And Another One Bites the Dust

[geoff]

Atlanta Central, I appreciate your explaination of model prices and I am sure your evaluation is mostly correct. But everything you mentioned does not explain a situation I just went through myself. I think we would all agree that Bachmann's brand new Fn3 K-27 is a very hot item. Suggested retail is $1400! I have seen NO ONE but a couple LHS's asking that price. On ebay they are anywhere from about $799 to $1000 with free shipping. Trainworld is I believe $799, Caboose Hobbies is around $700 and I bought one from a large online hobby seller for about $570. As you say, no one is loosing money selling these, so what is happening. The item must not be worth $1400? Someone is putting a real squeeze on the LHS forcing them to pay more than a consumer like me has to pay. It reminds me of Rivarossi back in the early seventies. They showed Big Boys with Suggested Retails of over $200 when anyone could buy one for less that $50. I don't understand how this is good for anybody?

[Woody Elmore]

I agree with SHeldon - the old fashioned hobby shop just can't compete with the internet. We had several hobby shops in the NYC area and most are now closed.

I also encountered salesman with no personality who was annoyed when I asked for items. I once wanted Testor's styrene glue, which at the time came in a jar with a brush. When I asked for it in one hobby shop I was told brusquely that they didn't carry it. All they carried was TenAX which he told me was "better." I had several styrene glues but liked Testor's because it had a little set up time. I left the store and put the other items I wanted to purchase back. The guy was very arrogant, and yes, the shop closed.

[Atlantic Central]

geoff,

I agree, I don't think it is good either. You have to keep in mind that with such a high priced item small percentages equal large differences in price.

WARNING - the Bachmann may delete this if I get too far into wholesale pricing structures/percentages.

But I will say this much, based on traditional mark ups, the guys selling them at $700 - $800 dollars are fair, in fact they are most likely still making a slightly smaller percentage than most in the retail business need/want to make.

The guy selling them for $570 is giving them away at a very, very small profit. Why, who knows what he is thinking, maybe he is using it as a loss leader to get your business on other more profitable items. But on such an expensive item a small percentage is often still a reasonable number of dollars. Maybe he bought too many and needs to get his money back fast, who knows. Just because one person makes a bad business decision and has to get out of it by selling something too cheap does NOT mean that is the "value" of that product or that others should sell it for that price.

You are correct, $1400 is inflated, if only by the fact that lots of retailers can and do sell them for less.

Without making a direct reference to current pricing structures from Bachmann or others, I will explain this much - In the old days when most every retailer bought from a distributor, it worked like this:

Retail price - $100.00

dealer cost - $60.00

distributor cost - $45.00


So you can see that if you can buy it at distributor cost you can sell it at 25% off retail and make the same percentage as buying at dealer cost and selling retail.

I will not reveal what I know about current discounts in the indusrty, but many small shops are still paying around that $60.00 figure through wholesalers like Walthers, even for products like Bachmann. So when you buy from Trainworld you are paying the same price as they pay from Walthers, give or take a few percentage points.

And, as a final note, in ANY retail business with a store front, if you cannot buy stuff for $60.00 and sell it for at LEAST $90.00 you cannot make a living, or even stay in business! Just ask K-Mart, Sears or Walmart, they ALL make an average gross profit of 30% or more.

I suggest you stop worring about why their prices are high, shop where the prices are right and the service good. I have a local shop who discounts what he can. I buy lots from him, but I do not buy Bachmann or other heavily discounted items from him. I shop for those items at Trainworld, Star Hobby, Standard Hobby Supply and others with low prices.

Sheldon

[Yampa Bob]

During the Ebay Christmas season, we won Bachmann GE 70s at $18 to $22 with $8 shipping.  from you know who.  This didn't detract from the "value" of the product in my mind.  I don't care if he made a profit or not, or what his purchasing strategies are, that's his business.  When you consider his "Buy it now" is $30, I think he did ok.

After the season, there were no more listings on the 70.  Perhaps the offerings were his way of spreading a little Christmas cheer in appreciation for his success.

When a store owner says to me "I really appreciate your business", you can be sure I'll return.  Many of the store personnel haven't been taught to just say "Thank you".
When I say "You're welcome" anyway I get a dumb stare.

I was President of the Chamber of Commerce in the Kansas City Area for 2 terms.  I always preached "If you don't take care of your customers, someone else will"   I also believe that, within reasonable limits, "The customer is always right".

Bob

[Atlantic Central]

Bob,

I agree completely, but I have no problem with the retailer who sets a fair price and expects to get it. When I was talking about value, there are those individuals who think like this, "Joe blow on ebay sold it to me for X so everybody should be selling them for X".

I paid $30.00 each for two bachmann GE 70s, at a local train show, no shipping, tax included. None of the sources I usually buy Bachmann from have them priced over $35.00.

I bought a new in the box Bachmann 2-6-6-2 for $50.00 a while back, but I don't expect to find that deal again any time soon.

As a person who has been self employed most of my life, I don't expect anyone to work for free. Walmart only makes a 5% net profit - I would not get out of bed for a 5% net profit.

Many years ago (in the 70's), in a hobby shop where I ran the train department, the owner and I often talked about how in the future hobby shops would have to be large, with good inventories and discount prices to compete with the mail order houses that where just starting then. And no one had even dreamed of anything like the internet. Guess we where right.

Sheldon

[jsmvmd]

Dear Friends,

Agree with statements from Bob and Sheldon.  In my little business, I, too am distressed by low profits.  However, in Altoona, "Rust Belt USA," some days I am glad to make any profit.

Years ago, the orthopedic company I worked for had 10% sustained profit, which was considered to be excellent.  I believe most American companies work on 5-10% profit.  Anyone who reports higher profits is probably kidding or using funny accounting, IMHO.

Comments anyone?

Best Wishes,

Jack

P.S. So I do not hijack this thread, our two LHS's have different clientele and staff attitudes.  The bigger one has high prices, will be rude if you ask for an Internet match or what he would be willing to do, and rarely says thank you. Clients ask me all the time to match internet prices, and I will do what I can, so am not offended.  Anything to stay in business!  The other guy is smaller, has less inventory, and usually has to order what you want, but discounts most everything.  Guess who gets most folks' business!  Every business has to make profit the best one can.  For me, it is exceptional customer service that keeps them coming back in the face of stiff competition.