a little OT - Unhappy events at Athearn Models

Jim, Is that not what Dave said, I quote: "They don't operate that way. Never have likely never will. One thing that might happen is that there will be a Minimum advertised price allowed (typically about 20% over cost).

To me that reads like fixing the price? Keith

Make friends in the hobby. Visit Garratt photos for the big steam lovers.

Says who? How many times have companies been bought only to have the product line drop off because of an inventory, or lack of sales issue.

john binford

FWIW, back in the 1960's, Walthers' had a subsidiary "Walthers Specialties", which was the division that made the "BeeJay" building kits and "Goo".

While the main plant was on Water Street, the address in the ads for "Walthers Specialties" was actually Bruce Walthers' home.

Don

I will warn you in advance. this is going to be a lo-o-o-ong post.

I have learned quite a few things from the Athearn buyout talk that I had never heard or even thought about before. A lot of information since I started this ball rolling two days ago with my original post. But as I learn I also become more confused as to "why". If you do not mind I would like to go here for a while.

So far from the replies I see that (pardon the oversimplification);

Brick & Mortar hobby shops are good. they are bad.

Brick & Mortar hobby shops that offer web and mail order service are good. they are bad.

Home based web and mail order services are good. they are bad.

(Are there other discounter groups out there anymore?)

And for the most part I think all of us have been going around the issue of "why" one group is better than the other. Too be honest, I see no real and meaningful logical difference between the three groups just emotional differences between individual preferences which should be expected. To me one seems to compliment the other.

Back in the 1960s.

I think most folks tend to forget their roots so to speak. S.S. Kressgee (spelling?), Cranks, David's, Woolworths, and what later became known as Woolco all sold Atlas, Tyco, Bachmann, and Athearn locomotives and plastic car kits (Woolco & David's only?). These stores were my introduction to HO model railroading and later on non-RTR kits. They were cheap and had relatively large selections and choices and I found them to be fun to build. There was absolutely no way I could have afforded hobby shop prices at that time and so would never have started. So in that sense discounters have been around a long time. Woolco sold Athearn at a minimum of 30-50% below the hobby shops. I remember the hobby shops complaining about the discounters even then. I wonder how many on this list took advantage of these discounters then.

.Next we had Hobby and trade shows. I think we also forget that they have been around almost as long as there have been trains. Back then there were tables set up by people who operated out of their homes and very few Hobby stores were represented. There were some deeply discounted items being sold in those days as well. Seeing items 50-70% off was not all that unusual if I remember correctly.

. Finally mail order was not quite as big as it is now but it existed. Looking back at my 1950s and 1940s Model Railroader magazines show me mail order has existed almost as long as there have been model trains. I also notice that all mail order was not always from Brick & Mortar hobby shops. In fact the only thing I see that is different is the numerical amount of ads. There are literally eight or nine times as much ads these days.

Today.

Well the department, drug, and variety stores are either out of business or dropped their railroad hobby lines around 20 years ago. Some of the complaining/non-complaining hobby shops have dropped by the wayside as well during this time. And a few have made it to this day.

As far as I can see, the Train show circuit has not changed much at all. Some of them seem to be a little better organized is the only difference I have seen.

And mail order continues to be strong and we have the advent of the Internet both for sales and for information that once was the private domain of the hobby shop. Now we don't have to wait for the hobby dealer to tell us of new products. All we need do is visit our favorite manufacturer's web site.

For 40 years that I know of, there has been a need and a market for discounted model train merchandise. The reality of the discount stores dropping their train lines would not have lessoned that need. Something would eventually come to fill the public's desire for cheap quality trains. After all, isn't that what America is all about if you think about it.

How many out there willingly pay list or a marked up price for a new automobile? How about the house you live in did you offer the seller a bid higher than they wanted (those without competition)? And I suppose you go to the most expensive grocery store to buy your food and household good and materials? And only frequent the most expensive attractions, while paying full price? Of course not! Then why on earth would you expect the public not to want to try and find model items as cheap as possible? Some will say that this is not the same thing. Of course it isn't. but what's the difference? To date there is only one company which has successfully broken the mold on this country's quest for inexpensive products. Even the drug industry has had to cave in to some extent.

