[Gary]

Richard said:-

Re:- Hornby Select QUOTE Probably explains their quick graduation to 99p ebay sales I suspect.

Yes I agree that on the face of it this is not positive however....

Gary said:-

QUOTE That dealer on eBay has gone to the Hornby wholesaler (which I could do also!), picked up a few Hornby Digital trains sets for £60 wholesale, split them up, and is simply selling the contents off seperately with all items starting at 99p. There is a profit to be made and he is making it. Whether it is right or wrong to do this is an entirely seperate argument but he is simply a small time box shifter taking advantage of the fact that Hornby supply to wholesalers.

All his listings start at 99p not just those for Selects. Its not what they start for its what they sell for that matters for that seller and that dealer will be making a profit on every Select sold and every buyer will be a new DCC entrant so its a win win situation for everybody except official Hornby stockists.

Hornby wholesalers do cheese off official Hornby stockists as it permits small time eBay traders to undercut official stockists with the practice of breaking up sets purchased from a wholesaler and auctioning the contents off cheap.

Nothing wrong with official Hornby stockists who choose to do this but what about those who have absolutely no link with Hornby, buy through a wholesaler, and are simply in it for a quick buck?

The issue is of course that Hornby sell very large volumes to sheds (Argos, Toys R Us, etc) and catalogues (Littlewoods, etc) and get returns so passing these items to wholesalers seems to be the only way of clearing unsold stock. But then Hornby do also supply new stock to wholesalers.

Would anybody have any comment to make?

Are you happy to buy from traders in it for a quick buck?

Does such a thing as loyalty to a local stockist or an official online retailer with a bricks and mortar shopfront exist?

Happy modelling
Gary

 

[ozwarrior]

I am not an expert on the present day UK but I'd suspect there's not much that can be done.
Over here I think the current wholesaler is damaging the brand as their commitment seems half-hearted at best. It also I would think add another tier to the pricing with the inevitable consequence of overseas purchasing by the modeller. I know exporters have a VAT advantage but I would cop 10%-15% difference and buy local. I wonder whether it would be better for Hornby to have a non profit warehouse or something?

 

[Richard Johnson]

The maths tells the story: One larger pie (RRP) cut into three slices, when a smaller one cut into two would be better for all concerned.....

True wholesalers rarely operate on less than 35% Gross margin. Not excessive really when proper stocking and service is (was) provided, but few of them seem to do that now. Even warranty seems to be bumped back to the Mfr direct (if U want any form of speedy service that is!).

Retail RRPs are usually based on more than 40% margin (not mark up). Also not excessive - it costs a lot of money to have and run a proper shop, and there is B all support from wholesalers really now.

RRPs are set to reflect this and more - 100 at distributor/wholesaler cost therefore = 100+ 35%GM + 40%GM = $256. Of course discounting may take this back but not by that much really.

But.... Why have the wholesaler at all if he's less than proactive for the brand - it just increases costs all thru the distribution chani - to me, in 2007 there is NO place for this level of margin in a global market, and where there is a wholesaler should give exceptional service inc perfect warranty help to justify it, not dump warranty responsibility back to the brand.

Personally I think that now, a single Mfr based distribution is far more sensible especially as global import export is now simpler than it was a generation ago too - the world is one big "free market" now with few restrictions, and its not really any harder to send a parcel to Perth Australia or Perth Scotland..... even delivery timesae ot that h loger!!

That would allow retailers a better survivability margin wise, slightly more for the Mfr to cover the "many smaller shipments" and give one less potential middleman problem - all whilst keeping the price on a more consistent global level.

Richard

 

[Gary]

The role of an overseas distributer is different to a UK wholesaler and their relationship with Hornby no doubt is somewhat different too as are the margins that they require for their respective enterprises.

Potential overseas distributers will approach Hornby so the power is with Hornby unless the distributer is exceptional (Walthers in the USA for example).

Hornby actually do need a UK wholesaler for a number of reasons so the power is with the wholesaler. For a wholesaler stocking Hornby might be a bit of a pain due to the randomness and unseasonal nature of the supply so Hornby probably have to make it worth his while.

Going back to the Hornby Selects on offer on eBay it would not surprise me at all if these are factory returns that are visually sound with the units in good working order. Packaging gets damaged and Toys R Us (and others) get customer returns for whatever reason and Hornby have to take this on the chin. One of the risks of dealing with a big American company.

