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The changes in model railroading manufacturing and the demise of some companys

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The changes in model railroading manufacturing and the demise of some companys
Posted by rrebell on Sunday, November 7, 2021 8:09 AM

I remember a time when most companys in the hobby, when they would deside to close shop, the company would be sold or a least the product would live on in someones elses line. Times have changed and it seems a lot of companys just disapear.  Some companys that come to mind are Jordan and Shinohara, both just died.

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Posted by Lastspikemike on Sunday, November 7, 2021 8:19 AM

I had thought Shinohara stuff got bought by Walthers.

But the problem of being unable to sell your business when you wish to retire is getting common. 

I believe it's down to demographics in part. In Canada the ridiculous burdens governments place on business operators are a significant factor. It is literally impossible to run a small business now without professional accounting assistance which is in effect a tax on business due to government offloading tax collection costs onto businesses, among other regulatory functions imposed such as health & safety and so on.

There are fewer people willing to start or acquire businesses. At the same time there are more potential sellers. The only other option is just close up shop at the end of your last lease term. 

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Posted by 7j43k on Sunday, November 7, 2021 8:21 AM

rrebell

I remember a time when most companys in the hobby, when they would deside to close shop, the company would be sold or a least the product would live on in someones elses line. Times have changed and it seems a lot of companys just disapear.

That change must have happened before 2010.  Champion Decals closed, and no one wanted to pay the seller's price.

Ed

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Posted by SeeYou190 on Sunday, November 7, 2021 8:26 AM

When Ron from Rail Graphics closed up and retired, I contacted him about buying the business. He was very honest and said the business was not sustainable and needed all new equipment. He said needed supplies were getting very difficult to obtain, and expenses were soaring. Potential customer base was shrinking, and a huge price increase would be necessary.

-Kevin

Wink Happily modeling my STRATTON & GILLETTE RAILROAD. A Class A line located in a personal fantasy world of semi-plausible nonsense on Tuesday, August 3rd, 1954.

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Posted by ATLANTIC CENTRAL on Sunday, November 7, 2021 8:32 AM

Lastspikemike

I had thought Shinohara stuff got bought by Walthers.

But the problem of being unable to sell your business when you wish to retire is getting common. 

I believe it's down to demographics in part. In Canada the ridiculous burdens governments place on business operators are a significant factor. It is literally impossible to run a small business now without professional accounting assistance which is in effect a tax on business due to government offloading tax collection costs onto businesses, among other regulatory functions imposed such as health & safety and so on.

There are fewer people willing to start or acquire businesses. At the same time there are more potential sellers. The only other option is just close up shop at the end of your last lease term. 

 

Shinohara simply closed up. Walthers sourced their new track from a different vendor.

The business climate here in the US varies from state to state, but is still difficult in many cases as we continue to head down a road that has failed everywhere it has been tried.....

Sheldon

    

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Posted by ATLANTIC CENTRAL on Sunday, November 7, 2021 8:33 AM

There were several companies I considered buying, but it just never made good business sense.

Sheldon

    

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Posted by ndbprr on Sunday, November 7, 2021 9:39 AM

Me too.

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Posted by Southgate 2 on Sunday, November 7, 2021 10:28 AM

Thank goodness NWSL was kept alive!!! I support them, and hope everyone realizes what a hit that would be for our hobby if they dissappear. Dan

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Posted by NorthBrit on Sunday, November 7, 2021 10:37 AM

The owner of my local model shop said he would sell every item he had for 1 penny each.    He cannot get a buyer.

Thankfully he is still trading  as I am one of his regular customers.

 

David

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Posted by betamax on Sunday, November 7, 2021 10:51 AM

For many of these small companies, their revenues would not support purchasing the company. Unless the new owner has cash and doesn't need to get financing to complete the deal, the cost of operating it would exceed the income.

Most of the assets outside of goodwill and intellectual property would only be worth as much as the scrap dealer will pay. 

