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I do not profess to know anything about model train manufacturer's business models, sales strategies or order fulfillment processes.  Sorry to ask what will probably amount to a really dumb question, but, after seeing/hearing the new Lionel "Built to Order" statement, I just had to ask.  I have pre-ordered a lot of stuff and I always figured that these pre-orders were used by Lionel, MTH and others to determine the base ordering totals on higher end items for the factories.  Pre-order numbers might help determine materials requirements, logistics planning and may even result in an item being cancelled if there were not enough pre-orders.  The point being, they are already kind of built to order.  If a dealer places his order for 100 Vision Line Big Boys, 90 of which are actual customer pre-orders and 10 are to keep in stock for walk in customers, whose going to track that, whats more, who cares?  Lionel gets paid either way.  I am just not seeing how this "Built to Order" is different now than it has been for the higher end items.

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Built to order is pretty much the same as pre-order except there are no extra units made for walk in customers. This is the classic business model for any low volume highly customized product. It eliminates the cost of carrying inventory and in some cases increases demand due to the "Order now or forever hold your peace" sales pitch. In reality there will still be a very limited number available for walk in customers due to people failing to complete the transaction. Their lost deposit will cover a temporary inventory carrying costs so Lionel stays strong. Golden Gate Depot is a true BTO manufacturer. Others who were not are no longer in business. This was a good move on Lionels part. Expect a lot more BTO in the future.

I heard the speech at the Lionel booth in the Orange Hall at York. I've been in the business world all my life. I know a scare tactic when I hear it.

What happens when a person walks into a train shop and there's nothing to buy?

Guess they'll have to drag out the old postwar stuff one more time to have something to sell. That's happened before.....

Last edited by bigo426
Originally Posted by bigo426:

I heard the speech at the Lionel booth in the Orange Hall at York. I've been in the business world all my life. I know a scare tactic when I hear it.

What happens when a person walks into a train shop and there's nothing to buy?

Guess they'll have to drag out the old postwar stuff one more time to have something to sell. That's happened before.....

I don't believe "built to order" is a scare tactic at all.  Lionel will lead in this business strategy to reduce the amount of overstockage dealers have on their shelves and overstockage manufacturer has to warehouse themselves.  The dealers have the opportunity to purchase as many of these trains as they want over what pre-orders they receive...........or none.  I also think dealers like this way of ordering high priced items also.  IMHO

 

Steve, Lady and Tex

Last edited by TexSpecial

If you look at the latest Lionel catalog, there are many products that are not in the BTO category. I don't think there is any worry about the lack of product at the hobby store level.

 

This is a smart business move on the part of Lionel, and you can call it what you want, it still makes sense to keep high end products in the chute.

Last edited by Former Member
Originally Posted by bigo426:

I heard the speech at the Lionel booth in the Orange Hall at York. I've been in the business world all my life. I know a scare tactic when I hear it.

What happens when a person walks into a train shop and there's nothing to buy?

Guess they'll have to drag out the old postwar stuff one more time to have something to sell. That's happened before.....

I counted exactly 6 products being made BTO in a 134 page catalog:

 

VL Big Boy,

Scale PE Berkshire (assuming this includes the gold-plated version)

Scale PE Passenger Cars (ditto)

Lima Berkshires

Pennsy M1a

USRA Heavy Mikados

 

Hardly the end of O Gauge model railroading as we know it.  You can probably make a safe bet that all of the above will appear again in some future catalog. (Even the gold PE in another 10-15 years...)

 

Rusty

 

IMO the original poster summed it up nicely.

 

It's a sales gimmick, no more, no less. 

 

It doesn't mean no dealer will order extras of items that say "built to order" and it also doesn't mean that any item not tagged "built to order" will be readily available when (if) it gets made. 

 

I think we can rest assured that if there are not enough orders for lower end product, they will also be cancelled.

 

Starter sets and add-ons associated with them may not fully operate this way, but most products will.

 

-Dave

BTO protects the manufacturer from over-production on relative niche items.  And it also prevents the manufacturer from making fools of its best customers if the manufacturer gets the supply wrong and dealers start blowing out high end items.  After thinking about it, I believe BTO is a win-win for the customer and the firm.