The only way to guarantee that you are purchasing Hornby first quality seal wrapped product is to buy from a recognised Hornby stockist.

If buying on eBay then caveat emptor.

Happy modelling
Gary

 

[Richard Johnson]

Hello Gary

You said: "Hornby actually do need a UK wholesaler for a number of reasons so the power is with the wholesaler"

And the reasons are??? Please to tell - this is an area I have great depth of experience in, in several countries, so I'm interested.

FYI I spent most of my life setting up affiliate companies and involved one way or another in global and local distribution. There is no difference in scenario in any country actually, the only true differences are minor detail...

Always, A local affiliate is far more efficient if justified / if market prices and brand value and control are important.

The simplest decision is to outsource distribution to a wholesaler to prevent the need for direct overhead - it looks better on the balance sheet and then there is no need to manage a competent sales force - which is harder than it might seem. Sadly using third parties rarely helps the consumer though, always increasing prices and it always results in less Mfr control and dilution of retail margins / narrowing of the real traditional retailer base.

Richard

PS - Just forget the Select - its not relevant to this issue, and any number of your scenarios won't change reality.

 

[Richard Johnson]

You Said: "The role of an overseas distributer is different to a UK wholesaler and their relationship with Hornby no doubt is somewhat different too as are the margins that they require for their respective enterprises"

*** Actually, Bollocks.
This area is the core of my lifes work in the corporate sector, in which I had a global role relating to distribution planning and strategy... that is what the core of marketing really is - product evolution coupled to strategy and distribution planning - nothing to do with selling as such.

The role of distributor and wholesaler is precisely the same, the scope may be bigger or smaller location related issues and needed infrastructure are only marginally different.

Relationships are different only in administrative areas and levels of comunication. Pricing is usually better for export / overseas distribution - marginally.

Distance does not change function and purpose especially in relation to branded products. Nor does it change the impact on pricing - levels may vary slightly but the figures quoted are quite valid globally in general terms.

Richard

 

[Gary]

QUOTE You said: "Hornby actually do need a UK wholesaler for a number of reasons so the power is with the wholesaler"

And the reasons are??? Please to tell

How do you suppose Hornby dispose of returns and excess stock? If there was a big skip in the yard at Hornby Towers I would be down there like a shot!

They will offer returns and excess stock to RoS, Hattons, Ontracks and others but they don't always take it.

Hornby may have superb state of the art stock systems however Hornby are obliged to order from China in batches and this inevitably means ordering more than you have trade orders for. Hornby do have their own online sales which helps here but even so its better for cashflow to use a wholesaler. This batch thing is of course one of the disadvantages of Chinese production but I guess the advantages outweight the lack of production flexibility.

Hornby's terms also do not favour the small shopkeeper so that is where the wholesaler comes in. There are probably more Hornby outlets in the UK that use the main wholesaler than deal direct with Hornby!

So a good relationship with a large wholesaler is essential to the smooth operation of Hornby PLC. There are not too many around as Hornby create niche products that general wholesalers simply are not interested in.

The Bachmann Europe operation is on a much smaller scale than that of Hornby and they dispose of returns and excess stock at the shows they attend.

If Bachmann Europe produced 500,000 sets then they too would require the services of a wholesaler!

Getting back to whether it is good or bad for the hobby to use wholesalers clearly it permits online only traders to set up. And they could offer batches of products on ebay for reasons outlined above therefore it would be wrong to use eBay as a barometer to determine the success or otherwise of a product. And online only traders can damage the margins and trade of bricks and mortar shops who then cease trading.

Without bricks and mortar shops some say the hobby will die!

Happy modelling
Gary

 

[Brian Considine]

QUOTE (Gary @ 24 Sep 2007, 17:02) <{POST_SNAPBACK}>If there was a big skip in the yard at Hornby Towers I would be down there like a shot!

Years ago there was !

 

[adecoaches26point4]

Richard,

Well put

Glad to see you have a pair

David

 

[Richard Johnson]

Hi Gary: Answers in text:

(Quote) How do you suppose Hornby dispose of returns and excess stock? If there was a big skip in the yard at Hornby Towers I would be down there like a shot!

***Answer: When I ran affiliate companies for a major Japanese Car audio Brand reworks were kept for (a) exchange for faulty stock direct to consumers to make serice time shorter (

to strip for spares so servicing wasn't delayed and © to sell to retailers to give them "special offers" to encourage success during shows and promotions.

