Market Dynamics at Work: Consumer vs. Supplier

laz1957 posted:

If you want to see how well the Lionel Legacy BTO items are moving just do a search on E bay of Lionel Legacy.  Same items and the same dealers trying to get just about full retail for them.  If they can get people to bite all well and good but seems like no one is biting and you see the same items relisted time and time again.  Dealers must have a large inventory.  I wonder what their price is from Lionel?

Probably the best example of this are the recent Lionel ES44AC's.  We were even led to believe the BNSF unit was sold-out via pre-orders, yet there now seems to be plenty of them on the market -- and in all roadnames too.    Dealers were quick to raise their originally advertised street-price closer to MSRP for these.  Heck, one of the forum sponsors who recently ran a big sale had the BNSF ES44 marked as "on sale" for $649 (the MSRP, by the way) so the locomotive wouldn't qualify for further discounting.  Gosh... if it were "on sale" for $649 MSRP, I wonder what the "regular" price was gonna be??? 

Meanwhile, many dealers seem to have plenty of these locomotives.  So with each passing week, we see the prices dropping a few bucks at a time.

BTW, I received an email ad from a dealer this afternoon... and it's the first time I've seen the word "CALL" for the price of the Vision Line GG-1's.  Haven't seen that since the MPC days when prices changed almost daily on "hot items" of the day.   Funny how the more things change... the more they stay the same. 

David

So this year its my dream car for me, so trains get pushed down the list.  But the prices going up considerably in the last 2 years was making me rethink Lionel even before the car purchase since I have to be more discerning with my train dollars I have.  I have nothing but Lionel and love the stuff I have.  But as an example.  The Legacy Shays when they came out were around I think 899.00 or so MSRP price.  The Hesilers coming out this year (which have been done before) which are comparable engines in size and features are 1199.99.  I was kind of shocked to see them that high.  So out of that catalog that's the engine I chose and the others I must pass on.  There have been major price bumps in the last 2 catalogs, not just normal small increases.  A company must keep selling product to survive, but for me I'm going to have to buy less product from them now because of the constant significant increases in prices on items that have the same features as before.  New tooling I get.  Reruns, not so much.

 What do you think someone brand new to the hobby, who knows nothing about a secondary train market, would do if they wanted to start in the hobby and went to a train store, opened a catalog and saw those prices.  Maybe pick a different hobby? 

Don't get me wrong. I spend money like I'm printing it in the basement, but there is a point where even I know its just too much.

I'm just hoping the rest of you keep Lionel alive so I can just buy my one or 2 items a year, haha

The thing that really skews the train and other markets today is that so much of this comes from overseas  For all we know, most of the trains come from the same factory in China.  I have been in too many plants and watched the same stuff being made for several companies and that was in the US.  Time will tell.

SandJam posted:

... I was kind of shocked to see them that high.  So out of that catalog that's the engine I chose and the others I must pass on.  There have been major price bumps in the last 2 catalogs, not just normal small increases.  A company must keep selling product to survive, but for me I'm going to have to buy less product from them now because of the constant significant increases in prices on items that have the same features as before.   ...

(my italics)

Sean, you're validating my theory that many of us are indeed buying fewer and fewer big-ticket items.  And that begs the proverbial question:  "Is our market really  large enough so that ALL those high-end products will still get sold?"  

It's the old analogy about all the guys who bought 10 high-end products a few years ago now just buy 1 -- which implies Lionel now needs 9 other people to buy 1 product each to make up for "lost sales".  Or perhaps there are still enough guys with deep pockets that still fly in and buy up the store.  After all... at the end of the day, Lionel doesn't care how MANY products each of us buys -- only that all the stuff they want  to sell gets sold.  That's somewhat of an oversimplification, but you get the idea.  Ironically, it's not as if we have this huge influx of people entering the hobby -- especially at the high end.  In fact, I'd wager just the opposite is happening. 

Apparently, there's still enough give-and-take in the market to meet Lionel's sales goals.  And until that's not the case, I don't think we're gonna see reduction in prices anytime soon.  So more and more of us will be forced to be a bit more selective in our new purchases -- and I guess that's not necessarily a bad thing.  

