Airfix changing trade terms

[IT_Man]

Have heard from one of my wholesale contacts that Airfix are changing their trade terms, to reduce the discount (not been told the numbers but "not much beyond a 10% margin")

 

Means that you may not see much in the way of discounts from online stores on Airfix/Humbrol going forward and perhaps them not being stocked.

 

Reading between the lines it seems to be because they want to sell more through their own website, so perhaps a good move for them on that front but can't imagine wholesalers and retailers will be too happy?

[Mike]

In an increasingly online world, and with the likely huge increases in the cost of shipping, maybe more companies could end up doing business this way, keeping their shipping costs to a minimum, rather than sending a bunch of kits around the country that eat into everyone's profit even before they get sold, instead shifting the shipping costs directly to the consumer at point of purchase.  I don't know.  Just spitballing

[Circloy]

It's similar to how Hornby (& Bachmann) work i.e. Limit the discount on new items for a short period after which larger discounts are then permitted - theory being it allows the smaller trader a fairer cut of the initial rush.

Bargains still come later.

[Markh-75]

I noticed before new year during a visit to my local Hobby Craft that they are all stocked up with Revell models and paints, glues, filler etc and that they have stopped stocking Humbrol at all, there may still be some kits but Humbrol is no longer on the shelves!

[IT_Man]

Part of me doesn't blame Airfix for it, but can imagine many retailers were banking on selling a lot of their kits this year and pre order incentives may not be possible any more without retailers making a loss? 

 

Think I saw the 1:24 Spit offered at beyond 10% less than RRP in a few locations!

[Circloy]

 

35 minutes ago, Markh-75 said:

I noticed before new year during a visit to my local Hobby Craft that they are all stocked up with Revell models and paints, glues, filler etc and that they have stopped stocking Humbrol at all, there may still be some kits but Humbrol is no longer on the shelves!

 

Hobbycraft haven't stocked Airfix for 2+ years.

[Mr T]

If you look on a model railway site like RM, Hornby Hobbies gave received stick for similar with the railway stuff. It seems they want to move much more to online l stuff off their own site. I can see this with locos etc as they are now expensive items (£200 plus for larger locos and £40-60 for coaches), but outside of the larger kits, not lsure this works so well. 

[3DStewart]

If true very few retailers will want to sell Airfix with just a 10% mark-up.  You offer substantial discounts to retailers to get your products in front of customers you can't reach yourself.

 

They won't get most of the sales currently made through shops if they try to do it on-line. The casual buyer, the impulse buyer, the buyer who likes to examine before buying - you'll never see them in your on-line shop.  Even more so overseas buyers.

 

 

 

Edited March 11, 2022 by 3DStewart
To be clearer

[ckw]

This is strange - I had a look at their latest financial report, and direct sales represent just 20% of total sales. Seems odd to hit retailers and potentially hurt their biggest revenue generator. On the other hand, since manufacturing is outsourced they are very vulnerable to supply chain costs, so they have to recover that loss somehow. I don't think Airfix could charge much more than they already do for their kits.

 

Cheers

 

Colin

[IT_Man]

I guess it will be OK for those retailers who also do wholesale (Hannants, Creative among others). It will potentially affect your smaller online or high street stores who will potentially cease selling the Airfix range?

 

I'd also suspect some may stop selling Humbrol paints, is ca. 25p profit per tin worth bothering with?

[IT_Man]

1 hour ago, 3DStewart said:

If true, very few retailers will want to sell Airfix with just a 10% mark-up.  You offer substantial discounts to retailers to get your products in front of customers you can't reach yourself.

 

They won't get most of the sales through shops if they try to do it yourself. The casual buyer, the impulse buyer, the buyer who likes to examine before buying - you'll never see them in your on-line shop.  Even more so overseas buyers.

 

 

 

Maybe they just don't see the casual buyer as worth bothering with? Odd though as so many (at least in the UK) potential buyers identify with an Airfix model where they don't with a Revell, Tamiya etc.

[3DStewart]

56 minutes ago, IT_Man said:

 

Maybe they just don't see the casual buyer as worth bothering with? 

 

Or maybe what you were told isn't true, or out of context?

Edited March 10, 2022 by 3DStewart

[IT_Man]

It was in reply to your comment.

