Actually a lot of those on line shops are B&M shops that has embrace Internet sales. To many old Mom & Pop shops cling to the old ways and in many cases are fighting a losing battle while others gave up and retired.. Here's the thing about those hole in the wall shops.. They are still there but,since they are off the well beaten trail (called the Interstates) modelers whiz by 'em at 65 and 70. However,if they took the old U.S Route or a old State route then they will see these "lost" treasure shops.
Not unless they OWN the building, then it is possible to survive, or at least easier. fatalxsunrider43
The problem in the industry is that everyone is looking for the lowest possible price, and then if there is a problem it becomes a nightmare at tmes to rectify with a Internet retailer. Shops are entitled to make a little more for the service they provide. When was the last time on an Internet site you had a pop-up advising you not to purchase this model because of problems. Or when was the last time an Internet shop helped you locate something that was not in stock with them already? What is missing in society today is the respect due to the shop owners, their expertise and their service. I do not mind at all buying from either of the two local train shops here in Sacramento or Roseville. And they have no problem if they can't get what I need telling me to try the Internet. So when talking about the markup percentages and margins, just remember that with that extra margin, comes a service and support mechanism that most Internet retailers can not provide. In business it should always be a win-win proposition. The shops that sell at MSRP may need to to cover thier cost of operations. The ones that deep discount just to attract customers are not making enough profit to last very long. Anything discounted more than 15% off MSRP could make it tough to survive. But a 15% daily discount is also what I would call a win-win situation. And I would buy at that price any time because along with the product, I get advise and insight into other aspects of the hobby. Trains at Walmart, good luck having anyone there that can even answer a simple question. MSRP is there so all the levels have a fair shot at earning income. Sales less than that, and some one is losing a little bit.
At Calzephyr... I understand what you are trying say, but most of us in Tennessee have to pay MSRP if you shop at a LHS. Perhaps you meant South Carolina? Here you won't find hobby shops outside of a metropolitan area. There are not what I'd call a lot of mom and pops in model trains here except that our HobbyTown USA is owned by a mom and pop. And I suspect they charge full MSRP because they have to pay rent, utilities, wages and taxes. However, one of the internet retailers that I have purchased from is located in Colorado and routinely charges 20% less than MSRP. For certain types of purchases, it is more advantageous for me to go the internet route. On multiple items it means I could purchase one extra item or more. We don't have a state income tax but we do have a 9.25% sales tax. So that means paying $6.95 in shipping on a $100 loco priced at $80 is money way ahead. And that proves Sam Walton's point. Of course, at what point does all this come around and bite all of us in the behind? Based on what I've seen clearance items marked at in HobbyTown, I'd guess that there profit is 40% of MSRP.
David:Shops are entitled to make a little more for the service they provide. When was the last time on an Internet site you had a pop-up advising you not to purchase this model because of problems. Or when was the last time an Internet shop helped you locate something that was not in stock with them already? ---------------------------------------------- That can be a 2 way street or perhaps a one way street.My local shop owner calls N Scale tiny..Can this because he is overstocked with HO and his N Scale is hopelessly outdated that nobody is interested? Yes,he will order anything-if he can find it and change full MSRP and call you when it arrives but, his knowledge is limited in what is available in N and when I ask if he could order 3 FVM cars I was told I would need to order those direct..I even pointed out the cars I wanted was in stock at Walthers and Horizon. That's not the service I should expect as a N Scale customer that's willing to pay full list for those 3 cars rather then ordering from a on line shop since the savings was marginal after shipping. I know there are shops that gives stellar services and they should be supported as long as that service is extended to N Scalers.
