Hello everybody,
how does the pricing work? I just bought two Bachman 70 ton switchers for less then I would pay for two top of the line freight cars. I really would like to know how it is possible to have two locomotives which have a motor, gearing, lights, decoders and a circuit board cheaper then two good quality freight cars that just have four axles and some detail. It boggles my mind,
Sorry if this sounds strange but it really is.
Frank
Frank, the answer is simple, amortization of tooling costs. Bachmann has made and sold way more, likely 100 times more, of those 70 tonners than the average high end RTR freight car. So the cost of tooling to be recovered is spread over many more units.
In either example the materials per unit are the lowest part of the cost. Tooling amortization, design amortization, shipping and labor are all way bigger factors in cost.
Do you actually buy many $35.00 freight cars?
Sheldon
PS - I have two Bachmann 70 tonners, great little locos.
Simple conclusion…the locos are the cheapest you can get and the cars,even top of the line units,are overpriced.
Not only is pricing between different models from different manufacturers seemingly chaotic - go to some train shows and note the differences in price with the same item from the same source! And even the most expensive one still sells. There is an Economics (or maybe Business/Marketing?) PhD waiting for the person willing to tackle this issue.
Different makers have different volume expectations (and different distribution); that explains some of it. And from time to time it is possible to buy something “brand new” – discontinued items, or gray market “imperfects” – where quite possibly almost nobody in the chain is making much if any money.
I agree however that it is becoming almost impossible to intuitively figure out what the relative pricing relationship should be between a freight car, a locomotive, a magazine subscription, scale figures, or a vehicle. You can’t compare them to each other. Perhaps they should not be compared. About all you can do is compare them, not to each other, but to some inner notion we all seem to have that tells us whether we feel the price is right.
Dave Nelson
More than likely they are closeouts. Looks like the retail price for those locos is around 70 dollars. Companies generally don’t like inventory sitting on the shelves so they will clear them out to raise cash and clear the shelves for new items. They may have gotten a really good deal from the distributer or other retailers trying to do the same thing.
Ricky
A simpler question would be what came first the chicken or the egg.
No need for an economics degree or a phd… I can tell you very simply.
After a threshold point, the costs are recouped, or else the cost to hold the merchandise is larger than they want to pay. So they can sell them cheap, or else they’re dumping them to get what they can out of them before they clear out the warehouse.
Why can they sell locos cheaper than rolling stock? Because they don’t have much in the way of competition, where else you gonna go? There is the volume element that Dave mentioned and that’s a factor. But beyond that, there’s the “because they can” factor-- you can call it “simple economics”, “good business”, “price-gouging”, or “plain ole’ greed”-- all of those answers are pretty much one and the same.
You take the same lump of styrene and shape it like a picnic spoon and you can buy a whole box for $1.49. Shape it like a freight car and stamp the letters “PRR” or “SP” on the side, and now you can sell it for $9.95 (or more). There ain’t no economics professor or phd that’s got a snowball’s chance in somewhere very warm that’s likely to be able to convince me otherwise.
John
The rooster.
John
When ever this topic of pricing and discounts comes up, there are always those who suggest the “dumping” of excess inventory at the manufacturer level.
My own experiance and knowledge from inside this industry suggests that this almost never happens, except with one manufacturer, but not the one in question here.
BUT, it is known fact that Bachmann sells direct to any dealer who can meet the minimum purchase requirements and has a low enough pricing structure to allow dealers who buy direct to easily sell their products at 40% or more below retail.
That would suggest that even the 29.95 70 tonner has some small profit magin for a dealer who buys it direct.
Why anyone would sell at such a small profit margin is anyone’s guess.
I suspect that most product “dumping” is done by dealers who buy more product than they can affort or have a reasonable market for. That may be the case here, and is often the case regarding low train show prices.
Anyone who follows this forum knows I have a fair amount of Bachmann, about 35 locos mainly - almost all bought new from brick and mortar dealers who’s regular prices on Bachmann are in the 40% off retail range.
