also desire.
Kevin,
A big gold star for your honesty here. At least you're not blaming Walthers, Athearn, the "market" or whoever for not being able to scratch that itch, which is so often the case in these discussions.
In fact, such discussions would have been looked at with an eyebrow set at "Really?!?" 30 years ago, when RTR hardly existed in HO and by just being in the hobby led to the assumption that you have at least some interest in learning many of the basic skills.
Now, there's relatively few basic skills needed if you stick with RTR. Pickers can't be choosers, though, a good thing to remember when the angst levels on what is being made - or not - in easy-to-unbox these days start rising.
Which is not to say RTR doesn't have a place. It most certainly does. Since Blackstone hit the market, I've built very few 3000 series boxcars, finishing my last 4 RailLine kits earlier this year after selling off most of my stock of those. It's so much easier to buy than to build even if you have the inclination and skills if the right product is available.
But convenience models, like convenience food, just don't satisfy like home cooked. If you've never tasted the difference, you'd not understand even though the hunger is satisfied either way. For more and more of us, that's just the way it is.
ATLANTIC CENTRAL Be it online or in a store, the fact that a beginner cannot easily buy a locomotive and a matching set of passenger cars all at the same time in the same place, is a discouragement to new people.
Be it online or in a store, the fact that a beginner cannot easily buy a locomotive and a matching set of passenger cars all at the same time in the same place, is a discouragement to new people.
This idea came up in conversation with a friend of mine who is a current hobby store employee, and he feels the buyers mentality has changed. Since so much hobby information is online and the educated consumer knows what is available, they often come into the store he works at already looking for what they want, a specific request, knowing very well that the store likely doesn't have every single piece of equipment they want and they might have to bounce around between several online outlets and local shops. In addition he mentioned most of the newbie crowd (both people starting off and parents looking for gifts for their children) tend to buy the all-in-one train sets Bachmann, Athearn and other companies like that produce.He also pointed out another observation which I thought about further... not a lot of new members of the hobby these days have any reason to buy matching passenger consists, if in part because passenger rail has been greatly diminished over the last 50 years in the US. How many people under the age of 40 remember an America with more than Amtrak, a few tourist museums and UP's private fleet being their only major experiences with passenger rail? Freight rail, with its mismashed colors and messy appearnace though is extremely dominant and its very easy to model freight without worrying about well... matching anything at all! I have said it before, but if there is one last bastion of passenger rail experiences its in commuter rail, and I suspect it will grow to dominate the passenger model railcar production as the years go on.
SeeYou190ATLANTIC CENTRAL I hate the product hunt, just like I have no interest in buying/selling as a secondary part of the hobby. The hobby shop John mentioned, which I believe is Spring Creek Models in Deshler, Nebraska, is the best stocked hobby shop I have been inside of in ten years. It reminded me of Orange Blossom Hobbies in Miami in the 1970s. Still, since they are a well run hobby shop, the inventory turns rapidly, and most of what they have on the shelf was released in the past 12 months, and it would be difficult to find that complete passenger train. -Kevin
The hobby shop John mentioned, which I believe is Spring Creek Models in Deshler, Nebraska, is the best stocked hobby shop I have been inside of in ten years. It reminded me of Orange Blossom Hobbies in Miami in the 1970s.
Still, since they are a well run hobby shop, the inventory turns rapidly, and most of what they have on the shelf was released in the past 12 months, and it would be difficult to find that complete passenger train.
mlehmanIf you break down and strip the paint off a passenger car, you end up with an undec. <SNIP> that's a sign you either need to pick up old-fashioned skills (in your case, you already have these)
The thing is, it is not just a matter of skill, but also desire.
I know I am passionate about my freight car fleet. I have no problem spending hours assembling a resin kit or "re-kitting" and stripping a RTR car to make what I want.
Passenger trains... not so much. I need two to complete my layout plans (actually three if you count the mail train), but I find bulding and painting passenger cars BORING!
This is not a problem, I already have the two I need. However, the new stuff Walthers puts out sure is slick, and I would spend the money if it was a simple upgrade with minimal work.
If I had real money, I would buy a modern set from The Coach Yard and pay a professional to repaint them for me.
Oh to dream.
I doubt that Athearn RTR, Athearn Genesis, Atlas Silver and Gold, Walthers Proto are waiting for pre-orders before they will produce something.
Athearn Genesis recently missed the market for a recent release, IMO. They released a new GP40-2 in various paint schemes. The CSX version sold out in about 2 weeks. Other road names are still available.
It tells me that they did not produce these items based upon the number of buyers that happened to respond during a pre-order window, or else they would have realized that twice as many modelers want the CSX version over the other names practically combined (if pre-orders accurately reflect the level of demand now or in the near future). They just used their judgement and came up way short on the CSX versions while the other schemes are in stock at various dealers.
SeeYou190I would love to get a Walthers name train model set undecorated. I would settle for ANY of the name trains just so the STRATTON AND GILLETTE could have a nice model of a complete matching train. I contacted Walthers to find out how to get this done. I asked them to pull a train off the line with no paint. I did not need packaging or fully assembled, I just wanted to buy a full train. I even offered to pay a premium for this special service. Their nice response was that it is impossible to disrupt the assembly line for any reason. I cannot have my passenger train.
If you break down and strip the paint off a passenger car, you end up with an undec. Yeah, a bit more work than buying a factory-packed one, but you seem to do OK with decorating freight cars.
But it often is the case that people without your skills often do want to buy the exact model they desire RTR. If it's a big road with lots of modeling demand, you may be in luck. if not, then that's a sign you either need to pick up old-fashioned skills (in your case, you already have these) or simply change your prototype to one that's more popular or to one that see things your way as a freelancer.
The problem here may really be more a case where people somehow believed because Walthers does multiple paassenger trains of UP origin, they will surely do the same for, say, the Monon. I wish they would, but I'm not going to blame Walthers for not getting me the train I want. The numbers don't add up and I'm going to buy just one train if it ever does happen (which it might) unexpectedly. In the meantime, I can search for the old Walthers hospital train cars then start building my old.
Bottom line: If you're a model railroader and you want it, you can always build it.
PRR8259 been told "NYC doesn't sell".
That might well be, and I am not a steam locomotive expert, it was just an example. I am sure some other popular railroad had a decent looking modern 4-6-0 out there somewhere.
I will eventually buy a brass model of the NYC F12, so I do not have a dog in the fight, but I would buy a decent plastic one if it was available.
My Bachmann 2-8-0 died, and was replaced with a brass MA&PA 2-8-0. My Athearn 2-8-2 is dead and replaced with an Oriental Powerhouse 2-8-2. I think my last plastic steam locomotive is the beloved and remarkable EM-1 2-8-8-4. I was so happy when that one came to the market.
Not to sound negative, but I've mentioned NYC engines to others, lately, as in "why isn't there a plastic (NYC engine)?" and been told "NYC doesn't sell". Again, there already are generic 4-6-0's out there. What you really sound like you want is an actual NYC engine.
There are tons of USRA 2-8-2's painted Santa Fe. Santa Fe never had one. Even folks say certain Santa Fe 2-8-2's are "close" to the USRA or that the USRA 2-8-2 was "loosely based on specifications of" a certain Santa Fe 2-8-2. That's like saying a Ford Thunderbird convertible is "close to" a Miata. They are both convertibles, but that's about IT.
For the person who merely wants a 2-8-2, they might be a great purchase. Somebody is buying them.
NO Santa Fe 2-8-2 ever looked anything like a USRA light or heavy 2-8-2. The facts do not support those statements, so I too, want what I want.
PRR8259Kevin-- Now we have a challenge with "generic" looking steam power. Mantua made lots of it years ago. It is being re-released or has been re-released under various labels including Model Power. The challenge is that with today's uber-detail-focused product reviews there are many folks who "don't want" generic steam, but instead want it "correct" for "their" railroad.
That is why I gave the example of the NYC F-12 4-6-0 in my post. It is a specific model from a popular prototype railroad, but looks generic enough that I can use it on my freelanced railroad.
The Bachmann 4-6-0 does not look right to me for my roster.
