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

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Posted by John-NYBW on Monday, November 8, 2021 3:54 PM

The primary driving force for any consumer product is supply and demand. If the price of new locos seems high, it is because manufacturers know that we the consumer will pay the higher prices in sufficient numbers for them to maximize their profits. Why would they sell a loco for $400 if they know there are plenty of people willing to pay $600. If they ask too high a price, at some point the consumer will balk and they won't be able sell enough to be profitable. There is an optimum price point for any consumer product and the manufacturers have determined that high end, sound equipped locos, with all the latest features can be sold in the $500-600 range so that is what they are charging us. 

I liken it to the cost of golf clubs. Each year manufacturers come out with new club designs. Last I looked, a top of the line new driver sells in the $500-600 range. Meanwhile, the price of the previous years models declines. That driver that today sells for $500-600 will be available in two years for around $300-400 and will be just as good as it is today. If you're really cheap like me, you go out on ebay and buy a used driver about 5-6 years old for around $100. Clubs haven't improved that much in 5 years to make it worthwhile paying the premium price for the newest models. 

Manufacturers of locos don't come out with new models every year so there isn't the depreciation that there is with golf clubs. In fact with the pre-order system that is prevelant today, it can be several years from the time a product is announced until it actually becomes available. There are enough of us that want these newer locos badly enough to pay the premium prices. As for me, I'll shop on ebay and find bargains there, even if they don't have the latest bells and whistles. 

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Posted by Lastspikemike on Monday, November 8, 2021 5:01 PM

The only driving force behind consumer prices is demand for industries like model railroading with elastic supply, I.e. no real constraints on production materials or labour.

Supply constraints only affect prices when the ability to supply is inelastic due to material or labour constraints.

Sure the actual selling price is determined by supply and demand but supply is unlimited for practical purposes. The upper limit on price is set only by the buyer as I've said before. 

For pork bellies or gold sure both "curves" are involved in setting the price but not for model locomotives. Anyone can build one of those. Supply is constrained only by the fact that most model railroaders seem to be cheapskates....

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Posted by rrebell on Tuesday, November 9, 2021 7:37 AM

John-NYBW

 

 
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. 

 

I bought a couple with dcc sound for $100 from TW and two more for a bit more (original MSRP was somewhere in the high $200's), no choice in road name or number, that and a few diesels got me commited to DCC.

 

 

 

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Posted by rrebell on Tuesday, November 9, 2021 7:47 AM

York1

 

 
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.

 

Not only is depreciation taken, it is required. Used to be the 19 year rule but that has changed (you used to have to take the full value of the non land value of what you bought evenly over 19 years whether you wanted to or not, then you get to add it back on when you sell).

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Posted by Doughless on Tuesday, November 9, 2021 8:57 AM

York1

 

 
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.

 

Don't read too much into comments that guy made.  Depreciation is simply a noncash expense that the government allows to reduce the building's taxable income, so that the owner (a shell partnership usually) pays fewer INCOME taxes. 

And then there is a LOSS CARRYBACK rule that allows said partnership to recover (get a refund) of previous taxes paid provided certain rules are met.

A building could sit vacant for a while as these carrybacks get paid, but stuff like heat, REAL ESTATE taxes, insurance, etc takes positive cash flow to pay.  And refunds of previoulsy paid income taxes don't usually carry the other monthly expenses very long.

So if there is no tenant, there is no cash flow, and the property is a cash drain on the owner.  If the owner has many other properties generating positive cash flow, he may decide to carry the vacant building out of pocket until such time as it makes sense to sell.  

Anyway, not sure what that has to do with manufacturing model trains, but just wanted to clarify.

- Douglas

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Posted by riogrande5761 on Tuesday, November 9, 2021 10:03 AM

ndbprr

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

Likely that is because of a couple factors.  A lot more computers are sold so they can be sold for less per unit.  And, computer assembly is much more automated.

OTOH, far fewer HO engines are made and there is a lot of labor/time assembling each one with all the detail parts.  Cost will be higher per unit.