What is MSRP? For me it is a piece of information that helps me decide to buy or not buy, e.g., is this as good or better than another in the same price class? When the function I'm looking for is met, I'll buy the cheapest I can. Sometimes buying a significantly poorer product than another, if the price is right. MSRP is an easy starting point to evaluate my choices. For the manufacturer, MSRP is a marketing decision that sets up the marketplace for their product. It might be that MSRP is meant to "recover" costs but don't be so sure that any manufacturer is sure of their historical costs, much less than future costs. Surely, there has to be an estimate of how much is produced in what time. And that can be eye opening to the producer after some experience in the market. I have enjoyed discounts (from MSRP) on all but 1 purchase I've made and have shopped LHS, major on-line stores, E-bay, and shows. The one exception was an Ebay item, just had to have. As far as the future of the LHS, it can only be challenging. Consider that one might learn more at Trainboard quicker than might be learned from an LHS operator. So, its not just Walmart prices, its a lot more. I don't pay someone to be nice to me. In my town I know of 5 LHS. One is a general purpose hobby store, selling all sorts of stuff. Great browsing, great interior, decent sales staff, some N-scale. Occasional great buys, always efficient shopping. Another LHS operates in a special world of insider knowledge, special interests, and disdain for newcomers. One shop thought they knew more than they did. Another wouldn't discuss discounting even for very large purchases. The one I started with met my expectations, supplied as much as they could, and helped me get started. They have lost my interest because they could not service my evolving specialization and could not maintain interest in me, their customer. Some of their merchandise is old, very old. On-line services are the greatest change in the business. I embrace that even with its problems.
Having owned two small retail businesses in the past I feel non biased on the Walmart issue. Frankly they are only doing what we all , I think , believe in . Free enterprise. If you can't compete then that's the way the cookie crumbles. I couldn't compete, but don't blame the Walmart's of the world that's just business. I was a business owner, but I am also a consumer and I shop for the best price and service. I have found Walmart not only sells for the "right" price many times, but if there is a problem they take it back no questions asked. I know they have their drawbacks in many of our minds , but Sam was one hell of a retailer and knew how to run a business. JMO
I think it's somewhat difficult to compare mass market items with hobby items. The total quantity of all N Scale SKUs sold in a year is a rounding error against, say, one consumer item. At the risk of starting another controversy I think it's reasonable to say that the fixed costs (tooling, etc.) have to be spread across a much smaller quantity of product used in model railroading, maybe unless we're talking about track. On the other hand, I also think that we've at least somewhat entered a "because we can" pricing model. It started with high end freight cars in HO Scale, which I think caused the also-rans to say, "Hey, we're 2/3 as good as this $30 car, so we'll charge $20for ours." Similarly, we may be looking at a model that maximizes margin vs. quantity. I could possibly sell a lot more 0-2-0s at $50 vs. $150, but do I make as much gross margin or profit? Only the Ruthless MBA knows for sure, and maybe not even him.
Meant no disrespect for Tennessee... LOL ... Oooopppps.... perhaps I meant "out of an old chickee hut deep in the Everglades of Florida"... close my home. I agree with your concerns about saving money... as I feel that I can get more bang for my buck on-line... both in higher discounting & no sales tax(es). Still... I do buy from my LHS from time to time. I have increased buying from the LHS this past year, mainly because I have been buying individual items under $50.00. I used to group sales over $100.00... and always bought expensive items on-line for the greatest savings. Recently I've actually bought some locos from the LHS despite the lower discount and tax burden. Of course... this LHS DOES discount about 15% from the MSRP... otherwise I would probably not be doing this. Yep... those sales taxes in TN can be hefty... I remember buying some fireworks in Jasper a couple of years ago... about 19% in state and city taxes!!! Can't blame you for buying from on-line shops in other states.
All, I've been away for a couple of days and missed out on the early parts of this thread. Most of the early explanation of how MSRP is determined generally apply but I did notice one part that was not mentioned, or perhaps not understood. Yes, tooling represents a significant capital cost which over the life of the model must be recovered. Depending on the accounting method applied could be done over years, or number of units. The one element not mentioned is what we refer to as "plates & masks". In the painting of any model, plates (which hold the model) and masks (which block the model) are created. These items are unique to each paint scheme. So, if you take a simple scheme (think black with white lettering) the plates & masks are very easy/cheap - relatively. However, if you take a complex scheme, like a bicentennial paint scheme that has multiple colors, curved lines/noses, it can require many many masks - thus increasing costs. What this means is that with a given release you are cost averaging across all of the paint schemes announced. And as was stated earlier, margins will vary from car to car, release to release, and many times is very complex to calculate - add to it the unknown of what will make one item more, or less, popular you start to see the challenges that any major manufacture faces. Oh, and did I mention licensing fees.....?
Richard, thank you for taking the time to put on the manufacturer's perspective. I love IM products; please keep'em comin'...
