Let’s say you want to buy a Spectrum 2-10-0 in Ho scale. You can only find it from Bachman, or Walthers for $170. Then you find one of the discount places online that sells the exact same locomotive for 70 bucks. How can these companys sell their models for 40% off or more and still turn a profit? Don’t get me wrong I love it. It just seems to me that they are loosing money if they do this too often. Thanks. Dave
I don’t think they are losing money, Walthers and Bachman are just making it. They probably are not making alot, but they are hoping that you may buy a couple more items from them plus maybe have some more business from you in the future.
Bachmann does not sell to the general public.
The price you see is the MSRP.
The shops determine what profit margin they can live with. The discounters rely on volume to pay the bills, not higher prices for a few items.
The one outfit you quoted is known for MSRP pricing structure in some groups.
They used to deal as distributors to dealers, hence the high listing.
I quit dealing with that distributor almost 20 years ago.
One thing you may not be thinking of is when a new model comes out they sell them at full list. So they may make up to %40 profit on them. If they sell several thousand at that price they can then reduce the price by half just to get rid of them. One thing I never do is buy a model that was just released. Cus they are gonna knock you in the head for it! The retail on almost every model I have see always goes down after several months or a few years.
MSRP= Manufacturers Suggested Retail Price
The manufacturers and distributors that sell to the public do so at the MSRP to protect themselves and the retailers’ profit margin.
Retailers (both LHS & discounters) buy at 40 to 50% off the retail price. The hobby shops have a lot of overhead to pay for so in general they only end up making about 10 to 15% profit if they’re lucky. Discounters make about the same or less, but make up for it in quantity and low overhead (no store) and can therefore sell at a lower price.
I cant realy comment on the discounting of model railroad equipment having just got back into the hobby after a ten year layoff but after many years involved with Pro Photography I shudder when new model digital cameras hit the shelves at $899 Australian and 6 months down the track the same thing is selling for $349au, I have nothing against people making a profit, that is what keeps them in business, after many years involved in camera retailing I know that even selling at $349au the distributors are still making a profit.
While many may not wish to admit it, there is a lot of price gouging going on in the industry today. With the even decreasing size of the “limited runs”, allowing for progressively less leftover items after the initial feeding frenzy ends and the decreasing likelihood of large numbers of models being recycled through eBay, pricing can be maintained at unrealistically high levels for as long as at least some consumers are willing to pay.
If one looks at the price cutting done in some of the “fire sales” in recent years, you’ll see items going for up to 60%, off, with the sellers still clearly making a profit. The most dramatic example I know of were the large Bachmann City Scene structures a few years back. When they didn’t sell because of their very high pricing, they were moved out at incredible discounts. I bought several $90 buildings for $15 each! And don’t believe that the stores weren’t still making something on them!
While relatively low-end locomotives (priced say $75-$100) are probable being sold at an acceptable markup by the manufacturer, some of those $300-$500 plastic engines are simply ripping the consumer off. The manufacturers all went overseas to cut their costs and what did we see? There was a very steady and dramatic rise in pricing which is still going on. This has certainly not been true of a great many other products which, in general, declined in price while increasing in quality and advanced design when their production moved overseas.
CNJ831
As a small busisness owner/opperator I can say (I think all will agree) No busisness will stay in busisness very long if there isn’t a profit. Some profit margins are enough to scare you. I know that at a Sonic drive in a 44 oz. soda will cost you about $1.78, it cost them around $.25 to make it. FYI Mike
PRICE GOUGING??? What do we look like, an oil company?
Pretty strong term there. When I see articles in the paper quoting oil traders stating “we have just about put as much fear premium in as we can, for us to go smartly higher, we’ll need a natural disaster” - THAT’S price gouging.
As for the topic in general, even being in this business I don’t understand how some things get priced the way they do.
Some folks come in and ask where the Spectrum steam engines are. Recently some On30 items showed up SOLD on eBay for less than my cost and BEFORE they were available to the model train shops.
And that’s why you don’t see any Spectrum in here anymore. But why is it this way? Getting a straight answer will be like getting a straight answer from a politician.
The bigger shops buy by cases,pay cash and get a bigger discount which saves them money they sit there prices by volume selling…Now some times things just doesn’t work out as expected and the demand is not there or has cooled so,they are force to dump these items at or below wholesale to git rid of them and make room for newer items…Remember items sitting on a shelf loses money and takes up space.Not to worry its all worked out in business tax as a lost…
MSRP is a massive rip off. Everyone makes alot of cash if you pay it. There is plenty of room for discounts and people still make money.
MSRP is designed to get the few who really want something to pay too much for it fast
Guys, it’s called “capitalism”. You charge what the market will bear, no more, no less. If you are selling like hot cakes, raise the prices until the sales start to slow. If they are sitting around gathering dust, lower the prices until they start to move. It’s a pretty simple concept…and has worked for centuries. I wonder why that is?