However, quality was such that the quantities were never high.

If H have so many that they need a dumping ground they have a real problem intheir inability to explain their quality requirement, properly control manufacturing specification and acceptance QC procedures! If they did this properly faulty goods wouldn't be shipped to them.

(Quote) They will offer returns and excess stock to RoS, Hattons, Ontracks and others but they don't always take it.

*** And?? What has this to do with distribution structure - this is an issue related to product rework and quality of inventory management.

(Quote) Hornby may have superb state of the art stock systems however Hornby are obliged to order from China in batches and this inevitably means ordering more than you have trade orders for.

*** But if Hornby have such a disposal problem they neither have good stock/ purchasing systems nor good planning ability.

Batch production has been a fact of life in every industry for decades... It is irrelevant to the discussion, they are the cause of their problem, not a victim of their suppliers.

(Quote) Hornby do have their own online sales which helps here but even so its better for cashflow to use a wholesaler. This batch thing is of course one of the disadvantages of Chinese production but I guess the advantages outweight the lack of production flexibility.

*** Direct Online sales are a definate no-no if you want committed or enthusiastic retailer support. They should showcase but offer a list of online retailer suppliers NOT take bread out of the mouth of local retailers.

(Quote) Hornby's terms also do not favour the small shopkeeper so that is where the wholesaler comes in. There are probably more Hornby outlets in the UK that use the main wholesaler than deal direct with Hornby!

*** That doesn't make sense. If Hornbys direct terms favoursed the small retailer then the small retailer would buy from Hornby. The way small retailers in UK tell the story, they are forced to buy at a higher price from wholesalers and therefore bleed badly when they cannot compete with large retailers who get a far better deal direct from Hornby.

(Quote) So a good relationship with a large wholesaler is essential to the smooth operation of Hornby PLC. There are not too many around as Hornby create niche products that general wholesalers simply are not interested in.

*** There are plentry of wholesalers: The question was is it necessary. Given your arguments, there is actually NO NEED, but Hornby choose to work that way.

(Quote) The Bachmann Europe operation is on a much smaller scale than that of Hornby and they dispose of returns and excess stock at the shows they attend. If Bachmann Europe produced 500,000 sets then they too would require the services of a wholesaler!

*** Globally Bachmann is actually not as small as you think, and Hornby is no where near as big... They do choose a different structure, and to me, returns from them too would be better placed as support for retailers who need promotable specials.

(Quote) Getting back to whether it is good or bad for the hobby to use wholesalers clearly it permits online only traders to set up. And they could offer batches of products on ebay for reasons outlined above therefore it would be wrong to use eBay as a barometer to determine the success or otherwise of a product. And online only traders can damage the margins and trade of bricks and mortar shops who then cease trading.

*** Hornby could control things far better than they do in relation to distribution. Online traders are fine but the terms of trade should balance between online, sub-distribution and direct to bricks and mortar retailer so some form of survivable equity exists. The way its being done is damaging to the bricks and mortar guys. ANY reseller who buys from H and uses Ebay could easily be stopped if they tried... there are many ways to skin that cat.

(Quote) Without bricks and mortar shops some say the hobby will die!

*** We agree on that: Shame H aren't doing their best to assist their survival.

Richard

 

[Brian Considine]

QUOTE (Richard Johnson @ 25 Sep 2007, 02:51) <{POST_SNAPBACK}>(Quote) Hornby's terms also do not favour the small shopkeeper so that is where the wholesaler comes in. There are probably more Hornby outlets in the UK that use the main wholesaler than deal direct with Hornby!

*** That doesn't make sense. If Hornbys direct terms favoursed the small retailer then the small retailer would buy from Hornby. The way small retailers in UK tell the story, they are forced to buy at a higher price from wholesalers and therefore bleed badly when they cannot compete with large retailers who get a far better deal direct from Hornby.

That's exactly why we do not stock Hornby International - we cannot sell what we cannot stock, so potential sales to our regular customers go esleware.

 

[Gary]

QUOTE (Quote) Hornby's terms also do not favour the small shopkeeper so that is where the wholesaler comes in. There are probably more Hornby outlets in the UK that use the main wholesaler than deal direct with Hornby!

