115 Anniversary Critical But Nice

thought it might be its own topic, my bad I'll delete the other one if I can

Deleted it.  thanks for letting me know.  Sorry for the duplicate.

That's like complaining about the price of a high-end luxury vehicle, yacht or mansion.  Do what most consumers do and don't buy if you're unwilling or unable to part with the money.

No matter the item, or the cost, or the ability to pay for it.  Everyone likes a bargain, and, not very many people enjoy paying too much for anything.

Without knowledge of actual production costs and normal operating expense, it is like shooting in the dark when attempting to comment on what is reasonable or not in terms of a company's pricing for their product line. Every company is different in this regard, so making a comparison from one to another also serves no purpose.

A financially healthy Lionel, or for that matter it's competitors, is essential if we expect to continue to be offered so many great choices in new products. You as the consumer can exercise your right to purchase these products or not. If you don't like the pricing, then don't buy the product. It is as simple as that.

From all indications, Lionel's BTO system is working very well for both the corporation and it's customers. The 115th Anniversary Berkshire also looks like it will be a great success for all concerned.

So I prefer to look at this from the glass is half full perspective. I think that it is a wonderful time to be in this hobby and I am glad to see all of the choices available to us.

My two cents worth.

The 115th anniversary berk is a "unique item", likely not targeteted for the "average o guager".

As far as price increases go, yes MSRP has gone up on many things, but that means little, to me anyway.

Actual "street prices" on many items are about the same, ie. the M1 and the painted berks are selling for exactly what they sold for the last time they were offered 5 years ago.

I paid $1050 for my scale PE berk back in 2011, and that was after the "mail in rebate" offered at the time.

There have been several locos in recent years that have sold for $100-$150 LESS than there previous TMCC versions a decade ago.

Your "sell a million" comparison is a complete joke. There is probably not a narrower market for anything than there is for O-guage trains.

The competition has been using the same tooling over and over as well, and the "new sounds" have changed/improved little if any. Theres certainly a "savings" there.

Theres more to "costs" than 7 figure salaries. As far as the competition and their lower price goes, see the Lionel vs MTH parts thread.

Lionel is far and away the leader when it comes to parts access and availablility.

Just a click of the mouse gets you most parts for most locomotives made in the last 15 years, as well as access to complete locomotive breakdowns with photos and part numbers. Surely thats worth something.

Its easy to "pile it on" and rant, but you really need to step back and take a look at the "big picture", theres usually more to the story.

Hey DOn,

  I'd like to extend the olive branch and apologize for my snarkiness.   Your post just happened to be the fifth post about what's wrong in a row I read and just added to a bad day I had and I took it out on your post.  Your opinions are valid, just as are everyone's.

Peace!

ps.  I deleted my offensive post to stop the derailing of your topic.

I believe my comparisons to McDonald's has some roots.  I believe there are about 29,000 members of TCA, and perhaps as many or more in LCCA.  There are thousands more hobbyists not in either organization.  Don't know for sure.  I DO KNOW that a young person with a family would be far more likely to buy for themselves, not their kids a $49.99 list price caboose rather than the same caboose with a list price of $99.00. I think the price has to be nearer $29 for a kids train toy car.  Guess that's what on-line auctions are for.

Lionel's stuff is made in the same factories as RMT's and the other guys.  At least a factory with similar costs to do business.  $39.99 pieces of rolling stock from one vendor versus....  Some of RMT's newer rolling stock has the added on hand rails, brake wheels and ladders etc.  What makes Lionel's cost more?  The unanswered answer is their cost of doing business.  The owners take a lot out of the company, and their salary scale is out of whack for a business with the annual sales volume they have.  I'm not singling out any position, just what it is for a SMALL company.  We know for a fact that Jerry and his marketing manager each  took out a 7 figure salary according to court documents.  If a business is only running $60 to 70 million in volume, that's excessive.  That's a lot of NET profit.  I recently read something where some guy on wall street (WSJ I believe) put the total O gauge market at $100 million annually.  Personally I do not know.  The comment was on the Internet.  You know how that goes.

I used to consult for 2 of the biggest train companies. Number 1 and 3, (3 is history) I KNOW what costs are for that $95 dollar caboose.  I'm only talking about manufacturing cost, not the overhead of doing business.  You guys would be amazed at the profit margin!

