MÄRKLIN & RAILROADS
www.trains-and-trains.dk : A personal view by Christian Vinaa
"That's how I see it . . ."
Theme : Märklin dealers
All shops would sell at the same retail price; - unless the dealer would have a special sale, making room ( literally ) for new items.
The dealer would service you, but the dealer made a given profit; although that profit was determined by Märklin alone, because Märklin announced the recommended retail price, and Märklin decided at what price the dealer could buy from Märklin.
So basically the service you got from the dealer, was in fact pre-paid by the price for the product you bought.
There was not a lot of competition, but the service and professional advice you got from the shops were for 90 % af the buyers worth paying the recommended retail price.
The system also made it possible for dealers to reward good customers by giving them "hidden" discounts in stead of giving discounts to everybody; whether they deserved it or not. This in fact rewarded the faithfull customer.
The system today with discounts to anyone rewards the "Don Juan" customer who shops around.
In Märklin's export markets the "whole-saler" would also claim his part of the profit. I presume that legally the individual shop was better off with a local whole-saler, who was legally responsable product-wise, but I have not enough concrete knowledge to evaluate that aspect.
Of course the European Union and the Internet changed all that.
Recommended retail prices were allowed but frowned upon and manufacturors couldn't enforce them legally.
Now you could also have a internet shop and cut down on expenses regarding rent and heating because you didn't have to be located on the main street, thous making it possible to either get a bigger profit or sell with discounts while keeping the same profit as the real store.
Customers, always looking for a bargain, began shopping at these internet shops, although most if not all the real shops also created an internet shop.
As I see it, it is up to the customer to decide what is best, in the long run. But people these days don't calculate with "the long run"; everything is short term these days.
The internet stores are not going away; even though the buyer pays postage the prices at most Internet stores are so low that it still is a good bargain ( in the short run ).
So the dealers have to manage 2 things : Competition from the internet and the co-existance with Märklin.
As I see it ordinary dealers must re-locate from the main street and the shopping malls into less expensive leases. Cutting costs is the name of the game. You cannot compete when you have a big overhead.
Since most customers don't buy trains just because they passed a train shop, most customers won't mind driving out into an industrial area or to suburbia to visit the local Märklin dealer.
Funny enough Märklin is counterproductive regarding this, because Märklin likes to have their dealers present Märklin items in big, brightly lit sales-rooms with expensive aluminum and glass shelves and racking and displays.
Märklin also values the MHI ( Märklin Händler Initiative ), which Märklin started in 1990. Basically the MHI is a group of "premium" train shops who sell Märklin. It appears that it is the MHI who orders and buys the items from Märklin so any un-sold items are MHIs head-ache.
Märklin also values their semi-official "Märklin Stores" and Märklin Flagship Store, which has given Märklin a little bit of the "iPad" image.
Problem is that these kind of stores MUST be on the main street, a pedestrian street or a shopping mall. All places with big rents to pay.
Which Märklin customer are those shops targeting ?
Answer : Not the typical model-railroader. These stores are targeted at first-time buyers; start-sets; and they can then see what the starter-set can be extended with.
However - can the "my world" and "Start Up" customers pay the prices that the rent demands; or can Märklin produce at a similar low cost ?
IMHO it just doesn't add up to have these high rent shops. Sorry Märklin - but it just doesn't.
I think that Märklin has to re-think the "dealer" situation and follow up on the 3-brand idea.
"my world" is supposed to be sold at big department stores etc. The starter-sets will get a prominent place and there will be place for supplementary items, so the child can get some new stuff each time mum and dad are shopping. All prices must be affordable. The Simba-Dickie group can teach Märklin a lot about this.
"Start Up". As long as there is no brand to fill the rather huge gap between "Start Up" and "Märklin" it only makes sense if "Start Up" is sold at the "Märklin" dealers. How else can you get the older child or the parent to buy some real "Märklin" ?
This means that the "my world" sellers must refer customers to the "Märklin" dealers, or that Märklin must advertice the "Start Up" items to the "my world" children. With the fanclubs that is done quickly.
I think, however, that Märklin should make it a treat for the children to migrate from "my world" to "Start Up". On the childs 7 year old birthday the child get an invitation to get a free "Start Up" item from the local shop. The item should of course be a regular item of value and it should be something else than the plastic "my world" items.
In fact - Märklin should, as a gimmick, prohibit the sale of "Start Up" items to children under 7, and this way make it a grown up thing to migrate into the "Start Up" brand.
So what about the regular Märklin dealers / MHI dealers ?
There is no doubt that they are threatened by the internet shops, but I don't see any solution to this. Märklin has made it known that Märklin is not happy with the internet shops, and there are indications that Märklin would favor internet shops that ALSO had a real shop, and not just a back-door, where you could collect your Märklin items in order to save postage.
