Prices?

That is why I used the Federal minimum wage in both instances to keep the comparison apples to apples. Same for the inflation rate. Prices are not uniform across the country. I can travel 56 miles west and at times, pay up to $.50 less for a gallon of gasoline. So I used the Federal rates for all. The problem with using any governmental data is that there is a political factor involved, particularly in the minimum wage and is not determined by economic factors alone.

 

Well the manufactures lost me, and I think they will lose a lot of people. When you buy gas, food, and medicine on a fixed in come not much
left for railroading!

 

From the Federal government's Bureau of Labor statistics, an inflation calculator so you can spend all day comparing apples to apples:

https://data.bls.gov/cgi-bin/cpicalc.pl

 

Here is the information I obtained by Googling it. The value of $100.00 in 1968 is worth $721.25 in 2018 using this source:

https://smartasset.com/investing/inflation-calculator

That is an average inflation rate of 4.06% per year

Using another calculator the value of $100.00 in 1068 is today worth $727.21. The source for this information was:

https://www.saving.org/inflation/inflation.php?amount=100&year=1968

All this proves that inflation alone cannot be blamed for the increase in prices. There are other factors at work in the market. The increase in labor costs in China is one factor that is always mentioned. The statistics that I came up with are that from 2002 to 2009 the average wage in China went from $.60/hr to $1.74/hr. There is a discrepancy in the data depending on where a factory is located, either urban and rural. Taking the higher figures for the urban area the wage went from $.95/hr in 2002 to $2.85/hr in 2009. This information came from:

https://www.bls.gov/fls/china_method.htm

Please note that the figures are employment costs and not what employees are paid. There is also social insurance added in. For instance the 2009 average rate of $1.74/hr includes social insurance costs of $.61/hr so the average pay to the employee was $1.13/hr. These figures are for the average wage. No information available for urban vs rural location of factory.

Another source put the average hourly wage in China at $3.60/hr (2016 figures). That information is from:

https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-china-isnt-so-cheap-anymore.html

That same site also says:

"That's more than five times hourly manufacturing wages in India, and is more on par with countries such as Portugal and South Africa."

But let's not think that rising labor costs are primarily to blame for the increase in prices. Prices have increased at a rate far greater than the increase in labor rates. That has the effect of actually lowering the percentage of labor costs in the final product. Ocean shipping rates are so low now that one source made the following statement:

"Global shipping rates are astonishingly low right now; it’s possibly never been cheaper to ship goods around the world, ever."

It also said:

"As of March 2016, it costs around $400 to move a 40-foot container from Shenzhen to Rotterdam, which is barely enough to cover the cost of fuel, handling, and Suez Canal fees. Here’s some more context. Let’s say that you want to travel for a year; it’s cheaper to put your personal belongings in a shipping container as it sails around the world than to keep it at a local mini-storage facility.
No ocean carrier can earn returns above its cost of capital at these price levels."

Source: https://www.flexport.com/blog/why-are-ocean-freight-rates-so-low/

So how about raw material prices? Plastic is made primarily from oil. The price of oil today is about 1/2 of what it was in 2011-2014. But prices went up so that doesn't account for the rise in prices.

Source:https://www.statista.com/statistics/262858/change-in-opec-crude-oil-prices-since-1960/

So inflation and wages went up at a rate lower than the price increase rate while shipping and raw material costs went down. What other factors are there to add to the equation?​

 

In 1974 I bought them for $3.50
Times sure have changed.

 

Yup. I recall back when things were booming in my city, and they are again, everyone was saying "hey your house is worth double what you paid! -- lucky you!" I had explain that if my house is worth double then every house is worth double. My house is worth a house.

If you have a serious train habit the best thing to do is start buying second hand items. I just recently got a Kibri crane and a kibri cement factory for half the sticker price. Both kits have been added to my pile of future layout projects and if I decide to sell them later on, I will likely make my money back or make some money.

