Good afternoon:

This is a buyers' market, and as buyers, we have more variety and better prices than we would have in a noncompetitive market. In such a playing field, when expendable income becomes increasingly tight due to world economic fluctuations, competitive sellers squeeze their profit levels. They are forced into lowering prices in their efforts to remain in businesses that survive in the short run to successfully compete for consumer expendable incomes, while consumer spending is low. For the purpose of example, look at the recent prices on HDTV’s. A year ago you were not going to see them in the $500 to $600 price range, but now you do. Smaller manufactures/importers also have to follow suit to survive in the present marketplace regardless of their much lower production.

Will the retail prices of O gauge trains then, follow in this trend by offering consumers lower, more competitive prices on products in their efforts to maintain a healthy albeit smaller profit margin, or will they continue to offer trains in the $700 to $1,000+ range as people’s expendable incomes continue to dwindle?

The fierce competition to get your “toy train dollars” has always been a tough fight indeed, but one worth fighting. Otherwise we would not see so many in the industry competing for sales, by further increasing their investment dollars in new products year after year. Granted, they will attempt to stay afloat in a myriad of marketing strategies: Lionel “Postwar Conventional Classics” for example, or as I like to refer to it: “Williams by Lionel, by Lionel again”!

In spite of the introduction of more lower priced sets, which the future of the hobby is dependent upon, along with the inclusion of incentive gimmics such as fifty dollar coupons in item boxes to use toward next years offerings, more must be done to attract the seasoned hobbyist’s attention, and entice him to spend what money he may have left at the years end to spend on trains.

I for one am not interested in another post war reissue from 1947 –1956 no matter how often I am bombarded with nostalgic art renditions of that period’s toy trains. Let us face the fact that these “Classics” have run the gamut, and could be offered as a buy one get one for ½ price and still be profitable for the company who has the cleaned up sixty+ year old tooling. Obviously that is not going to happen, and of course I am being facetiously arrogant here.

Let the high-end products price war begin among the major players, and shall the fittest, brightest, and most creative competitors survive the present long-term worldwide inflationary times we must all endure by tightening our belts a bit: theirs as well as ours.

Bruce E. Vincelette, TCAMG Owner/moderator
An Honest Forum, Upholding Membership Respect and Integrity.

nothing personal but I fail to see what you are getting at in this post?

Wanting competition between manufactorers? That has existed since the industry begun. MTH, lionel, atlas, etc are all competing hard for your money. Some people like 1950s repos, others don't.

??

I first read that the manufacturers were "sneezing their profits"

that made better sense.

Hdtv is not a good example...millions vs a few hundred. Try something else.

rat

Since no one's making much money on the high end stuff as it is, they'd be better off cutting production rather than lowering prices significantly. I think we'll see a lot more lower and middle-end stuff for the next couple of years. Lionel's already doing it.

Model railroading has, unfortunately become a "hobby for the rich." Sad as it is, only a small proportion of hobbyists today can actually afford to be O gauge railroaders. Of course there are the relatively inexpensive starter sets which will lure some new folks into the fold. But once they are here and see a MSRP of $800.00 for a new MTH GG-1 locomotive, they're stopped cold in their tracks. Gone are the days of youngsters saving their paper route money to buy that shiny new, and somewhat affordable, Lionel switcher.

There is an effort by some manufacturers, Atlas O, for example to introduce low cost alternatives through their Trainman and Industrial Rail lines, But sadly, these companies are in the minority.

Of course the manufacturers will argue that they have to recoup their production costs somehow. Do the startup costs, design, tooling, etc., for a new model justify the outrageous list prices that are being charged? Are limited production runs and narrow niche markets adding to the frustration?

Add this to shrinking dealer profit margins of only 25% to 30% (if you're lucky!), it's no wonder that brick and mortar hobby stores are shutting down across the country and sources of supply are limited to a handful of larger dealers and internet sales.

What message are we sending to newcomers to our great hobby? It's the greatest hobby in the world... only if you can afford it?

--Elliot

The only one to get squeezed will be the LHS, more than they already are.

Seeing that GG1 needing six feet of space just to make a U-turn probably stops just as many in their tracks.

I don't see why top-of-the-line product is regarded as the first thing O-gauge newbies go looking for when they first try out this hobby. That's like saying kids in decades long past saved their newspaper-route money to buy Blue Comet sets or 700E Hudsons.