No, the hobby is not dying. It is changing. We are so far down the road beyond where most people have any memory of steam. There are people who today want steam, but they literally want THE engine that they can see running somewhere. There are people who want Strasburg engine #90 because they can see it run (it was made in brass). People have been asking for it lately.
The vast majority are well into the diesel era now. The transition era modelers--though still some--are waning in numbers.
And from everything I've seen and been told, pre-orders are driving the market, unless maybe you are Bachmann and making one big run of something that your crystal ball says will sell, or Athearn's "Roundhouse" series of less detailed models (formerly MDC) or Atlas's "Trainman" series...
PRR8259 I'm talking about both. BLI and Rapido have both done very well with the products they have chosen to offer. Most have been homeruns. They chose USRA engines that many roads had-a no brainer, really. BLI and Rapido are still having issues getting reservations or pre-orders for products you would think would be a "slam dunk" success. Small steam is just dying. In brass, more so. People on this thread have bemoaned: "Oh, another Big Boy". Well the facts are that in brass and in diecast or plastic or even brass hybrid, and at all the detail levels in between, Big Boys sell--they just do. And cab forwards and challengers and big fan trip 4-8-4's and a handful of other engines still sell. If it was my money I'd be making the big mamma jamma's too because it's a guaranteed sale. But small steam...not much anymore. Athearn's manufacturer reportedly "lost" some of the tooling for the non-streamlined SP 4-8-2. It was a great plastic engine! Did anybody besides me on any internet forum even miss it or care after that one initial product run years ago now????? John
I'm talking about both.
BLI and Rapido have both done very well with the products they have chosen to offer. Most have been homeruns. They chose USRA engines that many roads had-a no brainer, really. BLI and Rapido are still having issues getting reservations or pre-orders for products you would think would be a "slam dunk" success.
Small steam is just dying.
In brass, more so.
People on this thread have bemoaned: "Oh, another Big Boy". Well the facts are that in brass and in diecast or plastic or even brass hybrid, and at all the detail levels in between, Big Boys sell--they just do. And cab forwards and challengers and big fan trip 4-8-4's and a handful of other engines still sell.
If it was my money I'd be making the big mamma jamma's too because it's a guaranteed sale.
But small steam...not much anymore.
Athearn's manufacturer reportedly "lost" some of the tooling for the non-streamlined SP 4-8-2. It was a great plastic engine! Did anybody besides me on any internet forum even miss it or care after that one initial product run years ago now?????
I think you're pointing to the difference here. I doubt that companies who produce Big Boys bother to gauge the market by sending out pre-order surveys. They just build them, figuring enough demand is there now, and not worried that the demand won't be there two years from now.
If a company is taking pre-orders, they are essentially saying they will not build the model unitl they get enough orders. That tells me they chose to be in the made-to-order part of the business. That isn't the same thing as saying that is the direction of the entire model train production business.
Its a different part of the business than I'm concerned about.
Maybe that, and all this preorder low production business, is just proof that the hobby of "Model Railroading" is actually dying in favor of "Model Train Collecting".
I'm not intersted in that second hobby...........
Oh, that's right, I have NEVER, in 54 years, owned a model of a Big Boy........
Why? I don't model the Union Pacific........
PRR8259 Pacific Western Rail Services told me straight out, on the phone, years ago, that "unsold" is after 3 weeks in country. At that time it becomes VERY difficult to sell the remainder. Others like my friends at one importer have concurred with their assessment. John
Pacific Western Rail Services told me straight out, on the phone, years ago, that "unsold" is after 3 weeks in country. At that time it becomes VERY difficult to sell the remainder. Others like my friends at one importer have concurred with their assessment.
You may be talking about brass. I would think that is even a narrower market, and one that is served by what I would call hand built products. Kinda like a Morgan 2 +2 auto where someone might order it, then its made after the order is received.
I was talking about more run of the mill products. Like a high optioned BMW. Not even a bread and butter Chevy (like a Bachmann). Neither gets produced from pre-orders. They get made to sit in inventory to sell within whatever time frame they've built into their inventory holding costs.
Maybe these smaller niche item model railroad producers are building stuff even more rare than a small market luxury car. A niche market, not a small market. I guess made-to-order items is what these niche model producers live on.
Kevin--
Now we have a challenge with "generic" looking steam power. Mantua made lots of it years ago. It is being re-released or has been re-released under various labels including Model Power.
The challenge is that with today's uber-detail-focused product reviews there are many folks who "don't want" generic steam, but instead want it "correct" for "their" railroad.
Many current hobbyists want just one and only one steam engine on their roster, and they are totally fine (and in their minds prototypically correct) if it is a currently operable fantrip engine and not something "in working condition" representing the age when they ran every day.
Not only do they want a Big Boy, but they want it to be 4014. Or Challenger 3985...or...well C&O 1309 is about to be very hot!
So generic smaller steam is becoming a very tough sell. There are 4-6-0's out there, even older brass...I think Bachmann even has or recently had a 4-6-0. I had the 2-8-0 version of it, same boiler?.
PRR8259small steam engines are just plain dead
That sounds accurate.
I would love a quality Bachmann undecorated generic looking coal burning 4-6-0 comparable to my EM-1. A decent looking ten-wheeler in brass (NYC F-12) will sell for $500.00 and up if you can find one. If Bachmann hit the market with a good one at $300.00, I might be one of ten people that would buy it in 12 months.
There is no appeal in the current market for small steamers.
PRR8259 One importer has told me straight out they'd much rather leave profit on the table than have unsold inventory tying up their money. John
One importer has told me straight out they'd much rather leave profit on the table than have unsold inventory tying up their money.
Do you have any sense about their timeline that defines "unsold" inventory? If unsold means that it doesn't sell in a month, or...ever? I would think they would like the extra capital the later sale provides considering its nearly all profit...IOW...more capital to sock away into the company over time.
If you leave profit on the table, you are reducing the amount of capital-build that can be used to reinvest in more product...or build two products instead of one next time.
Interesting.
As far as wanting steam engines, Rapido has offered some nice Canadian small-er sized steam engines, and I think they are not all a "go" as the pre-orders have not been there, despite Rapido's reputation for quality.
I have it on good authority, from Richard Bennett, a moderator of one of the forums over on facebook, who is personally tight with the owner of Boo Rim in Korea (as in buys parts directly from them in large quantities) that small steam engines are just plain dead--most especially in brass. Other than what Rapido is offering, and BLI's products, there are virtually no more in the pipeline because there are just not enough buyers out there for any one version of a prototype, period. SP's multi-colored small switchers are very popular, complicated to do, and have already been done in brass. They literally go for $2000 or more each for little 0-6-0's.
There is a Rio Grande 4-6-2 and 2-8-2 in the pipeline in brass, advertised at $1200 currently, that will be $2000...
Richard is saying you can get any steam engine you want made at 100 units and at a $2000 price point, but that's the problem. There aren't 100 people to buy it UNLESS it is a Big Boy, a C&O H-8, an early version UP Challenger, or a DM&IR yellowstone 2-8-8-4, or a cab forward.
Forget doing another B&O EM-1 unless it's brass: Bachmann's was fantastic! And they are still out there to be found new in box.
So even in brass we are going to ONLY see LARGE steam engines in the future. The sales are just not there for anything else.
BLI and Rapido will be able to provide some of the smaller steam, but they are going to be very careful as to what they choose.
Just my opinion, as someone who has been self employed most of my life, but anyone running a business like this with any measureable debt is crazy.
And maybe that is the problem, too many bank notes due.........
20 years in business and my debt has never exceeded my monthly cash flow........
Sitting on a little inventory that you actually own is different from sitting on inventory that belongs to the bank........
ATLANTIC CENTRALI hate the product hunt, just like I have no interest in buying/selling as a secondary part of the hobby.
Sheldon, I started a thread about newcomers based on your post about the passenger trains. My scope of model railroading is much smaller than yours, but I think we are very similar.
I have also already collected everything I need for my model railroad layout. I really do not need anything else to build my dream. I pretty much have a "lifetime supply" of everything I need hobby wise. I can buy the rest of the layout at Home Depot.
There are a lot of items I would love to replace/upgrade, like my aging Athearn set of PA-1s, but I now know that my market cannot support manufacturing.
