Pricing in the Lionel 2015 Christmas Catalog

K Line went bankrupt almost 10 years ago. I think some folks here have said they were selling too cheaply and profits were not there to support the business. It caught up with them and down they went. That was bad for all of us, not just K Line. All train manufacturers have had price increases the last year or two. RMT has also announced big price increases coming in all new items going forward when current inventory is depleted.

I don't like price increases any more than anyone else, but I also don't want to see the rest of the train manufacturers end up like K Line. If I get some extra money, I want some new trains with all the bells and whistles available to purchase. And some trains stores to remain open so I can go look at them. They have to make a profit to remain in business. They are the only ones that know what the price has to be to make that profit.

Competition is good, it gives us lots of choices, causes the manufacturers to develop new products and also helps keep prices down. If we lose any more train manufacturers it lessens the competition and that is bad for all of us. They have to make a profit and I want them to so they can remain strong and stay in business and add to the competition.

Turtle 7: I agree wholeheartedly.  There is little or nothing in Lionel's new Christmas catalog that is going to make me reach for my charge card.

It is hard to tell what the dealer pricing will be but, yes, based on list the prices look high for what you are getting.  

The great thing about the free market is that if the prices are too high, the merchandise won't sell.  If the production costs can't be rationalized to the price the market will bear plus a sufficient profit, the merchandise won't be made.  Thus, while my gut reaction on pricing here is the same as the original poster's, the truth is it doesn't matter what I think except to the extent my dollars are relevant to the market (unlikely).

Finally, one of the issues with all of the new scale equipment and more realistic equipment generally is that while it is beautiful, I think you lose some of the magic of the trains, in terms of how they look under a tree.  Thus now it is more necessary to have designated "Christmas trains" like the ones in the catalog.  For me, it is not necessary (I threw the catalog away after the kids were done perusing it a few times) because nothing looks better under a tree than a nice set of postwar trains such as a warbonnet F3 with silver aluminum cars.

My 2¢ is that the increased cost of business are passed through to the consumer. many of this administration's regulatory costs are kicking -in and , of course, the west coast port issues still exist.

It just costs the mfg more to provide the same car at the same profit margin. The distributors and retailers are facing the same cost increases just to open their doors each day. So, the consumer pays for it.

Granted... The dealer "street prices" for Lionel items are proportionately much lower than those of other imports due to Lionel's latest overly-inflated MSRP's.  But we can't deny the reality that hits us every so often that our dollar just isn't going as far as we'd like.

As I said the other day, I'll probably spend $200 (at dealer prices) for items in this catalog.  And that's for a few odds-and-ends in a catalog that didn't really catch my fancy in the least.  Dare I ask what the catalog would have cost me if it contained all kinds of goodies I liked?

Just a couple of days ago, I received 8 PE hopper cars that set me back a shade over $400.  I knew ahead of time they were gonna be delivered by UPS.  So when the relatively small brown package sat plainly on my front doorstep, it really hit home... "Gee, I just spent $400 for this?"    Where's the thud factor here?  And those cars would have been $625 at full MSRP!  That's just crazy!!!   

Good gosh, what would it cost me to fill up the back of my SUV?  I probably don't really want to know.

When we look at things in that kind of perspective, we finally realize the big $$$ that are being made on pallet loads of this stuff (by various elements of the supply chain) -- not to mention huge container loads. 

David

Lionel's traditional rolling stock is a very nice cash cow for the company. Simple to manufacture and way overpriced. Menards is contracting out to a third party to manufacture traditional type boxcars and are selling them for $20.

   Bill T

So here's a question.  If it's so easy to make money in this industry by overcharging, why aren't more people doing so?

Nobody said it was "easy".  Just look at the landscape of current toy train importers today, and then look at who's encountered major issues getting stuff manufactured in the past five years.  Some have lost their primary factory and needed to regroup accordingly (i.e., MTH and Atlas).  Others have encountered issues with suppliers of raw materials (i.e., resulting in Lionel's decision to transition away from aluminum passenger cars).  All have probably seen the cost of labor escalate (i.e., 3rd Rail has alluded to using Philippine factories beside Chinese factories to produce certain items).  And which importers have product produced in Korea anymore?  Nobody is immune from overseas manufacturing issues and increased labor costs. 

So while "overcharging" may not be the accurate word, consumers would be hard-pressed to conclude their dollar buys a whole lot less today.

What's interesting about high MSRP's though is that few dealers -- if any -- seem to be selling product at that level.  And an increasing number of dealers have more discount-sales quite "regularly" over the past few years. So that should indicate something right there.    BTO, on the other hand, is an attempt to create an illusion that buyers should part with their money sooner at higher price points to ensure availability of product.  It's a tricky balancing act.

David

"So while "overcharging" may not be the accurate word, consumers would be hard-pressed to conclude their dollar buys a whole lot less today."

I think the tone of some of the comments clearly indicated that folks think "overcharging" is going on. 

As for how much one's dollar buys, with a few exceptions,

expecting a fixed dollar amount to buy a fixed amount of product flies in the face of a typical core inflation rate of 2% a year, in addition to increases due to standard of living improvements for Chinese (and other poorly paid) workers, increases in insurance, shipping, etc.

Anyone volunteering to get paid what you got paid in 2010? 2001?

That's probably because the gap between MSRP and actual street-prices is largest with Lionel products.  Although we can argue RMT also has inflated MSRP's, but they deal direct to the consumer.  So it begs the question, "What is the 'right price' to pay?".

Case in point... those PE coal cars I talked about have a street price of $55/each give or take a few bucks.  The MSRP is $78.  Should we need a "sale" to bring them in line to the normal street price of $55?  Or should every dealer just list them for $55 and battle it out by pennies?  One lists them for $54.99, then the next comes in at $54.96.    And let's not forget some offer "free shipping" on orders over a certain amount.  That's a nice bonus too.

And if all that doesn't work, will these cars be blown out at $40/each down the road like other Polar RR freight cars?  Or will they sell out before that?

At the risk of irritating folks who don't like these price discussions (that's their problem, BTW... they're free to skip this threads), I have a theory that Lionel's inflated MSRP's are in place to help dealers deal with the shift of risk as segments of the product line transition to BTO.  On one end of the spectrum, Lionel has made it EASIER for small shops to compete for pre-order business.  We need to look no further than this forum to watch what happens when new products are announced.    But on the other end of the spectrum, Lionel also needs to somewhat appease it's larger dealers who had the history of being "big enough" to absorb the risk of ordering lots of inventory.  Those big dealers have probably now lost a chunk of business to other dealers in the BTO space.  Ask them.   

By inflating the MSRP's, Lionel is helping all dealers set their prices without any one dealer looking like the bad guy by selling at or above MSRP.  And for those dealers who sell early at the "typical, early-buy" street-price, it gives the impression that there's a huge discount being offered to the buyer.  After all, everybody likes a "good deal".

In the end, the market will determine the real selling prices.  Will folks buy those PE hoppers at $78 MSRP?  I doubt it.  But for the dealer who tries to sell them at MSRP, Lionel has tried to diffuse the suggestion of price-gouging.  Meanwhile, the dealers selling them at $55 get to say they're offering a 30% discount.   

Buyers will always draw their own conclusions.

David

I'm okay with Lionel's prices, Christmas catalog and otherwise.  I think their prices are reasonable given everything.   

I don't know how to find out what Lionel's earnings are, but I'm sure it is out there somewhere. I would think that at their prices they can make Millionaires faster than we can make layouts! What is the price of a Big Boy in the states? What is the wage of a worker in China? How many workers can they pay for the cost of a Big Boy?