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Posted by ricktrains4824 on Sunday, November 7, 2021 11:39 AM

The biggest issue is cash flow - If you have rent/lease/mortgage payment due, salary and other employee overhead, insurance on the business, contents, employees and any customer interactions, tooling fees, manufacturing costs, shipping costs, plus the numerous other expenses associated with being a business owner, you must be able to at minimum break even, and most people want to make a profit, as they need money to buy food, clothing, housing, etc... for themselves. 

Small "niche" businesses (like all in our hobby are) turn only little (if any) profit for the owners. And that chases potential buyers away from them.

The ones who have a adequate cash flow do continue on, those that do not are the ones that disappear.

But that happens in all businesses, not just model (really toy) trains. Look at retailers like K-Mart, Sears, etc... They did not have a good enough cash flow to turn profit, and are now gone.

In my own experience, a retailer I w*rked for had a decent business, locally owned and operated, and decently profitable, until the building he leased was sold to a out of state conglomerate that owns many strip malls. The lease/rent price was trippled, as that was the new building owners "standard rental fee" in other areas. Every single privately owned business in that plaza is no longer there, and they all were forced to close up period, as no other buildings in the area were available.

The only ones left in that plaza are the chains TSC, CVS, Verizon Mobile, a state owned liqueur store, a chain grocery store, and the fast food guys.

New tennants are limited simply to a single different chain store, Family Dollar. All the other store fronts sit empty and unused, unable to turn enough profit to afford the higher lease/rental charge.

But one chain store, and 3 locally owned businesses all left, because the cost became to prohibitive to remain.

Ricky W.

HO scale Proto-freelancer.

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Posted by rrebell on Sunday, November 7, 2021 1:02 PM

There also is the change in what people want. As eras keep on coming the percentage that model a certain era diminish even as the number of modeliers increases.

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Posted by York1 on Sunday, November 7, 2021 1:28 PM

ricktrains4824
New tennants are limited simply to a single different chain store, Family Dollar. All the other store fronts sit empty and unused, unable to turn enough profit to afford the higher lease/rental charge.

 

And the out-of-state owners are probably writing off losses the empty building incurs, so they are in no hurry to lower rents to attract tenants.

My kids say they want a cat for Christmas.  Normally I do a turkey but hey, if it'll make 'em happy ...

York1 John       

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Posted by ATLANTIC CENTRAL on Sunday, November 7, 2021 1:33 PM

rrebell

There also is the change in what people want. As eras keep on coming the percentage that model a certain era diminish even as the number of modeliers increases.

 

I have commented on this many times. All else aside, this is a major problem effecting this industry today. The demand for any one single product is ever lower, and made worse by unnecessary product duplication.

Sheldon

    

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Posted by emdmike on Sunday, November 7, 2021 1:59 PM

Back in the day, the tooling belonged to the company.  Not so in China, where most of our trains are made today.  The tool is the property of the parent company/factory.  So like the tooling for the G scale line of Aristocraft, which was owned by Kader, is now showing up under the Bachmann line of trains as Kader is also the parent company/factory that makes Bachmann trains.  

Silly NT's, I have Asperger's Syndrome

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Posted by ATLANTIC CENTRAL on Sunday, November 7, 2021 3:25 PM

emdmike

Back in the day, the tooling belonged to the company.  Not so in China, where most of our trains are made today.  The tool is the property of the parent company/factory.  So like the tooling for the G scale line of Aristocraft, which was owned by Kader, is now showing up under the Bachmann line of trains as Kader is also the parent company/factory that makes Bachmann trains.  

 

It's not that simple. Much tooling does belong to the model train companies, not to the factories.

Sheldon

    

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Posted by dknelson on Sunday, November 7, 2021 4:51 PM

rrebell

I remember a time when most companys in the hobby, when they would deside to close shop, the company would be sold or a least the product would live on in someones elses line. Times have changed and it seems a lot of companys just disapear.  Some companys that come to mind are Jordan and Shinohara, both just died. 

