@AmFlyer posted:I think there are some oversimplifications in the cost analysis above. The SHS engine Rusty posted above cost $200 and it would not have cost $150 without the scale wheels and pilots. The reason is the extra parts included add little to the cost when packed at the factory. The biggest cost mitigator is the greatly increased sales volume resulting from the same SHS product being sold to both scale and high rail operators. The sales volume would have resulted in the increased costs spread over at least 50% more units.
@rplst8 posted:Bingo. Increased sales, reduced SKUs, and no dealing with packaging, stocking, and distributing the parts - it's an easy win for the manufacturer and the buyer IMHO.
I think there is a little confusion on my estimate, my $50 price premium was based on a current O Scale Atlas Master, 3rd Rail, MTH locomotive prices ($500 - $700), not an S Scale model produced 20-years ago.
Secondly, it appears that you are really only talking about one manufacturer for this included conversion kit, that being Lionel. The financial benefit to Lionel being that they will grow their sales by some percentage by adding sales through expanding into the 2-Rail market, which is valid. However, Atlas, MTH, and 3rd Rail really have nothing to gain in new sales if they were to move off of their current sales model (separate 2R and 3R SKUs) and start supplying conversion kits with each model because they already sell to both the 2-Rail and 3-Rail market now. If they did nothing, Atlas, MTH, and 3rd-Rail would still sell the same number of models and actually end up having a price advantage over Lionel (should Lionel ever decide to go this universal route) since Atlas, MTH, and 3rd Rail have no extra parts/packaging/shipping to account for with each model that leaves the factory. Lionel may have some minimal cost savings on the single SKU scheme in factory labor but not enough to give a price advantage over the "other guys" with their current separate 2R / 3R model offerings that are not charging extra $50 for every single model to account for all the added conversion pieces. Remember, it is the labor that is cheap in China, so doing extra labor for separate 2R and 3R models does not have that much of an impact on the overall price. The average CNC machine operator over in China makes 50 cents / hour. I don't think the person putting two different 2R and 3R labels on boxes, making closer to 20 cents / hour, is going to have almost any effect on the cost to produce the model. I'm not saying that a similar conversion kit shown in the SHS photo will cost $50 at the factory to produce. All those kit parts probably only add up to about $20 total to make for today's Lionel O Scale factory since some pretty sophisticated machines are needed to make some of these parts; however, by the time it gets to my door (even when included in the model box) the price will easily escalate close to $50 (larger packaging for added parts -> higher shipping cost for bigger model packaging to house the extra parts -> added import duty on increased declared model cost -> importer markup [Lionel] -> dealer markup). Everybody gets their cut...
In the end, the only advantage I still see is to the modeler that buys a model on second hand market that wants to run it on different track five years after the model is originally made and everyone that buys that model that does not take advantage of the extra parts gets punished with a price increase for that privilege. As a matter of fact, if Lionel is really serious about increasing sales and they were willing to supply a conversion kit with every model, then they should instead just offer a 2-Rail version just like the other guys. If they are making all these 2R parts for each model anyway, then save everyone some money and time converting, make less parts for each version and offer a 2R model right from the factory without all the extra stuff in the box. Supplying the conversion kit is just a long way around saying you want Lionel to make 2R models but by supplying a conversion kit they can do this without making any real commitment to 2-Rail. If they go far enough to make the 2R parts, then they are already 90% there.
Basically, the same argument has been going on with P48 modelers that want the 2R manufacturers to supply Proto 48 conversion kits with new 2R loco models too. Should we add a P48 kit to every model too? Pretty soon all these included conversion kits that everyone wants will end up costing more than the model itself (I'm being facetious, of course, but still...).
Scott