I'll agree 100% with you that Lionel has the best parts business of any train vendor.  Simply second to none,  We owe that I think in large part to Mike Reagan.  He really is a super person and very nice guy.  I hope his replacement keeps Mike's good works going.

Out of 320 million people in the U.S. alone, not much of a market IMO.

In this day and age a young person with a family would buy their kid and ipad, i phone, or whatever. A train only runs in circles, the internet can take you anywhere, not saying its right, just that its the way it is.

I bet Apple , Samsung, etc sell several hundred million pieces, at roughly $400 each.

Apple has 30,000 employees assembling ipads alone.

This is more in line with your McDonalds...... come to think of it..... its no longer cheap to eat at McDonalds. Their prices have increased more than Lionels over the last decade.

Depending on the average( non vision line) loco, the "competition" might come in at $100-$200 less than Lionel. No whistle steam feature, poor parts availability, and a "minimally upgraded" sound system start to close the gap quickly.

I say might, because as in the case of a NKP Berk, the Lionel with whistle steam can be had for $1050, while the MTH version is $1100.

So now what?

"My point is Lionel simply continues to raise prices needlessly."

Really?  Needlessly?  No, they have a very good reason.  They want to make a good profit so stay in business.  I think their prices are reasonable and I want them to make money so they will be in business tomorrow.  

When Menards can have a third party manufacture and ship from China their boxcars and then sell them for $20 or less, pretty much tells what it costs to manufacture the traditional type rolling stock.

   Bill T

Don,

Welcome to the world of "observing" price trends in our hobby!!!   It can be trial by fire some days, given the wide range of passionate toy train enthusiasts here.  I've stuck my hand in the hornet's nest here more than once when commenting on industry trends and related topics, so COME ON DOWN and join the club.   

FWIW, you've made some very poignant observations here... and it's good to see a civil discussion on the issues.  Not everyone will agree with your comments, and that's fine.

I guess I'll never quite understand why some toy train enthusiasts are lock, stock and barrel willing to spend just about any amount of money on this stuff without even thinking twice and pushing back "even just a little" when pricing doesn't quite line up.  Money means different things to different people.  So I suppose that's part of the reason.  Don't get me wrong... I -- like many enthusiasts here -- spend a lot of $$$ in this hobby... I just like to get maximum bang for the $$$ I spend. 

David

I'll make it simple - To grow this hobby and grow your train business, you would increase sales and net profits way beyond limited sales due to high prices.  The lower costs to acquire trains certainly would allow way MORE people to join and enjoy this O Gauge hobby.

Sell 1000 $95 caboose at $ 45 net profit - $45,000.  Sell 5,000 $49.00 caboose at $12

net profit - $60,000.  I left out the resellers margins.  (But there is room for them as well at both price points)  In general, things also cost less with increased volume.

What is really important, and some of you loose sight of this is growing the hobby.  If the hobby's ranks continue to shrink, there will be no one to buy $2700 list price locos or $95 cabeese because no one will be making them.  One needs a critical mass to survive.  High prices are quickly shrinking us to the special critical mass.

The comment about the selling price of Menards trains was right on!  I would say they are the rough equal of a 6464 box car.

I don't think Menards has the pricing power Lionel does.  Though I do like the Kusan derived items.  

Perhaps the market Lionel sells to is a 100 unit at $1000 market rather than 1000 units at $100.  They aren't always interchangeable.  

Thinking along that line, Don...  With prices inching up in recent years... folks who easily purchased TEN $50 pieces of rolling stock without thinking about it, may now only purchase FIVE $100 pieces.  So if the importers still want to sell TEN pieces, they've gotta now find another consumer to buy the FIVE pieces the other guy didn't buy anymore.  Or, worse yet, five more consumers to buy one piece each.   

Reaching new consumers is not an inexpensive task -- especially with changing market demographics or a shrinking market.

Doesn't seem to bother the importers right now though.  So all seems well in the land of price-bumps... for now. 

David

quote:

 I believe there are about 29,000 members of TCA, and perhaps as many or more in LCCA.

I don't think the number of TCA members is a particularly meaningful way to measure the size of Lionel's market. While Lionel "O" gauge is certainly popular, there are TCA members whose primary interest is not current production Lionel. Many of the TCA members I know don't have any interest in all in current Lionel stuff.

On the other hand, I assume that everybody who belongs to the LCCA is interested in current production.