*** That doesn't make sense. If Hornbys direct terms favoursed the small retailer then the small retailer would buy from Hornby. The way small retailers in UK tell the story, they are forced to buy at a higher price from wholesalers and therefore bleed badly when they cannot compete with large retailers who get a far better deal direct from Hornby.

Hornby have a direct sales team. They can only visit so many outlets in an area.

Is it worth expanding the sales team so that they can visit shops who only want to take half the range and 1 of each product?

This also involves expansion of the account team, the despatch team and so on.

What would you do if it was you and your business?

Refer small traders to a wholesaler and at the same time support product sales through your customer service department?

It is very easy to provide counter arguments. It is much harder to provide workable solutions. Policing how traders merchandise their goods seems a bit Orwellian.

Happy modelling
Gary

 

[Ravenser]

It would appear that some German brands sell direct to the retailer in Germany but only to a wholesaler in other European countries (eg France) . As a result prices for German brands are normally around 20-25% higher on one side of the Rhine than another. In this day and age it does seem an odd way to do business , and it can hardly help sales if what is often already a premium priced product is subject to a further substantial mark up , not a penny (or eurocent) of which goes to the manufacturer.
Bad for the French detaillant, bad for the modeller, bad for the manufacturer. Bad for the envirionment as people drive into western Germany...

As a matter of curiosity , I gather someone is flogging new Select units on ebay. 99p may be the starting point for bids but I'm slightly curious where the price is ending. £1.05p, £10, or £30? This appears to be a real world test of what people think a Select is actually worth

 

[Richard Johnson]

Gary

Your last line is actually quote valid in some ways... but to tackle first your "Orwellian" comment. Close strategic management of reseller pricing is a constant battle for a company that values its brand and its clients - in all product groups and everywhere!!

It is essential to try to create a stable reseller price globally. It has to be done sensitively as you cannot legally regulate, but you CAN easily discourage extreme activity by restricting supply, reducing indirect support such as advertising monies and insisting on terms of trade that make it beneficial to toe the line properly. Strong brands do all of this, consistently, and resellers react by supporting the brand as they see their own risk as being less because the brand is well managed.

It is a conscious choice how a brand markets. It needs to have a sensible balance of both short term success and long term consolidated growth. Its easy to be a shooting star and break confidence of many clients - bloomin hard to grow constantly and preserve relationships.

It depends very much on how hard the upper middle management are prepared to work, and how good they are. It is difficult to cover all potential clients equally. It is difficult to manage a competent sales force.

A level playing field is the only way to make sure that balance exists and therefore loyal support will follow from the retail sector as a whole, not just part of it.

The most important thing is to create equity among clients opportunity wise. That may mean rep visits to middle and larger dealers only, but it should not prevent small dealers having regular email, phone or customer service access on the same levels.

One thing I always did when structuring a distribution was to ensure that all clients irrespective of size had equal access to product at exactly the same price - a 10 million dollar client had the same invoice cost per item as the smaller retailer. Differences came in promotional support, degree of sales education investment, added merchandising and show support. I balanced that with combined support for smaller retailers at regional events, whereas larger retailers had their own individual support at major events.

Order distribution was always strictly on a time of order basis, so there was benefit in making quick decisions - and often if product was oversold every small dealer got some at the expense of bulk purchasers.

This is all just vapourware discussion of course:

This isn't what happens really, but then again, your original question was "are wholesalers <between brand and retailer> good for the hobby. To me, the answer is that they are sometimes good for the easier life of the sales director of the brand, but in reality are neither good for the brand nor the retailer.

BTW you do I hope realise that the core of my comments is absolutely NOT aimed at H or any other brand specifically, but at the need to preserve the future of the bricks and mortar reseller at the same time as maximising the brands income reliability... there's simply no point...or future otherwise.

Regards

Richard

 

[Gary]

QUOTE As a matter of curiosity , I gather someone is flogging new Select units on ebay. 99p may be the starting point for bids but I'm slightly curious where the price is ending. £1.05p, £10, or £30? This appears to be a real world test of what people think a Select is actually worth

The same can be said of course for any DCC equipment auctioned on eBay. What premium would you put on buying a sealed boxed unopened example from a bricks and mortor or online official stockist against one that has been opened and is from a set?

I had an option recently to buy £300 of Digitrax equipment including a sound decoder for £130 although this was secondhand. I offered £90 tops which was turned down.

