Does Lionel's on-line store hurt its authorized dealer?

There isn't anything discounted any amount at Lionels online store that can't still be found for even less at the larger "volume dealers" .

Could you contact Lionel and ask them if they will refund you the 20% if you were to match the online price? You would think they would have a way to compensate the retailers on any price match sale. This, I would think, would be advantageous for both Lionel and its retail outlets. I understand it doesn't seem fair at all to under cut your retail network but maybe they will help you out. I'm not in retail sales but it seems as though Lionel should look out for you. Keep us posted!

The 20% off is not that big of a deal if at all when the tax & shipping is figured in.

Norfolk and Western SD40-2 MSRP 529.99...with 20% discount $424.00.  I havent seen too many dealers at that price.  In fact very few.  So yes on some items they are hurting their dealers. 

Im sure everyone would consider Charles Ro a larger "volume dealer" has theirs priced at $449.  So...draw your own conclusions.

If this is a new customer and Lionel's 20% off brought them in to your store, honor it and seize the opportunity to gain a new customer, who just might get bit by the bug. I have used this method in my auto parts stores, and have gained many life long customers.

Art

Charles Ro doesn't charge $40-$50 shipping  for this locomotive, rather $9.00. So much for the "big discount". 

Draw your own conclusions indeed, you might want to do the math first. BTW the Lionel store doesn't even have this loco in stock.

Art from that statement I would practically guarantee that you have a very successful business.  We need more people at Lionel to think this way.

All the time. Many, many stores have on-line businesses as well as brick and mortar stores. I bought a camera last month from Best Buy at a local store. The Best Buy web store had it cheaper. Often the store will match the on-line price, which Best Buy did in this case. But folks should "do the math" correctly, as has been pointed out. It is not uncommon for the on-line source to be out of stock. And of course shipping cost can be a big factor.

Also, for many items I like to be able to open the box and look at the item (and even examine the box itself), and have the ability to easily return and exchange an item, which you can do if you shop locally. Those things should be pointed out to customers.

A manufacturer, who has an established dealer network and attempts to directly sell new product at prices that are at or below many dealers' street price is walking a slippery slope on a number of points.

First, the manufacturer is probably jeopardizing many of it's small to mid-size dealer relationships.  Obviously, the smaller dealers can not generate the unit and dollar sales that the mega-dealers can employ at lesser unit margins.  The smaller dealer probably does not have the financial resources to often obtain the required minimum order quantity of selected products the manufacturer wishes to move quickly.  It is hoped that the regional distributor network, which I would hope acts as a dealer co-op, enables small to midsize dealers to participate in some of these mfr. sale incentives.

Secondly, the mfr. direct sale discounts also can also reinforce the belief that the mfr. has an over-inflated MSRP policy.  Dependent upon the dealer cost to MSRP pricing spread, customers will eventually wait for the deeper discounts before making a purchase.

The third consideration is that the mfr. is not happy with the current volume of sales through its dealer network and wish to move inventory that is still sitting in its warehouse before their fiscal year end.  If this is the case, it is anyone's guess who is at fault:  the mfr. for setting prices and/or making too much product or a dealer network that is not ordering or selling enough product.  Neither party wants to have train sets sitting unsold after January 1.

There are always going to be that dealer who has unsold "new old stock" items that are more than 3 or 5 years old sitting on their shelf or being lugged back and forth to train meets/shows with prices asked that are more than the market is willing to pay.  They actually missed the buying curve:  when that item was popular.  They are either in denial or too stubborn to realize the money they continue to lose (opportunity cost) each day that "new old stock" item sits unsold.  They hold out with the idea that the one customer who didn't buy this item 5 years ago will appear AND be willing to pay a price that is either just below MSRP or an above MSRP premium to round out their collection.

For sure, there is no simple solution that will please every dealer and mfr.  Data trends suggest that online sales (either direct or indirect from the mfr.) continue to increase.  Mfr's. might wish to have their feet in the water of direct online sales in an effort to fully control the sales/revenue cycle of their products.  It certainly will be a delicate balancing act for any of the train mfr's.