 

Anyway, it looks like a lot of the posts are back to the old "consarnit! the hobby is getting way too expensive"  yet again.

And to be sure, prices are going up even faster now than before.  I bought a couple of boxes of 25 pices of Atlas code 100 flex track for $98 and change each.  In the last few months, the same vendor is selling those boxes now for $148 and change, so a $50 sudden jump in price.  If would have waited, I'd have paid an extra $100 for those same two boxes of flex track.  I also noticed Peco #8 turnouts jumped $10 each in price, from $29.98 to $39.98.  Fun fun!

And to rub salt into the track supply wound, MicroEngineering is going up for sale.  If someone does buy it and take over production, we will be down to Atlas, Peco and Walthers primarily.  Good for them perhaps.

Rio Grande.  The Action Road  - Focus 1977-1983

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Posted by dknelson on Tuesday, November 9, 2021 10:21 AM

It would seem that an earlier era of model railroad manufacturers was prepared to think in terms of a longer time frame to amortize the costs of tooling design, instruction sheet artwork and text, product packaging, and the other expenses of production.  It is getting pretty evident that the current thinking is very different -- hence the short production runs, pre-orders, and all the other features we live with.  Two differences between then and now (already discussed or at least alluded to earlier in this thread): what we think of as model railroad manufacturers are really no such thing.  They are importers, true they are importing to their order much as the brass locomotive importers did back in the day.  Since they no longer really control the means of production, they cannot rely on this factory still producing that tooling like they could when they owned and controlled everything.

The other thing that has really changed is the whole notion of inventory and warehousing.   This is why Walthers for example no longer carries many of the smaller speciality lines of parts and detail items.  Way back they were more inclined to assume they'd make their money some day.  So once again, increasingly at least certain products are more a "once and done."  

In some important ways note that we modelers have benefitted from this change.  Back in the day, we lived with the inaccuracies and downright fabrications in the Athearn, Mantua, and Varney lines for years and years because we loved the low prices.  And that had a negative impact on the availability of better and more accurate models which regardless of distribution and manufacturing philosophy were going to have to cost more.  Indeed Linn Westcott over and over in his editorials in Model Railroader said that the intense desire of model railroaders for cheap prices was holding back the hobby -- but even MR in the Westcott era would often snicker in "Trade Topics" product reviews that this or that product seemed over priced.  So even MR was part of the "problem," assuming it was a problem.  Having said that, when Kurtz Kraft created their detailed and accurate model of a PS1 boxcar and packaged it to see for 79 cents unpainted, and 89 or 99 cents lettered (no trucks or couplers) it still failed.  The interest in prototype accuracy just was not there then; it is now.  And we pay for it.

As consumers, we model railroaders are a funny bunch of folks.

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Posted by snjroy on Tuesday, November 9, 2021 10:47 AM

Manufacturers follow demand, period. I'm not surprised by the high cost of new locos given the extensive availability of used or old new items available at lower prices. Athearn is a bit of an exception with their Roundhouse line, although it is based on older tooling. And new locos have a lot more technology than those sold 50 years ago.

I haven't done the math, but I really don't think there are less manufacturers today than in the 60s. The Internet has opened up the market and allows more "niche" manufacturing. In the early 90s, modeling narrow gauge was unthinkable in my neck of the woods. Now, with the Internet, I can access good used equipment, I can buy equipment from smaller manufacturing operations like Funaro and Camerlengo, and bonus, I can "make" my own rolling stock with 3D prints sold online.

Simon

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Posted by Lastspikemike on Tuesday, November 9, 2021 2:37 PM

Model railroad manufacturers hire the factories rather than owning them but I'd be surprised if they didn't buy and own the tooling for their particular models. Mind you, it appears to me that there's a bunch of borrowing or renting of tooling going on these days. Plus, why wouldn't you lease out your tooling once you'd sold your run?

Finally, since tooling is made CADCAM nowadays it might be very tricky to retain effective ownership if the computer files reside in a Chinese computer for very long....