The membership count of the LCCA and TCA came up here a while ago, I don't recall whether it was before or after the LCCA took over the Lionel Railroader Club. At that time, I think there were more TCA members than LCCA members.

Many people find value in belonging to both organizations.

Those boxcars and flat cats are most likely a very small if not microscopic blip in Menard's bottom line.  They can afford to let them go at those prices because it's not anywhere near what they make on everything else, plus it's cheap advertising and goodwill.  Look how many folks sing the praises of Menard's here.

Heck, I bought a Dilbert DVD for 5 bucks last week at Menard's.  If they lost anything on that DVD, they easily made it up with the other things I bought for some home repairs and the like.

If Menard's had to solely rely on the O gauge market, and not the lumber, tools, construction and garden supplies, the prices for the freight cars would be considerably higher.

But, in case you haven't noticed, their structures are priced more in line to typical O Gauge structures.

Rusty

The key to Lionel vs Menards is that Menards is a private company and "only" answers to Mr. Menard. Lionel surly must answer on at least a quarterly basis to the investment company that owns it. Menards ,in my humble opinion, is in a better position to pick it's shots and build it's O gauge business if Mr. Menards so chooses .

Brad

prices now for trains are just following the economy, in 2011 the car I bought listed for $36k, the discount was $1200.00. I bought the same exact car again in 2014 with a list of $42k, the discount was $8500.00. seems the new MSRP didn't go over well with most people, hence the discount.  competition is the key for consumers and lack of it for the manufacturers.

The hobby is shrinking due to a lack of interest more than anything. Toy trains are "old fashioned". I'd argue those of us that still enjoy them do so because they were one of the best toys we could get as a kid.

Kids today find other "high tech" electronic items more interesting and more fun. A $400 phone isn't cheap for a 9 year old, plenty of parents buy them without issue.

Just because a train is "cheaper", doesn't mean it will draw more interest.

K line did have some great items at great prices..........

I think what's being left out of the equation is the consumer paying for the brand name.

Take Goodyear as an example.  They make good quality tires, but they are tires where the quality tends to be no better/less than the equivalent from competitors like, say, Dunlop.  But Goodyear tires tend to cost more than much of their competition, and that is really for no particular reason other than Goodyear tacking on a premium for the brand name.

I believe this has also always been the case with Lionel, and continues to be so, good or bad.  Regardless, I always believe that, more often than not, whatever the prices set to by the importers are done so simply because they can, not necessarily because they must.  

While it's true in the end it's up to the consumer to buy at whatever the final retail prices are or walk away, I also strongly believe in the consumer having the right to make plainly known why they chose to not to buy something or why they feel something's overpriced, not just by voting with their wallet and remaining quiet about it.  Actions without explanations sends an incomplete message to the importers.

I'm not going to get into whether the price increases are "justified," etc. If you go back to a Lionel catalog from 12-15 years ago and look at MSRP in terms of the value of the dollar at that time, they look awfully high too. 

What I will say is that the huge price increases from Lionel have caused me to cut way, way back on the amount of trains I buy. I have bought exactly three new Lionel engines in the past five years - the Milwaukee Road S3 Northern, which was very attractively priced, a Rio Grande USRA Light Mikado that Charles Ro was blowing out for a great price, and I've pre-ordered the Milwaukee Road Heavy Mikado. I did a lot of soul-searching before placing that order. The pricing on that engine is interesting. The Milwaukee version is in the second group of Heavy Mikados being produced. MSRP on the second run is the same is the first run, but the real price is $100 higher because Lionel raised the wholesale price and left the MSRP the same. I am paying about $1100 for a Mikado with no special features, and new tooling only for the boiler. I thought about saving 100 bucks by buying a first-run locomotive and repainting it, but decided I'd go with factory decoration. That particular engine was the mainstay of the Milwaukee's freight operations through most of the 20's and 30's, so I wanted one very badly and I went ahead and ordered it - but there's nothing else I can think of that I want that much, so this will very likely be my last new Lionel locomotive ever. I have no other Lionel product on order now, and I doubt I'll be buying much from future catalogs. It doesn't matter if your price is "justified" or not; if your customers pull the plug and stop buying, you've got a problem. 

One thing to remember, we all here love trains and our scale "O", be it 2 or 3 rails, scale, tin, etc. Some can afford to buy every new release, some a few, and some that look to the secondary used market for their layouts. I can understand the concern of the later, not that I can't but I also have to think and plan for other things to spend and save money for. Home upgrades and appliances, doctor bills, and medicine, food and clothing.