 

Guys, this hobby priced me out when I got separated from the lady a few years back. Sold it all. I won't let that happen again, but I feel it. A lot of people don't know what it's like to literally have no hobby money, some of you do. I have a great job now and have rebuilt my collection larger than ever before, but I never recommend this hobby to folks I know who aren't "well off", it's a slap in the face the moment they go and look at Walthers' prices on just a couple items. If I couldd turn back time, I'd buy a few less project cars and keep every piece since I was 13... but can't do that, so I humbly accept I'll never be able to buy all the things I want, just some. Isn't that the problem with any collectable/toy hobby, though? There's just too much good stuff. Doesn't help that tariffs, taxes and economic booms in the countries which make our trains has Kader strangling manufacturers ands markets alike.

Start a new Kader somewhere low-economy with cheap US trade, you'd OWN this industry.

 

I do know what it's like to have a very small hobby budget and yes in the past I've had years were I was barely able to afford a magazine subscription so that at least I could stay an arm chair model railroader. Personally I'd never purchase locomotives from Walthers' Sorry, but I have to be frugal with my hobby spending. If I can't afford the mail order price, then I really don't need the item. It's the same with all my purchases, why pay more at some other store when I can purchase for less at a big box store? It is a doubled edged sword, I don't want to see the hobby shops close, but I can't afford to pay their prices. If they'd match the online price, I purchase from the hobby shop. But when I can get it online plus shipping and still pay less than what I'd pay in the hobby shop or Walthers, well sorry folks but I need to worry about keeping my head above water.

Most hobby shops now do not repair defective locomotives, you're told to return them to the manufacturer. So it does not matter if you purchase online or at a hobby shop, if it's broken it has to go back to the manufacturer. Also the two hobby shops in my area do not have any provisions to allow you to test a locomotive before purchasing, so what is the point of paying the higher hobby shop price when I'm getting the same service from the mail order house?

Things are always going to increase in value until the bottom falls out. When I started driving, gasoline was 50 cents a gallon and most new cars were $2,500. Now what's the average price of gasoline and new automobiles? Very few things ever get cheaper.

 

I suppose I have a different approach to the hobby. When I see someone spending ridiculous amounts of money on a DCC system or a super expensive loco I think that's great they are into this to that depth -- I'm not.

Some of the best layouts I've ever seen weren't big, but they were home made. We've moved into an era of prefab that makes it what it is today. When I see people lining up to be the first to own whatever car or diesel I just shake my head in disbelief. They are mass produced molded items and all of them eventually end up on the auction block for much less than they sold for.

Sure there is going to be that one thing you need, so save your pennies for that one special item.

I always trawl the auction site for "broken" locos. Usually all they need is to be taken apart and cleaned and lubed. All you need to do that is a cheap set of screw drivers.

I know it CAN be expensive, but if you design your layout based on your budget the only thing you will ever need to buy are power, locos, rolling stock, and track. The trick is to spread out your buying to a few dollars a week and stock up on things like couplers and scenery materials.

The thing I need is more spare time.

 

Why charge $20 -$35 for cars when they set their and no one buys them! There is stuff at the hobby shop thats been there for I don't know how long.
To me it would more since to lower the price and sell the stuff!

Don

 

All of this discussion about prices is just much too simplified to explain what is really happening. Besides "economics" there are "politics" and "fads" as well as cultural elements like the priority of pursuit of profit vs pursuit of happiness. And, those are not just happening in the U.S. where the government statistics are (imperfectly and sometimes dishonestly) tabulated. The degree to which workers in Japan, Korea and China are willing to work for a pittance to make toys for the U.S. market changes with time differently than the way it changes here.

So, what really matters to us is whether there will be a continuing affordable supply of the goods necessary to (1) sustain our hobby and (2) grow our hobby. About the only thing that is certain is that our currency is constantly deflating (i.e., prices of foreign good are increasing), and foreign manufacturing is not solving that problem for us.

