I recently rediscovered my train hobby (now that college, grad school, etc. are over) and have a lovely wife who let me colonize a large corner of the basement. My civilian job is in market research and strategy. As I sat in a boring meeting today, it struck me that so much has changed since I last ran the trains: the market then was really just Lionel. Mike Wolf was just a whippersnapper.
I’m curious about how the market has evolved. I would love to hear your insights and thoughts about the different companies and manufacturers (specifically, Atlas, K-Line, Lionel, MTH, Williams, Weaver, and even Gargraves and Ross). If you had to summarize in a sentence each company’s overall image or identity, what would it be. I have my thoughts, but you’ve been paying attention longer than I have. Who, for example, is the real innovator? Who is the mass marketer? Are there differences in focus (i.e. do some manufacturers focus more on western v. eastern RRs?).
Obviously the MTH/Lionel decision has shaken things up, so I’m also curious about where you think the market will go.
This is strictly for fun – I am only curious and have no ulterior motives.
Best,
Tom Baker
San Francisco (Last stop on the Grand Lake, Alta, and Truckee)
All the “manufacturers” (more accurately, importers) are currently playing a game of “keeping up with the Jones.” Hence the duplication of features, roadnames and specific product types.
There is more product, in more variety with more advanced features than ever with most of it in the area of scale sized and detailed items.
There are not enough buyers for the product that is being made.
There are more than enough catalog releases for the existing market. But don’t expect less… the company that puts out smaller and fwer catalogs will immediately be rumored to be in trouble.
The economy is still in shaky condition. Buyers are waiting for blowouts due to their own finances and in part because of the high (in some cases, too high) list prices for many items.
The train buying demographic is mostly older and mostly well to do - at least as far as those buyers who purchase frequently and in quantity - and therefore get listened to by the importers.
Roadnames are farily well imbedded in the past postwar era, since this is the where the greatest numbers of buyers are in their interests.
Lionel and MTH have stated very strong sales in starter sets and related starter items… K-Line states to holding their own. Yet one would never guess this from the emphasis on scale sized, advanced product aimed at established adult buyers. It will take years to see the effects from the increases in starter sets on the hobby overall as to whether there are actually new customers, or many existing hobbiests buying up deals on starter sets (I suspect a little of both).
The hobby itself faces some challenges from the overall common perception than it is one for the wealthy (that anything with the Lionel name on the box is worth its weight in gold). And that the younger customers that need to be reached will not hold the same job for 30 years, and will likely relocate several times in their lives… meaning permanent lay
Lionel trains regained it’s popularity amongst adult postwar baby boomers throughtout the 1980’s offering reissues of their postwar classics such as F-3’s, trainmasters, hudsons, etc. and added new models such as the SD-40, GE Dash 8 B and C, and standard O cars. During the late 80’s, Williams, Weaver, ROW (Right -O-Way Industries), and Lionel began to introduce scale models that run on three rail track and pioneered the hi rail market we know today. During this period, MTH (Mikes Train House) was a major dealer of these products and was also a middle man between Lionel and Samhongsa who made scale steam engines for Lionel. Lionel and ROW also introduced digital sounds During the late 80’s too. The hi rail trend really caught on in the mid 90’s and MTH went on its own importing Samhingsa models. At the same time, Lionel introduced command control and later, MTH followed with their own version of command control. Even though these models were scale, the detail was still a bit lacking. mainly for ruggedness and cost. Atlas decided to take a plunge and raised the level of detail and crispness of graphics. Thus Atlas O was formed. They were a success and Lionel followed Atlas’s lead and introduced new scale models with detail like Atlas. Due to high American labor and tooling costs, Lionel was forced to move all of their prodution overseas to compete with Atlas and MTH. Soon, K-Line followed suit with highly detailed models. Apparently, MTH is in the process of refining detail. In a nutshell, this is pretty much how things evolved.
Good synopsis John. To add and clarify to what you’ve contributed, I think the invention of Railsounds and TMCC by Neil Young and their introduction by LionTech/Lionel has had much more to do with the expanded growth of the hobby and the subsequent demand for more realism. We all know the new wireless control has offered operating possibilites never dreamed of before. And you would have to be a rock to not appreciate the realism and utter coolness of Railsounds. (I’m not into Railsounds as much, but I have to admit, it is pretty awesome.)