---PCJ

quote:

Originally posted by railfare:
Model railroading has, unfortunately become a "hobby for the rich." Sad as it is, only a small proportion of hobbyists today can actually afford to be O gauge railroaders. Of course there are the relatively inexpensive starter sets which will lure some new folks into the fold. But once they are here and see a MSRP of $800.00 for a new MTH GG-1 locomotive, they're stopped cold in their tracks. Gone are the days of youngsters saving their paper route money to buy that shiny new, and somewhat affordable, Lionel switcher.

There is an effort by some manufacturers, Atlas O, for example to introduce low cost alternatives through their Trainman and Industrial Rail lines, But sadly, these companies are in the minority.

Of course the manufacturers will argue that they have to recoup their production costs somehow. Do the startup costs, design, tooling, etc., for a new model justify the outrageous list prices that are being charged? Are limited production runs and narrow niche markets adding to the frustration?

Add this to shrinking dealer profit margins of only 25% to 30% (if you're lucky!), it's no wonder that brick and mortar hobby stores are shutting down across the country and sources of supply are limited to a handful of larger dealers and internet sales.

What message are we sending to newcomers to our great hobby? It's the greatest hobby in the world... only if you can afford it?

--Elliot

I respectfully 100% disagree with what you have said. Model trains, in general, are not a hobby for the rich. Certain engines are 'for the rich', but I'd bet ANY middle class person could have a few of the $1000 models if they wanted it. There are TONS of options for the 'poor' people out there. Lots of $100-$300 engines. Good model trains aren't 'cheap', and never ever ever have been. True R/C modeling isnt' cheap eitehr, nor is Pc gaming, etc...

I don't think this hobby of ours will go anywhere but onward.It has survived wars,a depression,recession,lawsuits and I believe it will survive anything else thrown at it.Even global warming.

Add General Mills to the list of events.......

Of all the sophisticated electronics that one can buy for $1000 that for the most part perform without issue, it seems that O scale items, especially engines are overpriced. Aside from the frequent lack of reliability out of the box, there seems to be an extensive premium for detail.

With all the issues in the economy these days tugging away disposable income, I believe the train hobby will have a couple of years of challenging business conditions. It'll be interesting to see if prices begin to soften more as we come into early 2009!

Bruce - What are you smoking?

The elasticity of demand is about zero in this hobby since the bulk of the buyers are in their 50s and 60s with many who can afford the current prices. And, if Lionel is making a profit as MTH is content with their margins, why would they lower prices? Remember Mike entered the market to underprice Lionel and he has with RailKing, however, Lionel has lower priced "hobby" style models and pricing. What you are asking for is already in place from the manufacturer's point of view.

What specialty consumer goods industries that have infused a great deal of new technology have lowered prices? HDTV is a bad example since it is not a specialty market like model railroading but a general consumer good.

Sad to say but your economics are way off and your chances of seeing this happen are similar to a snowball in ****.

[QUOTE]Originally posted by railfare:
Model railroading has, unfortunately become a "hobby for the rich." Sad as it is, only a small proportion of hobbyists today can actually afford to be O gauge railroaders.

What message are we sending to newcomers to our great hobby? It's the greatest hobby in the world... only if you can afford it?

--Elliot[/QUOTE

I wish someone would tell me WHEN! O gauge railroading was a hobby for those with a modest income. When I was a kid my first train set was an American Flyer because my parents felt the Lionel set I coveted was too high priced. When my wife and I were raising our first child we bought him an HO set because the Lionel Train I wanted to buy him was to high priced. I now am older and much better off financially so I by those $1000.00 trains because I can and I want to. In 1965 my parents bought 2 weeks worth of groceries (2 shopping carts full) for about $40.00 to $50.00 dollars as I recall, the same 2 carts full today is probably closer to $400.00. I think you will find that toy trains like everything else have gone up accordingly but you get a whole lot more bang for your buck with today’s trains then you did back then. This has all been a long winded way of saying if you think it costs too much DON’T BUY IT!!!!!!! Build an HO layout and save your money.

From my limited experience in business I would think that industry exhausts every possible way to maintain profits in tough times, including layoffs of junior personell, finding cheapor materials/labor, reducing quantity of new products, etc. before they resort to cutting profits.

Paul

Maybe some folks look down their noses at Post War Conventional Classics but I think there are lots of people who would enjoy them. And, they certainly are an attempt to sell good quality train sets at a good price-perfect for folks coming into the hobby as well as those who want to recreate what they had as a kid.

Don't look for any big price reductions on the high end stuff. It costs too much to develop and produce-and the cost of transporting it is escalating. I suspect what we will see is the same or higher prices but with reduced production. If you want it, better pre-order it!

quote:

Maybe some folks look down their noses at Post War Conventional Classics but I think there are lots of people who would enjoy them.