Certainly there is some old tooling which has proven surprisingly durable, including some items from Varney.  But if you look at the advertising index in a Model Railroader magazine from 1965, 1970, 1980, or 1990, or at the product list of a Walthers catalog from those same years, you'll see plenty of names which have indeed simply gone away and the tooling is not to be found.  

Dave Nelson

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Posted by kasskaboose on Sunday, November 7, 2021 6:35 PM

This development is a definate sign of changes in this hobby.  With many LHS closing, they might realize that e-commerce is a preferred route.  That is probably becoming more challenging with C-19.  How people adjust requires refocusing on addressing the multiple supply chain issues.  All of these interdependent changes are interesting to watch and discuss.

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Posted by Billwiz on Sunday, November 7, 2021 6:49 PM

York1

 

 
ricktrains4824
New tennants are limited simply to a single different chain store, Family Dollar. All the other store fronts sit empty and unused, unable to turn enough profit to afford the higher lease/rental charge.

 

 

And the out-of-state owners are probably writing off losses the empty building incurs, so they are in no hurry to lower rents to attract tenants.

 

 

I never understood this.  In my town is a strip mall.  The owner kept raising rents.  Many successful businesses had to shut down because they could not afford the new rent.  Over the years, many empty stores - is the write off really that good?  Somehow that does not make sense to me.

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Posted by rrebell on Sunday, November 7, 2021 7:06 PM

It is a mater of value and writeoffs. For example, years ago in multifamily, a pride of ownership property was worth 12x grose rents. So I raise all my rents to a certain point to get x amount of $ when selling, in the meantime you get to write off any losses and with proper timing you can turn loses into profits depending on the tax codes. In comercial real estate many propertys are triple net, the tenant pays rent, taxes and maintance.

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Posted by York1 on Sunday, November 7, 2021 7:18 PM

Billwiz
I never understood this.  In my town is a strip mall.  The owner kept raising rents.  Many successful businesses had to shut down because they could not afford the new rent.  Over the years, many empty stores - is the write off really that good?  Somehow that does not make sense to me.

 

I'm with you.  I'm not sure how it works.

I learned about it when a grocery store in our town closed instead of paying the ever-rising rent.

The building sat empty (still is) for over five years.  All that time, the out-of-state owners had to pay taxes, upkeep, etc., on the building.

I finally asked someone in town how that landlord is able to justify owning an empty building like that.  It was explained to me having to do with  taxes, depreciation, etc., but I didn't understand it.

If this is part of our tax code, then it's stupid.

My kids say they want a cat for Christmas.  Normally I do a turkey but hey, if it'll make 'em happy ...

York1 John       

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Posted by John-NYBW on Sunday, November 7, 2021 7:18 PM

Consumers vote with their dollars whom they want to see stay in business. If there is sufficient demand for a particular product, somebody will around to sell it. If a company ceases because the proprietor chose to retire, it probably means there wasn't enough demand for that company's products to make it worthwhile for somebody else to buy out the business.

It can be disappointing when a company whose products you like goes out of business but new companies are starting up to fill the void. Even if it is a new product line, somebody will meet the demand. On the other hand if it is a product that is no longer in demand, there's no reason to expect somebody else to produce it. I remember someone lamenting that Bowser was no longer going to produce loco kits. Apparently most modelers prefer RTR locos.  

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Posted by ndbprr on Monday, November 8, 2021 6:41 AM

I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now.  3D printers are coming down also. What if some programmer would make 3D programs for sale and we could print as many cars as we want after purchasing the program? Will it work for engines?No. Would it work for everything else? Probably. Modular building walls could allow any size building.  Detail parts could be had. While car bodies could be printed. This could be the future.

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Posted by Lastspikemike on Monday, November 8, 2021 8:42 AM

Billwiz

 

 
York1

 

 
ricktrains4824
New tennants are limited simply to a single different chain store, Family Dollar. All the other store fronts sit empty and unused, unable to turn enough profit to afford the higher lease/rental charge.

 

 

And the out-of-state owners are probably writing off losses the empty building incurs, so they are in no hurry to lower rents to attract tenants.