Entire industries have been formed to satisfy our need for discounted products in all parts of our daily lives (that silly cable TV shopping channel sticks in my mind as one of the more stupid yet successful examples). In the interim for trains, some mail order companies attempted to fill the opening that the discount store made when they dropped their product lines. Also, I am sure they were really never quite able to fill it adequately were they. but still the hobby shops did not flourish did they? Why? Could it be that a larger percentage of the general population still demands price value? It is really beyond my knowledge and the scope of this posting to attempt to answer that. I'll leave it to the reader to make his or her own decision.

From what I can see it appears that the old discounters failing or leaving the market have given rise to larger scale operations from the home businesses. The advent of powerful computers, email, newsgroups, Internet, and perhaps even eBay I am sure helped fuel this phase. I expect that the non-store front hobby businesses are the current version of our Woolco of the 1960s, but with a far greater selection that I attribute to our desire for variety, distinct, and accurate models. But it took the power of the Internet to make it work well.

Since a large (?) percentage of Athearn products historically were purchased at discounters I truly wonder what will happen to the company's sales in the quarter beginning April 1st and perhaps July 1sts. I assume it will drop by slightly less than whatever percentage that was served by the ousted discounters. Just because a "Horizon" dictates a sales venue change it is certain that a large percentage of those who frequent the discounters will necessarily be able to comply by rushing out to their local hobby shop or other authorized location to pay a higher fee. I would assume that the local hobby shop will not be lowering their retail price on Athearn after March

From this group I heard mention of several other manufacturers being bought out by a sole distributor. Were they as large as Athearn either in size or in sales? Were the "original" distribution channels and retailers similar? If they were not then a direct comparison approach would be meaningless and perhaps grossly misleading.

Another question that interests me concerning statements being made on Brick & Mortar stores is the inability to match the pricing structure of the "at home" business. This might be an ignorant question but. why not? The "at home" business has to stress total sales volume over price. The distributor would have to be offering a lower per unit rate because of the volume purchased. I can see no other way for the venture be able to get the needed discounts from the distributor and thus be profitable. If the two retailer types were charged the same it would be doubtful that the "at home" retailer could under price the Brick & Mortar shop the way they are. Thus a rather simplistic statement would be to say "why can't the hobby shop do the same!"

The hobby shop already has the necessary resources in place. Honestly, I do not know the time constraints on either but for the sake of argument lets say that will not be an issue. The shop would have to have a two tiered pricing structure in the beginning (maybe) but I would imagine the new volume(s) now ordered would surpass the home business and qualify the hobby shop for the best distributor discounts. I am sure this would not work in real life but I would sure like to know why it wouldn't.

Several years back I worked for Verizon Wireless Messaging {pagers} (a wholly owned subsidiary of the Verizon Corporation). Another arm was the cellular telephone operation. Verizon decided to drop the pagers, not sell or spin off but actually shut down. And transfer assets to the cell telephone arm (except the personnel), not because the company was not profitable (it certainly was) but because it was not profitable enough. I wonder if that is a reason why a hobby shop owner would not want to play both sides. The amount of return is too low????

I would ask the Hobby shop owners (if they wish to voluntarily share those numbers) whose business had failed the following questions (I would love to hear from the current owners as well but that might be giving to much competitive information to the "enemy"), I am curious as to what went wrong. In the 60s I knew of several Hobby shops that shut down but I do not know why. In one case the owner passed away and the family did not want to continue.

