I assumed nothing. And with a hobby budget of only $40 a month, you certainly aren’t helping put food on the table at your LHS charging full MSRP.
You should be thanking US. Those who gladly accept discounts and are willing to put our money where our mouth is. My LHS is thriving and with 20% discount everyday I intend to keep it that way.
I"m an overpaid underworked Government employee sucking off the teat of the American taxpayers.
And I thank you 
mmmm—dang. This is a funny way to have a discussion but since we are in this I’ll suggest that some LHSes up here do seem to survive even though they do charge MSRP—maybe they do because they offer more than just the goods–I don’t know. But there we be—
I’m thinking that the stuff Walthers have been doing, in that they serve both roles of Distributor/retail outlet, seems to have been going rather well for them. I get my $100/mth budget rather well spent–be it MSRP–or good deal—so as for the LHS’s that survive inspite of the MSRP thing-----all I can say was said in the words of a certain situationist writer—
And yet, they LIVE…[:D]
Barry,
A few thoughts more from someone who ran a train department in a hobby shop that largely charged MSRP.
I understand and agree with the “customer service” idea, that’s what I did.
I still pay whatever fair price someone asks for a product if I see it as a good value, MSRP or otherwise.
Sure, in many ways the hobby might be better if the discounting thing had never started or never got to the point it is at - but - see my story about Klein’s - it started a LONG time ago, that was in the 50’s.
In my view, smart shop owners buy each product at as low a price as they can, put a fair price on it based on their cost, and try to provide good service. The rest should take car of its self. But trying to sell Bachmann at MSRP or even near it is just foolishness.
I am a bargin hunter, BUT, I don’t haggle or expect anyone to sell something at a price lower than they have marked on it.
Knowing what I know about the cost and distribution structure in the business, I spend my money with different outlets based on their ability to sell specific products at reasonable prices. My closest LHS is only about 10 houses down the street in our little village. I buy lots from him, including most all the Athearn I buy. He discounts enough to be fair, not the cheapest, not the most expensive.
BUT, when I want a Bachmann loco, he is not the source. He does not buy Bachmann direct, we have three shops within about 40 minutes of here who all buy it direct and have great prices, and have lots of it in stock all the time - at about 40% off retail!
Service is important, and not to be to arrogant here, but after 40 years in this hobby and having worked in the business as well, the only service I need is a good inventory, a fair return policy (I virtually never return anything anyway), and a
I do thank you, and all the “conventional” model railroaders and collectors. Your $$ have made the wide variety we all enjoy today possible - whether at MSRP or at a discount. Your purchases, and the products made to meet that demand, have put a ceiling on the appreciation of both used brass locomotives and the OOP kits that I prefer as my base for my locomotives. And the availability of truly RTR plastic locomotives has reduced the demand for the models I want. Just because I do things differently doesn’t mean I don’t appreciate what other peoples’ money has done for the hobby. I do lament the passing of the kit era, but there’s enough unbuilt kits out there to take care of me and the few others that share my hobby interests for a while to come.
Bottom line: for the models I prefer, there isn’t the demand to support the high volume transactions at discounted prices. You reap the advantages of desiring popular models, which are made in large runs. I reap the higher prices of models where supply and demand are tilted more towards the seller.
Fred W
…HO and HOn3 modeling of foggy coastal Oregon, where it’s always 1900…
If your comments are based on something, note it. Because making 30% can mean 2 different things.
Your math is correct but it’s not what any business should be using.
Since different manufacturers provide different discounts from MSRP a company should use the basic margin formula. Margin = 1- (cost/Sell price)
Using that formula takes MSRP totally out of the picture and is much faster. It is “bottom line” and is what large and publicly traded companies use to figure the bottom line. It is also not profit, but a number used along with many others.
I guess I’m also not helping the economy by my purchases. The OP mentioned saving $400 in his single purchse. I on the other hand don’t spend $400 per year. So why would I spend MSRP at Walters? Well they usually have what I need when I need it. There is no LHS near where I live anymore. But recently I had some business travel so I was able to visit hobby shops in a couple of cities. I’ve been needing some paint so I took this chance to support an LHS. Guess what, in the end after visiting several LHS’s, I only spent $15 and didn’t get what I wanted anyway. Could have saved myself the trouble, ordered it all from one place, with one shipping charge, and had what I needed for the lowest life cycle cost.
One thing I’ve learned over the years – saving money costs in the long run.
First, I did note it by using the term dealer “discount” from MSRP, and never using the term “markup”.
You can say what you like about what companies should do, or about what larger industries do, fact is wholesale/manufacturer prices in the hobby business have been based on MSRP less (fill in the percentage, typically 40) for 70 years or more. I don’t see it changing any time soon.
Why is your fomula faster? It is the same. 1 - $60 (wholesale price) / $100 (MSRP) = 40%, I said this type of business needs to make 30% - just like your fomuula.
1 - $60 (wholesale price) / $90 (sale price - 10% off MSRP) = 30%
1 - $40 (direct from mfr price) / $60 (sale price - 40% off MSRP) = 33.3%
Dealer discounts in the hobby business are typically standard per brand/product line and until the last 10-15 years almost all were 40%. Then fast pay or volume incentives were deducted from the net due, typically no more than 10%, usually 5%.
Now IIRC, Athearn is 50%, Bachmann is about 70% direct from them, and 45% from most wholesalers.
Many other lines remain at 40% through distributors and are about 60% if you can buy enough to buy direct.
Sorry you don’t like how they do it, but that is how they do it.