Why not become a watcher and see for yourself? My guess is they go for about £25 to £35.

Richards last comments are very interesting and possibly not far from reality. eBay being the uncontrollable beast that it is makes life very difficult indeed for those wishing to market a brand and retain a loyal dealer infrastructure. Maybe Hornby Railroad will help here however even now there is Hornby Railroad appearing on eBay!

And whilst not really a wholesaler thing we should mention Bachmann limited editions...

On the other hand it could be argued that eBay is very good for a brand when you see brand items fetching massive premiums on eBay! Its the source of these items that is the issue here.

A slightly Machiavellian thought but maybe Hornby and Bachmann seed eBay with certain items occasionally to generate brand discussion....

Happy modelling
Gary

 

[ebaykal]

Hi all,

For what its worth, tought it might be interesting , the site which is the Turkish equivalent of e-bay: model trains
Its all in Turkish but principle is the same.

http://oyuncak.gittigidiyor.com/Model-Tren...eri_W0QQkatZZin

You will see Hornby products as well.

Baykal

 

[Gary]

100 Turkish Lira is about £40 or about €65.

One picture one line and the kit seems to fetch big money! The Turks are model railway crazy I tell you!

Even more so than the Germans!

Happy modelling
Gary

 

[ozwarrior]

QUOTE (Gary @ 26 Sep 2007, 00:29) <{POST_SNAPBACK}>The Turks are model railway crazy I tell you!
Even more so than the Germans!

Happy modelling
Gary

Do they model their own or do they buy German mainly?

 

[goedel]

QUOTE (Gary @ 25 Sep 2007, 14:08) <{POST_SNAPBACK}>eBay being the uncontrollable beast that it is makes life very difficult indeed for those wishing to market a brand and retain a loyal dealer infrastructure.
Sorry for going off at a tangent but more generally, what is a brand, if not a logo and a fuzzy cloud of misconceptions spun to the consumer? Surely a tool for tricking people, for complicating their lives unnecessarily and selling them things they don't actually need...

eBay is the next logical step in globalisation of capitalism - A sells directly to B regardless of where they are - a market place that anyone can visit and where the most curious desires can be matched with to a product swiftly. And always the margins get tighter and everthing gets faster and more desperate and more of a nightmare...can sales in all markets grow forever? No, of course not. But when will companies accept that 'growth' has actually become cancerous and is killing the planet, in all senses of the word, it feeds off?

I'm obviously stark raving mad...but the Titanic of Globalised Capitalism is surely on an accelerating collision course for the Iceberg of Global Desertification, presumably with the Third World sliding into anarchy and darkness while the First World grows ever more frantic, unbalanced and inhuman?

Goedel, who has gone to lie down...

 

[Richard Johnson]

You Said:
But when will companies accept that 'growth' has actually become cancerous and is killing the planet, in all senses of the word, it feeds off?

I'm obviously stark raving mad...but the Titanic of Globalised Capitalism is surely on an accelerating collision course for the Iceberg of Global Desertification, presumably with the Third World sliding into anarchy and darkness while the First World grows ever more frantic, unbalanced and inhuman?

Goedel, who has gone to lie down...

*** Hmmm Now you've started something.

There's a school of thought that says human evolution and inventiveness is largely a product if its grouped isolation and differences creating needs that are solved slightly differently group by group

* And that The Global village created by the Web takes away the differences or need for independent solutions

* So that whilst it might initially create a short term knowledge nirvana

* BUT that Long term it will create a slowing of need to independently invent and create solutions so that evolution of thought slow down, diversity reduces and therefore it will cause stagnation

* And the human race as a whole will not develop as strongly as the "Independent Knowledge Pool" will shrink.

And.....

Ebay may be similar. It is a useful tool as created for digital boot sales BUT it is getting hijacked and so becomes a cancer to the orderly distribution of products.

So the orderly distribution will shrink.

So the brands will not have the direct incentive to make new models or large qtys.

So the ranges may shrink and the availability drop.

SO... Ebay that was grown by users with an eye to a bargain will end up bidding for rarer and rarer items.

And Ebay will turn on its own roots by becoming the CAUSE of cost increases.

MT TURN to lie down - Move over Goedel and share the pillows

Richard

PS: Ebay should be banned for new product sales, and WHolesalers are still not good for the hobby if direct distribution Mfr to Retailer is a possibiity!!