Will Snubbing the Pre-Order System Get Us the Products We Want?

As I read the threads here, I hear the same old gripes about the current pre-order system used by a number of manufacturers. Some here even insisting that they will never pre-order anything again. But is that really a reasonable stand to take when pre-orders are what determine what will be produced or not?

Now I can understand the feeling that some have been burned in the past. But the reality of the current economic climate means manufacturers aren’t going to take risks or stick their necks out without some indication that a particular project will be a success. How do they gauge this interest? The ball really is in our court.

A few weeks ago I posted a thread asking was "Demand Weak" for IM’s ATSF Slogan 1937 AAR Box Cars? This was a set of box cars announced well over 2 years ago by Intermountain Railway. It really surprised me that, with all of the Santa Fe love around here, that an Intermountain rep would say that, due to a lack of interest, “demand was weak” and the project was postponed. Who’s fault is that?

When there was genuine, ample, interest in a product, and pre-orders bore this out, the manufacturers have come through. But is it their fault if an announced product appears to make no ripple in the purchasing chain and they back out of a possible losing proposition?

The trouble is, we can’t whine about the pre-order system on the one hand, and then complain that the manufacturers aren’t giving us what we want on the other. As long as the pre-order system is the means by which they gauge interest then we are only shooting ourselves in the foot by not supporting it.

 

I resisted pre-ordering at first. I like to see pictures or hold one in my hand before I decide. Lately, manufacturers have been posting pre-production photos which helps. Now these manufacturers have also established a better track record. So I have jumped on the pre-order bandwagon. I've had a few items that I would like come up for pre-order (more Trainworx semis and BLMA Flour Cars), so I placed my pre-orders. Now I can sit back and relax and not have to worry about missing out.

The old way of doing things is gone. If this helps the manufacturers turn a better profit: yay! That means they will make even more stuff, and that is what we all want.

 

It seems as though those manufacturers most keen on forcing the pre-order system upon their customers are also those with either poor or non-existent track records in delivering functional, reliable N scale products. Skills honed in successfully producing models in HO don't necessarily scale directly down to N. Such companies need to make a first effort so that potential customers can get some sense of whether or not they can produce a competent design as well as assemble them on a consistent unit-to-unit basis.

 

Why dont manufactures just put a survey/poll on their website/FB and see how many people are interested.
This whole 'preorder' everything mentality is flawed beyond repair !
JMO >>>> Live by the preorder....die by the preorder !

**fire away...I can take it...no prob.

 

I've seen it happen before that people post that they will buy X number of Y product. So manufacturers make Y, and make X + 10%, and end up sitting on 60% of the inventory because when it came time to purchase, half the folks that said they would, either didn't, or only bought 1 instead of 2 or 3 they said they would.

 

So I guess Preordering is a Catch 22 for both the manufacturer and the modeler.
Time will tell who wins

 

Sorry but I am another that is not on the preorder bandwagon. I do agree with the earlier comment about folks who state they will be in for 2 or 3 of something and then when it arrives either get just one or none. That can leave a manufacturer holding the proverbial bag so to speak if there is significant numbers of the no shows.

The other big issue for me is having my information sitting out there in someone else's data base for a year or more where it can be subject to hacking and identity theft or theft of funds. PayPal is always wanting you to link a bank account to which I say Bull#$%@. PayPal has been hacked before and most likely will be again. And Yahoo has been hacked with a lot of personal data stolen. Ask me how I know about that. Was a real pain for awhile.

So don't ask me to reserve something with a credit, debit card, or account number, that hasn't hit the light of day yet, and may not for a year or more if ever. I am not going to have my data setting out there in someone else's data base for unspecified time that I have no control or any level of security over. I am also not going to commit funds for something months away when I have no idea what life might throw at me causing me to have to redirect those funds.

And as much as I might want something I will hold off until I have some decent reliable information as to the quality of the item. I have wasted enough money on equipment that turned out to have performance or durability issues. I had ample opportunity to acquire an S-2 when they came out but held off until I finally got enough data on its performance. I have had far too many locos that have ended up in the parts box.

And last as a modeler my modeling choices are evolving and being more refined month by month. What I had desired last year is no longer relevant to this year and that big steamer I originally had wanted doesn't fit my modeling scheme any longer. And I am not going to buy something to just sit in a box and never be run.

 

Ironic, isn't it; there are two threads on the front page at the same time; one bemoaning the pre ordering system and another bemoaning a perceived lack of new product announcements.....

As a manufacturer of HO and N scale products the pre ordering system is critical to our long term success and is here to stay. How many modellers understand the costs involved in bringing a new locomotive or freight car to the market? In round numbers an N scale locomotive costs between 40 - 50 K in tooling, between 5 -15 K in marketing, "x" dollars in development and research costs (we employees don't work for free) and a percentage of the overhead costs of the company.... and all of this is paid out, in full, before the first locomotive is made, shipped and sold.... Most model railway companies are small to medium sized; unlike an IBM or Ford, we don't have huge multi million (billion?) dollar capital budgets. The cost to develop and tool a new product is basically funded by the profits of the last project..... it's a lot of cash to put out; especially if you have no idea how many you will sell...