Sheldon
Well, for all our figuring of who will and who will not and if or why, one thing is sure. There are businesses, both brick and mortar and online that are doing very well charging various discounts, MSRP and above MSRP. What a business chooses to charge is exactly what he hopes his customer base can tollerate. If he is in New York, his customers with a higher salary and a higher cost of living are used to paying more for a product and don’t bat an eye at MSRP. If he is in Central Illinois MSRP, quite frankly, cannot be found except for Hobby Lobby and we know about that. So my opinion is why would I pay MSRP when I cam drive 20 minutes for 20% off. Yes there is gas but usually I’m there in town anyway. IF I buy something from the internet, it must be something I cannot get from one of two Hobby shops and that is tough, or a substantial savings including shipping which on purchases the way I purchase MRR stuff, would have to equate gas for at least a 65 mile round trip specifically for MRR purchase. I’d rather pay the same or less, including tax, to my local hobby shops.
Now, I know everybody has their own situations regarding availability of a LHS, and my situation is not a blanket situation, but my point is apparently many shops do well charging higher rates than others, and the area they are in allows for the margins they choose. 20% goes alot farther in Springfield, IL than is does in Chicago. They need more profit to keep the doors open and the employees paid. And don’t forget the owner. No one, and I mean no one, starts a business and is satisfied with breaking even. They have to eat too.
All this talk means nothing. I’ve seen things go on E-bay for way more than I can buy it new. Some say that’s the idiot bidding, but I say, ask him what he says is a good price for a particular loco. He may say $225 is cheapest around and a good price. I look at him and say there are several in my LHS for $185.Same with anythin
Oh, you’re just way too happy. Maybe Sheldon and I like to be angry and depressed. Have you thought about our wants/needs[:D]
When I was in business and even in school, the method was-
Profit and loss, based on the cost.
Flip
[(-D] Forgive me I forgot. [(-D] You do have that right. Please feel free to be unhappy. If it makes you happy to be unhappy then I’m happy that your unhappiness makes you hap… oh this could go on for hours.[(-D]
(By the way, I still think you’re happy.)
Wow, 4 pages of replies when the answer should be pretty simple. They stay in business because they stay profitable. Guess it works for them. While Walthers prices are generally high, they sometimes have sales on Walthers rolling stock and buildings that are very competitive if not the best I could find. Plus they usually have complete stock of items in a passenger car series such as UP Cities, whereas other shops might only carry a portion of cars in stock.
Exactly. It’s actually a good exercise and also good that people in the business explain how they charge.
A successful business usually tracks actual cost and uses that to calculate margin. Seems in the hobby business they do the same but find themselves always calculating down from MSRP and back up from there.
My past background is in product management and setting both the net and list pricing (MSRP). Current is project management where we track net pricing (cost). The MSRP/List price is basically set so that the end user feels better when they receive a discount. Apparently the Hobby industry and other retail use the number to figure their net since it looks like the Manufacturers don’t post that number to their distribution.
I find it interesting and although some get defensive, I still find it educational. I now know the numbers that my LHS is using when I see them verbalize the 10% discount. [:-^]
I think the big question that was NEVER asked and should have been…is…::drum roll::
WHAT PERCENTAGE OF WALTHERS BUSINESS IS OVER THE COUNTER MSRP?
WHAT PERCENTAGE OF WALTHERS BUSINESS IS WHOLESALE TO THE DEALERS?
Ok, so that’s two questions that should have been asked.
My guess is 2% for over the counter MSRP (to people who don’t care what they pay)
And 98% for wholesale to the dealers…(for the rest of us enjoying our 20 to 30% discount)
So…What do they care…hmmmmm? I wouldn’t care either [^]
Exactly! Athearn or Walthers or Bachmann do not print/publish a dealer net price list. Neither do the remaining traditional distributors that are not also manufacturers like Walthers or Athearn. They simply tell the dealer this line is 40% off, that one is 45% off, and this months special is an extra 5% off the net if spend 10K and pay net 30 days.
You never see a printed “cost” price until you get the invoice!
In another life years ago, I sold Matco Automotive Tools, that business was the same way. The company printed a retail price list, which had letter codes that indicated the “dealer discount” for that item, ranging from 25% to 55% off MSRP.
Sheldon
Driline, you are likely right on about Walthers sales - AND, of that 98% that is wholesale, 80% or more of that is likely Walthers branded products.
Because, big shops like Kleins and Train World are buying those other lines direct, they have no reason to buy them from Walthers. So the only thing those kinds of outlets are buying from Walthers is the Walthers exclusive products.
In the hayday of distributors, Walthers was a big one, but with Athearn and so many other big players self distributed or sold direct to big dealers, that is long gone.
I would be willing to bet that Train World sells more Bachmann than Walthers.
Sheldon
Old way of mgmt—How do I cut cost?
New way of mgmt—how to maintain and build pricing power----[:D]
They layoff a lot of people , raise prices, and do not all ways have in stock what they advertise.
It’s the Wal-Mart/internet mentality. In other words, people think everything should be free or extremely inexpensive. It doesn’t matter to the buyer that by demanding lower prices they are taking money out of the seller’s mouth. Us vs them. Like the guy said, he won’t discount HIS work, but he expects others to do so for him. It’s the new American Way and it is sad. My daughter said to me one day, “I buy my groceries at Wal-Mart. i get more for less money.” i said “#1, you don’t need MORE. # 2, do you really want to buy meat from the lowest-paid butcher in town?” With my trains, do i want simply a low price, or do I want something that I know will be taken care of when it doesn’t work? From a company won’t charge my credit card three times because their salesperson can barely count, much less work a computer? That said, SLIGHTLY lower prices at an LHS or reputable internet dealer are understandable. But I’ve been around long enough to know bargain–basement prices mean bargain-basement quality.