Paul A. Cutler III
Weather Or No Go New Haven
If I’m not mistaken, I believe Walthers buys product from the various manufacturers at 45% of MSRP and sells them to hobby shops at 55% of MSRP.
I know a hobby shop owner who quit stocking Life-Like P2K products because after a time, LL would dump product at a discount and he would see LL P2K locos for sale at a show at a price cheaper than what he paid for them. I can’t think of Walthers doing this, so don’t look to get super cheap deals on P2K products anymore. I think the recent price drop in the MSRP minus mail order / internet shops standard discount is as good as it will get.
I purchase quite a few things from a distributor, and typically I pay 30-40% less than what I would pay purchasing retail through Walthers. I can get some awesome deals when the distributor is cleaning house.
MSRP is the basis on which all of the supply chain prices are based on… Manufacturer normally sells to distributor at 40-50% of MSRP and the distributor sells to hobby dealers at 54-70% of MSRP…
And even I believe that there have some items that were/are worth the full MSRP…
I find the term “ripped off” to be a bit confusing, if not odious. It’s as if the seller purposefully set about to defraud the victim…er, I mean the buyer. If I buy a Corolla for $15K and turn around to sell it to you for $16.5K, am I really ripping you off? If so, please explain your rationale?
To me, if I can get the extra $1.5K, it means that I could stay in business, pay my invoices, feed by family, keep employees…and their families…by taking advantage of your ignorance, or your willingness to pay when not ignorant, or your haste. If you don’t/won’t take the time to educate yourself or to temper your desire, who am I to turn down a nice profit? Perhaps I should ask all customers, “Are you in a hurry to get this engine, or do you really know how much they are across the street? Well, in that case, let me reduce it for you 'cuz I’m that kind of guy!”
More to the point, why, in God’s name, should I!!!? If the loco doesn’t sell before my bills come due, I’ll discount it in a hurry so that I get some liquidity. Until then, I’m lookin’ fer ya to walk in my door.
It’s BUSINESS!!!
I had ordered a Walthers Backwoods Loco/Car Shop from TRAINWORLD two months ago. I saw it was a good price, so I bought it. When I got it, I checked over all of the parts, and a whole side of the building was missing. So, I called Walthers, told them what happened, and they told me the real story of TRAINWORLD.
It seams that there is only one explanation for selling stuff so cheap:
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Company Seconds
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Buying by bulk
They told me that TRAILWORLD is their biggest buyer of Model RR items, and buys by bulk like crazy! They said that when Walthers merged with Life-Like, TRAINWORLD bought Walthers out of all of their Life-Like models they had in stock, and also ordered all they could find of any PROTO product from anywhere. That’s how they can sell list priced Proto 2000 S1’s for only $29 each, when they originally sold for $110 List.
Walthers also told me that when TRAINWORLD buys a product from Walthers, and it has a damaged box, they will do their own box replacement in their warehouse, so they can sell it. That happened to my kit, as the instructions were water-logged.
Walthers could not re-supply me with parts for the kit because TRAINWORLD bought out all of the parts for that particular kit. Didn’t suprise me. Walthers told me that for keeping track, they would like to put me on a special list for “TRAINWORLD ORDER DISPUTES” because they have a lot of missing parts from that hobby shop.
The second is factory seconds. When a company like Broadway Limited has some engines that don’t turn out perfect (eg, dented radiator, chipped handrails, bad DCC software), they can sell them to a person or place, such as TRAINWORLD for a cheap price, and in turn TRAINWORLD can sell them cheap too. When I bought my “new” BLI RSD-15 last month with sound and DCC for only $125, I knew something had to be wrong with it because it was so cheap. So when it came, I opened the box, and the BLI box appeared to be brand new. I commenc
Your story rings true. FWIW, Outlet Direct sells openly advertised factory seconds and customer returns even cheaper than trainworld; very likely trainworld gets some of their blowouts from BLI. I have purchased two such engines, and been assured that their full warranty backs every Outlet Direct engine. I returned my first purchase nearly three months into its use because it shorted my Super Empire Builder suddenly. It took an unusually long two months, but I got it back with the tech’s note saying it had a new decoder. Cost to me was $7 for shipping. Works great. The J1 has never given me pause, and I can find no cosmetic defects. That same engine would have cost me CDN$200 more at my LHS.
If I get a defective engine, it is BLI that gets my request for an authorization to return. So far, two return requests (an earlier Hudson needed a replacement tender pickup that I had broken. They said to send it in for the same $7) have been granted, quickly, and the results are most satisfactory.
I can’t speak for trainworld, personally, but several members here will vouch for them.