KR Models goes into liquidation

[Bob G]

A month after Accurascale bought Heljan and reverted to a web sales only model for future Heljan sales, KR models has also succumbed to cashflow difficulties. After a week or more of pure speculation, KR models issued this email release, which arrived in my inbox at 6am this morning.

The echoes of DJ Model's 2018 difficulties and ultimate demise are all to see. Whether you liked KR models or not, this is another sad loss to the modelling community, and let us remember that these are also people's lives that have been forever affected by this result. The email must have been very hard to write, but it answers many of the questions that flooded the net when DJM went under. If you want to see more vitriol from folk who don't know how businesses work, go to RM Web!

I will leave it to you to digest and comment if you feel the need to.

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Important News

It is with deep regret and sadness that we have to inform you that KR Models has gone into liquidation. Sadly, economic trading conditions at the moment are very tough for everybody. With global economic uncertainty, costs to every business have been pushed up to unforeseeable levels.

Sadly we have not been immune from these issues, and following on from news that one major manufacturer has been bought out to ensure their survival, and another has increasingly shifted to a direct sale approach to preserve the viability of their business model, we have reached a major crunch point. Our warehouse contains a large quantity of unsold stock. This is a lot of money tied up in assets that just are no longer selling, and we have been faced with an inability to raise the money required to pay the outstanding balance on our newest model that had just finished production in China. As the factory will understandably not release the models until the full batch is paid for, we have reached a point at which we have no choice but to shut our doors.

Our business model has always been one where customers can have the choice of either paying up front for a model, or waiting until it arrives into stock to order. We even introduced a payment plan so that you could spread the cost to help modellers buy expensive models. Do not believe anyone who seeks to further their own profile with videos or social media posts claiming otherwise.

When we first began, we came into the hobby not long before, a company that employed a crowdfunding model, DJ Models, had gone bust. It was not a good time to start a model manufacturer as a result. DJ Models had been a pure crowdfunding business, whereas we were not, despite the attempts by some to smear us with the same brush. We fought to overcome the stigma, and won awards for our first model - the GT3. We are very proud of that beginning. But the stigma left by DJ Models was strong, and it left a lot of suspicion of any new entrant to the market.

Our second model, the Fell, was a compromise. The reason why? The real Fell changed a lot over its short life. If we made a model that was of a specific moment in its life then we would have severely limited sales of what was always going to be a niche model. So we chose to make something that could represent Fell through her life. We were slated for that, but we knew that the realities of bringing a model to market are very different from what armchair experts would have you believe.

Where that model went wrong was that a large batch of the wheels used had a fault with wheel bushes that were not picked up until after the models shipped. By that time it was too late. Models in China are made via a main factory that then subcontracts different parts to other factories. There can be a vast supply chain, and it might surprise some people to know that there are factories that make nothing but motors, circuit boards, or wheels. They probably make parts for dozens of different manufacturers around the World. In our case those parts had a weakness and it caused an unacceptably high proportion of models to fail.

Despite the claims from certain social media influencers banging their drum for views, we did care. So much so that we undertook a programme of repairing all models under warranty, even though it made us make a huge loss on the model. We honoured our warranty and ordered in hundreds of new wheels. We paid for return postage and had a team of people fix models, sometimes even technically outside of warranty periods, because we felt it was the right thing to do. Those with an agenda to gain views from misfortune never point that out.

Unfortunately around this time the campaigns against KR really got into full swing, influencing followers and spreading misinformation about our business and models. This is very damaging for any business, and coupled with the problems caused by DJ Models' demise, we were left always on the back foot.

The Leader had some issues on a few models with failed wheel bushes and damaged whistles. We actually traced the issue to a pallet of models having been damaged in the factory after packing in their inner blister but before being put in their outer box. We did not know of this until warranty claims were made. But again, we honoured warranty and made sure spares were available to fix every model that was presented for repair at no cost to the consumer.

Our Hunslet model generated a single warranty return which was traced to a displaced bogie retaining clip and was easily fixed. We are rightly proud of that model, but the detractors conveniently never talk about it. Other models have had some teething troubles, but we never shirked warranty, and made sure they were repaired.

With our 4DD some of the bogie retaining screws were over tightened. We asked people to loosen all six per model, but spurred on by a sense of "they should fix it" drummed up by influencers looking to create drama out of small issues for the views, so many people sent models back at our expense for a technician to spend 20 seconds backing six screws off two turns. That costs money that has to come from somewhere.