 

But the MFR HAS sold the 'stuff'...to the hobby shop.

 

Take it one step further. Now most of us probably do not have land lines now, compare the cost of that line line vs the cost of our cell phone plans with unlimited data these days. Home internet bill. I didn't have that back in 1990. Cable TV anyone? The things we have today folks consider necessities were luxuries not even that long ago. How much of the household budget is eaten up by costs we didn't have 20-30-40 years ago. There's a lot more competition for every hard earned dollar than ever.

 

The reason why is MAP pricing and MSRP pricing. There is one manufacturer and I don't want to mention their name, but they are really strict when it comes to enforcing MAP pricing. Most online shops will advertise MAP pricing in effect, then tell you to place the item in your shopping cart to view their discount price. This is why the item is $20 - $35 on the hobby shop shelf and cheaper online. The Online store is earning their money in volume sales, the hobby shop does not have enough people walking through the door to sell in volume. In other words, the online shop can sell to everyone in the world, that is why they order 40 copies of an item, the local hobby shop can only sell to people in that area, that is why the hobby shop only order 2 items. Just as an FYI, MAP and MSRP pricing are 100% legal.

 

You guys are hitting some serious issues that I think about all the time when you talk about T'inter-nets.

At one point I had no job and no internet. I bought a laptop because I figured out I could go to a local coffee shop and use their internet for the price of a new laptop. Actually the laptop was cheaper than a year of internet. They charge too much for internet plain and simple. I just spoke to friend in moscow and he was telling his internet is about 13 dollars a month and it i much faster than in the USA. He is in a business that requires massive file upload and download; I tend to believe him.

As to the local hobby shop issue. Anyone who owns a small business these days and does not have an internet store of some kind, shouldn't be and won't be in business for long. I live near a street that was full of book stores 15 years ago. Almost all of them are gone. The only ones that stayed have employees you never see, because they are in the basement posting sales online or packing items all day.

What we are seeing in our economy will only get worse as time goes by. More jobs lost to ____take your pick___ for reasons we (us little people) can't control. Lower wages too. What I see is a lot of people trying to figure out how to increase their quality of life by downsizing. As people downsize, it means they are literally dropping out of parts of our economy. I have dropped out of the Model Railroad Product economy because I mostly buy second hand models. So while I do see these problems, I also decided to do an end run on how the market was going by taking my spending ability somewhere else.

I suppose I keep trundling out my Go-Cheap mentality over and over, but as a kid I made mountains out of flour and old newspaper and painted them with water color. I had more fun doing that low grade modeling than I do buying pre-made things. I can find materials easily either in places like goodwill, or habitat for humanity, marked down in regular stores like paint mis-tints, or just by driving up and down alleys looking for scrap lumber.

Ok, I better stop. I seem to be writing a novel here.

 

As was said, manufacturers will continue to raise the price of their items, regardless of what they are, if the market continues to be willing to pay that price. The old adage of "supply and demand" ... if demand drops as a result of the market out pricing itself, then the prices will drop so as to sell what is available. Price is determined (largely) by the market and what the manufacturer can, or believes they can, get away with.

Someone mentioned that your in business to make a profit and I couldn't agree more with that statement; however, there is a difference between making a profit and ripping people of (in any industry) for the purpose of making an unreasonable profit or for appeasing the stock market.

 

A distinction should be drawn between the 'model railroad company' (whose brand name is on the product) versus the 'manufacturer' who, for the vast majority of model railroad companies, is some anonymous subcontractor in the far east. If that manufacturing subcontractor decides to keep increasing its prices to whatever it believes the market will bear, then the model railroad company has little choice but to raise its prices, as well. As long as the model railroad companies continue to get sufficient pre-orders (to meet the minimum production quantity dictated by the subcontractor), at whatever price level covers their manufacturing costs plus earns them some profit, this situation is unlikely to ever change.