If I were starting out today, I could not imagine building the Fleet Of Nonsense from what is on the market and readily available. I cannot remember the last time I walked into a hobby shop and found a SELECTION of undecorated freight car kits. And those that read my posts know I walk into a LOT of hobby shops.
Go to Model Train Stuff and type "undecorated" into the search box. You cannot build a train suitable for 1954.
As I type this there is a side-bar-advertisement for Walthers new Super Chief/El Capitan train. Wow is it beautiful. I am sure it will be wildly popular and sell out. If you wanted one of these, you must be very excited.
I would love to get a Walthers name train model set undecorated. I would settle for ANY of the name trains just so the STRATTON AND GILLETTE could have a nice model of a complete matching train. I contacted Walthers to find out how to get this done. I asked them to pull a train off the line with no paint. I did not need packaging or fully assembled, I just wanted to buy a full train. I even offered to pay a premium for this special service.
Their nice response was that it is impossible to disrupt the assembly line for any reason. I cannot have my passenger train.
I think the hobby has passed us by, and it is fortunate that we already have everything we need.
I am in a good place. All future freight cars I buy will be Funaro & Camerlengo, Speedwich, Sunshine, Westerfield, or similar. I have two passenger trains, one heavyweight Rivarossi and one smooth side IHC set. I guess detailing and weathering these will become a major project when I am in my sixties.
It will be very interesting to see where scale model railroading goes to in the next 30 years. I know I am a dinosaur and except for weird one-off randomness like the Rapido X31-A boxcars, the manufacturers will produce nothing I will buy.
This is sad. Now that I have real buying power, I have nothing to buy.
I have become irrelevant in the marketplace of my favorite hobby.
The facts are that sales after initial pre-orders are usually miniscule. As in we are talking a percent or two.
What most of us fail to realize is that once Walthers and the other big distributors see a new product is a "go" they tend to place large volumes of pre-orders based upon what their sales people think they can sell, and often late--at nearly the last minute. The number of orders that come in later, after the cutoff date, or after the product is in country, is truly miniscule by comparison.
A product has to be a huge hit to generate a second round of orders from the big distributors, so practically speaking, it doesn't happen.
The pre-orders really do drive the market.
PRR8259 Ok, these importers now have entire staffs of experienced model railroaders working for them in house. Discussions can and do get animated or even heated regarding which products to produce--which roadnames will sell. Nobody has a good enough crystal ball to know for sure how they will do. If you guess wrong--which is easy to do--you end up with a lot of unsold inventory that costs you money. If you miss the boat with just 100 locomotives here and 50 of that there, it adds up, a lot faster than most of us would think! Suggesting that they should have a few for future demand is ludicrous. They want to have just enough to cover any defects, shipping damage, etc. That percentage varies from company to company. John
Ok, these importers now have entire staffs of experienced model railroaders working for them in house. Discussions can and do get animated or even heated regarding which products to produce--which roadnames will sell. Nobody has a good enough crystal ball to know for sure how they will do. If you guess wrong--which is easy to do--you end up with a lot of unsold inventory that costs you money.
If you miss the boat with just 100 locomotives here and 50 of that there, it adds up, a lot faster than most of us would think!
Suggesting that they should have a few for future demand is ludicrous. They want to have just enough to cover any defects, shipping damage, etc. That percentage varies from company to company.
The bottom line is that they need to understand the market by whatever means possible.
If they are using a pre-order process that captures demand that exists only during that pre-order window it seems to me they are leaving profit on the table...since most profit is made during the time when the last units are sold, because those units have the lowest production costs.
Random_Idea_Poster_6263 PRR8259 BLI now has the pre-orders for the ATSF 2-8-2 to move forward and is planning a new announcement of it to generate more sales. Model due "early 2021" so I was told on recent inquiry. Now that you say this, what aout the Northern Pacific 4-8-4 that is due in the fall?
PRR8259 BLI now has the pre-orders for the ATSF 2-8-2 to move forward and is planning a new announcement of it to generate more sales. Model due "early 2021" so I was told on recent inquiry.
BLI now has the pre-orders for the ATSF 2-8-2 to move forward and is planning a new announcement of it to generate more sales. Model due "early 2021" so I was told on recent inquiry.
Now that you say this, what aout the Northern Pacific 4-8-4 that is due in the fall?
Please check their website. I don't know any better than that. Their website already has estimated arrival dates for the 4-8-4. The Santa Fe engine is "after" that. No dates are given for the Santa Fe engine. I'm sure they want more orders before final production, but they say the tooling has been "started", whatever that means. Santa Fe fans should be happy it's in the actual pipeline.
Also, what many fail to appreciate is this: when company A sells out or retires and company B takes over the product line, even after thorough analysis by the bankers who have to finance the deal, company B literally ends up with a monthy payment of $10,000 or more. This is literally true in the case of one merger or buyout that occurred some years back when company A was actually valued at $3,000,000. Now $10,000 a month is a lot of trains you HAVE to sell every month. Then company B still has to fix any issues with tooling and get what they can updated and back into production as efficiently as they can.
So having a few of this and a few of that laying around eating up your available free cash is bad news when we are talking about real money and real bank interest.
This is WHY nobody wants any inventory after 3 weeks in country.
mlehman ATLANTIC CENTRAL You are correct, they miss lots of sales because they make no effort to keep product available for when people want it. Does it take more capital? Yes. Should they work toward higher margins to support this? Yes. I think it's pretty optimitic to think that after the initial sales demand is met, there is enough unmet need to cover the costs of stocking items long term. This would assume there is a group of modelers of a specific prototype who aren't paying attention to product announcements or who will be joining the hobby to model that specific prototype. It's not that this might amount to a few dozen units. It might. But that's a justification for running a close-out sale more than it is to stocking that item for several years. With ebay, etc, there's little incentive to warehouse for this niche demand that could more affordably in most cases still provide the model for those who either were asleep at the wheel or not present during the briefing the first time around. And that's just for ONE product. The fact of the matter is the mfg's want to clear out old stock constantly to make way for the new. That's where the capital comes from to build the future stocks. Inventory turns are what bring profits, not warehouses full of product with little remaining interest from buyers.
ATLANTIC CENTRAL You are correct, they miss lots of sales because they make no effort to keep product available for when people want it. Does it take more capital? Yes. Should they work toward higher margins to support this? Yes.
I think it's pretty optimitic to think that after the initial sales demand is met, there is enough unmet need to cover the costs of stocking items long term. This would assume there is a group of modelers of a specific prototype who aren't paying attention to product announcements or who will be joining the hobby to model that specific prototype.
It's not that this might amount to a few dozen units. It might. But that's a justification for running a close-out sale more than it is to stocking that item for several years. With ebay, etc, there's little incentive to warehouse for this niche demand that could more affordably in most cases still provide the model for those who either were asleep at the wheel or not present during the briefing the first time around.
And that's just for ONE product. The fact of the matter is the mfg's want to clear out old stock constantly to make way for the new. That's where the capital comes from to build the future stocks. Inventory turns are what bring profits, not warehouses full of product with little remaining interest from buyers.
I wouldn't think that astute and experienced companies would end up with "warehouses" full of unwanted products. They would really not understand their business very well if they missed the market that badly.
I think that interests change over a period of, say, three years, and people run stuff on their layouts that don't necessarily belong on their railroad. I bought 2 of the faded paint not-as built SP GP40P-2s I mentioned only because I saw a pic of the actual model and thought they are really cool. Any announcement from Athearn or production drawing wouldn't have captured my interest.
I think that simply using the level of preorders during a short window doesn't sufficiently capture the potential market, which I would think would be measured over a three-year sell out period, not a three month investment recapture period.
Not that it a bad thing, but its a business model that is a bit sketchy and unexpected to last the long term, IMO.
Question: How do companies approach products like structures and track? Do they wait for pre orders from consumers, or LHS orders, before they produce another batch?
ATLANTIC CENTRALYou are correct, they miss lots of sales because they make no effort to keep product available for when people want it. Does it take more capital? Yes. Should they work toward higher margins to support this? Yes.
LastspikemikeFor the record, I did not mention shipping by mail. I pointed out that it can cost a lot to send one unit between two cities in Canada
I was the one who got off topic, not you. I believed I was making an addition to the issue of shipping, but obviously I upset some by getting off topic. I need to watch myself.
