Variations in Lionel pricing

I suspect that it is up to the vendor to charge whatever they want to cover all expense and get a fair profit.

PRRMP54 posted:

I suspect that it is up to the vendor to charge whatever they want to cover all expense and get a fair profit.

I would agree with that statement, I didn't think there was that big of a margin on toy trains.

I am not familiar with Lionel per se, but that variation is not surprising. Companies will generally give a much lower wholesale price to a big retail outlet like let's say Charles Ro than they will a local hobby shop, bulk pricing is always going to be cheaper than if you buy a relatively few units (has to do with the per unit cost of a product going down, thanks to spreading fixed costs over  a larger run). Sometimes even smaller retailers can offer low prices, for example, if they are looking to clear out inventory, if a car hasn't sold the cost of inventory can end up making it less and less worth keeping around. The other factor is that a local hobby shop because they are small, has to make more profit per item to be able to pay their costs and make a (usually small) profit for themselves. A bigger dealer spreads their costs of operating (inventory, retail space, salaries, etc) over a lot more sales, those costs, many of them fixed, spread over fewer sales=higher retail price (it is the exact same reason when you buy from a manufacturer. the more you buy the less each item will cost you, fixed costs spread over larger run). 

And the question you asked has been discussed a lot on here.  Some complain about the decline in LHS's, but then the same people often go into the lHS, look at a product, then look on the net for the cheapest price. It comes down to how much you value your local stores or any store, if they give you something, whether it is advice, service/repair, or just a place to hang out and chew the fat with the owner and a group of buddies, then (to me, and this is only my opinion) it might be better to pay the higher prices to keep them in business, if you don't really have that kind of relationship with the store, and want/need to pay the lowest price, buy it elsewhere and get the better price. 

I may be wrong, but I believe that the very large Lionel dealers get their inventory directly from Lionel, while the smaller dealers get their inventory from a large supplier (middleman). It would make sense that the smaller dealers would have higher prices to subsidize the middlemen’s profit. 

I remember being told, so that makes this Hear-Say, that the more a dealer buys from a manufacture the better the price they have to pay. That is why Shops like Charles Roe or Nicholas Smith can offer a lower cost to their customers.

rrvics posted:

I may be wrong, but I believe that the very large Lionel dealers get their inventory directly from Lionel, while the smaller dealers get their inventory from a large supplier (middleman). It would make sense that the smaller dealers would have higher prices to subsidize the middlemen’s profit. 

You got it exactly right!

SURFLINER posted:

rrvics posted:

I may be wrong, but I believe that the very large Lionel dealers get their inventory directly from Lionel, while the smaller dealers get their inventory from a large supplier (middleman). It would make sense that the smaller dealers would have higher prices to subsidize the middlemen’s profit. 

You got it exactly right!

It's been true for years that, other than a few very large dealers, Lionel dealers have to purchase their inventory from distributors.

I don't know if that's still true, but I assume so. Relatively recently, when I had a defect in an item purchased from a fairly well known dealer (though not one of the very big ones), they had the replacement sent to me directly from a distributor in Pennsylvania. 

I'd be surprised if MTH didn't do the same thing.  My guess is that the manufacturers aren't set up to manage hundreds of sales accounts; it's more cost-effective to let a distributor (essentually a sub-contractor) handle this. This happens in many industries.

It can get more complicated than than. Just looking at the hobby industry, recently I wanted to purchase an item made by Tamiya, and asked my local hobby shop (a Tamiya dealer) if they would order it for me. I was told that this was not an item that their distributor could get. Product is divided among different distributors - different distributors can get certain items in the product line from the manufacturer for distribution to dealers, but other items they can't.

If that's the case, then all the dealers in a particular region (New England, Mid-Atlantic, Southwest, etc.) should get together and each form a regional trade association so that they can buy in bulk and get the same high volume discount that the larger dealers get from the manufacturer.

That's what a lot of small, local, independent appliance dealers do in our area so they can compete with the big box stores, price-wise, and yet still offer personalized service. 

Richie C. posted:

If that's the case, then all the dealers in a particular region (New England, Mid-Atlantic, Southwest, etc.) should get together and each form a regional trade association so that they can buy in bulk and get the same high volume discount that the larger dealers get from the manufacturer.

That's what a lot of small, local, independent appliance dealers do in our area so they can compete with the big box stores, price-wise, and yet still offer personalized service. 