Sadly the negative campaigning by one influencer in particular became too much. Their constant attempts to spread lies about our business model and portray our models as all junk had an influence on customers. They cancelled orders or just did not purchase when the models arrived. Our warehouse contains a huge amount of unsold stock orphaned in this way, because someone told their followers to avoid our models, and they listened to their word without checking the models out for themselves. Those that have paid in full for models should thank the influencers and their campaign for creating the environment that left you severely out of pocket.

Sadly the crunch point has been reached. KR Models has ceased trading as a result.

What this means for you

• Our website and Facebook page have been taken offline. As we are no longer trading, we are required to do this.
• Those with preorders paid up front should contact their credit card provider for a refund where possible. If you cannot, then sadly you become an unsecured creditor of the business and must wait for the outcome of the winding up proceedings. If there is enough money left after other liabilities have been settled, then unsecured creditors will get some or all of their money back.
• Warranty claims are no longer able to be met with the company no longer trading. We would like to reassure those who had already sent models to us that these are safe, and will be repaired and returned - your model will not disappear into an administration void. Please be patient and we will get the repaired model back to you as fast as possible.
• Model repairs may be able to be carried out by a third party if this can be arranged. This will happen for as long as spare parts remain available, however there would be a charge made for the work and you would be liable for paying postage costs. We will make our customers aware if and when this is set up. Please note that it would be provided by a third party not connected with KR Models.


What happens to future unreleased models?

The tooling exists and is complete for the Shay, Bellerophon, Big Bertha, DHP1 and in addition the torpedo wagons are at an advanced state. The Shay is produced, but remains the property of the Chinese factory that made them. These may appear via another manufacturer in time, however that is outside of our control. Please remember that even if you paid up front for a Shay, these models do not and never did belong to KR Models and you would need to pay the new owners for one if you chose to get one.

Currently we are in negotiations with a manufacturer for the sale of our previous tooling. This should allow previous models to reappear at a future date. Whichever manufacturer who buys them will tell you about it if and when they are ready to.

New tooling that has not yet been released is also part of negotiations. This is complicated by the fact that many Chinese factories offer tooling at a reduced development and production cost in return for effectively tying the first production run to their factory. This means that the tooling cannot just be sold and moved to the factory of choice by a manufacturer and may complicate the models appearing quickly. Our unreleased tooling fell into this category. Again, it is up to any manufacturer who buys it to tell you about that if and when they wish to. Do not ask us as this will remain a commercial secret. Again, please note that if that manufacturer runs that tooling then even if you paid KR Models in full for a model, it does not entitle you to one of their production run, and you would have to purchase a model from them at the rate they set.

Projects that had not progressed to tooling should be considered cancelled and defunct with immediate effect. This includes any of our three unannounced projects that you may have heard rumours of.

 
And finally

We would like to thank all our customers for their support over the years, and we hope that our models will provide years of enjoyment and service on your layout.

Keep on enjoying the greatest hobby in the World. Don't let anybody tell you what you should or shouldn't like. There is no one right way to make a model railway, and don't listen to anyone who puts you down. Also, if you don't like an aspect of railway modelling, then remember that store bought products to make your life easier are fine. It's okay to hate ballasting; no-one of value will judge you for it.

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[njee20]

Feels a bit like it was everyone else's fault. I struggle to believe the comments about failures being isolated, it was endemic on the Leader, and frankly embarrassing that the failure was essentially (according to this email) very similar to one that affected the Fell.

They tackled some interesting models, but did so badly in the main, and (far worse IMO) their general conduct was shambolic. I feel for those who've lost money. 

[PLD]

No personal dealings with them, but observing as a neutral, one area where comparison to DJM was certainly justified was in their approach to "Customer Relations"...

[emjaybee]

KR never did anything I'd be interested in. I did, however, try to chat to them way back about future plans & they were just not really 'people friendly'.

Personally I think part of their issue was trying to do too many niche products. Don't get me wrong, who doesn't like a niche product, but if you're running a business you need some 'bread & butter' products to prop you up to give you the buffer against manufacturing issues & slow sales of more niche products.

Just my thoughts, but it's always sad to see a manufacturer go.