Pre orders are not perfect; indeed I assume 10-15% of pre orders will bale before the product is shipped and another 5-10% will refuse to follow through with the sale. We, and virtually all mfg's don't ask for deposits (your LHS may, but it doesn't come to us) so we are counting on your "honour" to complete the sale. I have seen open letters by more than one LHS begging customers to follow through with their pre orders because the LHS is stuck with the product if you fail to honour your commitment. Pre orders provide us with the only "gauge" we have of sales volume and are the way which we decide if, and when to go to production. When you see a model delayed there is a very good chance it is because the mfg can't justify committing to final tooling and placing the raw material PO... thus we wait, maybe try and advertise some more to build pre orders and hope the project will be a winner..... While delays can be caused by other reasons (lack of production time, not enough cash to tool, having to make a decision about a models priority in the production schedule) more often than not it is simply a lack of orders and the mfg' s unwilliness to lose money and make the model without a firm minimum quantity commitment.

Now, not every company uses pre orders; Kato and Micro Trains for example. The fact of the matter is that Kato's business model is so different than anyone else's that they have the luxury of not utilizing pre orders; they also don't bring out large numbers of products each year and they are not primarily focused on the North American market... Micro Trains is a unique and frankly admirable business who has carved out a niche that supports their business model; more power to them! For the rest of us; we need to protect our limited capital and that means hedging our bets by insisting on adequate pre orders and limited inventory. I get more complaints from modellers who want a specific model a few months after it's introduced and can't find one than I do from modellers about pre-ordering. The indignation I hear from some people who say "I don't pre order, I demand to see and feel the model before buying one..... so why won't you sell me one now" is frustrating. I would love to sell them one, but would also love to understand how they feel that they can get a model that is offered for pre-order, sold as a "only make what me get pre-orders for" model if they don't step up and pre-order...

The point was made about new entries into the N market; modellers are reluctant to take a chance on a new product from and new N scale company; they want to see it first.... understandable..... but it's chicken and egg..... if we insist that we won't buy a product from a new entry into the market before seeing it then is it reasonable to expect that company to risk their limited capital and bring a product to the market "on spec" ? From the mfg's perspective they might as ell just stick to the market segment they are established in and forgo the risk.....

Something "internet modellers" sometime fail to see is that they really only represent about 2-3% of the n scale market.... and frankly they represent the high skill and expectation end of the market. The vast majority of our clients and the "silent majority"; they don't post, blog, review or critique products; they just buy them... yet as we have seen first hand and have heard from other model railway companies, the "power of the internet" can; fairly or unfairly significantly affect the sales of a model. Something as simple as one vocal person's perception of a colour or a spotting feature communicated in a negative and malicious way can have a huge affect on sales of a product or the quality reputation of a company..... and there's no way to "fix" that once the horse has left the barn, all the modeller hears is "x" is a crap model.... game over.

Because making models is a "for profit" venture yet model railroading is a hobby there exists a "void" between the two sides of the realm. Modellers crave a never ending supply of new models to pick and choose from. They want them to to be highly details, prototypically perfect, arrive fast, in plentiful supply, always in stock and for the lowest price possible.... I know that's what the modeller in me wants..... the business man in me knows that can't happen and allow model railway companies to remain profitable... we need to invest limited tooling dollars wisely; need to design, develop and manufacturer our products in the most financially responsible manner possible and need to take every step possible to provide successful products at a profitable and sustainable margin.... while not completely "at odds" with each other these two positions are hard to rationalize and bridge. The fact is that pre ordering is perhaps the best available tool the model railway company has to protect it's limited capital; finite production capability and ability to consistently deliver popular and successful products to the market...

It's an imperfect situation but it is; for what it's worth, the way it is.....

 

The problem is, THERE IS NO PREORDER SYSTEM. In reality, this "system" is simply a handful of distributors that has taken a bunch of already misrepresentative orders from dealers (who have typically placed an order with little if any regard for customer preorders) and basically applied their own biases to what they thinks *works*. Good news is this typically gets close enough to fill legitimate preorders since there's usually a small percentage of overshoot on the numbers. But not always.

Anybody that thinks their order actually reaches the manufacturer directly and has any bearing on whether a model gets made is sorely mistaken. And any manufacturers or dealers banging that drum should be ashamed.

And that's not even considering the idiocy that Intermountain is doing lately, whereby they announce twice the number of potential products with the mindset they will only produce those that meet the minimum production figure. Problem is, it splits the votes (orders from distributors) so that schemes that MIGHT have hit their minimum volume number with a normal number of announcements, WONT make the minimum number with the larger pool.

Give me an ACTUAL preorder system and then we'll talk.

 

Doug: I don't understand what you are saying regarding pre orders; the "system" is simple; we open pre-orders for "x" amount of time; the distributors and stores (Canadian stores order direct from us, the bulk of US stores order via a distributor) send in specific orders for specific sku's. Some send them in as they receive them through the pre order period, some "gang" them and send them at the end of the pre order period. We tabulate the orders and make "that many" of each sku, plus warranty stock....

