MÄRKLIN & RAILROADS
www.trains-and-trains.dk : A personal view by Christian Vinaa
"That's how I see it . . ."
Theme : Märklin - Status August 2014
See full list af articles below .
In March 2013 the Simba-Dickie Group (based in Fürth close to Nürnberg) took over Märklin.
The approx. 1000 employees in Göppingen and in Györ (Hungary) could keep their jobs. ( 480 employees in Göppingen ).
I will not here write about the almost bankruptcy and the years from 2009 - 2013.
That will have to be another article.
Simba-Dickie takes over Märklin - June 2013Simba-Dickie is owned by Michael Sieber and run by Manfred Duschl, Uwe Weiler und Michael Sieber.
Michael Sieber's son; Florian Sieber ➚ - born 03. august 1985, immediately began working at Märklin as the third manager with Wolfrad Bächle and Stefan Löbich as co-managers.
In July 2013 Stefan Löbich left Märklin, apparently because he had seen the USA as a big potential market, while the Simba-Dickie group wanted to focus on not only the neighbor-countries Switzerland and Austria, but also Russia and the Middle East.
The strategy for the future was announced right from the beginning :
The employees in Göppingen had already agreed to new employment-contracts; accepting cuts in wages and various benefits. These cuts would continue till 2019. But they were given job-security till 2019 too.
"New" strategy - November 2013In November 2013 Florian Sieber announced that Märklin not necessarily would continue to sell the cheap starter-sets at the socalled "Discount markts" [ ALDI - LIDL - PENNY ], where the price was under € 100,00.
Sieber was concerned that the customers, who shopped at the discount-markts, did not have enough buying power.
Instead Sieber viewed electronic stores, department stores and even books-shops as being places where people with more buying power shopped, and where it would be favorable for Märklin to sell starter-sets.
This is a clear trend :
Märklin does not want to compete on the price. In fact this is a sound business principle. Selling cheap will only make you look cheap.
But - the ALDI-sets, as far as I know, have been ordered by ALDI, just like any company could order an adverticing product; however without the adverticing. ALDI just negotiated a good deal with Märklin.
ALDI have more than 4300 shops in Germany. If each shop should get only 2 of each starter-set, pictured above, that means a total order of 17.200 starter-sets.
I really can't see Märklin turning down ALDI the next time ALDI wants to order 20.000+ starter-sets.
The problem is that ALDI has a psycological limit at € 99,99. Inflation will, over time, force ALDI to find another psycological limit; just like the coin-offers from McDonalds.
Can Märklin then let ALDI continue the cheap starter-sets and still deliver other starter-sets to the electronic stores ?
Well - that is what Märklin in fact already does if you take a look at www.conrad.de ➚
But here is where the Märklin logic fails completely. If you take a look at Märklins own online store, the same starter-set, # 29166 sells for € 149,95 :
So are we going to see that shops like Conrad won't be able to sell the starter-sets at prices below the price on Märklins own Online-Shop ?
Price and quality goes together - sometimesAre the ALDI starter-sets of lesser value / poorer quality then the "normal" startsets ?
Its hard to find a conclusive answer to that question. People have different views and expectations.
However I don't think anybody will argue that the ALDI starter-sets are really the cheapest possible versions; not that they are bad in themselves - but take a closer look at the pictures. Very ordinary crude looking locomotive. 3 very basic cars.
The only thing that looks like "real" Märklin are the tracks :
1 x turnout - 24611 - price august 2014 - Märklin Online Shop - € 18,99 = € 18,99
12 x curved track - 24130 - price august 2014 - Märklin Online Shop - € 2,99 = € 35,88
8 x straight track - 24172 - price august 2014 - Märklin Online Shop - € 3,19 = € 25,52
5 x straight track - 24188 - price august 2014 - Märklin Online Shop - € 3,19 = € 15,95
1 x curved track - 24224 - price august 2014 - Märklin Online Shop - € 3,49 = € 3,49
1 x track end - 224977 - price august 2014 - Märklin Online Shop - € 7,49 = € 7,49
Total recommended retail price for the tracks alone : € 107,32.