Originally Posted by Dave45681:

...

It's a sales gimmick, no more, no less. 

 

...

Exactly... but Lionel's BTO has shrewdly generated a tremendous amount of "buzz" over what is essentially BAU (business as usual). 

 

For example, we already know that places like Charles Ro will order "a few extras" over the actual number of units ordered by consumers.  They announced it, albeit we don't know exactly "how many".  So what's really different?

 

The only thing BTO tells me is that Lionel won't be warehousing those select products when they come off the boat.   Instead, Lionel will be shipping all of them straight to dealers... which pretty much assures us we won't see those units being blown out en masse (by Lionel) several months after initial delivery.  (Can anyone say Vision Line Centipede?  )

 

Also, by it's very nature... We'll have to wait for delivery of BTO items.  They won't be immediately available when the catalog is published, like the Giants / EM-1's a couple of years ago  -- some of which were blown out as low as $699, down from their regular street-price of $1100 or so, starting with a $1299 MSRP.  See what Lionel is trying to avoid?  

 

Aside from the blow-out issue (which we can understand is something that all importers would like to avoid), BTO is largely BAU for very high-end products.

 

Now... Hurry up and get those BTO orders in!!!  May 10th is just around the corner!!!  

 

 

David

 

 

Last edited by Rocky Mountaineer

I wouldn't worry about the BTO thing as it affects initial availability.  Some dealers will order an extra unit or two and if you shop around a bit you'll likely be able to find what you're looking for.

 

What I would worry about is replacement or repair some time down the road because it's not like the old days when replacement items or parts were often readily available.

Originally Posted by Allan Miller:

 

What I would worry about is replacement or repair some time down the road because it's not like the old days when replacement items or parts were often readily available.

That's a good point.

 

I'm pretty sure Lionel has honestly admitted recently that parts for new trains are obtained by them by disassembling extra units that they buy from the factory.  (the factory is not selling Lionel piece parts, essentially).

 

So does build to order mean your only option will be a full refund from Lionel if you have a problem with a built to order engine right out of the box? 

 

After all, they claim they are not making any extras, so there won't be any engines for them to disassemble.  Maybe QC has risen to 100% (an impossibility no matter how good your company is) and every unit will be perfect out of the box, so there will be no need for parts.

 

-Dave

 

Originally Posted by M1FredQ:

...

 

How do you go about deciding which number you want??

 

...

By offering 7 Big Boys,  Lionel is just giving enthusiasts a chance to select a personal favorite.  Nothing more... nothing less.

 

And if you have trouble deciding, I'm sure your dealer will gladly accept an order for MULTIPLE locomotives!!!  

 

David 

Originally Posted by Dave45681:
...

After all, they claim they are not making any extras, so there won't be any engines for them to disassemble.  ...

 

A little artistic license on Lionel's part with those words.  It's probably safe to say they're ordering whatever extra they deem "nominal" to handle service/parts issues.  But exactly how this plays out compared to non-BTO items remains to be seen.

 

David

From my point of view as a bystander Lionel seems to have taken the forefront as far as taking over a leading edge in marketing innovations. This seems to be ironic as MTH ( in my opinion) once held this spot and seems to be resting on it's past laurels.

I wonder if this will become a trend. 

It seems to indicate a more specialized and smaller market overall but the only drawback I can see is what Allan brought up, which is the future availability of replacement parts.

From my own experience this is already somewhat of an issue as a trend away from designs based on a longer lifespan versus built in obsolescence due to the fast changing advances in electronics. 

Last edited by electroliner

BTO can be a good thing for the dealers and the hobby,  It may drive margins up for dealers if done correctly, or start a bidding war when items hit the shelves.  We have seen how the dealers have priced a $2700 steam engine below $2000 on a fight for pre-orders.  This is definitely a benefit to us.  However, when the next time rolls around in next years catalog, dealers may see they can hold price because of fewer engines on the market and we may not be so lucky.