Those that can afford every new release will probable coninue, those at the middle and bottom will not as prices continue upward. Some may not even be able to afford secondary market items. But at my present state for loose cash for toys, as prices continue upward, buying will be rarerer, and I will not go out on a limb to support the manufacturers just to keep the toys flowing,when the family comes first. As prices increase, less sales, and eventually to high to continue, Yes, Lionel, and all the greats names will probable die, as did Marx, etc.

This argument goes on all the time, and there are a lot of facts here. First of all, Lionel makes all its profits from the trains, Menards is a home improvement store train that does train stuff as promotions for its business and as a result they probably don't care if they make much money on it, they probably treat it as a promotional expense more than anything else, so they can afford to sell it at a cheap price. I haven't seen the Menard's products up close, but are they particularly scale, or are they more 'toy train' influenced? That makes a difference, too. 

As far as the McDonald's comparison goes, apple and pears. McDonald's is designed around using absolutely cheap components (classic example of government support of a business model) marketed at cheap prices to a mass audience. The biggest difference everyone has to eat each day, especially lunch and dinner, whereas toy trains despite what we think, are discretionary spending..so they have a built in market of millions and millions of people each day, so small profit margin/huge numbers works. Plus they buy their input products in bulk, which further saves them money.

The other thing is brand, McDonald's is based on a very low end business model. If you go to Shake Shack or one of the higher end burger places, you will pay a lot more, because they market themselves as premium. They sell a lot less burgers and such, so they make money by higher margins, and it works for them. 

I think you also are being a bit unfair with Lionel being top heavy, as much as I am a critic of CEO compensation and such these days, Lionel doesn't have that many heavy hitters, they are a small company, I would bet that they have very few, if any, executives making 7 figures, I would bet that maybe the CEO is near that range, maybe the COO, but keep in mind Lionel is a private company, and that most of the compensation you see with executives is based in stock price. Even assuming the 'big boys' at Lionel have some sort of profit sharing, it is't the same thing, so I doubt it is their salary that is doing it. Given that the actual labor with these products is done by very cheap labor in China, much as McDonald's does, labor across the board probably represents relatively small part of their costs. Shipping is probably high, and I wouldn't be surprised if support is as well.

You could argue that being owned by a private equity firm is part of it, those kinds of firms want big returns on their investments, so that may be part of this, but even then if this was privately owned by let's say a proprietor or family, probably wouldn't change the prices much.

The reality is Lionel is more like Mercedes then Kia. Mercedes gets a huge premium on their cars because they are exclusive, they make relatively few of them comparatively, and charge a premium. Much like Lionel's high end engines, they offer premium features, and you pay a lot for that, too, on a MB. 

I understand the complaints, I understand wishing that they would be a high volume business, where the prices would be more in line with consumer electronics, but the reality is that given the market, the size of it, high profit margins are required when you  make relatively few units. I can't speak to tooling costs, but it seems to me a lot of what Lionel produces is not based on the old tooling, from what little I know (and others may wish to comment on this), I suspect even when producing the old conventional classics, they were not using post war or MPC tooling, and I wonder if the K line based products are still using that tooling, or if they recreated it by now, tooling wears out, plus when you do it overseas like that, might have been cheaper to redo it there then keep the old stuff going.....

MTH is a different model, as far as I know it is Mike Wolfe's show, so the profit model is going to be different, and maybe they are trying to do it on volume a bit more.....without looking at the MTH books and Lionel books, this is mostly speculation built on business model and the nature of the market, and I doubt very much either would let me look at them

As far as Lionel dying, I have been hearing the death of toy trains for years. When I was growing up, toy trains were old fashioned, too, yet people my age are now in the middle of all this, Lionel originally struggled to stay in business when tv and slot cars came around and other trends in toys, there have always been the distractions and such. To be honest, how many kids back in the 70's were doing toy trains, or 80's and 90's, yet kids in that age group when they became adults got into this. It is never going to be a high volume market, yet niche markets do exist, and they often are expensive. Solid state amplifiers took over a long time ago, yet there is a market for tube amplifiers, old McIntosh tube amps still cost many thousands of dollars, and the new ones being made, either straight tube or hybrid, are quite expensive, but they still soldier on, and I think toy trains are like that.