As a side story, recently while traveling, I came upon a small train shop.  Inside I overheard the counter person tell the owner that what sounded like a local guy phoned looking for Lionel's Horseshoe Curve train set and some other Lionel set.  The counter person said that the guy said "he checked the internet for the best price on these sets and wanted to know if you (this very small shop) would price match?"  The owner made what I'll call a smile/smirk/sigh and calmly said "I'll see what I can do and call him when I get back."

I do not know the final outcome of the call, but personally I would not expect such a small dealer to be able or willing to offer to meet or beat some of the mega-dealer prices.  It might be a win-win if the dealer is able to meet that price and not hurt his own financial well being.  But as a customer, I would be happy knowing I:

1) received a fair price

2) was able to take the item home today (possibly test before leaving the store).

3) could easily bring it back or ask and receive help if I did have a service or technical problem.

4) am keeping my money local by buying local.

IMO, sometimes there is a premium to be paid to be able to buy local.

"It might be a win-win if the dealer is able to meet that price and not hurt his own financial well being."

 This is true, but on the other hand, you can not but a price on word of mouth advertising.

Art

Look what RMT did to their dealer network, I doubt that you will find a dealer who will touch them now.

My wife and I have an eBay business.  A couple of years ago we were buying a product (not trains) from a manufacturer and reselling it on eBay for a decent but not spectacular profit.  We suddenly noticed that the manufacturer was putting his product directly on eBay at a price that was less than he was selling it to us.  We stopped selling the product.

I look at the Lionel website but I haven't bought anything.  The nearest Lionel / MTH dealer to my home is 35 miles away.  I only shop there a couple of times per year.  Most of my train purchases are via the internet.  I shop on the internet because it is easier than driving 70 miles roundtrip in heavy traffic.  It is also sometimes less expensive at today's CA gas prices.  I think that many people are in the same position that I am.

I visit relatives in the Seattle area about once a year.  I usually shop at Eastside Trains in Kirkland during these trips.  Eastside Trains seems to have a winning formula for train sales even though almost all prices are at full MSRP. The store competes on outstanding service and having a huge selection of trains and accessories.  I almost always spend a couple of hundred dollars on each trip.  

I think that stores can never compete with train shows and online sales.  I think that they will need to compete on service and selection.

Joe

I'm sorry but I have to jump in here.

The Lionel store discount only applies to items in stock at the LionelStore website, and there are even some exclusions to that. Most of the items in stock at the Lionel store website are not the most popular items, and there is very little of the 'scale' product at all. Only those items where there is excess inventory seem to ever make it to the store website.

I don't believe that Lionel are trying to undercut their dealers at all, but are simply trying to shift excess inventory at an attractive price for a short period of time.

Nicole,Thank you for your post,and there is no reason to be sorry for stating some basic business principles

As any FYI... Just doing a quick spot check, there are some good deals to be had on Lionel's webstore right now -- even if you factor in their inflated (make that VERY inflated) shipping charges along with sales tax.

For example, if you're interested in an articulated locomotive, the numbers work very much to your favor.   Other locomotives... not as much.  And then again there are those that are listed but out of stock, like the Polar Express Legacy K-4, for example. 

Again, just spot checking, I noticed lots of stuff tallied up $40 and $50 shipping charges, which most large dealers might charge 1/3 of that at most.  So what gives, Lionel???    Is your time to ship and package more valuable than mine??? 

Lots of new stuff, like the Canadian Pacific DD35's are listed as "no further discounts apply".  So again, only select items appear to be on sale -- even though the opening sale banner indicates "store wide".  But then there's the asterisk that indicates "exclusions apply".  So then it's not REALLY store-wide, is it??? 

So to hobby shops out there... I understand your concern big time.  But I wouldn't necessarily feel compelled to offer the discount to your customers across the board, since -- as ALWAYS -- the devil is in the details.  And even Lionel is NOT offering the discount on every item.

Very situational at best... gotta look at things on a case-by-case basis.  Some winning scenarios (for the customer) for sure.  But in other cases, there are factors that bring the net discount more into the range of 8-9%, which is pretty much in line with many of the smaller, mom-and-pop LHS's.