I only paid about $35 each for my two 70 tonners when they where first re-released in the regular line several years ago - again, at a brick and mortar store.
Sheldon
Hey, I resemble that remark!!!
[(-D] [(-D] [(-D] [(-D]
Enjoy
Paul
As all Ironroosters should----[swg][swg][swg]
[sigh]
It must be time for one of these threads again—
Well, after paying out people to work on the thing the owner could stand to earn a bit of a stipend for their effort—[:-^]
I guess the issue could be that there are varying degrees of profit making innvolved, although that remains to be seen, as no one will say just how much in terms of sales there really is here.
I don’t believe that for a second. Manufacturers for years would produce products in large amounts or that had little or no appeal and they would end up dumping them. Even today if a bunch of Walthers kits sits to long in their warehouse they end up discounting it by 40% or more. Why do you think that preordering is now the way the manufacturers do business?
Well John the PhD I was referring to was to explain how at a train show folks can sell the same item for radically different prices and both of them are selling quite nicely. I can remember seeing the Walthers catalog selling at Milwaukee’s Trainfest for $15 and $9 right across the aisle from each other and both seemed to be moving the product!
I’ve seen even bigger disparities at swap meets.
Dave Nelson
I’ve seen that a lot at shows as well Dave. The reason I believe is the cause of it is because you have both the internet seller and the brick and mortar stores trying to compete with each other. The stores lose out every time because the internet sellers don’t have as much if any overhead. Most internet sellers that come to my clubs show sell as much as 50% less then the B&M stores. When I’m setting up the floor plan for my clubs show I always keep the stores together and the internet guys together. I’ve seen arguments between the two at shows a few times. What is a modeller suppose to do though? I try to support my LHS as much as possible but lately everything is ten or more dollars over the cost of the internet guys. That really adds up over time.
Maybe dumping is a little hard on the ears for some of us…would ‘liquidation’ be better? Who doesn’t liquidate stock when you need a chunk of cash for the monthly bills, or to bring to market that highly acclaimed second run of X locomotive that is now 2 months overdue and the natives are restless?
Is it better to have 50 engines that haven’t moved in two years continue to depreciate and gather dust, or do you sell them for what you can, and take the cash and run to the bank to forestall foreclosure? Sometimes you act strategically, and others you act tactically. Tactical actions are more immediate and urgent, and they have strategic consequences. But the wrong strategic moves affect tactics every time.
-Crandell
Bachmann is notorious for giving incredibly deep discounts to retailers who purchase large quantities. They do this on newly released items as well as “liquidation” stock.
Of course, they couldn’t give those discounts unless they’re a) selling a lot of units, and b) amortizing the R&D over the long term. Since Bachmann stuff is generally available, they don’t have to make all their money right away.
I think the same answer still applies. [swg]
John
Hi!
There are possibilities for the reduced prices that do not involve the manufacturer. It could simply be the case that the dealer found themselves overstocked, and/or they need to sell at whatever price to stimulate cash flow. In short, they may be selling at a loss just to get some money in the drawer.
A number of months ago I bought two new HO E units - both powered and with sound - for an almost “too good to be true” price. I figured it was because they were Illinois Central, which has no where the demand of many other railroads.
Anyway, I had some relatively minor problems with them and got in touch with the mfg for repairs. Ha, it turns out I bought them from an “unathorized” dealer, and the manufacturer would not honor the warranty (they eventually did fix the units, however). It seems I bought the locos from the “grey market”, which - in my mind - just should not have mattered. But it did to the manufacturer, saying the locos could have been used or even stolen.
None of the above may have anything to do with the OPs situation, other than to insert the point that the dealer - rather than the manufacturer - set the lower price.
Mobilman44
Hi,
thank you for all the replies. I appreciate the different thoughts on what is happening with the pricing, but in my opinion they are charging the price because they can. If I take something as simple as a length of flex track and pay 4 dollars for it and only seven and a half times as much for a locomotive then the only explanation is that they charge the prices for the track because they can. For me there is no other explanation.
Frank