Modelers now had realistic sounds and advanced control and wanted locomotives (and rolling stock) that met the higher standards of the new electronic features. It was the former baby-boomers (now adults) who had the money to spend on these more expensive features. Also consider that when RS and TMCC were introduced, the hobby was still on the tail-end of the “collector fever” that had gripped the hobby during the 1980’s into the early 1990’s. Some of the newer electronic laden trains (although expensive) were no more costly at the time then typical powtwar locomotives without the new operating features.
Also for clarification, K-Line Trains had been made in Chapel Hill, North Carolina until somewhere around the 1989-1990 period when all their production was moved to China. Quality improved in their current less-than-scale offerings, but it wasn’t until 1996 that their first F-series scale locomoitive came out. I remember the headline at the time… “K-Line gets serious.” What? They weren’t serious before? What it was is that the hobby was going scale, and K-Line certainly did their part to raise the bar and do it at competitive prices.
MTH has always been made overseas, and it has been my understnading that part of the reason for so much new tooling from MTH has to do with a personal relationship with relatives of the overseas contractor.
We all know that MTH’s massive amount of product introductions raised the bar on this ho
The general consensus is the market is contracting due to too much product in too short a period of time and the continuing aging of the baby boom and previous generations, for whom three rail trains hold special attractions and significance. Advertising pages have dropped noticeably in the last five years, perhaps partially due to the stagnant economy, but other forces appear to have played a role.
The market is also very difficult for dealers, working with margins of 40% and sometimes much less for a very small cotery of hobbiests (most estimates are 150,000 or less). TCA membership, one indicator, has for the first time in half a century started to trend slowly downward. One of the manufacturers has chosen to make war constantly since their early days on the other manufacturers, and the result has been and will probably be in the future, more money spent on lawsuits than is healthy for the industry. The presence of two largely incompatible control systems (TMCC and DCS) has split the marketplace and made life for dealers even more difficult, and left many hobbiests confused. From a product availability standpoint things have never been better, but the future of the hobby and industry is quite clouded, in my opinion. This is a product of unfavorable demographics, competition for the entertainment dollar, the weakening of the dollar (likely to continue) versus the producing countries currencies, and the fraticidal warfare going on in the industry between the largest importers. But don’t worry, there will always be lots of new and old trains to play with, and magazines or on-line places to learn about and discuss three rail trains.
I’m relatively new to the 0 scale hobby, but what is appearing to me are the prices asked for the trains. A pricetag of 899 dollars is normal, and almost every month there is a new review of such expensive machines in CTT. In the mean time I noticed K-line getting cheaper… (They manufacture GP7’s for $50 dollars, a diecast 4-6-2 with whistle tender for about 80 dollars). They have the Lionel postwar level of detail, which is good enough for beginners. They have metal trucks and electronic e-units. Because they use a simple motor truck in all of their “low end” machines which is easy to build, (has a cheap but good motor in it and is easy to repair,) they can keep production costs extremely low that way.
I think K-line is going to set a new standard and slowly others start to follow. Lionel offeres a nice switcher (tankengine) under 100 dollars now they see that low priced machines bring in money if sold in high quantities.
If a manyfacturer is trying to survive, they have to find new markets and leave the top end items for a moment. One new market is making 0 gauge in the price range of h0 (K-line proves it can be done) and with that draw people into the larger scale… (which is much nicer then h0[:D])
Lionel and MTH are too much focussing on the high end, fully loaded top models. Only insiders know what the possibilities are and what it can do. Someone leaving h0 to get into 0 doesn’t care in the first place about railsounds, they didn’t have it in h0 either. They look in the first place to the price in comparison to h0…
I think that is the new policy which will be hot for the next time. Trying to get more people into the hobby by making good quality trains for low prices; those people starting with that will buy the expensive ones later in life.
Prices today aren’t bad compared to 12 years ago. Those $899 steamers were $899 then (or more) and weren’t as well detailed and didn’t have command control and the sounds were nowhere near as good as they are today. A Lionel 700E Hudson was around $1,200 discount in 1991. Weaver 6 or 8 driver imports were $900 discount. A ROW Berk was $1,200. Lionel diesels with just a motor or two and reverse unit were around $250 to $400 discount. F-3 sets were $500 discount. Today, a K-Line scale hudson with more features is around $600 w/TMCC. F-3 sets today with all the new features are still around $500. Inflation has not been a factor here so many of today’s trains are actually cheaper. Overseas production has a lot to do with it. If Lionel were make a scale Hudson today in the States, it would probably be $1,800 or maybe $2,000 discount.