ALDI s price for the whole set was € 99,99.
But to be fair - Märklin dealers have always chopped up starter-sets, and sold individual items at a lower price than the recommended retail price for the individual item.
It just shows how Märklin regarding the cheap starter-sets and the discounts are trying to both have the cake and eat the cake.
I my opinion these cheap ALDI starter-sets tarnish the Märklin name. Notice that it says MäRKLIN in the usual big red letters on the front. Not "My World" or "Start Up".
Most people don't understand that just because the Märklin name is on BOTH the ALDI starter-sets AND on the expensive digital starter-sets, the quality is not the same.
In the old days Märklin used the HOBBY name and the PRIMEX brand to distinguish the cheaper version from the "real" Märklin models.
If Märklin continues to sell to ALDI, Märklin should insist on them being labelled "My World" or "Start Up". That would be a good starting point for Märklin to clean up the confusion amongst the customers.
So we come back to the different Märklin names : "My World", "Start Up", "Märklin".
3 brothers : "My World" - "Start Up" - "Märklin"In February 2014 Märklin presented more than 300 new items at the Trade Fair in Nürnberg.
The distinction between the 3 brands "My World", "Start Up", "Märklin", was pointed out again and again.
It makes sense to have these 3 sub-brands. The customer is not disappointed when buying a "Start-Up" locomotive, believing he gets a "Märklin".
There is a classic jazz tune called "Four brothers". I somehow feel that the gap between "Start Up" and "Märklin" is a huge gap.
I would think that a fourth brother will appear sometime soon. I can't see, when I look at the "Start Up" items, a child migrate directly from the rather crude and robust "Start Up" to the much more detailled and fragile "Märklin". After all "Start Up" is labelled "age 6-12".
So a "MOVE UP" series targeted at the 13-? year olds would not surprise me. I also think that Märklin will have to have something for the adults that are returning to the model-railroad hobby, but who perhaps will not buy the fairly expensive high end "Märklin" items.
There is no doubt that the "Märklin" items are not going to get cheaper. Although Märklin points out that the "Insiders" and the 50+ customers are very valued customers, you shouldn't be surprised if Märklin don't try to find the exact economical "pain threshold" or "value".
After all - the 50+ customers are the ones with the money, and I will not at all be surprised to see that Märklin will try to get € 319,00 for e locomotive that previously cost € 299,00. Of course Märklin will sweeten the deal putting in a lot of electronics to make the deal look better; just like VW and other car-makers but in electronics in the cars.
Just remember that the electronics are mass-produced and cost perhaps € 5,00, but makes it possible for Märklin to raise the price € 20,00.
The iPad factorI think that the iPad is still a serious competition to "My World". The iPad games are visually more detailled, the graphics are more realistic.
I am often reminded of how children watch a professional layout at a fair, and then are given a starter-set with tracks to make an oval.
Is the child disappointed ? Will the child not find it more satisfying to watch the fine details on the iPad.
The child can NEVER get the same result with a starter-set than the layout the child sees at the fair.
As a child I can remember LEGO, and how there never, by far, were enough pieces to make the models that LEGO so cleverly displayed on the boxes and in the brochures. You had to have about 5-10 times more LEGO pieces in order to build the things in the brochures.
I think Märklin should think about this.
Märklin should at fairs, also, have realistic "My World" layouts, with just the right amount of surplus tracks and effects. Let the children be able to see something, that they can mimick at home; size-wise.
C-track, whether it is the (new in 2014) cheap "My World" plastic tracks or the real c-track, is basically very cheap to make. I believe Märklin would be wise to produce some cheap collections of c-track, so children really could have something to play around with.
Yes, - Märklin have "extension set", ( 11 tracks and 2 turnouts for € 15,00 ), but if you watch children play with trains, they actually do not want to build the layout according to the plan in the brochure.
They don't want 11 more tracks - they want 40-50 more tracks, so they can construct the layout that THEY want to run the battery trains on.