David

you might want to check your research first....looks like they have this one

http://www.lionelstore.com/loc...-2-legacy-n-w-1.html

Nope, as soon as you "add to cart" its says out of stock. Regardless, your point was the discount.  

As I have heard from many Lionel dealers is all they care about is "in 30 days they want the cash."  And the Lionel dealer is left to handle any or all problems that arise.  Being a business man I dont think having a 20% discount on items, no matter how few, that dealers still have on their shelves is doing right by them.  Even if you save $10-20 not a huge amount but money that can be spent on other items.  Lets face it we all want to get as much as we can for the lowest price.

$40 to $50 for handling / shipping would be a deal breaker, sounds like they are recouping some of their discount.

Hey Bill,

My family's shop is in the same boat.  We are an authorized Lionel Dealer but no longer repair as my 87 year old grandfather can no longer see some parts to work with.  Our biggest concern other than Lionel's own store undercutting us is Amazon.  I want to know how Amazon can sell trains and how can they sell them for less than what we can even buy it for from our distributor.  When we 1st set up to be an authorized Lionel Dealer, we had to prove we had a brick and mortar retail store via photos and such.  I know Amazon has no such thing so where are these prices coming from?

Best of luck to you and your shop and your continued success.

There are stores that won't match the on-line prices of their websites - the brick and mortar operation has too much overhead and can't afford to match their on-line prices. Some stores will, of course, like BestBuy.

Regarding opening boxes and checking items, I was talking about the advantages of shopping at a LHS, where you can do that while shopping in the store before you buy. If a particular item isn't satisfactory, you can get a different one. I've shopped in train stores in many states, and never had a problem with opening boxes and checking items in the store. Returning already-purchased items can be a different matter, but that's not what I was talking about. I've never returned an item to a mail order seller unless it was damaged or defective, and so have never encountered restocking fees and so on.

We had a husband and wife come in our store and inquire about a train set last weekend.  Our salesperson got the set down showed, them everything about the set, spent 1/2 hour with the couple.  After they were done looking, the husband turned to his wife and said, "I'm going to get this off the Lionel web site, it's 20% off and has free shipping.  I just wanted to see it in person before I ordered it." 

How's that for dealer support?  Stores have now become showrooms, not retail outlets.

Generally, I am not a dealer and I don't buy direct so my view is that this is none of my immediate concern. Further, it is between dealers and the manufacturer to sort this out. Unless someone who is a dealer shouts out, it's sort of a misfired left field lob aimed at Lionel, etc. Lionel etc who have dealers cannot afford to lose them or they would lose a significant profit margin consequently I don't see dealers screaming bloody murder. Why? Because it continues. It's sort of like dropping a match on wet kindling. Nobody is jumping up and down with joy on either the quality or cost of products, but this "controversy"is sort of an end run on a topic that has beaten into a pulp.

"...I don't see dealers screaming bloody murder."

Au contrare, mon frere.

When my manager told me about Lionel's "deals", I sent an email immediately to one of the few people I know there and also knew that he would forward my concerns up the line.  That was this past Thursday,a week ago.  Last Monday I wrote another email with my "husband/wife story".  The Lionel employee told me that mine was not the only email that they have received and that "It has caused a real stir and management is well aware of it." 

That being said, I can't imagine that Lionel or any other manufacturer will change their ways because of a few retailers.  The train hobby is not the only industry that this happens in.  This "business practice" is running rampant.  Like I said on my last post, retail stores have become show rooms.

LONG LIVE SMALL, LOCAL BUSINESSES!

I won't plead innocent to never having done a mail/online order, but I don't do it often.  I like to see what I'm buying in all three dimensions.

Even though they might not have the "best" prices in the known universe, I still make most of my purchases at my LHS.

He gets to feed his family, pay his employees, is willing to scour the distributors for an item no longer cataloged, no hassle service when I need it and have a place to hang out.

Rusty

Greg,
When best buy matches prices they can because they have over 1000+ stores.  You can imagine their markup (with large volumes purchased) is almost 40-60%.  Now add in the costs of the stores, employees, benefits, utilities, shrinkage, etc.  Ok so by the time they are done they are making 30% and can afford to match a price because of the size of the chain and the volume of sales.