Todays selection of great $100 engines is fantastic compared to what we had 12 years ago. Lionel’s 0-6-0 saddle tanker, K-Lines $99 EP-5, Williams $125 geeps, just to name a few are great values.
Bear in mind, for any company today to have sales, low price is a big factor. In the case of the K-Line KCC offerings, there’s no wholesaler or retailer. It’s “factory direct” so-to-speak. Even with that, I’m sure these “loss leader” prices are designed to get people to try the product.
I personally am a news junkie. So it helps to bear in mind that I’ve just read that currently 28% of all American families are in the poverty income bracket by government standards (ABC). And almost 60% of all people who have been out of work a year or more and are finding new work, are accepting jobs that pay 50% less than they were making at their previous job (NPR, AP). That doesn’t spell anything good for retailing in general, especially buying non-essential items like trains. The numbers of Americans working 2 or more low-paying part-time jobs is also at an all time high - because the economy has turned so heavily to a service-oriented economy. Anyone wondering why the R-M-T “Beep” is selling so well???
Also bear in mind that with the overseas production, the companies actual production costs are lower than they have been in decades! It is the development and creation of vast amounts of new tooling and the additional electronics that are adding costs. The trains should actually be a lot cheaper in price than 10 years ago with the savings in overseas production. And still the trains aren’t selling as they should, hence the fast and furious amounts of blowouts.
These blowouts won’t stop either because even though production numbers are already being lowered, they still have to make a certain amount to justify the run. Multiply this by all the product in one single importers catalog and then multiply that number times all the other companies making trains (sometimes the same identical products) and it’s inevitable the blowouts will continue. Not until the US economy really picks up, or one or more of the train companies goes under. And now that seasoned train buyers are aware of the blow
If you want to see two hobbies going in opposite directions, compare radio control cars and three rail toy trains. The December issue of R/C Cars is about 320+ pages which is more than both three rail O gauge magazines put together. If you walk into the average hobby shop, you’re almost surely going to see R/C cars for sale, whereas three rail trains remain relatively uncommon. This hobby has peaked, IMO, due to demographics and “scorched earth” policies amongst the manufacturers/importers that have turned off and damaged both dealers and consumers to some extent.
Let’s face reality, yesterday I visited the Allentown First Frost Train Meet and the old pot- bellied guys with grey hair, white hair or comb-overs out numbered the kids by at least 10 to 1.
Later I visited a big local Hobby Shop. In the rear of the store they have two large slot car tracks, and the place was filled with youngsters, non of which were involved with 3-rail trains.
Fact is that Atlas, K-Line, Lionel, MTH, Weaver and Williams are singing to a shrinking audience.
Lets face it there is a large variety of O gauge trains out there. It can be really hard to decide what one wants to purchase. Look at all the many cataloges some of the manufactures produce every year. I really think it’s overkill.
I think that Williams is the one company that has stayed pretty true to the era when 3 rail trains were dependable, fairly simple toy trains, not high end scale stuff. There are a lot of us who like our toy trains but either refuse or are unwilling to spend several hundreds of dollars for an engine.
I draw the line in the area of $100 to $200 range, maybe a little more for something really special. For this amount of money you can get a dandy Williams engine that runs great and often comes in a large variety of roadnames. I live in Maine and they have offered several engines for New England railroads. Not just the same old roads over and over again. I must confess that I do have a soft spot for the Santa Fe.
Also look at all the different types of track that is being produced, much of which is incompatable with other brands. What a pain in the neck. I think the hobby would have been better served by sticking to 027, 0 and Gargraves type and offered track items that would work with these track systems at a reasonable price. I have no interest in paying $40 and more for a good working turnout. I think this cost factor hurts the hobby.
Any way, lets hope the hobby gets itself in order so that in the future there will always be an interest in toy trains.
As I was reading this topic I recalled a mention in the Lionel/MTH lawsuit discussions that the target production for an engine design was 1,000 units. The reference was hazy, but I thought this was rather a small number, what with all the tooling, start-up production, and marketing costs that had to go with the new design.