York1 John
York1 . I always believed Kato wanted preorders to know how many to produce. I didn't realize they may be considering if they would even produce that model based on demand.
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I always believed Kato wanted preorders to know how many to produce. I didn't realize they may be considering if they would even produce that model based on demand.
John, I think that is an important distinction. There is a difference in placing an order with a company to ensure you get a copy of a model that they are going to produce anyway.....quantity maybe undefined...as opposed to ordering something that may not be produced at all if they don't get enough orders. I think the latter is the frustrating example.
I've only been in model railroading for two years, so I've never yet myself pre-ordered anything. I have an excellent model railroad store less than an hour away which has a huge selection of N Scale. So far, I have gotten everything I've needed or wanted there.
There was a certain BNSF Kato locomotive I wanted. The store said they had pre-ordered several, so they put my name on one of them. I didn't pay anything up front. I probably would have been able to just purchase it when it came in, but this made sure they didn't sell all of them before I got there.
Several months later, I noticed they still had two of that locomotive on the shelf.
Overmod Naturally the company wants to 'sell out' as quickly as possible; that's obvious good business if that can be done at satisfactory margins. The pre-ordering serves as a gauge of general interest; it fails somewhat if a large and relatively 'connected' interest group ... let's say the old B&O Yahoo Group ... gets every one of its members to pre-order a locomotive with front-firing stoker, because they have the interest, but no one else really wants one. Not only might you have a slow-moving time with 'the rest' but the opportunity cost of making that locomotive instead of something else can also be counted as 'lost'.
Naturally the company wants to 'sell out' as quickly as possible; that's obvious good business if that can be done at satisfactory margins. The pre-ordering serves as a gauge of general interest; it fails somewhat if a large and relatively 'connected' interest group ... let's say the old B&O Yahoo Group ... gets every one of its members to pre-order a locomotive with front-firing stoker, because they have the interest, but no one else really wants one. Not only might you have a slow-moving time with 'the rest' but the opportunity cost of making that locomotive instead of something else can also be counted as 'lost'.
I simply think that the preorder process is a reflection of companies that are thinly capitalized, IOW, they don't want to put too much of their own money at risk. I get it. Its not a complaint, its reality.
If we're talking about a specifically featured item in a specific roadname, the issue isn't really about pre-order, the issue is that the producer is considering making something that has an inherently narrow market. A risky item. Sure, gauging how narrow that market is by allocating it to pre-order process is way to avoid producing something that relatively nobody cares about.
OTOH, Athearn seems to produce diesel locomotives that have many specific road name details. They even produced the GP40P-2 (passenger service GP40-2) which was about 4 locomotives ordered by the SP for commuter service in CA, and then inherited by the UP. Athearn produced the steam generator equipped original version in SP paint, the de-steamed freight conversion version in SP paint (which is a faded paint color to reflect non as-built years of service), and the modern freight version with ditchlights in UP paint. I don't recall a huge pre-order marketing survey. They just designed and built them, IIRC. Some are still available, but they seem to sell quickly because they are simply a pretty cool and unique loco, IMO. Maybe Athearn is a big enough company to build and sell products this way.
Doughless I think missing from the discussion so far is the question: How quickly does the company need to sell-out the product? Seems to me that pre-orders are merely capturing an interest a buyer might have for a product during a short window, and the company wants to capture, produce , and sell the product during that short window. Interests change. Not with standing the fact that most purchases are probably made simply because the customer likes the product...not because he needs the product. So the company who produces enough stock to sit in inventory a number of years is able to sell product to the buyers who change interests or happen across the product and see it simply for being attractive. Maybe more capital is needed to produce and hold the inventory? Just seems like the current preorder process is limiting the product to capture buyers' interests that exist only during the short pre-order window.
I think missing from the discussion so far is the question: How quickly does the company need to sell-out the product?
Seems to me that pre-orders are merely capturing an interest a buyer might have for a product during a short window, and the company wants to capture, produce , and sell the product during that short window.
Interests change. Not with standing the fact that most purchases are probably made simply because the customer likes the product...not because he needs the product. So the company who produces enough stock to sit in inventory a number of years is able to sell product to the buyers who change interests or happen across the product and see it simply for being attractive.
Maybe more capital is needed to produce and hold the inventory?
Just seems like the current preorder process is limiting the product to capture buyers' interests that exist only during the short pre-order window.
You are correct, they miss lots of sales because they make no effort to keep product available for when people want it. Does it take more capital? Yes. Should they work toward higher margins to support this? Yes.
Is this necessary for every product, No.
I hate the product hunt, just like I have no interest in buying/selling as a secondary part of the hobby.
Abother way to use pre-orders is in a sort of DMM sense. Many Ronco-style 'teleproducts' are entirely paid for by the down payment plus S&H, so even if the customer makes none of the time payments you've at least broken even on your direct costs. I wouldn't be surprised if the pre-order accounted for much of the out-of-pocket cost right up to shipping the first batch. If anyone remembers the Monorail model of contract-manufacturing 'custom' computers... it's applicable, too.
As a note, manufacturers seldom profit directly from any appreciation due to scarcity. No author benefits in the least when his railroad book on the steam locomotive goes to $850 a copy from 'rare book' dealers who smell fan blood. What does work is the artificial element of perceived exclusivity that goes with a certain kind of scarcity: no availability at a sellout or fire-sale price. Mass marketers have a fairly fixed schedule to discount products sequentially to recover the TVM of the 'investment' in inventory, and often rational expectations makes price-makers wait for the big sale to get the most for their money. If a company can weather this trend they may get more absolute return on their investment, particularly when as now the opportunity cost of capital is comparatively low and alternative uses for rapid settlement comparatively restricted.
richhotrain Paul3 richhotrain,Sorry, but pre-orders are not a sign of decay. It's a sign of change, sure. But decay? Explain Rapido then. They started with limited runs in 2004 and hired their first employee (Bill Schnieder) in 2009. They now have 15 employees not named Schron and right now are looking to hire two more. Or explain Tangent, Moloco, ExactRail, Arrowhead, and the other high end, strictly limited run companies that continue to grow and expand their product lines. If it was decay, why are they thriving?Build it and they will buy it is not true. If you make the wrong thing or too much of the right thing, you'll lose money, I promise you. For example, the NHRHTA ordered 1200 stainless steel diners to get the best deal from Rapido but we only had pre-orders for 800. In the last 8 months, we have sold maybe another 100 or so. We still have ~300 stainless steel diners to go at $140 MSRP each (and we're selling them at $120). When are "they" going to buy the rest? Because we have around $42,000 worth of inventory sitting in a storage locker just waiting for them... Paul, If high end, strictly limited run companies continue to grow and expand their product lines and are thriving, then so be it. But if that were the future of model railroading, then all manufacturers would do it. The hobby would be totally pre-order. The fact that one or more strictly limited run companies may be thriving is a sign of decay in the overall model railroad hobby because it signals a turn to niche markets which reduces the overall interest in the hobby by the vast number of model railroaders who just want to shop based upon what is available. Your example of the 1200 stainless steel diners, of which 300 went unsold, is a good example of the problem with pre-orders. By definition you can infer that the manufacturer went out on a limb and chose a risky venture. At a $140 MSRP, you automatically rule out probably around 90% to 95% of potential buyers. At that rate, Rapido would hardly thrive if it kept on manufacturing such risky products. I think you answered your own question. Rich
Paul3 richhotrain,Sorry, but pre-orders are not a sign of decay. It's a sign of change, sure. But decay? Explain Rapido then. They started with limited runs in 2004 and hired their first employee (Bill Schnieder) in 2009. They now have 15 employees not named Schron and right now are looking to hire two more. Or explain Tangent, Moloco, ExactRail, Arrowhead, and the other high end, strictly limited run companies that continue to grow and expand their product lines. If it was decay, why are they thriving?Build it and they will buy it is not true. If you make the wrong thing or too much of the right thing, you'll lose money, I promise you. For example, the NHRHTA ordered 1200 stainless steel diners to get the best deal from Rapido but we only had pre-orders for 800. In the last 8 months, we have sold maybe another 100 or so. We still have ~300 stainless steel diners to go at $140 MSRP each (and we're selling them at $120). When are "they" going to buy the rest? Because we have around $42,000 worth of inventory sitting in a storage locker just waiting for them...
richhotrain,Sorry, but pre-orders are not a sign of decay. It's a sign of change, sure. But decay? Explain Rapido then. They started with limited runs in 2004 and hired their first employee (Bill Schnieder) in 2009. They now have 15 employees not named Schron and right now are looking to hire two more. Or explain Tangent, Moloco, ExactRail, Arrowhead, and the other high end, strictly limited run companies that continue to grow and expand their product lines. If it was decay, why are they thriving?Build it and they will buy it is not true. If you make the wrong thing or too much of the right thing, you'll lose money, I promise you. For example, the NHRHTA ordered 1200 stainless steel diners to get the best deal from Rapido but we only had pre-orders for 800. In the last 8 months, we have sold maybe another 100 or so. We still have ~300 stainless steel diners to go at $140 MSRP each (and we're selling them at $120). When are "they" going to buy the rest? Because we have around $42,000 worth of inventory sitting in a storage locker just waiting for them...
