The issues behind the scenes affect all of us: customers, retaulers, distributors and manufacturers. Customers are usually unaware of peculiar circumstances within the hobby industry which affect how and where we buy, the prices we pay, and the products we get. Keep in mind that in any business, perception counts as much as fact. What people think is happening can be as important as what is really happening.
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(We're not taking sides with shops, discounters or weekend vendors here. Our aim is to inform you about an ongoing situation in the hobby retail industry which might have ramifications for customers in the future. Read on and draw your own conclusions.)
You may or may not see it, but it's there: a conflict of epic proportions within the hobby industry. Even if you don't know about it, you're involved. The dispute has grown hotter, and lines have been drawn. The outcome could have a drastic effect on the way you buy trains in the future.
Up until the early 80s, the local hobby shop supplied most of a model railroader's needs. Today, the increase of mail order discounters and train shows has eroded the market for hobby shops. Individual retailers are on the ropes, or so they say, because they cannot match the extremely low prices charged by discounters and weekend marketers.
To read about it in trade magazines, it would seem that shops are folding left and right. The hobby shop business was never a sure thing, even in the best of times. Before discounts became a way of life, the shops were the major source of good quality trains. Today, they are feeling the crunch.
It's just as easy to pick up the phone, call in an order and enjoy a significant discount. Money talks, and few serious hobbyists have refused to take advantage of the mail order companies' deep discounts. Likewise, most of us have said, "The hell with the cost, I need it now!" and made a beeline for the nearest shop for that one piece we needed immediately. Cost meant nothing compared to instant gratification.
Shops claim that they offer service and expertise. They say that you can't get that from discounters. And for beginners especially, you can't. But shops have one disadvantage: price. It's all economics. Individual retailers buy through distributors, at the set wholesale price. Discounters buy in bulk direct from manufacturers, in enough bulk to get the same price a distributor would pay. Because they sell in volume, the discounters can retail their wares at prices hardly much higher than the set wholesale cost. Individual shops don't buy in bulk, and so must pay the wholesale price and mark up enough to cover overhead and make a profit.
The shopkeepers feel that manufacturers have abandoned them. Kato was recently taken to task by a distributor for not doing enough to attract customers to shops. In the old days, when the hobby shop was the source, manufacturers advertising invariably recommended visiting the local hobby shop. That doesn't happen much any more because of the discounters.
Are discounters and weekend vendors the villains that shop owners claim they are? Actually, discounters are only doing what the current sales situation allows: buy in greater bulk, sell in volume, undercut the competition. The 90s are a time when this kind of discounting is available. Mass production and nationwide marketing by manufacturers and mail order sellers has created a place for them. They're not villains, just companies taking advantage of an opportune business climate.
Weekend vendors have been slammed as charging low prices because they have no overhead. Another gripe by hobby shop owners is that neither fair vendors nor discounter collect sales tax. Yet weekend vendors vary. Many are specialist in collectibles. (Our visits to train shows have indicated that perhaps 50% or more are collectible vendors.) They sell used collectible trains, and so aren't in competition with shops selling new goods. Others tend to be a mixed bag, selling an oddball variety of things from several scales. They are mainly buyers of closeouts and special discounts. Though prices are low, the variety is a mixed and match. Train shows succeed because they are promoted and advertised, and offer customers a variety and chances for sales. Once again, the economy of our times makes them profitable.
Customer loyalty is no longer an issue these days. Money talks, and the ease of buying from discounters might be enough to dissuade you from visiting the local hobby shop. Whereas individual retailers used to find it good business to support local clubs, these days it is a waste of time and money. Clubs invariably go for lower prices, and so buy most of their goods from discounters. Those who had supported clubs have told a tale of expending effort, but getting few sales in return. Manufacturer loyalty has pretty much gone to whomever buys the most. With most manufacturer advertising done in the same locations where discounters make their bread - hobby magazines - very little actually urges buying from local retailers.
Whether you agree with the shop owners or not, you can see why they might feel threatened by discounters and weekend vendors. Whether the perception of those threats far exceeds the real danger is another thing altogether. The fact is that shops are facing a drop in sales. Some of it can be attributed to mail order and train shows, and a good part to the lack of interest in conventional hobbies among many young people. While many manufacturers have no qualms about selling to discounters, others will only sell to legitimate distributors or shops. We found that most hobby distributors require some evidence that a potential customers has an established shop. There is some protection for individual retailers, small though it may be.
For you as the customer, the problem is in how you might have to buy trains in the future, where you will get hobby support, and a rising of costs. The rising prices would be contingent on one of two possible outcomes. In the first case, shops may dwindle in number to such an extent that discounters have no real competition. They will be able to raise prices without the consequence of losing to the competition. In the second, manufacturers might decide that the individual shops ought to be the center of their attention, thus putting the squeeze on discounters and forcing a rise in prices.
Without shops, support would have to come from manufacturers or local clubs. The absence of support might engender a new business: the hobby support hotline. Companies could crop up whose only mission is to provide technical expert support for hobbyists. It would still be support at a distance rather than hands-on help.
The time could even come when manufacturers feel it profitable to sell a greater volume directly to individual customers. That would edge out discounters and retailers alike, especially of the makers offered special terms for members of their respective "clubs" or special sales that undercut the normal prices.
All of these scenarios are possible. They might not be probable, but who knows?