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Posted by xboxtravis7992 on Tuesday, November 9, 2021 5:12 PM

Lastspikemike

Model railroad manufacturers hire the factories rather than owning them but I'd be surprised if they didn't buy and own the tooling for their particular models. Mind you, it appears to me that there's a bunch of borrowing or renting of tooling going on these days. Plus, why wouldn't you lease out your tooling once you'd sold your run?

Well, yeah they do lease out tooling to other companies in the industry. Tooling is expensive, and any path to pay off the cost is vital. While model companies do not own the factory, they certainly own tooling and will loan it to other model companies when possible. From what I understand, most of the model railroad manufacturers are actually on pretty cordial terms with each other and willing to collaborate on tooling when possible. 

Also don't expect manufacturing to really switch to more domestic supply lines either, model railroading is such a thin in the margins industry already that paying for domestic labor costs and hiring is almost impossible. Yes, its frustrating when a container of models gets stuck in a ship for weeks, ends up trapped in a railyard waiting to offload for a few more weeks, then gets stolen at the border and goes missing for a few days until the police find it (if you follow Rapido's social media you know exactly what I am talking about). But unless automation can suddenly slash costs, models can hardly be manufactured domestically in bulk anymore unless we suddenly all decide we are willing to pay much much much more to cover the overhead that would bring. The people who can pull it off are rare (like Kadee), and the horror stories of people trying to produce domestically without any planning for it (think like... Value Trains USA) show that it is despite the boon of cutting out trans-Pacific shipping, is more of a hassle than its worth. 

As for some of these operations listed as having shut down earlier, its probably important to denote the difference between corporations and one man operations. Many one man groups aren't in this for the money and doing it out of love for the hobby, but their products will vanish when they retire or die if they don't make an effort to pass on their operation. Again, another case were their bottom line as thin as it was is probably being cut into with the wider access to equipment like 3D and Resin printers, laser wood cutters and even CNC milling now available to more people. While a custom cast brass detail component might be of a higher quality than a resin print one, the resin print is cheaper in small batches, easier to produce on demand and can fit the needs of the model industry without needing to invest in more expensive equipment. 

I encourage anyone who has access to RMC to read the columns Jason S. from Rapido has been writing there these last few months. Great insights into "behind the curtain" as to what the model railroad industry is doing, and the challenges it faces.

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Posted by John-NYBW on Tuesday, November 9, 2021 5:28 PM

xboxtravis7992

 Many one man groups aren't in this for the money and doing it out of love for the hobby, but their products will vanish when they retire or die if they don't make an effort to pass on their operation. 

 

The first name that came to mind when I read this was George Selios. There's no doubt he loved the hobby but he also made his living from it. He did it for the money AND his love of the hobby. I suspect most of the one man operations had the same motivations. I doubt anyone got rich from the hobby given it's limited customer base, but apparently some made a living from it. I'm sure for others it was a way of supplementing their income. 

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Posted by NittanyLion on Tuesday, November 9, 2021 6:55 PM

I will say the only thing that raises my eyebrow is why track costs what it costs.  It is pretty straightforward a product, isn't it.

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Posted by rrebell on Tuesday, November 9, 2021 9:42 PM

NittanyLion

I will say the only thing that raises my eyebrow is why track costs what it costs.  It is pretty straightforward a product, isn't it.

 

Limited demand and compatition. Once you build a layout and that is if you do, then you don't need or want any more track and there are lots of track brands including hand laying. I can think of a dozen that are still in buisness and many more that are not but it is still out there. There are those that still use Tru-scale. Last you have the many gauges and types of track. Shinohara made over 50 types of track in HO alone.

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Posted by wjstix on Wednesday, November 10, 2021 1:40 PM

Trainman440
These prices are a bit unfair due to the rapid inflation which occured in 2021, but it still tells a story. 

2021 is particularly difficult, because prices dropped drastically in 2020 due to Covid shutdowns which caused 14% unemployment (and other problems), and then this year started bouncing back to around where they would have been without Covid. Then you get a shortage of truck drivers and longshoremen and products can't get delivered, causing shortages and driving the prices up more. 