Paul,
If high end, strictly limited run companies continue to grow and expand their product lines and are thriving, then so be it. But if that were the future of model railroading, then all manufacturers would do it. The hobby would be totally pre-order.
The fact that one or more strictly limited run companies may be thriving is a sign of decay in the overall model railroad hobby because it signals a turn to niche markets which reduces the overall interest in the hobby by the vast number of model railroaders who just want to shop based upon what is available.
Your example of the 1200 stainless steel diners, of which 300 went unsold, is a good example of the problem with pre-orders. By definition you can infer that the manufacturer went out on a limb and chose a risky venture. At a $140 MSRP, you automatically rule out probably around 90% to 95% of potential buyers. At that rate, Rapido would hardly thrive if it kept on manufacturing such risky products.
I think you answered your own question.
Well said Rich.
I have lots of money to spend on trains, but I don't CHOOSE to buy $140 passenger cars.
Or $2400 brass locomotives, and not all that many $50 or $75 freight cars.
The new "elite" is this hobby seems to be "I don't have a big roaster, and that roaster may have holes in its plausablity, but what do have is PERFECT".
That's not my idea of model railroading.
York1,This thread is about the production cost of model trains and how many units does it take to make production worth it. Lastspikemike brought up shipping as an added cost to making model trains, which while true, is about $1.00 or $2.00 per unit no matter if it's a $50 boxcar or a $600 steam engine. Then he talks about mailing individual items from Rapido in Canada to addresses in Canada. That has nothing to do with production costs, either, but rather it is an end-user cost which is off-topic for this discussion about manufacturer costs.Then you brought up the Universal Postal Union and how nations like the US and Canada are subsidizing mail delivery from China. The reason why that doesn't make any sense is that Chinese-made model trains are not mailedfrom China. They are shipped by private cargo companies by either boat or air freight. They always have been. Bringing up the cost of mailing something from China in relation to the production costs of model trains makes no sense because no model train production run has ever been mailed to North America. They are shipped, not mailed.
I believe it was Seneca who said, "Qui non proficit deficit."
"Who does not advance falls behind."
It's very true in a hobby where other entities are part of a wide negotiation of 'quid pro quo', also known as 'the market place'. I agree with Paul that a hobby has to advance, or to evolve, if it is to continue calling itself successful. If it has bankers and private investors, they'll want a return on what they put into it, and that means profit, or dividends at the very least. No model company of any description will be able to do that unless they keep their ears to the ground and adapt to new wants from their customers, investors. AND their suppliers/assemblers. If there are no investors, and it's a small enterprise, then just the customers and suppliers.
The companies that seem to be getting the nods and the attention, not to mention the patronage, are those who insist that they need pre-orders before they do the cash outlay for tooling and assembly. That is part of the 'quid pro quo' process between prospective customers and them, the importers. It seems to be working.
I don't know how much longer Bachmann, Athearn, and Atlas will continue to do bulk purchases on a whim and on a prayer. And Intermountain, Accurail, Scale Models,... I suspect they might have to tighten up quite a bit over the next 12 months, given what this year has been like.
Paul3York1, If you know that shipping a container of model trains from China to North America has absolutely nothing to do with any postal organization, then why did you bring it up?
I'm not sure what the problem is. If you'll go back to my posts, you'll notice I didn't discuss containers. I talked about shipping and mailing packages.
First post:
York1Years ago, industrialized countries agreed to subsidize shipping costs from under-industrialized countries. In effect, U.S. and Canadian taxpayers subsidize Chinese companies' shipping costs. This is part of the Universal Postal Union. The U.S. tried to end this last year, but as far as I know, we still are doing it. However, rates are supposedly being adjusted to correct this. It costs more to mail a package from one U.S. city to another U.S. city than it costs a Chinese company to mail the same package from China to that city.
Second post:
York1I'm not sure I understand what you're saying. A Chinese package is carried by the Post Office in the U.S. or Canada at a rate that is lower than the actual cost. https://en.wikipedia.org/wiki/Universal_Postal_Union
Maybe the confusion is that I mentioned "shipping". By "shipping", I meant the mailing of packages.
York1,If you know that shipping a container of model trains from China to North America has absolutely nothing to do with any postal organization, then why did you bring it up?Sheldon,Um, of course I took it literally as you wrote it that way. "But as the grumpy old men sit around and talk about the hobby dieing, and a handful of them ask "how can we get new people interested?", I would submit this one simple fact. Be it online or in a store, the fact that a beginner cannot easily buy a locomotive and a matching set of passenger cars all at the same time in the same place, is a discouragement to new people." What else can that mean? The hobby is dying because newbies can't buy entire passenger trains with matching engines all at once is what it sounds like to me.Yep, Atlas sold the first real quality drive. The updated Atlas Roco drive and the Atlas Kato drive are superb even today. But I still wouldn't say they were leaders in detailing like Bachmann or Life-Like. Atlas models of the 1970's, 1980's and 1990's were, other than their drives, not much different from Athearn BB's in part count.Early TOFC cars are unlikely in today's market, but possible. At Springfield this year, I bought a resin NH 17200-class cast steel flat from Speedwitch Media that I plan to convert to TOFC service just like the NH did (I even have the plans). 30 years ago, it was impossible to get any early TOFC (well, other than Athearn's).B&O converted heavyweights will be a problem, but they could happen. After all, the NHRHTA partnered up with Rapido to make the totally unique-to-NH stainless steel passenger cars. We're making the 4th car type with Rapido right now. Why not get the B&O historical guys to make the same deal as the NHRHTA did? I assume they have more members than we do. It's possible. 30 years ago it would have been impossible.For more (accurate) B&O engines, group pressure works best. NH fans campaigned a long time for NH steam, diesel and electric locos. And better yet we put our money where our mouth was by buying the NH models once they came out. Convince B&O fans to support their railroad and campaign for models and stuff will get done. We in the NHRHTA are proof of that.richhotrain,Sorry, but pre-orders are not a sign of decay. It's a sign of change, sure. But decay? Explain Rapido then. They started with limited runs in 2004 and hired their first employee (Bill Schnieder) in 2009. They now have 15 employees not named Schron and right now are looking to hire two more. Or explain Tangent, Moloco, ExactRail, Arrowhead, and the other high end, strictly limited run companies that continue to grow and expand their product lines. If it was decay, why are they thriving?Build it and they will buy it is not true. If you make the wrong thing or too much of the right thing, you'll lose money, I promise you. For example, the NHRHTA ordered 1200 stainless steel diners to get the best deal from Rapido but we only had pre-orders for 800. In the last 8 months, we have sold maybe another 100 or so. We still have ~300 stainless steel diners to go at $140 MSRP each (and we're selling them at $120). When are "they" going to buy the rest? Because we have around $42,000 worth of inventory sitting in a storage locker just waiting for them...
Yes, it thrived for 50 years without pre-order but it was also a world of "here's your 40 boxcar" that didn't depend on incredibly granular market research and a customer base that will sink all of their claws in you over the most minute flaws.