David

It makes perfect business sense to me for Lionel to make fewer products at higher prices to maximize profits.  There will be buyers, that is proven.  Building to order makes perfect sense, on their end.  Lionel probably makes more profit on one Legacy engine than Menards does on a hundred cheapo freight cars.  Selling quality, perceived or achieved, is a recipe for success. Selling quality at cheap prices doesn't work either, see Kline.  Plus there are much fewer costly warranty demands with fewer products sold.  Money out the door with no return.  Don't take it personally.  Try to bring your market dynamics down to a lower level and determine how to spend your dough.  If it costs too much don't buy it.  No sense gnashing your teeth over a toy train manufacturers prices.  Ok, the Bethlehem Steel set is $1200 and isn't a good deal.  It wouldn't be the first time, would it?  Don't buy it then.  Do you really need it?  I hope they make like ten sets and they are worth like ten Gs in a couple years.  Keep ranting, but the real market dynamics are in the palm of your hand.

Well, based on all this advice and foresight...I hereby boycott purchasing any new engines this year, from any maker (now watch, each and every one will announce their new line of Seaboard Air Line "specific" engines ).

I would think that Lionel has made enough $$$ just from pumping out GG1s, Berkshires, and Hudsons to not ever have to worry about making another engine again.

When I 1st started in O scale my limit for what I'd spend on a single engine was $200.  That has crept up to $700 over the past 15-20 years.  I really don't see me going beyond that, especially with almost 20 engines now (and the most I can run at one time is 2).

For those of you who have to have it all, good luck in your quest and I hope the prices come down soon!

I could never justify spending much more than $300 for a plastic toy train o scale engine.   The last I bought was a Burlington TMCC U30C   That was when I lost interest, so to speak.  Now $850 for a big, beautiful, original, prewar standard gauge steamer of any species that runs great, I'm up for any of that.

I am cheap, poor, whatever so I keep my eyes open for things that are $100 or less but I have gone over that many times depending on the model, condition and the uniqueness.  I have plenty of O gauge so I am mostly interested in adding to my Standard gauge fleet now. But, if I see a "bargain" in O I will jump on it.  Fun.

William 1 posted:

It makes perfect business sense to me for Lionel to make fewer products at higher prices to maximize profits.  There will be buyers, that is proven.  Building to order makes perfect sense, on their end.  Lionel probably makes more profit on one Legacy engine than Menards does on a hundred cheapo freight cars.  Selling quality, perceived or achieved, is a recipe for success. Selling quality at cheap prices doesn't work either, see Kline.  Plus there are much fewer costly warranty demands with fewer products sold.  Money out the door with no return.  Don't take it personally.  Try to bring your market dynamics down to a lower level and determine how to spend your dough.  If it costs too much don't buy it.  No sense gnashing your teeth over a toy train manufacturers prices.  Ok, the Bethlehem Steel set is $1200 and isn't a good deal.  It wouldn't be the first time, would it?  Don't buy it then.  Do you really need it?  I hope they make like ten sets and they are worth like ten Gs in a couple years.  Keep ranting, but the real market dynamics are in the palm of your hand.

A great posts and really sums things up neatly.   It IS a perfectly reasonable business strategy.  Bentley doesn't make a lot of cars - they price them well beyond the means of most people - but they turn a handy profit last time I checked.   Same can be said for Ferrari, Porsche, or really anyone selling and 'upscale' product.   Sam Adams doesn't make nearly as much beer as Coors, but they're making plenty of money.    I'll pay the up-charge; some won't.   Is there a line they shouldn't cross?   Sure there is - and they pay people a lot of money to study market dynamics and try to understand where that line is.   They don't want the Coors market.  Make less beer and pocket more cash at the end of the day?   Brilliant!    

I doubt Lionel has access to the all of the sophisticated mechanisms used by huge corporations, but they have some, and you can always hire consultants.    Sometimes you gamble wrong, and consultants are idiots.  It happens, and they results are usually clearly evident pretty quickly.  

Don't want it?  Can't afford it?   Think it's outrageous?  All perfectly rational and valid responses.... so don't BUY it 

From my small world, I can only see prices driving many on to other suppliers and products. As someone stated, the people at Lionel (MTH, Atlas, Bachmann and others) see these comments.