What was their average markup over procurement cost they had to have in order to meet expenses and liabilities and still have a reasonable profit? Would a further average 5% reduction of procurement costs have made a difference in saving your company? What else could have been done to save or resurrect your business? I know the numbers will be different based upon what area of the US you live in. As will be the reasons for shutting down. I am sure others and I know I am interested in knowing the pitfalls above and beyond the Home run businesses. For as long as I can remember I have thought that owning a full service storefront hobby shop would the neatest thing in the world. If you have not figured it out by now, I like to talk. On just about any subject in fact. My warmest recollections of the hobby shop I frequented in the 60s was the weekly meetings in the back room, the technical conversations on the hobby, and even the political discussions of the time (Vietnam not Iraq). That is one intangible that the "at home" folks cannot provide. BTW: That is one aspect I like about my "new" local hobby shop which happens to be farther away than most of you would go (interpreted from comments made here in the last few days).

Think I'm nuts? Maybe, but one thing's for certain, I do not fear failure. I am a retired member of the armed forces. I have been laid off four times from high tech firms in the last 10 years by companies going out of business or moving production/operations overseas. I own my own home based part time business (as a professional service provider). No hobby retail sales venue is more restrictive than the business I operate. I must be state licensed, insured or bonded, operate with a business license, continually advertise, I must pay an astronomical sum (very high fixed costs) each month to have updated and timely information (some months more money goes out that come in), must have x amount of associated continuing education credits in order to regularly renew said license, I am required by federal law to keep a complete paper trail for a minimum of 5 years thus requiring additional storage area (more $ and gives one zero chance to hide from the IRS if audited), and if I make a unreasonable mistake the best I could hope for is the loss of my state license, the worst, jail time. Even if I had no intention of committing fraud!

Several posters have stated that because of the restrictions they will no longer buy Athearn. I would urge you not to take such a drastic step, you will only hurt yourself in the long run. Athearn still makes (or has made in China) a quality product. If you wish, please email, write, or call Horizon with your comments. I doubt it will do much good in the short term. Horizon will not listen to us even if all members of this newsgroup were to contact them. Their decision was finalized in a boardroom months ago. It would take

Horizon Hobby

Champaign, IL 61822

Phone: (217) 352-1913

Toll Free: (800) 338-4639

Fax: (217) 352-6799

This post actually turned out longer than I had originally envisioned. Pretty much due to the fact I also scanned and responded to all the pertinent views stated thus far.

From my perspective on this issue I will continue to use reputable online, email, and local hobby vendors as each serve a useful function and fill a sometimes competitive niche but at times are complimentary as well. It will vary year-to-year but right now I spend about 30% of my hobby dollar online and the remainder at the local hobby store(s). For me that means anything less than 40-50 miles or so. But hey, that's life in the Bay area.

For my online dollar; as long as ECMR provides even half of his current level of service I will go with him. I have seen nothing slipshod, unethical, illegal, or immoral about his operation. Quite the opposite in fact, I found his service to be highly professional (quick, reliable, friendly, and honest). Everything I would ask for in a Storefront operation. His professionalism actually fooled me into thinking that he was a shop owner. I just found out otherwise yesterday he was not. Believe me when I say, there are a few Bay area Hobby shops who could learn something from him it customer relations. The rest of my online dollar goes to eBay for some of the harder to find older models. But eBay is extremely risky. Go into this area knowing you are throwing away your money. That way when the inevitable sting happens you are better prepared for it.

I still prefer the "touchy - feely" sensation I get when I look at merchandise at my local hobby shop. I always have been and always will be the type of person who wants to see something before they buy. I want to know ahead of time that what I think I want to fit a particular niche is actually what I need. For all the pluses of mail ordering, that is one area they will never truly compete in. Web pages can only do so much in mitigating that disadvantage. For this reason and the fact I am the "sit around the pot belly stove" type I will continue prefer Hobby shops for the majority of my purchases. But under no circumstances will I ever pay premium prices for a run of the mill item as Horizon would wish for me to do. I will do without first. My premium dollar is far better spent on Premium items at the hobby shop.

But for the life of me, I still cannot figure out why Horizon is willing to throw away sales. That is what really puzzles me. More so in light of the Walther's reinstatement in allowing web sales. Time will tell that's for sure.