Paul3 richhotrain,If this is decay, I want more of it.And yes, manufacturers take a lack of pre-orders as a lack of interest. Because that's exactly what it means. If you really want it, you'll pre-order it. If you don't really want it, you won't.
richhotrain,If this is decay, I want more of it.And yes, manufacturers take a lack of pre-orders as a lack of interest. Because that's exactly what it means. If you really want it, you'll pre-order it. If you don't really want it, you won't.
Manufacturers may take a lack of pre-orders as a lack of interest, but what is really means is a lack of interest in pre-orders. As I said earlier, build it and we will buy it.
Paul3,
I knew you would take the passenger train analogy too literally.
Altas was slow in the detail department, but early with the much better driveline.
Things I would buy that we will likely never see, even with preorders:
Accurate detailed early piggyback flat cars, like the 40' cars the B&O built from wagon top box car frames, or the ones the New Haven built.
B&O heavyweight passenger cars that were rebuilt into "smooth side streamliners".
A WESTERN MARYAND Pacific, heck, we can't even get a reasonable B&O P7, as built or as modernized. I would by a couple modernized P7's. But we a tripping over K4's?
Like Kevin, I was all in for some undecorated ALCO PA's, I placed my preorder with a major retailer.........but the Proto2000 ones I have are plenty nice enough. Some more of them will show up on Ebay.....
Paul3York1, You know that shipping a container of model trains from China to North America has absolutely nothing to do with any postal organization, right?
Yes.
Paul3lastspikemike, Actually, running plastic through injection mold tooling in North America is doable and economic, even with our relatively low production runs in our hobby.
Also, Games Workshop manufacturers most of their product in the UK with their own injection molding machines. Very doable, but no assembly.
When I watch those videos (not necessarily model trains) of Chinese workers accurately assembling amazing models out of tiny parts, I am breath taken. Are there even workers in North America that could do that? It is an incredible thing to see.
lastspikemike,Actually, running plastic through injection mold tooling in North America is doable and economic, even with our relatively low production runs in our hobby. Kadee, Accurail and Bowser prove that. The expensive thing is assembly due to labor costs. Kadee's innovative snap-together models and Accurail's kits don't have a ton of labor costs, and Bowser shoots the plastic in the US and ships it to China for assembly and painting.Back in 2008 during the economic crisis we had, Atlas had posted on their old forum that it cost them $8000 to ship a 40' container from China to New Jersey. The year before, it had only cost $4000. If that $8k cost is still the same today, and you have a production run of 3000 to 5000 units, then yeah, it's only a buck or two per unit for shipping costs to the East Coast.York1,You know that shipping a container of model trains from China to North America has absolutely nothing to do with any postal organization, right?tin can,A company spending $4 per unit to ship something to China and then ship it back fits in with the numbers that Atlas talked about 12 years ago.Sheldon,FYI, Atlas was kind of late to the game with high-detailed loco models. IIRC, it was well into the late-1990's before they started putting grab irons on locos. I think the U23B was the first and that was in the 1999 Atlas Catalog.Production runs are much smaller today. 3000 to 5000 are more common.DAVID FORTNEY,The problem is with the market, not the manufacturers. In yon olden days, you could make a loco model and it would continue to sell well for years afterwards. Today, you make a loco model and after 6 months on the shelf you might as well throw them away for all the sales you'll get. The market only wants the new stuff (with rare exceptions on eBay).Sheldon,Huh? People can't buy an entire passenger train & matching locos all at once and that's why "the hobby is dying"? Walthers does a complete new passenger train with matching locos every year. Rapido is bringing out Horizon/Comet passenger cars in 3-car sets (with add-on coaches available), and matching locos will also come out at the same time. Now if your point is that a newbie should be able to walk into a hobby shop and buy any passenger train they want, then that's on the hobby shop not the manufacturer. A hobby shop could have ordered 50 or 100 of each passenger car for the last 20 years of Walthers train sets so a newbie could buy them years later. Of course the hobby shop will never do that because it would ruin them financially.Did you buy 1000 freight cars, 300 passenger cars, 130 locomotives, 1400 feet of track in less than a month? Of course you didn't. It took years to acquire that, so why should any newbie think they can get everything they want when they want it instantly? No one in this hobby ever has. Like any hobby, you have to work for it.You worked for a hobby shop many years ago. How many FL9's did you sell back then? How many EF-4's? How many C-430's? How many I-5 4-6-4's or I-4 4-6-2's? How many HH660's? I can tell you that you never sold any of them because they didn't exist. I prefer a sales method where I can get these things vs. one where I couldn't.richhotrain,If this is decay, I want more of it.And yes, manufacturers take a lack of pre-orders as a lack of interest. Because that's exactly what it means. If you really want it, you'll pre-order it. If you don't really want it, you won't.I'm enjoying every one of my pre-ordered NH models that I've received over the years. FL9, FB-2, 8600 coach, parlor, diner, I-5, I-4, RDC-1, RDC-2, RDC-3, RS-11, GP9, NE-5 caboose, 8200 coach, 8500 smoker, SW1200, etc. And these aren't generic models painted NH, these are actual NH models customized by the factory for the New Haven Railroad. And I will patiently wait for my new Rapido PA-1 and my NH "County" combine when they come out next year. Almost every NH diesel has been made in HO scale in the past 20 years, along with 4 major steam classes and even an electric (with an EP-5 on the way).It's a great time to be a NH fan. You can actually model the NH today vs. buying ATSF cars and generic diesels painted in foobie NH colors.
gregc,From what I understand, a high end car could cost ~$80k in tooling. However, every car and every loco is different depending on complexity and variations.
lastspikemike,Shipping a container of model trains from China to North American has nothing to do with the United States Postal Service, Canada Post, the Universal Postal Union, or anything postal. At all. It's not parcel post, it's cargo which is shipped by a private contract. When Rapido ships their pallets of NH passenger cars to the NHRHTA here in the States, it arrives by a trucking company, not the USPS or even UPS or FedEx.tin can,Yes, today if you want six CF7's you might have trouble finding them. In the 1980s (before pre-orders) you wouldn't be able to find any because they did not exist. I prefer a system where I merely have trouble finding the models I want vs. one where I cannot find any models I want.
mlehmanrichhotrain The pre-order concept is a sign of decay in the model railroading hobby.
Pre-order has been a round for a good while now, but as for decay, we seem to have the most choices that ever have had. If this is "decay", then it doesn't seem too bad.
I generally don't pre-order; I just wait for items to comeout and if it's popular, I try to be on top of it. Generally I've been able to get what I need.
Personally, I am not a big fan of pre-order/advance reservation. I did preorder and prepay once - and that was for 2 steam locomotives in S scale (not hi rail) which are hard to come by and these happened to be for a railroad that I was interested in modeling. I got a discount and they were only sold by the manufacturer/importer.
Otherwise I buy stuff when it becomes available. I also buy NIB older items at train shows.
Several items that I would have bought had they been made, were canceled because there were not enough pre-orders. Other items I would have bought, were so limited run that they were gone before I decided to buy them - in some cases before I even knew about them. But that really doesn't bother me - there's enough stuff to buy at train shows and truth be told I have more stuff than I'll every use.
Paul
"If you stock it, they will buy it" does not work anymore. Too often buyers go into the local store, see an engine they want, and then go out online and buy it for $50 or $100 cheaper someplace else, and if it hasn't sold out from the importer within 3 weeks of arrival in the U.S., it becomes "dead inventory" that then becomes very difficult to sell (and may even get stripped for parts).
I don't do that. If I see the engine I want in the local store, and all is well that it looks like I want, I'm buying it from them. However, I'm likely a dinosaur at 52.
I agree completely, Rich. I really believe in the "if you stock it, they will buy it" concept. But the Walmartization of retail has everyone clamoring for the lowest price. Inventory is supposed to turnover multiple times in a year; out with the old, in with the new. The problem in model railroading is that there are no longer model railroad staples. Everything is limited run. If I was starting out, and wanted to buy six Santa Fe CF7s; I would have to go to ebay to find them. No distributor has them, and certainly not a hobby shop.
The Santa Fe stock cars sell like hotcakes on ebay. My model railroad supplier of choice does not take advance reservations; maybe they pre-order enough, but it is frustrating when production on a popular model is delayed or put off because there aren't enough pre-orders. BLI has been promising a true Santa Fe 2-8-2 for years; another model that will sell regardless of pre-orders.
richhotrainThe pre-order concept is a sign of decay in the model railroading hobby.