 

It will be interesting to see how this strategy plays out.  If Lionel receives enough pre-orders and produces everything or if they start cancelling a lot of items.  Buyers who are waiting for deals on ebay or from dealers who over ordered, may dissappear and those may choose to also pre-order the next time.  

 

It will also be interesting to see how MTH reacts to this strategy.  If they produce the same or relatively the same item, customers may go to them to buy it.  This could under mine Lionel's strategy and produce more profits for MTH.  Or MTH may start BTO also to improve profit margins.

 

Let's see what happens a year or 2 from now.  This could be fun to watch.  Only time will tell.

 

David56

BTO is a good business plan, but only for high end products. There will always be plenty of inventory of rolling stock and RTR.

 

It's the same in the restaurant industry. Peter Luger Steakhouse doesn't make your steak until you sit down and order it. "How would like your steak? Medium, Medium rare?" Same here: "How would like your Big Boy? 4014, 4004?"

 

McDonald on the other hand always has a ready supply of Hamburgers when you walk in the door. RTR is the Lionel version of a Happy Meal.

 

BTO is good for us because we continue to have a choice: Big Boy or Big Mac. Plenty of food for everybody.

Originally Posted by David56:

...  We have seen how the dealers have priced a $2700 steam engine below $2000 on a fight for pre-orders.  This is definitely a benefit to us.  However, when the next time rolls around in next years catalog, dealers may see they can hold price because of fewer engines on the market and we may not be so lucky.

 

...

The $2700 MSRP was a joke right out of the gate.  That's the real reason the dust finally settled down around $1900-$2000.

 

The importers will always push the envelope to see what the market will bear.  OTOH, they also have production volume minimums that must be achieved to make a manufacturing run feasible/profitable.  

 

If the Big Boy held up near the $2700 price point, I'd suggest Lionel would be sitting with a noticeably lower number of orders in hand.  It's a delicate balancing act... but it always has been.

 

David

Last edited by Rocky Mountaineer

BTO is a good solid idea. Look, we all like a blowout when Lionel makes too many but it hurts, A- the customer who paid reg. price. B-the dealer who has inventory, C- Lionel, who now has to "delute the market" thus hurting their future releases. It hurts us all. Are they making money on the blowout? Just barely when you factor in overhead, employees and such.

 

I would not expect many Big Boys around unsold after they are shipped. The "wait and see'ers" will find a much higher price.

"They will loose all the impulse purchases that people make . This has to cut into sales. As stated though it Is only a few items"

 

I would think the few that might be purchased by the impulse buyer would not overrule the fact that this new BTO policy is financially sound, and what is really important to our hobby is the fact that the manufacturers are around in the future to satisfy our appetite for innovative products. To a manufacturer, just achieving high sales numbers unless the sales are profitable makes no sense at all. 

Last edited by Former Member

It's a sales gimmick, no more, no less.

 

It doesn't mean no dealer will order extras of items that say "built to order" and it also doesn't mean that any item not tagged "built to order" will be readily available when (if) it gets made.

 

I think we can rest assured that if there are not enough orders for lower end product, they will also be cancelled.

 

Starter sets and add-ons associated with them may not fully operate this way, but most products will.

 

Comments like this one show how very little some people know about the business end of the hobby. See Charlienassau's comment above. It's not a scare tactic. Some people have become accustomed to the frequent blowouts. They say, "well, I won't pre-order... I wait for the blowouts." As Charlie said, this hurts everyone, save for the consumer on the short-term. On the long-term, it sends a message to the manufacturer NOT to make that product again.

 

It's highly unlikely that a locomotive costing nearly $1,000.00 is going to be an impulse purchase in the same way an additional starter set car or some FasTrack would be. True, the BTO production numbers will be truly being based upon what the dealers and distributors order. BUT if there is no interest in these items, that will undoubtedly affect the risks the distributors and dealers will take.

 

The fact that Lionel dealers state starter set and low end items sales overwhelm the high end sales numbers proves that there is a better risk factor on these kinds of products for the broadest range of dealers. You can rest assured most of the high end products are being taken by the bigger Lionel dealers who can offer the deepest price cuts - as witnessed by the plethora of recent Big Boy price threads.