They need to take heed. Our expectations (at least mine) are to have quality models that look good, run well, and are reasonably priced. This of course is tied to the features on desires.

Quite frankly, I am disappointed in the offerings of the most recent catalogs. Too many kiddie products and stuff that just doesn't cut the mustard. Especially at some of the prices shown as MSRP. (And Yeah, I know Dealers can lower prices to some extent.) But, BTO and MAP are modern terminology for getting the prices as high as possible. Many of us, will vote with our wallets. I for one am forced to seek trains at Shows and Auction sites.

Sad to feel like I have been driven out of the NEW TRAIN market.

I go to my LHS  and look in his big glass display cases, check out the big engines just to look and then  look at the ones I  MIGHT be able to afford, the $400-500 range, but they just don't look like they are worth it when I can go to a show or antique store and get a good running PW engine. The control systems are an extra cost to take advantage of those features. So for me and many others Lionel and the other mfrs. are competing with Lionel's heritage fleet from  40-70 years ago.  It would be very interesting to be able to cost out the manufacture in today's business world of an exact duplicate of a popular Lionel diecast locomotive. No can motor, no electronics just as the old Lionel made them and made in the US. I would guess  $400 ??

Earlier post

"Oops, I forgot. This is a captured market and we should take what we can get... And be thankful at any price.....and and and....."

As my three year old grand daughter says " you get what you get and you don't get upset!"

Well, I've got a huge number of really nice trains and am getting much mor particular about what I buy and now that I've got the DCS working really well on the layout I'm not gun shy about buying more MTH locos. IMHO, MTH makes a better looking diesel than Lionel and Lionel makes a better looking steam engine than MTH but when I see the astronomical price of Lionel's scale equipment I'm really put off. And with Lionel introducing Lionchief I just can see my investment into yet another control system. My preferences are leaning to either high end 3rd Rail or GGD trains. If I'm going to pay that much for it I may as well get the better model. Whistle steam is neat but it's only need from 2 feet away and the novelty wears off faster than the new train smell. Legacy is a nice system but mixing trains like tmcc and legacy doesn't work like ps2 and PS3. Lionel makes a good product but they've pushed the price up to the point where I can buy the better model for not a whole bunch more money and the less expensive line isn't even compatible with my existing control systems. So unless it's pretty special I'll be skipping over the Lionel and not buying at all or moving my preferred manufacturer to 3rd Rail or MTH

Well said, Matt.

Rocky Mountaineer posted:

Aside from the fact that Lionel has switched materials from aluminum to ABS (with associated re-tooling costs), the price points for the passenger cars have remained somewhat steady.  Also keep in mind all the cars based on baggage car tooling (i.e., most of the AFT cars, UP Excursion flag and power cars) will be 18" in length.

Friendly tip... I would definitely pre-order the UP flag car 2-pk (or the whole train) if you're interested.  'Cause those are sure to sell quickly, and they're not BTO.  So order early!!!

David

I actually pretty excited about the excursion train.  I plan to order the four-pack and two-pack, which is $689 for both from Charles Ro.  I think $115 per car is a great value considering the sounds, lights, kinematic couplers, kadee pads etc.  I agree that if you don't get these early, you will really miss out.

HOWEVER, $299 MSRP for the Stations Sounds Diner?  That's outrageous.  I'm skipping that guy cuz I really don't need it at that price point.

(The up excursion flag car really looks like it is 21" in the picture.  The generator car is clearly not.  David, can you explain how you know it is not 21"?  I read the catalog pages as carefully as I could and didn't see that.)

Martin H posted:

... The up excursion flag car really looks like it is 21" in the picture.  The generator car is clearly not.  David, can you explain how you know it is not 21"?  I read the catalog pages as carefully as I could and didn't see that.

Martin,

After hearing Mike Reagan say that the AFT display cars (which are based on a baggage car design) would be 18", I inquired with Lionel and was told that the UP flag car and power car would be 18".  All other cars in that set will be 21".

David

Thanks David.  Since you got that from the horse's mouth, I won't be shocked when I receive my set and find that out.

I still have to say the catalog is a bit misleading...