I sort of understand those that don't like pre-orders.
On the other hand, after 30 years the rot is either not as pervasive as believed or people have mostly moved on. Anything that requires a warehouse to hold it costs money and would mostly be full of rather average stuff that few lust over, but which might be needed along the way.
The fancy RTR rolling stock models seem to offer a plethora of choices in locos and cars. It's all the not-pre-ordered stuff in the hobby that we tend to find ourselves needing extra patience to find on the market now.
beside tooling, may be worth considering all the labor the goes into each model and why they're made in china and not he u.s.
greg - Philadelphia & Reading / Reading
Number of preorders required to produce a product varies based upon what the product is, what the potential roadnames for the product are, and is a closely guarded secret. I worked for a (still in business) manufacturer; they are my lifelong friends, and they won't even tell me. I only know generalities and am definitely not authorized to comment about anything on any forum on their behalf.
Even passing along a few little tidbits of information in the past went poorly and earned them negative phone calls from people who were ticked off. So I am most definitely not authorized to comment about anything at all, and my posts anywhere are dwindling down to nothing.
The number of pre-orders varies based upon the tooling cost. One project only got made because the Chinese made a sweetheart deal to do the tooling themselves. Because this is now almost ancient history I can probably get away with sharing that the fairly recent plastic Alco C-430 would never have seen the light of day if the tooling were designed in America. With 16 prototype units, and none owned by PRR/UP/SP/ATSF the potential sales numbers were far too low despite a plethora of second- and third-hand owners. The project only became viable because a Chinese builder offered to do the tooling for that one project. Otherwise it would never have happened at all despite some people (including but not limited to me) asking for it for 25 years prior to production.
Normally that manufacturer does a lot of the engineering themselves here in America, including almost all 3D cadd drawings, and including (with railroad permission) climbing all over surviving prototype examples to measure and photograph details, and use of 3D scans wherever possible. In many cases they even mold the plastic parts here to assure dimensional stability. That is how they provide the best quality that they can.
After many years, it is known that certain roadnames still have nearly rabid fanbases who will buy just about any decent product with that roadname on it. Who the roadnames are significantly affects potential product sales. Certain other roads are known to be very poor sellers (even if the model is very correctly done, virtually perfect in every way).
Big Alcos that only existed near the very end of PRR in prototype life no longer sell like they once did but still sell enough to get made. Reading sells far out of proportion to its size.
Speaking in general terms, you probably have to sell a minimum of 2000 to 3000 models in just the first product run to make a plastic diesel even possible, and you need enough roadnames for multiple runs to pay off the tooling cost. Engineering costs are NOT fully tracked because the small importers don't have time to invoice every 15 minutes of an hour spent. They do engineering in between waiting on customers, working with dealers, and a myriad of other daily tasks. So engineering charges are often just not tracked accurately and they don't want to know how many hours went into the drawings for this and that because it would get depressing.
According to my new friends over on Facebook, to make a new brass engine now--anything--even the smallest steam switcher--you must be willing to make and sell at least 100 units at $2000 each. Making a little 0-6-0 switcher and offering it painted, dcc'd, lighted, etc. does not get any cheaper than making a Big Boy, other than you have only one set of drivers. The costs do not come down; you still have all the production operations involved. For this reason the manufacturers tend to make really big engines, because there are not 100 buyers out there for most of the small steamers, even if any past model was poorly done. There just aren't 100 people left for most small steam engines to ever get made again, if even done in the first place. (Not my opinion, but folks over on facebook with much larger train collections than me).
LastspikemikeCheap Chinese postage subsidizes American recipients, not the Chinese sender. Not coincidentally, your current Administration has a similar and completely wrong headed view of international trade.
Please do not bring politics into any discussion in these forums.
This is where we come to get away from such things and talk about our electric trains.
Random_Idea_Poster_6263how many preorders of units of said product are needed to go ahead with tooling?
does anyone know what the tooling for a typical model costs?
tin can I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
Somehow, manufacturers equate the lack of pre-orders as a sign of disinterest. But, it seems to me that the pre-order concept is self-defeating on the part of the manufacturer. Remember the old adage, build it and they will come. If a manufacturer thinks that some item is a good idea, then build it.
From the standpoint of the modeler, it may also be a good idea, but who wants to pre-order and then wait to see if the idea even gets off the ground, maybe as long as 1 or 2 years into the future. Imagine if everything model railroading related were a pre-order. Not only locos and rolling stock but also turnouts, decoders, structures, you name it.
SeeYou190Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
Brent
"All of the world's problems are the result of the difference between how we think and how the world works."
ATLANTIC CENTRALHouses mostly built to order? <SNIP> The developers put a hundred cookie cutter houses for every custom home around here - even in the $500,000 price range - which is the beginning of expensive in these parts.
Same here. Probably less than 5% of the houses are built to order. At least 95% are "Spec Homes", one just like the other, put up either in old neighboprhoods like mine, or stuffed in 10 to an acre in new "high density" communities.
These houses sit on the market for no more than three months after they are built.
Yes, the $500,000.00 4,000 square foot house on a .085 acre lot is a real thing now, and they have no problem selling them.
People are willing to give up a convenient location, back yard, four car driveway, and city infrastructure to live in an ugly half-million dollar brand new house made out of OSB and steel studs.
York1 Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America. I'm not sure I understand what you're saying.
Lastspikemike Well, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
I'm not sure I understand what you're saying.
I can't make heads nor tails out of it either.
LastspikemikeWell, hardly. China as well as other countries subsidize their postal systems which only looks like countries who don't subsidize their own system any longer are now subsidizing them but that's a really odd way to look at what was actually agreed upon. Also bear in mind the whole system was invented by America.
A Chinese package is carried by the Post Office in the U.S. or Canada at a rate that is lower than the actual cost.
https://en.wikipedia.org/wiki/Universal_Postal_Union
Lastspikemike ATLANTIC CENTRAL DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave Clearly true, but trust me, it is bad for the hobby. Sheldon Good for the hobby. Without this pre-order system nothing interesting would get made. All manufacturing is changing to build to order. Houses are mostly built to order now. It fits really well with computerized manufacture of components for assembly. Car makers build only what is sold, mainly for dealer stock in North America but in other markets you order what you want and it gets put into the production line. Everybody saves money if all that is made is already sold.
ATLANTIC CENTRAL DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave Clearly true, but trust me, it is bad for the hobby. Sheldon
DAVID FORTNEY Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over . Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run. Dave
Most Manufacturers today Only build Enough to cover orders. The new BTO Is the new mantra Of manufacturing Nobody wants to be stuck with inventory. If it sells out The better it is for the manufacturer or importer. The days of stocking nventory for 3-5 years is Long over .
Look at what scale trains does They do exactly What I mentioned above if There's more demand for an item they do 1⁄2 3rd run.
Dave
Clearly true, but trust me, it is bad for the hobby.
Good for the hobby. Without this pre-order system nothing interesting would get made.
All manufacturing is changing to build to order. Houses are mostly built to order now. It fits really well with computerized manufacture of components for assembly. Car makers build only what is sold, mainly for dealer stock in North America but in other markets you order what you want and it gets put into the production line.
Everybody saves money if all that is made is already sold.
Houses mostly built to order? Maybe where you are, not around here.
I restore historic houses, and do medium to high end remodeling for a living. The developers put a hundred cookie cutter houses for every custom home around here - even in the $500,000 price range - which is the beginning of expensive in these parts.
Clearly it is time for me to go back to sleep for another week.......
the most important cost of a run is the new tooling, and the number of these ...
if it sends the costs up astronomically, then the new run is dead in the water due to this costs being added on to the end user ..
I am not questioning how or why it has evolved to this.
But as the grumpy old men sit around and talk about the hobby dieing, and a handful of them ask "how can we get new people interested?", I would submit this one simple fact.
There are people on this forum who laugh at me because I run Athearn passenger cars and I am happy with Athearn blue box cars mixed in with my uber detailed Kadee, Intermountain, (fill in your favorite brand of high end RTR).
But I won't live long enough to see everything I want made in high detail RTR, and I won't live long enough (even though I have the skills) to scratch build/detail all of them to that level.