So Märklin : make these cheap bundles with planty of tracks - sell them at or close to break-even and then let the parents buy more expensive accessories to populate the layouts.
This would also distinguish "My World" from the 100+ Chinese producers of model-railroad sets, which no doubt are of poorer quality, but where the one major draw-back is that you really cannot expand the set. There are no extra tracks to buy anywhere.
The Siebers in the newsOn the Simba-Dickie website you can read a portrait of Florian Sieber ➚ where he ( in 2012 ) expresses his views for the future :
In January 2014 Michael Sieber in an interview with the Nürnberger Zeitung commented the discounts that Märklin had given to dealers :
"... Soon after we took control of Märklin we realized that the discounts that the previous management had given to dealers were more widespread than we had been given to believe.
Simba-Dickie is not interested in the short-term effect of selling at discounted prices.
Selling with discounts would destroy the Märklin brand. It compares to selling a Ferrari with 40 % discount. That would destroy the desirability to own a Märklin locomotive. ...".
There are several, quite important, things to learn from the interview :
Beginning with the last item. Märklin, with LGB, apparently had a yearly sale in 2013 at about 107 mill €.That means that there is a REALLY long way to go up to 170 mill €.
It amounts to double the sales. And double it during a financial crises.
Well - if you don't have high hopes . . .
It is interesting to see that the USA market is especially interesting for the LGB brand - and apparently not for the Märklin H0.
I wonder : what was then the real differencies between Stefan Löbich and the Sieber family. Stefan Löbich also wanted to explore the USA market.
Was it differences over other strategies, or was it just the simple fact that Stefan Löbich, as any director, had trouble taking a back seat to the Siebers ?
With 75 % of all sales made in Germany it sounds very logical that the expansion must be in other countries.
However - I don't think that Austria and Switzerland will be able to buy that many more Märklin products. Switzerland and Austria both have a population of about 8 mill. Germany has a population of about 80 mill.
Switzerland has always been a key market, and Märklin makes a lot of Swiss SBB-CFF, not to forget the RHB, locomotives and cars.
Märklin could produce some more Austrian items.
Especially now that many locomotives and cars are more and more Euro-standard, it is possible to produce regional items, that caters for the individual countries.
Russia is of course an interesting market, but politically unstable. The recent tumoil with Ukraine where there now will be trade restrictions between the west and Russia makes export to Russia even more difficult.
The middle east, - defined as Turkey-Egypt and east towards Iran is a peculiar market to want to venture into. Perhaps the Siebers knwo something I don't - In fact I hope they do - But of course that is where the oil money is.
There is no limit to how many gold-plated Crocs Märklin could sell in Saudi Arabia, just as long as the quality and the exclusiveness is in order.
Although it is not something we often see, arab families also have children; - problem is to make the world of model train exiting to a 6 year old boy in Saudi-Arabia; there are but a few real trains in that area of the world.
But "Thomas the Tank Engine" is a world wide success; - so why not ?
The bottom line seems to be that the Siebers clearly see a synergy-effect with Märklin and the other brands in the Simba-Dickie family.
I somehow feel that the synergy is more visible with the "My World" items than with the "Märklin" items.
It is a bit like why tire-companies are present in the Formula 1 racing; not because they actually make a profit there, but because there presence their gives great adverticing value and also gives them scientific gains that will make the tires for the ordinary car more sellable.
So Märklin will have to continue with the "Märklin" brand if not else then because Simba-Dickie needs the brand - the mark of quality. Look : we are the ones that also makes Märklin ! ( Therefore our plastic toys are better than the plastic toys from other manufacturers ).
The good news for the longtime Märklin afficionado is that the Sieber family seems to be genuinely committed and interested in Märklin and in model railroads.
Articles of interest :
Links were working in August 2014.
These articles might be removed from the internet anytime by the newspapers.
I do not check and verify the links.
I have supplied PDF-files with the articles as they were August 2014.
All articles are of course © the respective Newspapers - journalists.
Copyright © Christian Vinaa
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