Pre-orders?

Of the major toy train importers these days, I would say this is LEAST true with Lionel.  Even in very recent years, they've published a catalog -- only to have some of the stuff immediately available.  So we know those items weren't "made to order".  And of course, the proof in the pudding is the number of blow-outs that occur annually as a result.

Atlas-O, on the other hand, seems to have a more strict build-to-order model.  Stuff is catalog'd -- sometimes even without prices -- and order levels (by dealer) determine whether an item gets made.  I've noticed very recently that certain roadnames/paint schemes have been cancelled -- presumably for lack of pre-orders.  Ironically, the Atlas-O delivery time has been absolutely horrible of late -- almost always running many months beyond their ETA's.    Let's use the CZ cars for example... at this point, the entire train should have been produced.  Yet instead, they're about half way complete, and we're now hearing rumors to the effect that a couple of the more CZ-specific car variations won't be made at all.

Third Rail also seems to have a heavily built-to-order strategy.  Low pre-orders means those items don't get made.  MTH seems to fall closer to Lionel in the spectrum, but we never seem to see stuff delivered simultaneous to a catalog'd publication as we see so often from Lionel.  On the other hand, we seldom see blow-outs from Atlas-O, MTH and 3rd Rail like we do from Lionel.  

What does all of this mean?  Well frankly, I seldom pre-order anything anymore.  It's a rare occasion when I do... such as the recent Atlas-O production run of CSX Gunderson cars -- yet to be delivered, I might add.    I have more than enough trains to last me a lifetime and then some.  So if companies think I'm gonna pony up $$$ for pre-ordering before they take months and sometimes years to produce product, they're sadly mistaken.  I'm not their customer.  And if that means some stuff I like doesn't get made, I'm perfectly fine with that.

David

I pre-order stuff I really want and take my chances with stuff that I think just might be nice to have.  Pre-ordering might make a difference in whether or not a manufacturer makes an item or not, but I don't consider that.  I do it mostly to assure myself I get an item that, about 30% of the time in my experience, because hard to get soon after coming out.

This is a trend has it good points but is mostly bad. The good is a bottom line money issue for the industry . They only build what they have orders for and this equals higher profits and they are able  to command higher prices. The bad side is lower production means higher prices, selection becomes limited , Peaple stop preording because of the wait time upwards to 2 years or more. This equals to less interest  in O Gauge as a hobby. This also limts new blood to keep the hobby alive. If you look at HO,N, and Z gauge the selection is huge and the prices are lower. This is why the used train market is doing well and peaple are willing tho upgrade older engines with TMCC or PS2 if you can find the kits.That is one of the reasons that Williams has consistently done well. Lower prices and the ease of upgrading the engines . MTH and Lionel need to realize if they want to survive they need to lower their prices stop trying tomake a 800.00 profit on items that cost 200.00 produceand to increase quality  control. Who wants to pay 1000.00 for an engine that has issues coming out of the factory. They also need to find a ways to create interest in the hobby with the young generation or as the collectors start dying ing of so will the hobby. Just my 2 cents worth.

My three “rules” for pre-ordering.

1. I never pay a deposit.

2. I pre-order items that I know I really want without regard to whether or not I think it will be made. Frankly, I don’t think I’ve ever pre-ordered something that was cancelled.

3. Patience. I take the shipping dates with a grain, or two, of salt.

I primarily buy from Lionel/Legacy in terms of train equipment and I have no problem in pre-ordering something I like from a dealer that does not have an up front deposit requirement. This gives the dealer and manufacturer some idea of what to order/make. If the item is not made because of insufficient demand, no harm no foul.

Based upon current market conditions, it just makes good sense to do business this way.

Exactly. My LHS doesn't require a deposit for pre-orders. If he did I wouldn't pre-order at all. I don't pay him anything until I am picking up the item. I also only pre-order the items I really "have to have". The other items I want I just take my chances, and so far I have been lucky. Also I have figured out that shipping dates usually require at least a five gallon bucket of salt.

That's because there are many more model railroaders in HO and N (I'm not too sure about Z) than O, but comparitively speaking, the prices aren't that much lower for what you get when compared to O.  

A Micro-trains Z scale F7 ranges $99 to $129 depending on roadname and it's a very small locomotive that's DC only.  An AZL GP38 is likewise $99.  So, value is in the eye of the beholder.

Kato N-scale F7's are around $89 and their SD40-2's around $100.

Athearn Genesis F7A's without sound are around $170, while the Athearn Ready to roll GP38-2 is $99 so if nothing else, HO also provides the most "bang for the buck."