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Posted by Darth Santa Fe on Monday, November 15, 2021 12:53 AM

Southgate 2

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

Speaking of NWSL, 2 of their employees just passed away a couple weeks back.Sad  They're planning to stay open and pull through, but things could be difficult for them for a while.  According to them, those two (Mark and Jody) were half of their work force.

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Posted by PRR8259 on Monday, November 15, 2021 11:53 AM

Well, I was buying trains during 2020 and I did not notice any price drop at the time?

My dealers did sell out of all steam locomotives at a point as people I guess were populating their bucket lists of locos.

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Posted by rrebell on Tuesday, November 16, 2021 10:53 AM

No price drops I noticed, price increases now though on everything.

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Posted by jmbraddock on Tuesday, November 16, 2021 12:45 PM

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.

 

 
There are several real world problems with this thought. First, the person who takes the time to design the car for 3D printing deserves some remuneration for his/her efforts.  How will they be able to feed their family with everybody sharing their design and printing thousands of cars.
 
Second, 3D printing large items is not cheap.  Besides the cost of the printer, the cost of filament or resin adds up very quickly and before you realize it, you could have purchased a car much cheaper, which leads to the third problem.
 
A 3D printed car needs finishing before it can be used for its intended purpose. Not only is there the finishing that every 3D printed object requires, but there is assembly, painting, decaling, adding trucks, wheels and couplers.  Is your 3D printed car going to have molded details for grab irons and stirrups or wire ones? If molded, an Accurail car at $15 will be significantly cheaper than what you will have to invest for the 3D printed one and depending on one's modeling skills will look much better, too.
 
Don't get me wrong, 3D printing is great for things that aren't readily availbe.  I think on MR's Beer Line, Cody had cement trucks 3D printed for the specific era being modeled because nobody sold a commercial one. Likewise, 3D printing something to be used as a pattern for a mold makes a lot of sense or for a scratchbuilder trying to duplicate exactly some feature of a building or locomotive or car, etc.
 
But it simply doesn't make sense, economically, for an item already being produced.  
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Posted by jmbraddock on Tuesday, November 16, 2021 12:59 PM

rrebell

No price drops I noticed, price increases now though on everything.

 

 
Blame the increases on shipping container prices have increased from $3800 to $17000 in the past year.  In the past, the selling price of 10,000 widgets per container would have included $0.38 shipping cost per widget.  Now it is $1.70.  That's the cost increase to the manufacture who needs to increase his price something more than that to maintain his profit margins.  That means the cost to the wholesaler has now increased and they, too, must increase prices to maintain their profit margins.  Finally, the cost to the retailer goes up and they, like everybody else in the supply chain have to increase their prices maintain their profit margins.
 
Shipping from overseas is something that manufacturers have very little control over.
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Posted by cv_acr on Wednesday, November 17, 2021 12:23 PM

John-NYBW
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.

Perhaps because it doesn't really work that way, exactly.

You don't make/sell "software to print rolling stock and structures". 3D models can be created with any number of drawing programs, and several decent ones that are perfectly capable are even free licenses (for personal non-commerical use only). The printers are ~$500, and come with the software they need to process a 3D model for printing.

Where people in the hobby come in is creating the 3D models themselves, and while you could charge money for someone to download your model, once one person has downloaded it, it can be copied and you lose control. It doesn't seem like there'd really be any sort of reliable money in this scheme. And it's a question of what will people be willing to pay for just a digital file?

What IS happening is that small cottage makers are 3D printing models and selling them as kits - this doesn't in any stretch of the imagination ever come close to competing with RTR manufacturers, but fills in some of the space that has always been home to small resin craftsman kits makers.

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Posted by xboxtravis7992 on Thursday, November 18, 2021 10:23 AM

cv_acr

 

 
John-NYBW
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.

 

Perhaps because it doesn't really work that way, exactly.