 

The wholesaler I spoke to (known for 25+ years) seemed to infer that it was a tactic to combat their products being discounted elsewhere, so people buy from shops instead of direct.

 

Who knows, let's wait to see what April brings. I recall something similar about 8-10 years ago.

[Jamie @ Sovereign Hobbies]

On 3/10/2022 at 1:59 PM, 3DStewart said:

They won't get most of the sales currently made through shops if they try to do it on-line. The casual buyer, the impulse buyer, the buyer who likes to examine before buying - you'll never see them in your on-line shop.  Even more so overseas buyers.

 

 

I think you'd be surprised. There are many reasons for this but we live in a global economy, and most "examine" stuff before buying via online content. It takes much more deliberate action to travel to a bricks & mortar shop, walk inside, pick something up and go to the til than it does to order online. Especially now that even courier shipping for e.g. paints and glues is much cheaper than travelling to a shop. 

 

You will likely also find that Hornby can make a higher EBITDA both in absolute and % terms with a reduced volume but without huge discounts. Nobody wants to invest in a company with £1.5m turnover at 5% EBITDA when there's an alternative £1m version at 10% EBITDA. Selling at big discounts aiming for volume does not make good returns. It's just loads of storage space and working capital tied up for token payment. Gross margins on product are probably 1/4 to 1/5 when Hornby sells to trade compared to selling online at or close to RRP themselves. 

 

 

[RAF4EVER]

23 minutes ago, Jamie @ Sovereign Hobbies said:

 

I think you'd be surprised. There are many reasons for this but we live in a global economy, and most "examine" stuff before buying via online content. It takes much more deliberate action to travel to a bricks & mortar shop, walk inside, pick something up and go to the til than it does to order online. Especially now that even courier shipping for e.g. paints and glues is much cheaper than travelling to a shop. 

 

You will likely also find that Hornby can make a higher EBITDA both in absolute and % terms with a reduced volume but without huge discounts. Nobody wants to invest in a company with £1.5m turnover at 5% EBITDA when there's an alternative £1m version at 10% EBITDA. Selling at big discounts aiming for volume does not make good returns. It's just loads of storage space and working capital tied up for token payment. Gross margins on product are probably 1/4 to 1/5 when Hornby sells to trade compared to selling online at or close to RRP themselves. 

 

 

EBITDA?? Please translate

[PhantomBigStu]

10 minutes ago, RAF4EVER said:

EBITDA?? Please translate

Earnings before interest, taxes, depreciation and amortisation, the income figure before the accountants have a play and governments takes their slice  

Edited March 14, 2022 by PhantomBigStu

[RAF4EVER]

OK  Thanks

[Duncan B]

You don't have to look too far on here to find threads full of online "examination" of kits (that sometimes haven't even been released yet) and casual buying is what has made the likes of eBay and Amazon what they are so I don't think Airfix have any worries on those terms. I am quite sure that a reduced margin on trade prices being offered to retailers (whether virtual or bricks and mortar) will result in more retailers dropping the brand as very few online retailers that I price check against sell at full RRP anyway (I can't speak for bricks and mortar as I don't price check against them and they have a different set of overheads to deal with than online anyway). Only offering a 10% discount is effectively going to remove the brand (that is already a troublesome/unattractive brand to smaller retailers due to recurring QA issues which cost those retailers dearly) from many shelves. That might suit Airfix if they can convert other retailers sales onto their own online platform.

I might be wrong but have always assumed that for anything other than a high end luxury brand (where exclusivity is the name of the game) getting volume into as many retail outlets as possible was the way to go. Maybe Airfix are struggling with producing good quality items in sufficient numbers to allow that? We will have to wait and see as time will tell.

 

Duncan B

[3DStewart]

1 hour ago, Duncan B said:

I might be wrong but have always assumed that for anything other than a high end luxury brand (where exclusivity is the name of the game) getting volume into as many retail outlets as possible was the way to go.

 

Volume is essential for a mass production technology like injection moulding. The tooling costs and press set-up costs don't allow boutique sales, as I discovered!  That's why I take the claim with a pinch of salt.

[Jamie @ Sovereign Hobbies]

3 minutes ago, 3DStewart said:

 

Volume is essential for a mass production technology like injection moulding. The tooling costs and press set-up costs don't allow boutique sales, as I discovered!  That's why I take the claim with a pinch of salt.

