N Gauge wagon pricing

[Southerngooner]

Having seen that the new Peco 9' wagons are on sale for £15-ish, and are made in the UK, is there a case for bringing production back from China for Farish, whose equivalent is 50% more expensive? Taking Peco as a whole, they can make UK production work so why can't others. I presume it's because of parent companies based in China, but it must change over time?

Dave

[jpendle]

Hi Bob,

I'm sorry but you're comparing apples to wombats 

Peco are a private, family owned, company, they probably have low overheads compared to Kader, who own Bachmann.
Kader are a multinational company with operations in multiple countries, with all the concommitent expenses.

So just to make up some random numbers.

Peco may well be able, and quite happy, to make just 5% profit on a model that is sold with a 20% margin over it's manufacturing cost.
Kader, and any other multinational, will be expected to make 10% profit and that will mean a 50% margin over their products manufacturing costs.

I work in the electronics industry and a gross margin of 65% translates into a profit of around 10% once all company overheads are taken into account.

If it really were becoming cheaper to manufacture in the UK the modelling community wouldn't need to prompt the manufacturers.

Regards,

John P

[Chris Morris]

I love Peco. A British family owned and run company. They remained committed to British production when everyone else was pulling out. There are a number of big advantages relating to
Production on the UK. Design, manufacturing and sales are in the same building which is efficient. Stock doesn't spend weeks on the high seas which saves money and gets product to the marketplace quickly.
One thing Peco will have which the others won't is the ability to make tooling in house; they will still have tool making knowledge and experience here in the UK. I think the problem others would have if they wanted to manufacture in the UK is that there will be very few people in the UK with the ability to design and make tooling for model railways. Tooling cost is a significant part of the cost of our models and if a toolmaker could be found in the UK it would probably be a lot more expensive than having tooling made in China.

[PLD]

All other things being equal, it it still significantly cheaper to produce in China than the UK, but that's not the whole story.

Peconomics:
Make 10,000 of the same wagon, paint in ten different liveries that it's "near enough" for.
Manufacturing cost in UK: say £6/unit.
Add on manufacturer's margin say 50% =£9 wholesale price to retailers
Add on retailers markup say 60% =£15 retail price.

Kadernomics:
Make 1,000 each of ten different wagon types with detail variations to be as accurate as possible for each different livery.
More complex tooling or multiple tools to allow variations, but with lower Chinese labour costs and other overheads, Cost to Kader owned Chinese factory: still lower at say £4/unit.
Kader factory sells to sister company Bachmann Europe with say 50% margin=£6.
Bachmann Europe sells on to Bachmann UK subsidiary with say 50% margin=£9.
Bachmann UK (branded as Farish) adds on their 50% margin =£13.50 wholesale price to retailers.
Add on retailers markup say 50% =£20+ retail price.

Numbers are for demonstration only, but illustrate two additional factors in play:
1. Farish tool for more variations which all other things being equal would be more expensive per unit.
2. More links in the corporate chain each adding on their slice of the pie.

If Peco were to make wagons in their volumes and limited variations in China, it would likely cost less than they do for UK made models.
If Kader/Bachmann/Farish were to produce with all the variations in the UK, the cost to the end customer would be even higher.