So, I just realized that I have never seen any company or industry business data. How big is the hobby, in terms of revenue. I went to my usual source for this information, “edgar.” (Goverment site for public company reporting).
Nothing. None of the companies, and I looked for all I could think of, were listed. This means they are all privately held.
Anyone ever seen any company data for the train hobby?
Lionel’s sales (not sure whether retail or wholesale) have been thought to be in the 60-100 million dollar range in their better recent years. My guess is that their current sales and licensing fees are no better than the lower end of that spectrum now. MTH sales were said to be in the 50-60 milion range before dropping by about half in the early years of this century. It’s fair to say that the entire three rail market is probably less than 150-200 million dollars per year at retail, perhaps much less. All the major and minor firms are privately owned, as you say.
Bill from Wayne and douellet have hit a couple of good points. Go to any train show that isn’t advertising display layouts and it is mostly an older group. Of course, many families with kids who might have trains are not hopping off to every train show as devoted older train guys are. But as an exception, the Syracuse, NY show at the Fairgrounds is one show that does seem to attract many kids. Of course, there are activities for them including a ride around train, diplays and lots of layouts.
The diversity in the hobby is both a blessaing and a curse. I can see how it would be utterly confusing for any newcomer: so many track types, some stuff that can run on this but not that, the different control systems. Scale and traditional sizes, nevermind the prices. Douellet’s price ceilings are not that uncommon, yet one might never guess it from looking at the catalogs and what is being offered.
In my estimation (and here comes the Frankenstein mob with their flaming torches and pitchforks) Lionel made a huge blunder by trying to replicate what MTH had already done with their scale models. It was a game of catch up, instead of setting their own course. So now in addition to Weaver (who has always made scale models from square one) now we have everyone getting in on the act, with some doing it better than others. Sure, the gang at YORK was saying “MTH and K-Line are making this, so why aren’t you Lionel?” This is not what the dealer networks or the hobby needed… more duplication of existing products (other than some do prefer TMCC over DCS). It is no wonder small dealers are going under… too much product, too low wholesale margins, too few buyers, no national advertising, no co-op advertising and blowouts that undermine their existing stock - no wonder small dealer are grouchy.
Lionel should have focused more on what isn’t being done - which is how you succeed in business - by doing something no one else is doing - and doing it right. The very thing Lionel can do better than an
I don’t entirely blame the manufacturers. There was a demand from hobbyists for highly detailed scale offerings with all the sound and command goodies, so that’s what they produced. I think, however, that there is a disconnect between kids today and trains in general. I am 60 years old and my grandchildren, two boys ages 4 and 7, do not see trains the way I did at their ages. I received my Lionel set for Christmas when I was 6. At that time, trains were much more a part of the community. We lived near the tracks in a small town, my Dad worked at a lumber yard and knew all of the local train guys, a switch engineer lived across the street and the C&O brought my aunt in from Detroit on Friday and took her back on Sunday. Besides that, a train was the top Christmas gift for a boy in 1950. Look at the competition today: computers, video games etc. Today’s kids have a very different perception: if they have any contact with trains at all, it is usually listening to their parents complain while they are waiting for a barely moving 100 plus car freight to clear the crossing.
I have a Lionel postwar layout which highlights operating cars and accessories and those are the things which really capture the boys’ attention, but not for very long. They were here today and I have to pickup spilled coal, un-jam the milk car and find all the barrels, which I don’t mind doing. The 7-year-old likes the 182 crane the best, but I think it’s because that is the item whose controller most resembles a video game controller.
My conclusion, from taking the boys along to several train shows is there needs to be some action on the layouts. Add some operating cars and accessories and let the kids operate them. Give them something to do besides watching a steam engine smoking its way around an oval with 5 or 6 cars in tow. How many of today’s kids can relate to a steam engine anyway? Or a caboose either??
But, is anything going to capture their interest for more than a short time at best? I personally doubt it.
Jim
I’m not real concerned about the future of the hobby. I enjoy it for what it is today. No matter how small the number of fans becomes, the trains themselves won’t evaporate and will still be around for the few of us to enjoy. In great numbers at great prices I’m sure.