Ok now look at a mom and pop train store

-1 store
-3 employees(maybe)
-margin of 30% (- whatever they give off of list so lets say 20% after a 10% discount)
small operation with little or no break on expenses  and no credit lines and little or no incentives from the manufacturers.

-Sales that are so tiny in comparison to the big box stores that they barely cover the cost of the store operations.

-1 season during the year of hi-volume sales (christmas)

I could go on..........

Depending on how much you feel that this couple will be return customers for other items (materially doubtful IMO), if they return to your shop with a service issue you can politely inform them that product purchases from your store receive 1st preference for repair.  They might have an extended wait.  At a minimum, you should also provide them a "Free Post-it note" that includes Lionel's service support phone number and mailing address.

And the Lionel/Amazon relationship continues on 12/19/12 2PM PST with another lightning deal...NYC Flyer set.

Yeah, being a small family run mom & pop train shop can be an uphill battle in today’s environment. The computer has made the world much smaller and the bigger mail order’s more powerful.

It can be quite frustrating and Lionel really isn’t helping its supporting network of dealers by selling items directly to the consumer for less than the dealer does. I can understand a little bit if they were just selling old outdated stuff at discounts that the dealers haven’t been able to sell, like an outlet store. But unfortunately that isn’t necessarily the case. For instance, the ‘Peanuts’ Christmas Set certainly is not an old set that hasn’t been selling. For crying out loud, that just came out the other week and they are offering that less than our discounted price in our store (with their 20% discount). Yeah, their shipping prices are high so I guess that is something to remember the next time a customer brings a Lionel On-line ad/price in. Still, not the way a manufacture like Lionel should be showing their support of its dealers. (don’t get me started on that NYC popup store clearance sale last year)

I understand the need for the mail order outfits since a good deal of our country does not have a LHS within a reasonable driving distance. And, as many have stated, finding a good LHS can be tricky. We have a presence on the internet ourselves, but there is no way we can compete against the big ten mail order houses. Don’t even try. We just don’t have the money, time or space to attempt to do that. Though I sure do wish us smaller guys still had the same purchasing pricing opportunities with our smaller quantities. But that’s just business.

What I really don’t understand is this whole Amazon thing. How do they sell stuff cheaper than I can purchase from my Lionel distributor. Something is just not right here. This annoys me much more than the whole Lionel discount issue. For instance, Amazon has the Polar Express O gauge set for $220.00 and I can get free shipping. This is less than my cost as an authorized Lionel Dealer. I can’t imagine what they must be getting them for since I assume they need to cover the shipping cost. It is a big company that doesn’t stay in business by giving stuff away. And on another note, to be a Lionel dealer you need to prove you have a ‘bricks & mortar’ store front and you are suppose to have a running layout in the store. What the heck, am I missing something here?

As far as a store price matching a web site price, if it is the web site of that business I can understand that. We do have a web site store and if there is a price that is cheaper on there than what we have in our ‘bricks n mortar’ store, yes, of course we will price match. But price matching with somebody else’s web site, that is something different and we don’t regularly do but have done depending on the price difference, item availability and most importantly customers attitude.

I think this has been a good and important topic and I appreciate the constructive comments from everyone. I was hoping it didn’t turn into just a Lionel bashing thread and it didn’t, thanks. I am still a huge Lionel fan, just not happy with some of the pencil pushers that only look at their number books sitting in front of them at their desk. For all the small businesses out there, trains (G and G, Choo Choo Barn, etc.) or other types, I wish you all great luck in your adventure. Not always the easy road.

Ps, Funny, as I write this I see on the right hand column here on the OGR forumn Arist-Craft/RMT’s ad for doing just what I had started this thread about but worse. Factory direct to the consumer cheaper than I can buy as a dealer. Gotta love this business (said with eyes rolling).

It has been many years since I looked at the paperwork, but it used to be that the store front and layout requirement was if you were a Lionel Authorized Dealer and that let you sell the entire line. Our Lionel rep was always upfront with us that they would let mass merchant outlets and department stores sell starter sets. This was in the days right before the advent of the internet.