 

Did you see Eduard's recent sales figures they published?

 

"The best selling of the Eduard Spitfire kits was Spitfire Story: The Few, which sold 7,535 pieces, and as such, became our best selling single kit out of our range, ahead of the second place P-51D Chattanooga Choo Choo with 6,422 sold items. In third place, we have the 1:72nd scale Tornado GR.1 Limited Edition kit “Desert Babe” with 6,295 sold. Worth mentioning is that in fourth place was the TORA TORA TORA! Zero new release with 5,706 sold, that is a number that continued to grow through January. The market share from sales of model kits for 2021 came to 41%, making it, from a sales perspective, the most significant component of our range. In all, we sold 152,784 kits in all of the ranges."

 

https://www.eduard.com/out/media/InfoEduard/archive/2022/info-eduard-2022-02en-feb.pdf?fbclid=IwAR0TnaWiFdfFBcJ1IUfQY99beb0x3mhplrtz4-YGJkOISOAYD3aazPQYnwk

 

 

These figures are much more than resin kits would sell, but far, far below normal injection moulding volumes. An established brand with global reach could sell a 4-figure sum online. A 6-figure sum would be a different proposition entirely.

[bootneck]

Hi Jamie,

 

Do those Eduards sales figures refer to as sold to customers, or to shops/outlets?   Just like to know if they might be 'sold' by Eduard, but still sat on shelves in shops. 

 

Mike

[Circloy]

Definition:  Market share is the percent of total sales in an industry generated by a particular company.

 

5 hours ago, Jamie @ Sovereign Hobbies said:

The market share from sales of model kits for 2021 came to 41%,

Do Eduard really believe they sold 41% of ALL kits sold in 2021? or should that be 41% of Eduard's sales were model kits.

[Jon Bryon]

7 hours ago, Jamie @ Sovereign Hobbies said:

 

Did you see Eduard's recent sales figures they published?

 

"The best selling of the Eduard Spitfire kits was Spitfire Story: The Few, which sold 7,535 pieces, and as such, became our best selling single kit out of our range, ahead of the second place P-51D Chattanooga Choo Choo with 6,422 sold items. In third place, we have the 1:72nd scale Tornado GR.1 Limited Edition kit “Desert Babe” with 6,295 sold. Worth mentioning is that in fourth place was the TORA TORA TORA! Zero new release with 5,706 sold, that is a number that continued to grow through January. The market share from sales of model kits for 2021 came to 41%, making it, from a sales perspective, the most significant component of our range. In all, we sold 152,784 kits in all of the ranges."

 

 

 

I too was surprised at how low the numbers are, but obviously this is sales of kit boxings, not total kits from the same mould. It would be interesting to know how many P-51s they've sold in total, given multiple boxings and the fact it's been around for a few years.

 

Jon

[Jamie @ Sovereign Hobbies]

9 hours ago, Circloy said:

Definition:  Market share is the percent of total sales in an industry generated by a particular company.

 

Do Eduard really believe they sold 41% of ALL kits sold in 2021? or should that be 41% of Eduard's sales were model kits.

 

I suspect this is a translation issue and they probably mean something more like "41% of Eduard's revenue came from model kits"

[Jamie @ Sovereign Hobbies]

7 hours ago, Jon Bryon said:

 

I too was surprised at how low the numbers are, but obviously this is sales of kit boxings, not total kits from the same mould. It would be interesting to know how many P-51s they've sold in total, given multiple boxings and the fact it's been around for a few years.

 

Jon

 

This is naturally just a snapshot but they've been a great deal more transparent than other companies. It would seem folly to try to analyse these numbers too much but they do give some insight into orders of magnitude.

 

I do understand it's common to set pricing such that costs are recovered within the first batch (or two). What was missing was roughly how big batches were in this sector of industry.

 

It seems straight forward enough to create a hubbub to get a rush on the first batch for a few online builds and another 6000 to insulate lofts, but selling subsequent batches takes much longer. The likes of Tamiya seems better able to regulate supply to give the appearance of continuous availability, but that's probably just an illusion helped by their low release rate and mature back catalogue that sells steadily but slowly. Most other brands release something then it's gone for months afterwards.