Question Regarding Lionel Dealers

It is my understanding that some large dealers can purchase directly from Lionel. The smaller ones have to go through a distributor. There is an extra layer of profit for the distributor so the big dealers have lower costs than the smaller train shops. I do know that my LHS has to get Lionel from a distributor.

 

I do not know about MTH, whether they have this setup or not. I am under the impression that they do not and have a more level playing field. I doubt any of the train shop owners will be able to give us the correct answers and I imagine the only way to know for sure with either manufacturer is to open a train store and see for ourselves, which is probably not an option for most of us?  

My understanding from the owner of my LHS is that he has a lot more wiggle room price-wise with MTH than Lionel. He said he doesn't get a big break off the retail price of Lionel as compared with MTH. Therefore, he's able to discount MTH products more substantially to regular customers than Lionel products. 

No they don't.  That's one of the reasons mom and pop shops struggle to stay in business.

-Greg

Yes, There are some 10 or more Large Dealers that can still buy Direct from Lionel. Then, there are Distributors, of whom I have no idea, that sell to the Rest Of The Lionel Dealers.

I can see Lionel's logic here, BUT, it's really not FAIR to The Many Old Dealers That Made Lionel Successful. Therefore, I continue to buy from my Local Hobby Shops at prices that may be a little Higher, But, They are my Friends. Friendship Has No Price Tag, just a Fair Hand Shake. NUFF Sayd.....Happy Railroading.

Thank's for the input.  I was trying to figure out why there were at times some big differences in selling prices for the same items.

 

Bum.

leapinlarry,

I agree with you.

It was the small shops which helped Lionel to become the success that they have enjoyed through the years and through thick and thin.

Ralph

Thanks RJL, I grew up in Dennison, Texas, and lived 1 long block from the back of The MKT Real Train Yards. This was in 1950, and there were three Toy Trains of interest, Marx, Lionel, and American Flyer...My trains were Lionel and I know my Dad bought them from Jackson County Hardware, which indirectly came from Belknap Hardware and Manufacturing Company, Louisville, Kentucky. (BELKNAP was a Large Hardware/Housewares/Toy Distributor.  ( I worked for Belknap for 23 Years)..Lionel sold many Toy Stores, Hobby Shops, Direct, Many Distributirs Direct, and who else I can not imagine. Over the last few years, with different owners, have brought forth many COLD Changes. The change of distribution has had a Large effect on our smaller Home Town Dealers in the amount of Profit they can make on their Products. With lower margins of profit, The Fun of Selling Lionel is less attractive. Although MTH seems more proffitable, it really is not.  In Fact, the Entire Inndustry is working on lower margins of profit to Fight for Our Money....It seems, the Higher Tech Lines are Winning.  This all boils down to Who We Choose To Buy From, an I choose the Local Hobby Shops. 

One of the best ways to buy any of the trains you want, is the Secondary Market right here on the OGR FOR SALE OR TRADE FORUM. 

 

Interesting about Belknap.  Did not know they were a trains wholesaler.  Knew them as

a hardware wholesaler for years as relatives owned stock in them until they went

bankrupt.

Colorado Hirailer, Concerning BELKNAP HARDWARE AND MANUFACTURING CO., I began my career with them in 1963, as a Warehouse worker, to earn money in the summers to pay for my college education. After College, I went to Belknap Business School to Learn Sales. I Sold for Belknap up until 1984, then was promoted to Sales Manager of the Southern Region.  Belknap sold everything from Hardware, Housewares, Toys, Furniture, Congoleum Flooring, Carpet, Motel Furnishings, Nuts and Bolts, And LIONEL TRAINS. (BLUE GRASS TOOLS Was ther handle.....Thanks for Asking.... They Ceased Business, Febuary 6, 1986...1000 employees lost their jobs......Life Goes In...So does Lionel Trains....

It's real simple. Wholesalers of Lionel Trains pay 50% off of the catalog price. The 10 direct Lionel dealers pay 40% off of the catalog price. The rest of the dealers who buy from wholesalers pay what ever the wholesalers wants to charge them but usually they pay about 35% to 38 % off of the catalog price.

 

MTH charges all dealers 25% off of the catalog price for their Rail King product and 22% off of their premier line product. The wholesalers pay less so that they can sell to their dealers at the same discount as MTH charges the direct dealers.

Ed.  If I understand your reply, the smaller hobby stores are paying for a $100.00 catalog priced item between $65.00 and $62.00 on Lionel products and/or $75.00 or $78.00 for the RailKing and Premier MTH items.  If that is the case, it doesn't leave much negotiating room on the MTH line.  Ryan's reply above hints that it is just the opposite with MTH having more wiggle room.  Am I calculating this correctly?

 

Bum

 

Bum

Always a good question. As others have said, pricing to dealers is based upon volume and whether they buy direct from Lionel or go through a distributor (usually smaller dealers). But pricing should not be your only decision making point here. There is a lot to be said about supporting a local dealer who usually can more than make up for pricing differences with quality service and support to you.

 

Find a good dealer and stick with them. This is the best practice here.

This is not correct. Different products are discounted at different percentages. There is not this much margin in it for anyone. The more expensive products are discounted far less. Nobody gets anything at fifty percent off. Definitely the guys that buy direct get a better deal, but it's not lots better. The distributors take a very small percentage. There is also back end money, and promotions based on purchases of track. The terms change annually and the pricing with every catalog. What causes the huge swings in price are dealers that are happy with ten percent markup relying on high volume. 

No. It's not that low, and it's a lot more complicated. The percentages move around based on the type of item and it's relative MSRP. 

On another thread the subject of Lionelstore.com, a site that sells on the internet owned by Lionel LLC came up.  Is this site in direct competition with their retail dealers?  

 

Bum

B-I-N-G-O! This has happened throughout their history.  Is it fair? (I cannot write the answer)

Dealers may have differing opinions, but I don't see anything wrong with it, if they sell at MSRP pricing only. Many manufacturers with an online presence do this from their website. It's when they try to under cut their dealers. That's a different story and not fair at all to the dealers. I don't think there are many that do this, if they do they may not have any dealers for long and will be selling it all themselves.

 

They shouldn't be selling for less than MSRP, with the exception of promotional items or club item specials for their club members like LRRC (now LCCA) or MTHRRC. I would not consider close out sales and the open houses Lionel has to clear out their left over items in their warehouse as a threat to dealers, they have to get rid of stuff that is not selling well in some way, can't keep it forever. I would guess this is mainly done with items that the dealers had little or no interest in or they produced way too many. With more built to order I would expect items like this to be in much shorter supply and not as many things left over to have to get rid of.

On Black Friday they were selling train sets at less than the price I can buy them. I had one "customer" that ordered a set then came in and demanded I do a price match. Some fun. Lionel's response was that they were only going to do it for a couple of days.

I agree with you 100%. My LHS came close to dropping the line over a blowout they had a few years ago. They were stuck with some expensive steamers that were current products at the time. They were not happy, and I am sure you were not either. My wording was not real good here, but the close out items I was thinking about would be older items they had had for sometime, not current products. After some more thought, maybe they should offer the close out items to dealers instead, and stick to just selling only at MSRP?