 

Lower priced (lower end) products are another story entirely. In the nearly 25 years I've been back in the hobby, the only low end Lionel products to be cancelled were because of tooling problems (the CSX center cab) or licensing problems (like the Lego flat car). The overwhelming number DO GET made, though some are undoubtedly made in smaller numbers.

 

There can be blowouts on these products, but they are not the same matter as the higher end products which have all the recent development, tooling and higher production costs. The lower end products are from tooling and dies that have long been paid for. But even here, these blowouts can hurt dealers who already have the products in stock and have paid the higher wholesale prices.

 

Originally Posted by brianel_k-lineguy:

It's a sales gimmick, no more, no less.

 

It doesn't mean no dealer will order extras of items that say "built to order" and it also doesn't mean that any item not tagged "built to order" will be readily available when (if) it gets made.

 

I think we can rest assured that if there are not enough orders for lower end product, they will also be cancelled.

 

Starter sets and add-ons associated with them may not fully operate this way, but most products will.

 

Comments like this one show how very little some people know about the business end of the hobby. See Charlienassau's comment above. It's not a scare tactic. Some people have become accustomed to the frequent blowouts. They say, "well, I won't pre-order... I wait for the blowouts." As Charlie said, this hurts everyone, save for the consumer on the short-term. On the long-term, it sends a message to the manufacturer NOT to make that product again..................

 

I think you are misinterpreting my comments. 

 

I am not suggesting there will be loads of these items around and that people should wait for blow out pricing.  Nor am I suggesting that blow outs are a good thing.  When I say it's a sales gimmick, I mean it does not mean much more than the pre-order process will remain the way it has been for many products for a long time.  If you really don't want to miss something, you should pre-order it.  I am not saying there will be blowouts on Big-Boys.  I fully agree with Charlie that there will not.

 

I am simply stating that this is not significantly different than the way it has been for the last 12-15 years for most products (probably not coincidentally correlating with when the catalogs got so large and then finally settled at roughly their current size and frequency)

 

The exceptions are the cases like those big steamers from 1 1/2 to 2 years ago, not the rule.  Something (I will not pretend to know what) made Lionel decide to make those on a schedule that did not allow a pre-order process to take it's normal course.  Lionel did that one to themselves. 

 

As to low end product always being made, my Snoopy Red Baron pylon that got canceled would beg to differ.  Lionel has made many Peanuts products recently, so licensing did not likely kill it, and they have made many different versions of the airplane pylon successfully(how different would the tooling need to be?), so I would have to assume there were not enough orders.  One example only, I know, but it demonstrates a possible hole in your blanket statement.

 

 

Last edited by Dave45681
Originally Posted by scottn941:
...this also means, when something breaks or a circuit board poops out, replacement parts - or lack thereof - will render your $2,000 engine to the fireplace mantle.

There will be spare parts made. And last year Lionel has gone to a common board that can be reprogrammed. Will there be as many parts ares there are for postwar trains, no, but parts will be available.

 

Originally Posted by Charlienassau:

BTO is a good solid idea. Look, we all like a blowout when Lionel makes too many but it hurts, A- the customer who paid reg. price. B-the dealer who has inventory, C- Lionel, who now has to "delute the market" thus hurting their future releases. It hurts us all. Are they making money on the blowout? Just barely when you factor in overhead, employees and such.

 

The problem is that a true BTO system only serves part of the toy train market, namely those who are willing to commit to purchase the item today, sight unseen, knowing they won't get the item for months if not years.  Not everyone who is willing to spend $2k for a locomotive is willing to do so on these terms.

Originally Posted by Bill N:
The problem is that a true BTO system only serves part of the toy train market . . . .

Yes, but that is the profitable segment and Lionel has gone after it.  It is a sound business decision and the "wait and see" segment will just be left out.  

 

If is worth considering this: if your mother had to live in her retirement on dividends from the earnings of Lionel - if a profitable quarter versus an unprofitable meant the difference between her being comfortable and eating well versus shopping for dinner in the cat food section of her grocery - what business decisions would you want Lionel to make?   Someone gets those profits, and they are making the decisions.  