Tell me, was this too long? Told ya!

Art

Oops, my proof reading sucks. Lets chang this...

Since a large (?) percentage of Athearn products historically were purchased at discounters I truly wonder what will happen to the company's sales in the quarter beginning April 1st and perhaps July 1sts. I assume it will drop by slightly less than whatever percentage that was served by the ousted discounters. Just because a "Horizon" dictates a sales venue change it is NOT certain that a large percentage of those who frequent the discounters will necessarily be able to comply by rushing out to their local hobby shop or other authorized location to pay a higher fee. I would assume that the local hobby shop will not be lowering their retail price on Athearn after March

Personally I don't care about Athearn. I just got an email back from them:

----------------------------------- Will,

Thank-you for your inquiry. Please note that we do not produce any of the

items that you inquired about. You might want to look at some of the

equipment produced by Roundhouse and IHC.

-----------------------------------------------------------------

At least they sent me to the competition.

I think I will go IHC for 4-4-0s and freight and Con-Cor for passenger cars on my 1880s layout.

Well, in case anyone is interested Horizon has told my main dealer that the all Challenger orders are cancelled as of today. They will have to be reordered at a new HIGHER wholesale price. Sounds bad. I'll email the whole notice to anyone that wants it.

If true, Horizon is rapidly making me wonder about their level of intelligence.

In this case it's an "advertising minimum" and not telling you what to sell it for just what's the lowest advertised price allowed. It's been going on for quite some time. You could put in ad with "Call For Price" (how many have you seen? ). What MAP pricing has done in other aspects of the Hobby is to essentially set a "street price".

Dave

It's not generating money sitting on the shelf. In fact sitting long term costs money as I pay taxes on my inventory held at the end of the year. For example if I have a Loco that I paid $60 for and can't sell for say 2 years I'll have taxes to pay. Say at 5% that engine would now have cost me $66.15 to watch collect dust. That drives up my operating cost and reduces my profit that can be used for new product. Pick enough losers and don't get rid of them and it'll be adios! Now if I sell that dust collector at a discounted price of say $70 and take that $70 and buy $60 in freight cars that I sell them at a full retail of $100 and reorder 4 more times I 'll have turned a "turkey" into a "cash cow" that generated $160 in gross profit as opposed to zero sitting on a shelf long term. That's the simplfied version.

Dave

In article ,

Try not paying taxes in this day and age and see how long you'll get away with it. One of the shops in town did that and they still are paying off an IRS lien.

Dave

I just read recently where there was a overall gain of 200 new hobby shops in

Dave

Sorry to inform you that this has gone on for many years with many Vendors. There are those that will sell to non traditional retailers (Internet and Train Show) and those that won't. Horizon is just one of many that won't.

Dave

I for one do not believe this scenario is likely to happen. I'd cite the Futaba deal with Great Planes of several years ago. Futaba put all their distribution globally with Great Planes Model Distributors. Futaba is one of the more sought after names in R/C radios. The prices in this case have not gone up. In fact they have held fairly constant and can be bought at excellent prices. Also the supply is better than ever. As far as a restriction in Trade how can that be. With exception of the "no shop" retailer selling at near wholesale costs being shutout every other dealer can get the Athearn they want and at better prices than most distributors have had. Just fill out some paperwork and your on your way.

Dave

Sort of like Con-Cor's Electroliners that never materialized. "Oh, that's a

Jay CNS&M North Shore Line - "First and fastest"

Part of the reason it was dropped, and people didn't want it, is it wouldn't have run on most traction layouts. In a conversation with Eric Bronsky he told me the pre-production sample had a minimum radius of 18".

The PROTOTYPE could do the equivalent of 12" in HO.

Don

-- snipped-for-privacy@prodigy.net

Yeah, but Jay, we're talking Con-Cor and plastic. $389 for a four car trainset?. It would have to be Genesis quality, and I doubt Con-Cor made that kind of commitment.