Lionel's New Policy

I think that this applies to the Vision Line Big Boy. There may be other examples of this like the Gold Edition 1225, but I don't think you can make a broad assumption that manufacturing in the future will by advance order only.

Sounds like a good business decision by Lionel.  I agree with Brian that I doubt that applies to anything other than the Big Boy.

Art

I'm not a Lionel authority by any stretch but I also think PTC  has the answer. I can't believe many LHS want many of those 2000.00 engines sitting on the shelves for a lot of us that won't go that high or can't even run them on a regular layout. Big curves for Big engines mean Big bucks IMHO.

Hard to believe they'll actually do that for all items.  Many of these are impulse purchases.  The only thing that makes sense here is they're throwing the responsibility for stocking on the dealers.  Time will tell if they really do this and if it is successful or ends up biting them in the butt.

Its a good decision considering.  The one risk a manufacturer would consider in doing that is, will customers put up with it? Ordering now to get a loco months from now.  Lionel knows the answer to that is yes.  So, why should they take any risk?  This assures them of profit.  As long as the locos are quality, and they deliver on time (or close to it) I am all for it.

Sounds like Lionel does not want to be hammered with overstock blowouts in the future.

Except, it's right there in the video, in the presenter's own words, "any other 2014 locomotives."

It *IS* a good business decision because there is no excess inventory tying up Lionel's resources. No $2500 locomotives sitting in a warehouse gathering dust waiting for someone to happen along that wants one. Such a person will have to hope a dealer ordered one for his own inventory and still has it in stock, or wait for the secondary market.

The old "build it and they will come/buy" business model stinks, but there hasn't been anything close to an accurate way to judge demand until now. You'd have to live under a rock to not know that the Big Boy was coming, so it's just a logical extension to use social media and have all the orders set up before production even starts. You're going to cover 95%+ of the total sales this way, and may even end up with MORE sales because you're getting the impulse buyers on the hook before they can stare at the catalog for 6 months and decide that they really don't want it.

The train business isn't all limousines and tangerines. It's tight out there for everyone from the dealers all the way up to the CEOs.

RickO:

The operative phrase is "once the orders are tallied". As you know, orders don't come directly from the consumer, but what the distributors/dealers collectively order. To me this translates that Lionel is not going to make any surplus 2014 engines above what is ordered from their distributors or direct purchase dealers. Makes perfect sense to me, they don't want engines left in the warehouse.

The other consideration is Lionel has apparently set a production cap for the Big Boy. The 1225 Gold Edition is another example.

However, if a dealer wanted extra Big Boys, my guess is they could up their order count above what they have taken commitments for. When the production cap has been met, the order period is over.

Having a better control of production quantities is not only good for Lionel, but also for the consumer.

I think the above pretty much outlines the general operating procedure for most all manufacturers at the present time, not just Lionel.  The trend has been in that direction for some time now, and it makes good sense given the current state of the market for product, particularly at the higher end. 

I agree with passenger Train Collector, RickO and Allan Miller. Only building the quantity that you have orders for should help everyone in the end. It should also hopefully pave the way for more variety in the future, as Lionel will be able to build smaller quantities of less popular items, and larger volumes of the more popular ones.

I also doubt if this will  apply to the high-volume starter products, as this market segment does not normally think about purchases many months in advance, and is often an impulse purchase. Although I'm sure that early dealer orders will have an effect upon the quantity produced.

I would agree that this is more of a positive sign for the future than anything to despair about. 

Oh, boy, like the MTH McKeen car, there will be all these people, after the cancellation, saying, "Duh, I wuz gonna wait to see one 'fore I bought one."

It will definitely cut down on the variety of available rolling stock.

"The other consideration is Lionel has apparently set a production cap for the Big Boy. The 1225 Gold Edition is another example."

The VL BB and Gold PE seem to have different build strategies.  The BB build count is apparently whatever is ordered.  No surplus units.  The Gold Berk is limited to 200 units (as per the 2013 Christmas catalog).  I think there's a serious chance that the Gold Berk could be priced in the 1500-1700 range due to it's limited numbers.

What I'm wondering is how the Gold Berks will be allocated to dealers and how dealers will allocate them to their customers.  Some dealers (Charles Ro for instance) are taking pre-orders for it.

I am fine with this, as long as we know how long the pre-order window is open....

Hope there isn't anything else I want after forking down the money for a VL Big Boy!

This does not sound new.  Sounds like L's program of the 1950's.  The SP TM was not green lighted because not enough dealers ordered enough of them!