 

 

 

 

I never understood this.  In my town is a strip mall.  The owner kept raising rents.  Many successful businesses had to shut down because they could not afford the new rent.  Over the years, many empty stores - is the write off really that good?  Somehow that does not make sense to me.

 

Since I live in an oil town I can offer insight.

Typical lease terms and typical financing terms (mortgages) are five years.

The typical general business cycle since WWII  has been five years.

Property owners, their lenders and tenants can get out of sync with the cycle of expansion and recession in the economy.

When that happens you can get situations where both rent is too high  and vacant premises. 

In my town I've seen triple net rent rates for the same space in ordinary Class B or C buildings (older and long paid out premises) go from $5 per foot up to $30 per foot and back down to $5 in 30 years which is about 5 business cycles. Being an oil town explains the wild range of lease rates. If you're  not actually in the oil business you frequently go broke during a boom, paradoxically. 

Hobby shops only survive these business conditions if well capitalized. Many other ordinary businesses likewise. 

Alyth Yard

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Posted by SeeYou190 on Monday, November 8, 2021 8:49 AM

ndbprr
I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now. 

100% true.

HO scale locomotives have become a luxury purchase. Back in the day, when I was buying multiple Kato N scale locomotives to populate my dream house layout, these were luxury purchases, but only because I was buying 6-10 at a time.

Even then, the purchase was less tha half of my mortgage, not even a car payment, and not a full weeks pay even though I was a 21 year old blue color worker.

Now, an HO steam locomotive or two diesels easily exceeds a car payment and is getting into mortgage payment territory.

A locomotive is absolutely something that needs to be budgeted for a lot of households. The hobby is changing.

-Kevin

Wink Happily modeling my STRATTON & GILLETTE RAILROAD. A Class A line located in a personal fantasy world of semi-plausible nonsense on Tuesday, August 3rd, 1954.

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Posted by John-NYBW on Monday, November 8, 2021 8:51 AM

ndbprr

I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now.  3D printers are coming down also. What if some programmer would make 3D programs for sale and we could print as many cars as we want after purchasing the program? Will it work for engines?No. Would it work for everything else? Probably. Modular building walls could allow any size building.  Detail parts could be had. While car bodies could be printed. This could be the future.

 

I have no doubt this will be the future. In fact I'm surprised it is not the present. Maybe the cost of 3D printers hasn't come down enough to make selling software to print rolling stock and structures a lucrative proposition, but I don't see how that isn't going to eventually happen.

What will that do to the LHS if that becomes the reality. There will still be products that can't be made on a 3D printer and with rolling stock you still need trucks, wheels, and couplers. I can't see plastic versions of those replacing metal. Will 3D products hasten the end of the LHS, which are already fighting an uphill battle against e-tailers? Who knows, but it could take a bite out of their revenue. 

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Posted by NorthBrit on Monday, November 8, 2021 9:01 AM

SeeYou190

Now, an HO steam locomotive or two diesels easily exceeds a car payment and is getting into mortgage payment territory.

A locomotive is absolutely something that needs to be budgeted for a lot of households. The hobby is changing.

-Kevin  

 

Years ago here in the U.K.  a locomotive was produced.  If the owner wanted a different number on it  he would do it himself.

Now when a locomotive is produced there are eight or nine varients.   Different numbers,  liveries etc.    Then,  there is sound etc. etc..    A store has to have them all, yet  it is just one locomotive.

 

David

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I cannot afford the luxury of a negative thought

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Posted by John-NYBW on Monday, November 8, 2021 9:07 AM

SeeYou190

 

 
ndbprr
I think we may be entering a new phase of the hobby. HO engines are more expensive then computers now. 

 

100% true.

HO scale locomotives have become a luxury purchase. Back in the day, when I was buying multiple Kato N scale locomotives to populate my dream house layout, these were luxury purchases, but only because I was buying 6-10 at a time.

Even then, the purchase was less tha half of my mortgage, not even a car payment, and not a full weeks pay even though I was a 21 year old blue color worker.