"The problem is that a true BTO system only serves part of the toy train market, namely those who are willing to commit to purchase the item today, sight unseen, knowing they won't get the item for months if not years.  Not everyone who is willing to spend $2k for a locomotive is willing to do so on these terms."

 

It is easy to look at this in terms of how this policy effects each one of us with respect to our individual buying habits. In my opinion, those who don't want to make a commitment without seeing the product first, will still be able to secure the item. However, they may pay a premium for their caution which is simply the law of supply and demand at work.

 

It seems rather odd that some have singled out Lionel for this policy shift for a very limited number of items, while 3rd Rail has BTO for many years. If this policy will allow Lionel to be innovative and PROFITABLE, I am all for it.

Originally Posted by cbojanower:
Originally Posted by scottn941:
...this also means, when something breaks or a circuit board poops out, replacement parts - or lack thereof - will render your $2,000 engine to the fireplace mantle.

There will be spare parts made. And last year Lionel has gone to a common board that can be reprogrammed. Will there be as many parts ares there are for postwar trains, no, but parts will be available.

 

Exactly.  

 

After all, if I spend a lot of money on an engine, I'll find something or go to the aftermarket to find parts to keep my engines working.  May not be what I prefer, but it'll run and operate.

 

I think the BTO isn't going to have a large impact on us.  Those who don't pre-order big ticket items will be disappointed.  Not reasonable to expect shops to keep $2K or even a $1K items on a shelf.

 

Besides, even if no one will admit, these BTO will show up on the secondary market in a few years.  There will always be a way to find and buy trains...

Last edited by 86TA355SR
I do not know the price of the bto items nor do I care.  The price point for me is probably too high and I never respond to the buy now or forever hold your peace business model.  Maybe it will work but it sure turned me off.  I suspect this business model will appeal to those who have income to support this and will likely push others away.
Originally Posted by bigdodgetrain:
Originally Posted by 86TA355SR:
 

 

Besides, even if no one will admit, these BTO will show up on the secondary market in a few years.  There will always be a way to find and buy trains...

the first run of the NKP 765 with Rich's voice never showed up that I could find.

Thought I saw one the other day, and it only seems natural since the newer ones will have the whistle-steam smoke effects, rendering the former ones somewhat "dated".  Probably will be a good buy for someone who isn't into the latest-and-greatest features. 

 

OTOH, the technology treadmill is a tough concept to fight for some folks. 

 

David

Originally Posted by brianel_k-lineguy:
...

Comments like this one show how very little some people know about the business end of the hobby.  ...

 

Not only are comments like this condescending in a broad-brush way, they're downright wrong.  You misinterpreted his post completely.     If you don't agree with him, that's fine... but don't suggest he doesn't know what he's talking about.

 

 

 

Originally Posted by Dave45681:
... When I say it's a sales gimmick, I mean it does not mean much more than the pre-order process will remain the way it has been for many products for a long time.  If you really don't want to miss something, you should pre-order it.  ...

 

Dave, you are dead-on correct in your thinking.  I would also go a step further and suggest that those waiting to "see before buying" are very likely to pay a nominal premium which may vary over time and situations. 

 

Some dealers will have one price (lowest and best price) for those who pre-ordered back when the product was previewed; another price during the "regular" pre-order period; yet another price for those who order one of the "dealer extras" before the product is delivered; and still another range of prices for those wait to purchase after product delivery.   

 

Dealers LOVE having a corner on the market for limited inventory in the marketplace, so I wouldn't expect any bargain prices on these gems -- unless, of course, a significant number of folks back out of their commitments and we find a critical mass of these left unclaimed.  Unlikely... but ya just never know.  More likely that we'll see a tremendous amount of game-playing in terms BTO product prices for items purchased after delivery.  It's gonna be a mess, but that's the way it is in this market when supply is down and demand is high.

 

I can see it now... dealers with "left-over" BTO items probably won't publish prices... rather they'll list them with "call for availability".    We haven't seen that kind of craziness since Lionel's Collector Era heydays in the late 198's / early 1990's.  

 

Whatever the case, it's gonna be interesting to watch! 

 

David

Last edited by Rocky Mountaineer
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