A retailer brought up an interesting point. For decades, department stores had large train displays during the holidays. They sold hundreds of train sets annually because of those displays. When discounters edged into the market in the 60s, the department stores stopped carrying trains. Train sets were no longer a big seller, so the displays were packed away for good. As a result, perhaps, the entire model train industry hit dry times in the later 60s and 70s. Maybe the fellow's point is valid, maybe he's drawing a wrong conclusion from a few facts, but it is something to consider. If the hobby declines, we all suffer.
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Last fall, seven companies combined efforts to promote G Scale. The Large Scale Model Railroad Association is formed of Aristo-Craft, Bachmann Industries, Hartland Locomotive Works, Kalmbach Publishing Co., LGB of America, Marklin Trains and USA Trains. They intend to promote G Scale nationwide, even going so far as to offer G Scale sets as gifts for popular talk and game shows on TV. It sounds ambitious....yet rings of the past, when Lionel and others ran television advertisements and other promotions to sell trains. Most "kids" over 40 remember the old Lionel ads that ran around the fall. Could the G Scale folks be contemplating a similar coup? And if it's successful, could oversize trains put a crimp in the O / O27 end of things? After all, today's younger generation doesn't have the same respect for the Lionel name like we did as kids. They didn't hear the TV ads, see the sets in department store windows, or the displays in hobby shops.
Maybe it's time O gauge makers started pushing the hobby far and wide.
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Recently, complaints about the reissued Postwar Trains by Lionel have hit the message boards. Among them, gripes ran from the use of plastic gears to a peeling decal on a WP F3. The impression is that these new Postwar Trains aren't exactly what folks expected. People wanted Postwar to be exactly what they used to know. Dissatisfaction could seriously hurt Lionel. The thing with the decal, though cosmetic, has been heard here and there since the loco's reissue in 1998. Since appearance is so important to toy train collectors, a paper peel-on decal just won't cut it.
That brings up an earlier complaint from the 1970s. I grew up with Postwar Trains. After my father packed them away that last time, I considered buying a whole new railroad for myself. I looked at some of the MPC Lionel and wasn't exactly satisfied. The plastics were lighter, and things just didn't strike me as "solid" as the Postwar trains. (And so I gave up on O Gauge for a long time). Others voiced similar objections about a lowering of quality, to which end Lionel's presence was severely diminished for years.
All manufacturers have to be careful with issues of quality, especially when reissuing a product. If the original item's quality was high, customers will expect the reissue to match or exceed it. Any change in the reissue has to be viewed with an eye to customer perceptions. Even something as facile as a sticker / decal can cause disappointment. Once word gets out that a thing wasn't what it's cracked up to be, well, they stop buying. A manufacturer who goes out on a limb to produce something can suffer terribly if the people lose interest.
Most hobbyists have stories about makers who lost out by cutting corners. Hobbyists won't accept the manufacturer's explanation that he must cut costs. A cut in quality is taken personally, whether it is mechanical, structural, operational or cosmetic. Rather than lose an image, a maker ought not undertake a new product unless he can meet or exceed his customers' expectations.
Lionel has come a long way since the dark days of the 70s, but in the 90s it cannot think itself unchallenged. The only big competition from Postwar to the 1970s came from Marx and Gilbert. Gilbert's S gauge American Flyer line had part of the market, but they folded in 1966. Marx was an all-around toymaker, so their model trains were never too serious a threat to Lionel. Things have changed considerably. MTH and K - Line are nipping at Big L's heels. MTH claims to match the earlier quality of the Postwar Era. K - Line is trying to find its niche, and once it hits its stride, will be hard competition.
Competition. Hobbies just aren't as big today because of the Internet. That will change once folks come to view the Net as a utility rather than a novelty or toy. The virtual world isn't as nice as the real one, and there will be a desire for very real toys and hobbies again. In the current atmosphere, makers of hobbies have to establish their image and get more visibility. They cannot afford a black eye or a reputation for less-than-expected product quality. A name, even a powerful name, can lose its influence after a few blunders.
Apparently, Lionel will have to tackle image from another perspective, blending both the traditional train maker and the new company for this era. Though the Lionel name meant something a generation ago, its influence over the young folks today is minor. The train maker has to reintroduce itself to this new generation while addressing the concerns of older customers. The low profile of the 70s and 80s won't be enough.
MTH is virtually unknown outside the train hobby. It is not a name that rings a bell with the general public. Neither does K - Line. Only by taking their message to the public will they gain the high ground held by Lionel. It's an uphill battle, but it has to be fought if they want the prestige and name recognition which can propel them into the mainstream. K - Line has yet to exploit a few notable advantages. Its quality comes at a lower price, which has immeasurable impact on buyers these days. Though the K - Line inventory is smaller, it has managed to turn a few good models into a wide variety of roadnames. Unfortunately, there seems to be an identity crisis there. They started as a Marx recaster, and are only recently adding new models and aiming for new levels of the hobby: the high end and the collectors. If the company finds its niche and unifies its image, it can aim at the public and gain a large market of newcomers. MTH seems to have a more distinct image, yet has not made inroads into the public at large. Lionel's image with big kids over 40 is solid, but to younger generations it is a "grandpa toy." Hitting the general public with ads is important here, because without a public sales campaign these makers will only be fishing from one shrinking pond.
The young are not so tied to the Internet that they would be impervious to the lure of hobbies. Very soon, kids will want an alternative to the Net. Websurfing gets boring after a while, and the novelty will wear off. Now is the time for O / O27 train makers to introduce themselves to the youth of today. And now is the time to make sure one's products are the best available, because that first impression is going to mean a lot.
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Keep checking this column - as we hear it, we pass it on here.
To paraphrase a New York clothier: "An informed consumer is the best customer."