How does Lionel work?

I have been buying Lionel Trains from the 1957 catalog. Everything is available for immediate purchase.

Many of the items in the current catalog, including all of the top end items, are Built to Order.  Lionel needs to know in advance the demand for an item and thereby how many of an item to produce.  This process all takes time, especially with overseas production, and is the only way a company the size of Lionel, and the niche product they sell, can hope to remain in business for the long term.

BamaRider,

With model trains, the production numbers are determined by the public response to the item in the catalog. In many cases, you must pre-order the item from the catalog, they then know how many to produce, and it will be delivered a year or more later. As far as what is in stock now at a dealer - yes, it is the items from last year's catalog...

MELGAR

The model train business is very small, a niche business if you will.  The whole market segment is probably under $100,000,000.  Individual Toys-R-Us stores used to do more business than that, depending upon where they were located.

And the overwhelming majority of trains are manufactured overseas.  Weaver's the last train company I know of that made trains primarily in the US.  Lionel has some LionScale stuff made here and maybe some others.  When your manufacturing is not under your direct control, toy train makers are somewhat at the mercy of their subcontractors.  It's not like Lionel can call up a factory operating in China and get 30 or 300 or 3,000 units on-demand.  Capacity is limited, scheduled well in advance, and what you order is what you get (at least until your time-slot comes around again).

The items you speak of are commodities.  Toy trains are not.

Best,

George

@BamaRider posted:

Does that pretty much sum it up?

 

Yep

BamaRider - So, given all of the above comments, if you want 'immediacy' you'll have to stick to motorcycles.

Welcome to the hobby!

I think most of us who have been into toy trains for a long time (I joined TCA in late '72) understand and live with the process.  Even in the '50s, catalogs came out before some of the product was made so dealers could order for late-year delivery and JLC could evaluate sales trends.

The modern practice was invented by MTH 15-18 years ago when the firm was stuck with overproduction and decided not to have excessive inventory on the shelf.  Lionel, after several years of having "sales" due to the popularity (or lack) of specific items, began the "BTO" program.  The biggest "sales/blow-outs" have all but dried up for both Lionel and MTH.

IMO, it's not a bad idea for the reasons posted by others above - especially those written by G3750.  It keeps our toy train makers in business and we get what we want.  Eventually.  It's just not immediate gratification.  But be forewarned ...  there are BTO items that you might not get - but want - if not ordered.  That goes for Lionel and MTH and 3rd Rail and Atlas.  

PH saw what was goin on and said, 

"BamaRider - So, given all of the above comments, if you want 'immediacy' you'll have to stick to motorcycles."

Well its a good thing I have patience, I was just curious how things worked, so I knew what to expect,

As discussed, this is a boutique, niche industry that requires proportionally high capital investment for new tooling (which is why you see almost none of it, except from the largest company, Lionel).  Thus one invests up to hundreds of thousands of dollars up front and finally see the revenue start a couple of years later.  Cash flow is particularly a challenge according to the owner of the HO and N company, Rapido of Toronto (interview on "A modeler's life" podcast with founder/owner Jason Shron). 

No one wants unsold inventory, as noted above, thus the expensive new locomotive tooling requires up front orders by retailers.  Otherwise it doesn't get made.   If the market wanted only the same old,  same old each year, which apparently most of us don't, you could have inventory sitting on the shelf perhaps, but not with any ability to provide much variety. The variety of product these days is quite remarkable considering the small size of the market.  But it requires this approach to create that product variety.  How much truly new tooling is made by motorcycle manufacturers each year?  I suspect it's pretty small as a percentage of total parts.  It's also a much larger market/industry, so perhaps they can take the risk of making product without having up front orders.

@BamaRider posted:

PH saw what was goin on and said, 

"BamaRider - So, given all of the above comments, if you want 'immediacy' you'll have to stick to motorcycles."

Well its a good thing I have patience, I was just curious how things worked, so I knew what to expect,

Yeah. In the immortal words of Mick Jagger ... "You can't always get what you want."

Even with motorcycles.  

The whole pre-order process started I think in the HO world, in the late '80s- early '90s, and as I remember with Atlas, on locomotives.  It was concurrent with the move to 100% "Made in China" (or maybe Korea, Japan, Singapore etc.).   I am not necessarily saying it is BECAUSE of the foreign manufacture.  But it was in the same time period. 

Maybe a bigger issue is that the costs/ prices/ and huge variety of locomotives mean that the LHS (local hobby shop) or traditional local train dealers cannot afford to stock much in the way of these high-ticket items.  In the old days, Lionel made a LOT of Lionel Lines trains including engines, and a relatively small selection of prototype road name products, with a few exceptions.   

In 1965, a Lionel Santa Fe War Bonnet diesel AA set, with two motors, horn, and MagnaTraction, freight cars, track, and transformer was $85 list;  the dealer probably made 40% or about $30.

Fast forward to today- a Lionel Lion Chief Plus 2.0 Anniversary Set No. 2022120, is a deluxe set, but contains pretty much what the 1965 version did.  The price is $999, or 12 times the 1965 product.  Compare the base 2020 Ford Mustang at  $ 26, 670, to the 1965 Mustang Fastback which sold for $ 2427.  That is 11 times. 