Distributors and stores may, or may not order inventory; that is their business but I can tell you that from the variation of sales of road names and numbers it is clear that most distributors and stores are ordering per their pre orders and perhaps topping up their own shelf stock based on the popularity of a given road name or numbers. You have only to look at the constant "dribble" of one's and two's requests we get after every deadline from distributors who are getting last minute requests. In addition, we occasionally hear from distributors and stores upon delivery when they have a one or two extra order from someone who missed out or (and we hate this one) when we mess up and short ship a unit or two.... all this clearly indicates that the "orders are real"....

I don't know why you doubt this fact but it is the way we receive our orders and I can say with complete faith that in the majority of cases, our orders received mirror that of those placed by our end use customers.

 

I follow the monthly announcements from the manufacturers, see what looks good, and make a decision. Then I stop by my LHS and place an order before the deadline. Then when the product comes in I go and buy it. I take it home and give it a test run on the layout. Sometimes it needs a part reglued or a new set of wheels. It's okay. I don't expext a factory full of Chinese workers to do my modeling for me. I'm happy, the LHS is happy, and the manufacturer is happy. Sometimes it's lost on some people that the manufacturer and hobby shop are there to make money.

 

Remember Con-Cor's Cabforward $50 reservation fee ? ?

 

No it is not ironic. The reason being that the only connection between the two threads is one that points to a failure of the pre-order system to provide new products.

What you describe is not unique to the model RR manufacturer. All industries operate under those same parameters. While you are not as big as Ford or IBM your costs are not as big as theirs either. What your last sentence tells us is that you are under capitalized. And that is not the fault of the customer.

Again under capitalization rears its ugly head.

Maybe the rest of the industry is operating on the wrong business model and should change. It Seems Kato and Micro Trains are doing well. Like Jed Clampett said to Jethro, "If the other guy is catching fish and you're not, find out what he is using for bait."

You put the cart before the horse. The risk belongs to the manufacturer. Profit is the reward for risk taking. Using your analogy above of the Ford Motor Co. They were the ones who brought us the Edsel which was a loser. They were also the company that brought us the Mustang and the F150 pick up truck which were winners. Ford suffered the loss on the Edsel but it was rewarded by the profit on the Mustang and F150. Ford took the risk on those products not their customers. If a business is so risk adverse that it fears ruin if a bad decision is made then it truly is under capitalized.

I fail to see how the pre-ordering system solves this "problem". What's more, the rise of LifeLike and Bachmann, like a phoenix from the ashes contradicts your statement about a company's reputation is unchangeable. There is also the story of the original Atlas GP7/9. You know the one with the horribly wrong truck centers. Atlas took a pounding on that one and rebounded quite nicely. Then we have Kato with the original Mikado which was panned for its lack of pulling power. Kato added the traction tire and now the Mikado is the "gold standard" of steam locomotive design. All four companies seemed to find that "fix" and get the horses backin the barn.

Like I said, under capitalization is the key here. Business is survival of the fittest. A business that is under capitalized is not the fittest. One of the primary goals of any new business should be to build capital just as an average person needs to put away some income in a saving account for that rainy day. Because that rainy day will come. The pre-order system will not prevent that.

 

Good points which I agree with. They should have a Reputation for producing quality before blindly investing money as a consumer

 

That's how I do it also . I have no use for any system that requires pre paying or using Pay Pal . No ones get a credit card # from me , mainly because I don't own a credit card !

 

I usually miss a product if I don't pre-order, SOLD OUT! With a pre-order I can just forget about it until it gets shipped. I have never had to prepay for any pre-order and always use a CC . I like using the banks money for a month, getting cash back and never having to pay any interest. Yes, it would be nice to have a LHS less than 100 miles away that orders every N-scale product in, but that's not the case for a lot of people.

 

Designs that have been proposed/pre-announced online and were shot down are ones that prove the value of the pre-order system, if you think about it. They save a lot of money for the manufacturer. An example is the variant Osgood Bradley car that I thought the SP/SSW road name would make that variant body style a "go". But IIRC as reported here, there was pretty much no interest in it. Keeping it listed all over as TBA is a little strange, but perhaps that means an SP/SSW name train of the period is a possible long-range project. Pure speculation BTW.

Now if you miss something because you don't pre-order, is it such a tragedy? You might have to dig around for a seller who also might not give the deep discount you want. If you're patient, there is also the secondary market you can tap months or even years later on eBay or the shows. There are often other things you'll want to buy anyway. Good on ya if you have the ability to buy all you want when released, but that's something I could never do.

Some of you are giving examples of model train life before the recession. That's no fair comparison. Take a look around and see the 1:1 building projects that died during the recession and are just getting built and notice the projects that razed usable buildings but are still empty lots today. Undercapitalized? If a business has too much ready cash, it makes itself a takeover/buyout target for the cash, with assets sold off and nothing left as a business. It's rather remarkable that so much of the model RR business survived the recession, China manufacturing problems aside.