Now, an HO steam locomotive or two diesels easily exceeds a car payment and is getting into mortgage payment territory.

A locomotive is absolutely something that needs to be budgeted for a lot of households. The hobby is changing.

-Kevin

 

It was only about 15 years ago that I bought three Hudsons with DCC and sound from Trainworld for about $130 apiece. Granted, this wasn't MSRP but those would probably retail for over $500 each today. I can't remember the last time I saw a loco with factory DCC and sound with a MSRP under $500. I looked at Rapido's Ten Wheeler and even that is well north of $500. Modern locos are so much more sophisticated than just 20 years ago but that comes with a cost. You observed a loco now costs more than computers. Maybe the cost of them will eventually come down just as it did for computers but I don't think that will happen soon. I'm glad my loco roster is pretty well filled out. I can't see paying current prices for a new one. 

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Posted by Lastspikemike on Monday, November 8, 2021 9:30 AM

Given the more or less consistent difference between diesel and steam models I infer it costs a lot more to assemble a steam locomotive. Labour cost to assemble a steam locomotive might be triple that for a diesel. 

Also, I infer a marked reduction in total demand for steam locomotives in general. Lower volume would also increase parts costs.

Finally, steam locomotives are inherently more susceptible to damage or faulty assembly. Another increase in cost.

As for comparison to mortgage or car payments I am sceptical about that. Cars and houses are now financed differently to the way these were purchased years ago. Real interest rates are now negative and have been for quite a long time now (real meaning before the markup by the lender which hasn't changed much nominally but is a much higher proportion of the cost of borrowing).  Interest rates years ago were much, much higher than they are today and positive even after inflation is allowed for. Cars have quadrupled in nominal price since the 1980's and houses? Well you can do that math. After inflation neither cars nor houses have changed much in real price and generally speaking wages are higher even when inflation corrected. 

Model locomotives are comparatively cheap now. If you compare the sticker price on a Lifelike DCC ready model to the current Walthers pricing for a similar model you'd see immediately how much cheaper they are today, after inflation is backed out. I know. I have some NIB with original retail pricing stickers still there. One even had a 15 year old plus visa receipt verifying the price paid. Used prices for NIB old but good locomotives haven't changed a whole lot nominally. Of course they are a bargain once you back out inflation, especially if they really are DCC ready like Lifelike were.

Alyth Yard

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Posted by Trainman440 on Monday, November 8, 2021 10:20 AM

Oh boy not another "this hobby is getting too expensive" threads. 

My argument to the "inflation is the only reason why things are expensive, things are actually comparatively cheap" is to compare the ONE loco that has consistentely been produced over the span of 13 years and counting (2008-2021+) with virtually ZERO upgrades, the BLI I1sa. This engine gives a good idea as to whether prices are being unfairly raised or not.  Made in the PCM era with QSI sound, then in paragon 2, paragon 3, and now in paragon 4. Assuming electronics cost roughly the same to produce/buy from QSI, I can confirm the tooling and paint is identical throughout the eras. Therefore, the ONLY thing that has changed over the years is the price. 

In 2008, the PCM I1sa MSRP was $399.*
In 2010, the paragon 2 I1sa MSRP was $399. 
In 2016, the paragon 3 I1sa MSRP was $449. 
In 2021, the paragon 4 I1sa MSRP was $499. 

Otherwise though, the price has increased $50 every 5-6 years. Bringing all prices to 2021 inflated prices, 
2008 $399 is now $509. 
2010 $399 is now $503
2016 $450 is now $515
2021 $499 is now...$499. 

These prices are a bit unfair due to the rapid inflation which occured in 2021, but it still tells a story. 

Make of the data for what you will, I think it concludes that atleast BLI is being pretty fair with MSRP prices. Although I still find $500 for a plastic loco is too much...but that because Im cheap :)


Charles

*Some possible reasons why the PCM to paragon 2 didnt increase in price could be due to only having a 2 year gap, and also BLI's paragon 2 costs less to make than buying decoders from QSI. 

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