I am going to build and play with the layout NOW, not when the pre order shows up.........all 1000 freight cars, 300 passenger cars, 130 locomotives, 1400 feet of track, filling 1500 sq ft worth.
I worked in the train store, I got people started in this hobby, and waiting a year for some model is not the way to attract new people.
I don't have an answer to this problem.
BUT as I said, I'm glad I have most of what I need and want to build the next ATLANTIC CENTRAL.
Nothing interesting will be made? I don't own a model of a BigBoy, or a NYC Hudson, or a PRR K4.
I own a bunch of boring Mikados, Mountains, Consolidations, and Pacifics like most railroads did. And I did not pre order any of them.
I have said this before, I will say it again. Knowing what I know, if I had to start over from scratch in this hobby, based on product availablity alone, I simply would not.
A few facts without getting too specific about numbers I do know......
As mentioned above, there is the break even number, the minimum to support the tooling and setup costs at a price considered marketable.
Then there is the maximum economy of scale number, the number at which production does not get any cheaper.
That would be the ideal volume per run if there is suitable demand for the product.
Starting in the late 80's, the cost of injection molding tooling has declined to an amazingly low level - but our models have gotten much more complex.
When LifeLike, Bachmann and Atlas began this off shore production of high detail, high quality plastic models 30 years ago, LifeLike and Bachmann in particular had deep pockets and invested in lots of inventory.
They were working on the old business model like Athearn and others had for years, and they had very large margins based on the exchange rate, cost to produce, and their willingness to buy at that "maximum economy of scale" volume.
That worked well for a while, they could afford to sit on that money and wait for stuff to sell.
Walthers did similar stuff, more with rolling stock and structure kits.
That was 30 years ago......now there are 30 years worth of new prototypes for people to want, in addition to those older prototypes that some are still interested in.
So even if the number of modelers has stayed the same or increased some, the demand for any one model is very likely much smaller than it was when the first Spectrum K4 or 2-8-0, or LifeLike GP7 hit the market.
And costs have risen in China faster than the rate of inflation, eating into those high margins of those early days.
Those high margins allowed them the luxury of sitting on lots of inventory.
From what I know, what I saw in person, and what I was told, in the early 90's a typical "run" of a Proto2000 loco was in the five figures, and sometimes pretty well into the five fiqures. And they came with and extensive stock of parts.
The expectation seems to have been that a "run" was actually the projected 3-5 year demand for the item. They may have been optimistic.......
Today it is way different, and many of the customers are way different.......in ways I don't always understand.......
I'm sure production runs are smaller now........
I just know this, I have most of the trains I want for my next version of the ATLANTIC CENTRAL. And I am not stuck on the idea that every model needs to be some high end rivet counter model.
So if someone makes something new of interest, I may pick up a few, if not, ok.
Just one of the advantages of having been at this for 54 years.....
Twenty years ago I was talking to a manufacturer's rep at a hobby train show about production in China. It cost his company $4 to send a kit produced in the USA to China for assembly and packaging, and return.
Interesting OP. I have been waiting for Intermountain to rerun ATSF stock cars for years. Those molds are already made, all Intermountain has to do is produce the cars. Their web site says they are accepting reservations for several runs of cars; but my dealer emailed me Friday saying that Intermountain has cancelled the runs, not enough demand.
York1Years ago, industrialized countries agreed to subsidize shipping costs from under-industrialized countries. In effect, U.S. and Canadian taxpayers subsidize Chinese companies' shipping costs. This is part of the Universal Postal Union.
It served its purpose and now through ongoing negotiations is being changed one country at a time, albiet slowly as it is tied to so many factors.
Canada Post runs the postal systems of about 30 third world countries and that just shows what kind of complications have to be dealt with. It is a most complicated issue that falls within the pervues of foreign aid and/or trade. This is only one example of the intracacies of the situation. The Canadian Federal Government through Canada Post runs some foreign Post Offices as foreign aid as there is just no way a third world can run a profitable Post office.
I spent 36 years in world logistics and we often moved things by mail depending on what country(s) was involved. Cost were never a constant.
York1It costs more to mail a package from one U.S. city to another U.S. city than it costs a Chinese company to mail the same package from China to that city.
A few years ago I sold two small models on eBay. One went to Georgia, and the other to Norway.
It was less postage to ship the model to Norway.
LastspikemikeA single HO locomotive in its own box might cost $25 just to get it from Ontario to me. It cost basically zero per unit to get from China to Vancouver by container ship.
Years ago, industrialized countries agreed to subsidize shipping costs from under-industrialized countries. In effect, U.S. and Canadian taxpayers subsidize Chinese companies' shipping costs. This is part of the Universal Postal Union.
The U.S. tried to end this last year, but as far as I know, we still are doing it. However, rates are supposedly being adjusted to correct this.
It costs more to mail a package from one U.S. city to another U.S. city than it costs a Chinese company to mail the same package from China to that city.
BATMANguessed there were 2400 Hudsons. I am probably way off. Add Quote to your Post
Maybe not, but it is a secret.
I do know the number of each miniature that Reaper Miniatures initially made in their "Bones" line of injection molded models made in China. The number was MUCH LOWER than what I would have guessed for the break-even point.
And they made a profit!
I have no way of knowing, but I would guess the up-front costs of injection plastic molding have come down.
When the Hudsons arrived at the Rapido warehouse they showed a photo of them all. There were four Hudsons per carton, so I did a count of the pallets and cartons and guessed there were 2400 Hudsons. I am probably way off.
In manufacturing engineering (and I am sure in other disciplines too, although I am speaking just from my own training) there is a process called a break-even anaylsis. Its the methodology of deciding on what form of manufacturing can be used, how many units can sell on market, cost of labor, shipping, and lifetime of use for the manufacturing process before replacement. I am sure the exact calculations used by each manufacturer are indeed a trade secret, but its pretty easy to imagine that to make an injection molded product requires x-amount of unit sales before the product is profitable. Again, different manufactuing methods have different break even anaylsis. A 3D Printer and a wood laser cutter are both relatively cheap, but they churn out a lower number of items per hour of operation than an injection molding machine would, and that needs to be factored. That is why a 3D printed design is so great for one off products and rare prototypes, they can be ordered 'on-demand' and produced in one off batches. Brass due to its lower rate of produciton can also make smaller batches of rarer prototypes, but expect the cost to be higher just to reach the break even point. Injection molding will churn out thousands of pieces in relatively fast time, but has a much higher initial investment into tooling that requires a larger audience to justify purchasing the model.
mlehman It is indeed a trade secret. Jason is more open than most about roughly where they're at on preorders. Not sure he posts exact numbers though?
It is indeed a trade secret. Jason is more open than most about roughly where they're at on preorders. Not sure he posts exact numbers though?
Some brass runs are below 1000 units. In order to stay in business, those prices per unit have to be pretty steep. Not just profit, but re-investment and new capitalization.
For a first run, I would think most suppliers would want at least 8000 units sold. Thereafter, without having to pay for tooling, they might be satisfied with about half that many.
It's just my guess. Those numbers might be too much too small.
The numbers will also vary widely even if they were discussed. A loco is a much higher ticket item than a freight car. Simple is cheaper than complex. Items that can be produced in multiple versions make a mold more able to produce future variants while some molds might produce an item that is essentially one variant to remain accurate.
Your question is a bit like asking how far you can push a string. Depnds on the string.
EDIT: I'm pretty sure Kevin's numbers were just picked at random as examples. It's more likely that a popular model like a Big Boy is closer to 2,500 in a run than 250,000. I suspect most runs of locos are likely well under 10,000 units. It's a point that worth making, because while there are economies of scale in manufacturing, in this hobby it's nowehere near large enough to expect lower pricing just because a unit is popular and sells well. These aren't Walkmans (do kids even know what that is?) or microwaves.
You need to amortize the production costs into the run, so the number will vary from one model to another.
Setting price point is all internal to each company.
If you know a Big Boy will sell 250,000 units, the tooling cost can be spread out among many models. If you know a B&O EM-1 will only sell 100,000 units, the cost per model will be higher.
The maufacturer needs to set the price point high enough to cover these costs, but not so high to limit sales.
In short, there is no way to answer the question.