You don't make/sell "software to print rolling stock and structures". 3D models can be created with any number of drawing programs, and several decent ones that are perfectly capable are even free licenses (for personal non-commerical use only). The printers are ~$500, and come with the software they need to process a 3D model for printing.

Where people in the hobby come in is creating the 3D models themselves, and while you could charge money for someone to download your model, once one person has downloaded it, it can be copied and you lose control. It doesn't seem like there'd really be any sort of reliable money in this scheme. And it's a question of what will people be willing to pay for just a digital file?

What IS happening is that small cottage makers are 3D printing models and selling them as kits - this doesn't in any stretch of the imagination ever come close to competing with RTR manufacturers, but fills in some of the space that has always been home to small resin craftsman kits makers.

 

 

Again the method of manufacture is important. As you said, small 3D printers can't keep up with the demand for anything larger than small batches. Injection molding while more expensive to invest in at the start, in the long term is better for anything with a huge production run due to its speed and reliability. 3D printers though will be the bread and butter though of the cottage home modeling industry, as people will use it to do small batches of stuff the major manufacturers will never touch. 

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Posted by SeeYou190 on Saturday, November 20, 2021 9:00 AM

xboxtravis7992
3D printers though will be the bread and butter though of the cottage home modeling industry.

I hope so. I loved the small cottage industries and their unique offerings.

-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 Bayway Terminal on Saturday, November 20, 2021 11:26 AM

i have been a commmercial real broker in New Jersey for 32 years, the most simplistic answers why retail stores in the US are becoming a distant memory is Amazon,Walmart,Target, these are anchor stores for most regional of local shopping centers who pay the least amount of rent psf. Now it has become mass market online trading of consumer products deliverd direct to your door from 1,000,000 SF warehouses nearby stocked daily with products produced in China, notwithstanding Corporate American Greed reflecting on balance sheet returns. If its cheaper to Mfg. a product overseas and load a container with thousands of items , and with up to 12,000 containers on one vessel, and offer a discounted price online there will always be an interested buyer 

Should I mention Factory Direct Trains or Train World?  Bayway Terminal NJ

 

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Posted by rrebell on Monday, November 22, 2021 9:47 AM

Real problem with labor in this country is the extras that companys have to pay like family leave, health, retirement, workmans comp ect. etc. The company that pays out $20 in wages can be paying double or more. I was always anoyed when not working indipendently that I had to take a lunch or the fact that I could not work overtime because of the cost to the company, I just wanted more of my regular wages, I wanted to work at least 12 hour days, when independent this was normal and when things had to get done by a certain time we worked even longer.

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Posted by Lastspikemike on Monday, November 22, 2021 3:19 PM

And taxes of all kinds. Low wage economies are low taxation economies. That's not a coincidence. Income and sales taxes are all labour taxes in reality. 

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Posted by Bayway Terminal on Wednesday, November 24, 2021 10:46 AM

And lets not forget what a gallon of diesel fuel cost last year as opppsed to today, shutting down exploration & drilling of energy reserves in North America together with interstate pipelines will continue to increase the cost of imported products to the end consumer, believe it or not the largest consumer of diesel fuel in the US is the Union Pacifc Railroad, this is why low cost CNG & LNG together with hydorgen power fuels are being developed, electric fuel cells will not suffice for powering a 100 car double stack unit train or a 250K ton Pacifc Ocean container ship crossing from Singapore to LA. The profit margins for tooling and manufacturing products overseas including model trains has to be a sustaining investment for investors on both side of the planet, the only way to remain the the "Black" is to pass on the difference of the inflated cost to the end consumer, and cutting out the middleman retail stores by selling at a discount to hobby warehouses or factory direct retailers who purchase entire containers of produts at discounted rates, unfortunately our beloved hobby has become a victim amoung others who rely on a foreign based supply chain to the US. OPEC being #1 .  Bayway Terminal NJ

 

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Posted by rrebell on Wednesday, November 24, 2021 11:28 AM

Yes the world has changed but then it always dose. And yes volume is everything, selling ones and twos of things is costly.

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