Not a bad idea, it is kind of like what Ace and True Value hardware is for example, it is independent hardware stores forming a co-op to allow them to market better and also to be able to buy in bulk the way the big box stores do. I don't know if there are enough hobby stores to make this effective, but it is an interesting idea. 

Richie C. posted:

If that's the case, then all the dealers in a particular region (New England, Mid-Atlantic, Southwest, etc.) should get together and each form a regional trade association so that they can buy in bulk and get the same high volume discount that the larger dealers get from the manufacturer.

That's what a lot of small, local, independent appliance dealers do in our area so they can compete with the big box stores, price-wise, and yet still offer personalized service. 

I think it’s more of a credit issue than anything else. If they pay within terms then by all means it could be a good idea. We’re talking small companies here that cannot afford to have monies dragged out beyond their terms of payment. 

Yeah, a handful of big dealers buy directly from Lionel while the rest buy from various distributors (middleman).

The big dealers typically get a better price which can be quite frustrating. They also get the new items shipped directly from Lionel which can sometimes be several weeks before the others who have to wait for their distributors to receive, process and ship to their dealers. This also gets very frustrating. 

So basically, the big guys get it cheaper and faster. And in the small world of the internet it makes it a struggle for the typical local hobby shop. Unfortunately this is business.

As for the example of the new Freights Sounds box car. The MSRP price is $134.99 but we would typically have priced at about 15% off at $114.74, Though I see Charlie Ro has priced at $99.95. From a distributor that car to the dealer would cost about 35% off for $87.74 so to match Charles Ro price I would profit $12.21 for the $99.95 sale. I do not know what that car cost the big guys directly from Lionel.

In most businesses that is a pretty poor profit margin, especially considering wages, rent, utilities, insurance, fees, etc. has to come out of that $12.21. Yeah it sucks, but like I said, that is business and business in the 21st century (amazon world). We live in a free market and a dealer sets their prices the way they see fit.

Though, it does really get frustrating when you see one of the big guys selling off stock at prices below what we, the typical dealer, pay for from the distributor.

Because of all these reasons above, it is SO important for a store to give the best possible service you can provide while also trying to build solid worthwhile relationships with your customers and hopefully they’ll consider you when thinking of that next purchase.

Even though the prices are lower in some locations, you have to consider how much the delivery costs add to the total. 

Andrew

Bill Henning posted:

Yeah, a handful of big dealers buy directly from Lionel while the rest buy from various distributors (middleman).

The big dealers typically get a better price which can be quite frustrating. They also get the new items shipped directly from Lionel which can sometimes be several weeks before the others who have to wait for their distributors to receive, process and ship to their dealers. This also gets very frustrating. 

So basically, the big guys get it cheaper and faster. And in the small world of the internet it makes it a struggle for the typical local hobby shop. Unfortunately this is business.

As for the example of the new Freights Sounds box car. The MSRP price is $134.99 but we would typically have priced at about 15% off at $114.74, Though I see Charlie Ro has priced at $99.95. From a distributor that car to the dealer would cost about 35% off for $87.74 so to match Charles Ro price I would profit $12.21 for the $99.95 sale. I do not know what that car cost the big guys directly from Lionel.

In most businesses that is a pretty poor profit margin, especially considering wages, rent, utilities, insurance, fees, etc. has to come out of that $12.21. Yeah it sucks, but like I said, that is business and business in the 21st century (amazon world). We live in a free market and a dealer sets their prices the way they see fit.

Though, it does really get frustrating when you see one of the big guys selling off stock at prices below what we, the typical dealer, pay for from the distributor.

Because of all these reasons above, it is SO important for a store to give the best possible service you can provide while also trying to build solid worthwhile relationships with your customers and hopefully they’ll consider you when thinking of that next purchase.

The big guys get it cheaper and faster, because they are a distributor as well as a retailer, resulting in extra margin.  As a distributor, you purchase direct from Lionel and sell it through your retail format.

Someone mentioned CODB for varying prices.  This is true.  If I order one piece of rolling stock or $20K in MTH product direct from MTH, I pay freight no matter the order size.  They even charge freight to ship catalogs!!  Have to recoup this cost somehow or another.

Train Express out of Indy was a distributor and retailer for many many years.  Larry visited us near the end and indicated he could make more leasing the building he was in than selling trains.  Strictly a business decision.