In both cases, there is no comparison on the product itself- the car or the train.  But the list price inflation factor is similar.

But because the model train market is so varied in terms of product, yet so specialized in terms of the entire hobby, the train dealer/ hobby shop today cannot stock a $ 1000 set, one road name and style, where he MAY sell one set a year, and makes $ 300.  That's a 3-year dollar inventory turnover.  The really BIG dealers- national dealers like TrainWorld, can, but not the mom and pop.

So, the pre-order game.

Lionel has been operating in this fashion for 120 years.

This is why I follow Greg R's advice and order from the 1957 catalog.  I liked it when I was a kid and I still like it, but now don't have to save up my lawn mowing money for it.

Chris S.

Your best bet is to hope it works. Otherwise, you have to get an RA and send it back.

Two marketing messages for train hobbyists -- "hurry up" (to place an order from the current catalog before the dealer's deadline) and then "wait a while" (for production and eventual delivery - perhaps a year of more).  Others have thoughtfully explained the reasons why.  This hobby is not for the impatient who place a BTO product with a local dealer. However, most hobbyists (me included) will say when an item is finally delivered, "It was worth the wait!"  

That's how I felt when my Sunset 3rd Rail O-gauge model of a Rock Island TA passenger train set arrived -- equipped with Lionel's TMCC and Railsounds. I waited for it for more than a year. The dealer (Arkansas Train Hobbies) offered an inaugural run of this elegant train on his in-store train layout. Fabulous!

Mike Mottler   LCCA 12394

"Built to order" is a major supply chain procedure.   If you Order light fixtures for a new build, or remodel, expect, at the best, (8 weeks), manufactured state side.  Be sure your order is correct, add, may be 2%, overage, for the product that comes damaged, or does not work. Keep extra light fixtures, or store them on site, within a year, usual warranty period, there will be failed fixtures that require replacement.   One order: I needed a repair fixture, for the one, that the plumbers destroyed.  Phone conversation, was that the fixture was obsolete, and not available.  ???  A light fixture was obsolete, before I paid for it...   Wild world out there.  IMO, Mike CT.  ?? Does that sound like your model trains ??  

I believe there also 'may' be one addendum to rthomps's comment "But be forewarned...there are BTO items that you might not get - but want - if not ordered."

Occasionally even BTO products may not be manufactured if there aren't enough orders placed to warrant it (ie. make it economically feasible.)

It's my understanding that this was the case recently when Lionel was going to make a lesser known 'brass' version of a N&W steam locomotive, but it unfortunately fell through for the aforementioned reason.

It just reaffirms that old axiom...There's no guarantees in life except death and taxes! 

On the surface, I can understand the OP's question and perspective. I'm 55 and got into O-Gauge in 2002 when in my late 30s. 

To me, the array and variety of choice of product available for a relatively small, hobby industry are  astonishing. The dozens of road names available exponentially adds to the number of SKUs. Then throw in the good-better-best approach with LC, LC+/LC+2, Vision/Legacy and Rugged Rails / Rail King / Premier. Granted, not every combination of tech gets made in every line, but I marvel at the options we have.  I could easily understand if just about every product was decorated or assembled to order.

I don't pretend to know the supply chain and logistics challenges of the model train industry, but I have wondered if the manufacturers/importers could find a way to have components made overseas and shipped to the US and have assembly/distribution shops closer to customers who then final assemble, decorate,  inspect/test, and ship the final product. 

@raising4daughters posted:

...but I have wondered if the manufacturers/importers could find a way to have components made overseas and shipped to the US and have assembly/distribution shops closer to customers who then final assemble, decorate,  inspect/test, and ship the final product. 

That is something I would really like to see.

MELGAR

@raising4daughters posted:

I don't pretend to know the supply chain and logistics challenges of the model train industry, but I have wondered if the manufacturers/importers could find a way to have components made overseas and shipped to the US and have assembly/distribution shops closer to customers who then final assemble, decorate,  inspect/test, and ship the final product. 

I think the costs, or maybe the perceived costs, are what stops this from happening. 

I get boards from overseas, and I do what you say, I perform the final inspection and also test and program each board before they're packed for shipment.  However, I can imagine that "decorating" them, implying doing the painting and lettering, is somewhat labor intensive.  Also, for stuff like locomotives, the painting and lettering happens before the assembly.

@raising4daughters posted:

I don't pretend to know the supply chain and logistics challenges of the model train industry, but I have wondered if the manufacturers/importers could find a way to have components made overseas and shipped to the US and have assembly/distribution shops closer to customers who then final assemble, decorate,  inspect/test, and ship the final product. 

@MELGAR posted:

That is something I would really like to see.

MELGAR

Lionel does that with LionScale.  The trucks still come from China.

Interestingly, American Models (S Scale) does something similar on products with complicated paint schemes.

The shells and drive trains were made here.  The shells were sent to China for decoration then the final locomotive was assembled here.

Rusty

@Craignor posted:

Lionel has been operating in this fashion for 120 years.

 

Not to my knowledge. Lionel didn't start built to order until after it moved overseas. Lionel use to produce and send to dealerships/stores from there U.S factories. And it was not built to order. 

It just reaffirms that old axiom...There's no guarantees in life except death and taxes! 

ADD :  +  Shipping/Handling