I ordered some Post War Conventional Classics.
After seeing the bargains for NOS Lionel (Modern Era) that are to be had on Ebay right now, I am sorry that I ordered anything.

Good response, and right on track!
Bruce

quote:

Originally posted by Capetrainman:
Of all the sophisticated electronics that one can buy for $1000 that for the most part perform without issue, it seems that O scale items, especially engines are overpriced. Aside from the frequent lack of reliability out of the box, there seems to be an extensive premium for detail.

With all the issues in the economy these days tugging away disposable income, I believe the train hobby will have a couple of years of challenging business conditions. It'll be interesting to see if prices begin to soften more as we come into early 2009!

Most of those items are built by large conglomerates with deep R&D pockets and access to hi-tech manufacturing facilities. And of course they manufacture them in very large quantities. O gauge trains are mom-and-pop operations by comparison.

Larry,

Many in their 50s are paying off student loans: either theirs or their kis's, big mortgages, and ,or alimony and child suport. And, many of the guys in their 60s are living on fixed retirement incomes.

Also,Larry, I don't smoke...anything and resent the mean-spirited intent implied. As on my forum, I would hope that we can keep respect for one another a top priority

quote:

Originally posted by Larry3:
Bruce - What are you smoking?

The elasticity of demand is about zero in this hobby since the bulk of the buyers are in their 50s and 60s with many who can afford the current prices. And, if Lionel is making a profit as MTH is content with their margins, why would they lower prices? Remember Mike entered the market to underprice Lionel and he has with RailKing, however, Lionel has lower priced "hobby" style models and pricing. What you are asking for is already in place from the manufacturer's point of view.

What specialty consumer goods industries that have infused a great deal of new technology have lowered prices? HDTV is a bad example since it is not a specialty market like model railroading but a general consumer good.

Sad to say but your economics are way off and your chances of seeing this happen are similar to a snowball in ****.

quote:

Originally posted by acid:
.....Certain engines are 'for the rich', but I'd bet ANY middle class person could have a few of the $1000 models if they wanted it. There are TONS of options for the 'poor' people out there.

You are out of your freakin' mind....

Cheers,

Mike

This message has been edited. Last edited by: gmfunk,

Bruce,

I'm sure that the O Gauge manufacturers are all scrambling to find creative ways to keep themselves and their business partners, LHS's and other dealers, in business during these stressful economic times.

And that includes evaluating their retail pricing structure and profit margins.

As has been pointed out earlier, this industry has been through these hard economic times before.

The comments about this being a hobby only for the rich is too broad a generalization. Yes, it can be an expensive hobby if you have to have the most expensive, highest detailed model trains available. However most people will participate in this hobby over many years and accumulate a lot of trains and train related product a little at a time so as not to price themselves out of the hobby.

The truth is that in this time of extremely high gas and energy costs most families have cut out a lot of non essential buying to concentrate on their priorities.

The next year to eighteen months will certainly be a test for everyone doing business in this hobby and there will be casualties along the way.

Let's hope for a soft landing.

Steve Tapper

quote:

Of all the sophisticated electronics that one can buy for $1000 that for the most part perform without issue, it seems that O scale items, especially engines are overpriced. Aside from the frequent lack of reliability out of the box, there seems to be an extensive premium for detail.

That is very apparent when comparing Railking to Premier steamers. RK steam generally retail around $400, while their scale counterparts are twice that, even more as in the case of the Camelbacks in which the RK version is scale. Both contain the same electronics. Notwithstanding production numbers, scale operators are willing to pay much more and the companies price accordingly. With recent price hikes on just about every good and service (including electric trains), we may see even fewer of the top of the line new items offered for sale.

Paul

All these arguments aside, there is one huge factor happening right now that will more than likely obviate any chance of Bruce's well-intended idea materializing.

With the increases in world-wide fuel prices, the cost of shipping containers long distances, such as from China to the US, has greatly increased. While not only has the cost of polymers increased for the same reason it is getting almost prohibitive to ship from China. This has resulted many companies reconsidering their strategies and taking the work elsewhere, such as southeast Asia, or bringing it back home. In fact, there are now layoffs in China due to the pull out of manufacturing.

With such cost pressures on manufacturer's base cost of materials and shipping the chances of lower cost models beyond what we see in say RailKing seems to be not in the cards (in my opinion). We're now a global economy and this has benefits but also creates issues that this country has not experienced in recent times.