Märklin is VERY interested in their dealers having a psysical presence in the local community.
However ordering from the internet is here to stay. It won't go away just because it doesn't suit Märklin.
As a paradox; Märklin also created their own virtual shop; selling at recommended retail prices. Why - I am not sure. Why do Märklin need to sell on the internet, when there are many dealers all over the world ?
But then again; why did Märkln create their own retail shop in the "Märklin Erlebniswelt" - now "Märklin Museum" competing with the dealers in Göppingen and surrounding towns ?
These dealers complained to the Göppingen municipality when the Museum Shop was kept open also on Sundays, when - especially in southern Germany - EVERY shop is closed, but with little success.
Märklin's 600 jobs in Göppingen makes a large noise in the Town Hall.
IMHO Märklin needs to decide what Märklin want.
And it really is not that difficult. Märklin must close the "Online-Shop". In stead they can refer to a list of dealers. Märklin already has the "find-a-dealer" option on the website.
Märklin must refrain from the glass / aluminum shops when it comes to "Märklin" items. I personally find it depressing to shop at those shops with long lines of un-sold white Märklin boxes.
I think that the "Märklin Insider", a male of 50+, doesn't feel at home at the shops with too much aluminum and too many lights. They value the expertise and the "feel" of the model-railroad.
On a side-note; I think that Märklin should go back to the colorfull boxes of the 1960ties. The white boxes are way to sterile. The way you can see in car inside the box, whoever, must be kept.
Märklin must accept that "Märklin" dealers, where the "Märklin Insiders" buy their stuff, can be a scruffy mum-and-dad shop, with a location outside the city centre. Honestly Märklin - do you think that a "Märklin Insider" wants to buy a locomotive from a 22 year old apprentice at the local K-Markt ? I THINK NOT.
Märklin should go ahead with the "my world" brand at will just as long as they don't force real "Märklin" dealers to ALSO stock the "my world" starter-sets etc. The starter-sets really takes up a lot of m3 and the "Märklin" dealers will have enough problems with handling the "Start Up" items.
If Märklin wants to try to minimize the impact of the internet shops, there are several legal ways to do that. Märklin has already, as stated below, cut most discounts.
Märklin should continue the "shop-window" program, where Märklin gives prizes for Märklin dealers that has the nicest shop-window; prizes that would compensate real shops for the competition from 100 % internet-shops.
Märklin could help real shops with setting up / running an internet shop. I don't see why not Märklin could run a centralized packing and shipping facility for many of their dealers.
Märklin could emphasize things that, by their very nature, needs to take place at a psysical shop.
The latest issue between the dealers and Märklin is that Märklin is no longer willing to give the discounts that especially the management during the "bankruptcy years" was willing to give dealers; a crude way of fullfilling the sales bench-marks.
Michael Sieber told reporters this in an interview with the "Nürnberger Zeitung" on January 26, 2014 :
Florian Sieber had already explained the same problem in an interview with "Stuttgarter Nachrichten" on December 03, 2013 :
Actually it is hard to disagree with these arguments. Discounts undermines the value of your product.
The new strategy is of course murder for "bargain-hunters" who waits 1 - 1,5 year and then buy the Märklin lok with a 20-30 % discount. They most likely will not be able to get the lok at a discount, but will have to buy the item second-hand.
The second-hand price is of course anyones guess, and the future retail price also depends on the second-hand price.
The "faithfull" buyers will have the pleasure of buying a lok that still after 2 years will retain its retail price.
But it seems that Märkin is also trying to not have a ware-house filled with items produced but not ordered by the dealers. In fact it seems that Märklin is going MHI strategy all the way.
It will be interesting to know how many pieces Märklin is going to produce "extra". If a lok achieves 9800 preorders, is Märklin going to produce 9800 or 10.000 or 12.000 ? ?
The strategy will of course not stop dealers from pre-ordering more items that they in fact have actual orders for; - that is up to the dealers own strategy, but it won't completely stop the prices from dropping. If a dealer normally have a profit of 20 % he can still sell after a year with a profit of 10 %.
But the interesting piece of information is that Märklin, apparently, now will try to only produce items that are virtually pre-ordered. Märklin has done that before with many Insider items, but apparently it is now the official strategy.
It will also be interesting to see whether Märklin uses this to "favour" the real shops over the internet shops ?
Preordering an item is not really the way that internet shops do business. Internet shopping is about ordering and get delivery within 3 days. I doubt that the usual internet shop can handle orders made in January 2013 and deliveries in March 2015.
Preordering can just as well be made in a real shop where you discuss the model with the dealer and other customers.
We'll have to see how well Märklin implements this strategy.
Copyright © Christian Vinaa
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