RRP, discounts, and really big discounts.

[trkilliman]

Like many I signed up for newsletters from Model railways direct.

In keeping with other so-called box shifters they often have items that are heavily discounted, and Farish items figure regularly.

What caught my attention today was Farish S.R. box vans discounted by 42% from the rrp.

Now, I'm not knocking it as like some others I feel that increasingly rrps of new Farish stuff is pushing prices to the limits.

I do find myself wondering if the rrp of new items is set over and above what it needs to be. Initially they capture the customers who "just must have it...now" at these prices, then allow 15% discounts.

Laterly, if they are left with large stocks for whatever reason offer them to the box shifters who can sell them at  prices heavily discounted from that original rrp.

I'm not knocking the heavily discounted prices in any way guys, it just seems a strange way of doing things. Would they sell a lot more overall if the starting price was lower, or is this pricing accountants ideology that is way above my mode of thinking?

Not a moan at all, I'm just puzzled by it.

[RailGooner]

..
I'm just puzzled by it.

You and me both.

[emjaybee]

+1

I'm constantly mystified by pricing strategies. At Warley I picked up a LMS 4f latest Farish loco of a high street retailer for £60 and Royal Scot in Crimson, again, latest Farish model for £70. They had them listed at 1/2 price. Half price of rrp. I've never seen anyone selling the 4f for more than  £105 and the Scot for £120.

I can't believe Oakes was selling at a loss or even at cost, which leads me to believe that Manufacturers RRP is never expected to be achieved it's just a sales ploy to allow retailers  to look like they're discounting heavily. Who knows!

[njee20]

Shops certainly do sell stock for a loss, rather than have it hanging about, but I'd not expect occasional sale items to be at a loss.

[daffy]

Ah! Such prices for locos that I can only dream about.

Going Continental (Swiss) means higher prices for most of mynrolling stock, and sub £100 new locos are a rare, though not unknown, commodity, even when discounted, so UK rolling stock seems very cheap.

That'll teach me!

[Dorsetmike]

Gaugemaster don't appear to discount their Minitrix (and other brands German locos)
http://www.gaugemaster.com/search_results.asp?searchstring=scale~~%ACn%AC~~scale+brand~~563~~brand+%ACsteam%AC&style=&andor=&method=kws&strType=#5

(enough to bring tears to yer eyes!)

[daffy]

In my limited experience, including a visit to their shop, Gaugemaster don't discount anything off their Continental items.  I now only use them to gauge the prices at other sellers, so in that way they live up to their name.

Other views may differ.

[Chris Morris]

Oakes do have genuine sales of stuff that hasn't moved. Don't tell anyone but their post Christmas sale always has a small number of great bargains. They could well be selling below cost price. So far as I am aware the Bachmann retailer prices as a percentage of recommended retail price haven't changed for some years. Rrp for a 4f is £119.95 and Scott is £139.95, so to within a couple of pence they were half price. Wish I had had chance to look at the stand.

[Graham Walters]

Being in the trade I can say that MRP is there so that the retailer makes a reasonable profit on any given item, it varies with each manufacturer, and there are incentives of extra discount for those of us who pay our invoices off early.
Apologies for some that may realise this, 20% of MRP is VAT, and this is where things get complicated, for a retailer with turnover of less than £60k per annum (me) I pay VAT on the cost price, BUT I don't have to pay HMRC VAT, so I could in theory discount by my whole margin and just make the difference in VAT paid and VAT collected ! If your turnover is more than £60k you can claim back the VAT you  pay, but you have to pay HMRC the VAT you collect, some companies do this on a monthly basis to improve cash flow and to keep the bank at bay, but it will catch up with you ( or so my accountant tells me)

Looking at the turnover and gross profit of a certain company in Liverpool, in 2015 said company turned over £11m for a gross profit of £300k or thereabouts, 2016 however they recorded a loss of £400k, in 2015 their margin worked out at around 11%, that's not enough to survive.

One thing you can be sure of is that if any company is discounting heavily on one product, they have to be making it elsewhere.

I have myself worked out on odd items that the company in Liverpool is selling that if they are paying the same cost price as me, they are making £1 profit, sometimes they sell at a loss, to improve cash flow, or simply to make room for new stock arriving in the warehouse.

Just my two pennorth !

[Graham Walters]

In my limited experience, including a visit to their shop, Gaugemaster don't discount anything off their Continental items.  I now only use them to gauge the prices at other sellers, so in that way they live up to their name.

Other views may differ.

Gaugemasters primary business is now as a wholesaler. Their margins on cost to RRP are no better or worse than any other dealer.

[Ian Morton]

Also GM don't discount lines they produce or wholesale. This is to support their retailers who would take a dim view if they 'did a Hornby' and were selling items direct for less than the trade was paying.

[daffy]

Gaugemasters primary business is now as a wholesaler. Their margins on cost to RRP are no better or worse than any other dealer.

Yes, that really was my own conclusion, as other sellers, who obtain some of their stocks through GM, do sell below GM's listed prices, strongly indicating where GM's core concern lies. Which is I suppose good news for those smaller sellers. If GM discounted to individual buyers, many might go to the wall.

Edit - I see Ian makes that same point as I was typing.

[Graham Walters]

Also GM don't discount lines they produce or wholesale. This is to support their retailers who would take a dim view if they 'did a Hornby' and were selling items direct for less than the trade was paying.

GM are very canny, many of their scenery lines are repackaged Noch lines, they realised long ago that a lot of us Brits don't like buying 'that foreign stuff'   

[BobB]

The retailers job is to get as much as it can when selling allowing for long term sustainability. As a customer I want low prices but only to the extent that the retailer(s) survive. I need them as they need us.

[MJKERR]

for a retailer with turnover of less than £60k per annum (me) I pay VAT on the cost price,
If your turnover is more than £60k you can claim back the VAT you  pay

The mandatory VAT threshold is £85,000 (it was £60,000 in 2006)

However, the turnover can be less than £85,000 and the company can register for VAT
There can be advantages to that...