Not an issue here.....Like Allen said pretty SOP and in fact thought MTH had gone to this a while back. IF Lionel makes something I really want, and can afford, I have no issue with a deposit and pre-order.  I did it for my Smart 452 and I am with my Elio......

I see it as pure marketing.

The last time most trains in a catalog (which were much smaller then) were actually produced in larger numbers (or guesses at quantities) was probably the late 90's.

Back then, the blowouts were far more common.  The cries of "they're not making too many extra trains anymore" started probably a bit after that when the catalogs exploded an morphed into the behemoths they are today.

So this has been the company line for a while.  Then every once in a while there is an exception.  An engine (or more) are either cataloged after they are available, (like the EM-1s from a couple years ago) or there are more made of some particular item (many of the Sharks as mentioned above).

This is only the policy until the next exception comes along.

I hope you're right, JC642. Except for 3rd Rail, I buy nothing, nada, zip, zilch until it has been delivered and evaluated both in the mags and by the folks on the various webs. No reservation for $2000 unexamined locos for me.

I don't see what the issue is.  These high end locomotives are a niche product.  If the market will bear it, there is no incentive for Lionel or its dealers to take on the risk of stocking an item that is as expensive as this locomotive is.  So they'll build what the people order, and supply will be calibrated to demand.  If you don't want the locomotive, don't order it.  If you want it, then go put a deposit down somewhere.  There has been plenty of coverage of this locomotive, as well as plenty of opportunities to see it at the major events like York -- those are the places the serious enthusiasts who'll plunk down a few grand for a locomotive are likely to be.  For others, I understand the desire to see it but the economics of the marketplace no longer permit that, or at least that is the direction in which Lionel is heading.  The people who own the business have the right to make this call, just like you have the right to go somewhere else.  

The other thing is that I understand that people may want to have extra production because it drives prices down.  I don't have a money printing press in my basement either.  But at the same time, if the manufacturers cannot find a way to make these high end products in a profitable way, they won't make them.  And the consumer will be deprived of them.  That's a lose-lose.

Finally, the only downside for Lionel here is if these things aren't right quality-wise.  At this price point, and given that the folks who order these are likely to represent a material subset of your most important customers, they better get the thing right.  That means no mass issues and the related excuses with any of the features.  Any manufacturer of a speciality item that irritates or disappoints its primary customers finds itself in a world of financial hurt, quickly.  I think Lionel understands this, and I think this is one of the reasons Mike Reagan has become much more heavily involved in the production side of the equation.

I can't afford these remarkable locomotives, but this seems like a solid plan to avoid blowouts as well as to condition prospective buyers to order prior to production rather than waiting for a blowout. Given the quantities involved this makes good sense and protects dealers.

And, if there is tremendous demand for a particular item, a few years later, there can always be a second run with a different cab number. So if your heart is set on a big boy, go for it, and expect it to be a great investment in the fun sense, not in the financial sense.

I am not sure what folks think the issue is.  A manufacture of any product can't just randomly produce a number and hope it sells.  At some point they must have enough data to start making accurate predictions.

I would think it is better to make a smaller profit by under producing, than lose your profit by over producing.  In the end, a run several years later of an under produced item will be a sure seller.  The other thing is that the used market stays up and in general train values stay up.  Win win for everyone.

This seems to be good marketing strategy that would correct the old strategy that lead to blowouts that killed the preorder model, or was causing the manufacture to sell directly via the internet which killed the distributors and dealers.  G

What happens if your engine is badly damaged in shipment?  You just don't get one???

what

Could be.  I had that happen to me with the SF Map reefer 3 pack.  Arrived damaged, sent back, no replacement to be found.  Of course, Lionel will actually be making some extras.  That I believe is how they stock some parts.  Disassembled items.

Build to order is a great strategy as long as what is represented in the catalog is exactly the product that is delivered.  If I order a $1400 engine with X features and Lionel builds an engine with out all of the features advertised then I will not purchase the engine and the dealer will be left holding the bag.  That is not "built to order" in my mind. 

I always found that hard to believe, too. I have the MPC version of the SP FM and it is a beauty!

Your theory has problems because the 2013 release of SD40-2 and GP35 locomotives were already finished and being shipped in a container as the catalogs came out.

The number produced of Legacy Steam Locomotives will most likely be restricted to orders taken.

Andrew

Perhaps we will see a increase in the purchase of certain engines for speculation. How much would a bb be worth 3 months after Lionel delivers? List?  Fred