And just to indicate the lack of purchasing power of a small market, the MTH S Scale F3 MSRP's at $379 for a powered proto-3 unit and $199 for a non-powered so you're getting awful near $600 just for an A-A set with one unit powered.

But even the HO manufactures are cutting back.  Exact Rail went direct only a while ago, Rapido Trains builds to reservation and even Athearn may wait years before rerunning something as simple as a Ready to Roll Santa Fe F7.

It's a brave new hobby world.

Rusty

As a rule, I don't pre-order.   There are a number of reasons.   Of course I have more than I need for one reason.    But not knowing the quality and fidelity to scale of an unseen product also makes me cautious.   I have had some less than pleasant experiences in the past with products that were talked up well and came in and did run as expected, or did not look as expected, or both.   I usually wait and see what it will be like.

On the other hand, I do pre-order if I really want the item and I have had some good experience with the importer.    And by the way, Sunset 3rd rail does not require a deposit with a pre-order.  

I am interested in scale 2 rail and accurate prototypes, so I am usually looking at products from the smaller importers not the big toy train mfg.   

Some items I have gambled on that turned out really well were the PRR X29 and H21 from Atlas O.   And the E7 A units from Sunset 3rd rail are really exceeded expectations.   

AS for profitability, and dumping etc, when I lived in Ohio, I did some part-time stuff for my local LHS.   The owner and I were friends and we talked a lot especially on the way to train shows.   he told me that he had to pay personal property tax on his inventory every year.    I assume it was a state issue, but might have been city.   In either case, if he had an item in inventory at the end of the year, he paid personal property tax on it.   When something sat around the shop for a few years, it became a business decision to cut the losses and dump it for the what he could get.   That way he could stop payng taxes on it, and have some cash flow back to invest in new inventory.    Yes no one stays in business making a loss every year, but most businesses do take a loss on some items just to get out from under.   I don't think any of the small hobby businesses make wealthy owners.

Definitely not the case with Z (which I was heavily involved in for many years).  The number of products being offered today is a small fraction of what was available back when Marklin and even Micro-Trains were grinding out stuff at a very decent rate.  AZL seems to have taken the lead in Z, but the full range offered by all the Z manufacturers is quite small compared to what it once was.

Regardless the selection is still huge and if you cant find what you want, the ability to repurpose engines and rolling stock using decals is there. Try finding O Gauge Decals in hobby stores.

Doug

Quantities of scale.  O gauge/O scale is a niche within a niche hobby.  If O gauge had the sales volume that HO and N have, I'm pretty certain the issues you mentioned including lack of product selection and availability of decals would be less so.

I was stationed in Germany for 14 yrs. Marklin was and still is the lead in Germany and Europe for Z scale. The problem is a lot of their products are not available in the US, the same as their HO and N scale lines.

Doug

Another point to consider about pre-ordering... is accuracy of the product depicted in the catalog or brochure.  How many times have very basic questions been asked of the importer regarding a catalog illustration/photograph... only to be told that they don't know how the model will ultimately look until it arrives Stateside?  That's gotta be my biggest pet peeve about pre-ordering nowadays... whether you pay a small deposit or not.  I'd hate to be the dealer caught in the middle of this nonsense.

David

One thing else. In 2006 Germany put restrictions on the items built for German Companies in Chinese and other Asian countries factories were production costs very low.  The first companies to fell this was in the diecast car and truck markets (Minichamps and Schuco).

Doug 

That goes back to the point I am making. about prices, preorder to delivery time, and product availability.  If you bring in more people into the hobby sales increase, Therefore variety increases, delivery time decreases and that feeds upon its self.

Doug

Doug

You want to know tough?  Try being in my chosen scale: S.  Very, VERY, VERY few hobby shops have anything at all in S (and I'm not talkin' used Gilbert Flyer...)  Until last year, S Scale had virtually NO new products for 2 years thanks to Sanda Kan.

O Scale has a cornucopia of products by comparison to S.

But, nobody forced me into S and I've learned a long time ago to deal with the shortcomings of the scale.

Rusty

Rusty I found this In bold probably explains this best

Chinese contract manufacturer Sanda Kan has sent letters to a number of its customers worldwide, telling them it will no longer be able to make products for them.
According to industry sources, among the model railroad customers receiving letters from Sanda Kan are Weaver, S Helper Service, American Models, Bowser, Micro-Trains and Märklin/Trix.
Among those not getting letters were Bachmann, Lilliput, Graham Farish, Lionel, Atlas, Walthers and Aristo-Craft.
Kader Holdings, which purchased Sanda Kan in 2008, is also the parent company for Bachmann, Lilliput and Graham Farish.
Numerous model railroad companies that have products manufactured at Sanda Kan have seen delays in deliveries over the past 18-24 months. Some had already moved the bulk of their production to other companies like AFFA Technologies.
Also picking up some business from the turbulence is Rapido-Maytex. The company's Jason Schron says it has picked up a couple of customers and is looking for more. He says the facility specializes in runs from 1,000-10,000 pieces.
Sanda Kan's move is widely seen as an effort to focus its production capacity on its biggest customers. It also manufactures slot cars and other injection-molded hobby products.