I’ve got to agree with everything Agent 027 said. He hit the nail right on the head when he wrote about the cost of developing the Fastrack system and the fact that the money could have been better spent on improving the existing 027 system with improved turnouts and an intermediate track radius with matching turnouts. A blacked center rail and some extra ties would be nice. Williams is adding extra ties to their track, now if they would add some smaller footprint turnouts there is no question what I would buy. With such a system you could run most any affordable loco that is likely to be produced.
If you really want scale trains then 3 rail trains really aren’t the answer. I believe the vast majority of 3 railers want sturdy, dependable trains that give the impression of looking similar to the prototypes without having to be an exact replica. They also want them at an affordable price. Who wants to take out a bank loan for a hobby.
Where I live there are no hobby stores that carry 0 gauge trains. I travel 50 miles to the shop where I buy CTT and other model magazines. They carry HO and N and I buy a few cars from time to time. The price of a good Atlas HO car is around $20. If the same shop could sell a quality O gauge car for a little more I’d be tickled. I wouldn’t be expecting the same amount of scale detail just something reasonable. Price does matter! How many small hobby shop owners can afford to stock big buck trains and how often can he expect to sell them? Unless O gauge trains can compete in the market it is not going to succeed. It’s time for manufacturers to get back to the basics and really start to grow the hobby.
what comes up in about every post concerning the “kids” in the hobby are RC cars, gamecomputers etc. Keep in mind that a top of the bill RC car costs only about $400, a gamecomputer like the x-box or the playstaion are for sale in holland for $150. Games are from about $20. For that money you have a new, top of the line gamecomputer with all options possible.
Emagine the cost of the toytrains. A turnout at $40, an engine of $899 and every additional car costs $49.99 too. To get something interesting going it costs a huge amount of money.
I have a good job for dutch standards, my girlfriend works parttime and we have a daughter. The money left over after paying everything is about $500 a month, From that we have to pay the dentist for our daughter, clothes, pay the horsies and do all extra things. The money left over for trains is about $100 a month.
In this situation I’m not the only one. A lot of others are in the same position. If I want a nice amount of engines rolling on my layout, I have to search e-bay and trainshows for something affordable. Guess what comes up most; K-line. Followed by postwar Lionel which is hard to sell in Holland and is affordable too.
If trains want to compete with other “toys” they should be in the same pricerange and being kept in prices which are affordable for a lot of people without saving for months.
The reason computer games and R/C cars are less expensive than trains is simple. They sell millions of the former and tens of thousands of the latter. A typical run of O gauge three rail locomotives or rolling stock is a few hundred to a few thousand. The economies of scale work against lower costs. There are hundreds of millions of kids who play video games, in all likelihood, and millions of kids and adults who do R/C cars. There are probably only 150,000 or fewer three rail hobbiests of any seriousness in the world. Do the math, as they say.
You are absolutely right Daan. It’s long been a common thought that Lionel is overpriced and that you are paying for the name as much as the actual product. While the blowout pricing is an exceptionally bad business practice as far as holding your perceived product value (from a mfger. viewpoint), truth is most of the stuff starts looking more affordable at the blowout prices.
$44.95 for a box car and $59.95 for a flat car with a tractor is just ridiculous and highway robbery. They want folks to support local hobby shops, but I’ve had Lionel reps tell me (when I talk about high prices) to buy from Train Express. Yeah, so much for the local dealer.
I show the Lionel catalog to people with kids all the time. The reaction is nearly always one of shock when they see the prices. Nevermind that they have to look through 140 pages of stuff they’ll never afford to find the 10 pages of stuff they may be able to buy.
Of course, everyone’s prices have been creeping upwards for the past few years. It’s not the price oil (though it may soon be) nor the price of shipping from the pacific… it’s selective pricing. All the companies are doing an incredible amount of new product tooling on the scale end. I’ll bet nearly none of this development pays for itself, so prices are increased on everything to help subsidize the scale product development.
In the case of Lionel with statements from former company heads, they are far too concerned with after-market collectible prices. I don’t doubt the typical average price of $50 for a postwar reissue car has a lot to do with this… they don’t want to help drive prices down too much on the older original items.
This hobby for far too long has worried far too much about the needs of the few, instead of really growing the hobby. Though Back2Trains makes some valid points, I disagree. They were kids in the 40’s and 50’s who didn’t get into trains much either. I knew kids (when I was also a kid) who got Lionel train sets and n