I don't believe the solution is as simple as that.  Lower volume tends to equal higher price.  Lowering prices doesn't guarantee higher demand and volume nor does it guarantee the long term success of model/toy train companies; look at what happened to K-Line for example.   They undercut the competition but at the expense of not being able to pay their production debts. The chicken or the egg argument doesn't really apply IMO.

Back to the comparison between O and HO/N, the issue going against O scale/O gauge is its size relative to those two smaller scales.  That's one of the reasons O lost favor over 50 years ago when HO really started to take off.  Factors such as more families renting apartments and the space in newer homes after WWII really became more of a premium.  You can do more with less square footage in the smaller scales than you can with O.  Plus the simple fact that trains, both prototype and toy/model, aren't as popular with the public as they used to be.  We all recall how during the later postwar period air travel and the space race significantly declined interest in trains as a toy.  Even today, railroads still aren't in the public eye as a whole anymore, and the romanticism and wonder of trains just isn't there like it used to be.  Plus today, trains are up against much higher volume products like R/C cars/airplanes and video games.  No way can they compete against that.

My only concern with pre-orders is that you run the risk of everything arriving at once, rather than being able to spread your purchases over the year. I'm loathe to pre-order much at the moment, as I already have a whole raft of items on pre-order from previous years, and if they all arrive at once it will be a very expensive month.

Tell me about it.  I know all about it... I lived through it.  It's also why MTH is now in S, Mike was able to buy the former S-Helper Service.

S Scale manufacturers are generally small companies, smaller than Weaver.  It took over a year for American Models to get all their tooling back from Sanda Kan. 

The S maunfacturers fired by Sanda Kan didn't have the resources to reboot immediately.  And Sanda Kan was shorting final production runs.

MTH S won't be showing up until the end October or so, locomotives in March next year (IF all goes according to plan...)  Lionel's breaking out of the traditional AC gilbert mold, but compared to O, Flyer is just a trickle.

S is still nowhere near O in availability.  You can stun an ox with either a Lionel or MTH O catalog while you can barely generate a breeze with a Flyer or MTH S catalog.

Rusty

I had that happen when I was in Germany. I had preordered some trucks from Minichamps. In between one of my trips to Afghanistan, I stopped by my hobby shop that I did business with over 2 yrs waiting 7 trucks came in at once. Instant 1200 euro (1600US) I was not happy.  I like what NSbill solution, but what happens if it become a 2 yr wait or they decide not to produce it due to insufficient orders. 

Bottom line its a crapshoot either way.

Doug

Very interesting reading and perspectives.

I'm surprised by a couple of the comments re pre-order down payments and arrival 'crunches' hurting the home cash flow.  For all of the 15 years I've worked at our LHS, we've had a couple of policies that, apparently, are not so common?...

1) We encourage pre-ordering...to ensure the opportunity to get what someday might be hard to find.

2) We do NOT typically require a down payment for Trains pre-orders....period.

3) If you pre-order, we WILL give you a price break...the size of which is determined by the net price we are required to pay upon delivery...which has been known to change.  When we have a guaranteed net price, we can/will quote you your price.

4) Walk-aways and no-shows do happen.  It is seldom an issue of the buyer being discourteous.  More often it's due to job change/loss, death/accident, etc.  That's life.  We live with it, too.

5) We offer a lay-away plan...25% down, 90 days...to help the homefront cash flow.  In our local economy, we've even bent the 90 days....sometimes heavily...due to life changes.  As long as SOME regular payment is made, showing sincerity, we hang in there with you.

BTW, pre-ordering is not only helpful to the manufacturer, but also to the distributor and retailer.  It is some measure of the sales potential for the item.  So pre-orders, especially strong pre-orders, is an encouragement to obtain extra stock for late demand.  No demand?  Why order a bunch of dust-collectors to absorb working cash, pay interest to a bank, sell at a loss months/years down the road to get rid of? 

FWIW.

KD

Doug,

Sometimes it does become a long wait, and it sucks having the money tied up. But it is worth it to me having the item secure. As for the product cancellations, they're disappointing, the money just get credited to other stuff.

Bill