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Economics 101
As happens from time to time in our hobby, folks are taking a look at the price of products on the market. The general conclusion is that stuff costs too much, but this is a hopeless generality. I buy my share of model railroad stuff, and I watch the alarming impact it makes on my checking account. That is consumer economics. I browse some of the forums, as time permits, so I see posts from guys who bought two of a certain hundred-dollar locomotive, liked the model, and so they are planning to purchase maybe three more. These aren’t rich guys; this is just how they choose to spend their disposable income. So that’s the first rule of consumer economics: Choice.

Price gets kicked around a lot, and everyone would like to be able to get that sound-equipped, highly detailed steam locomotive for just $49.95 instead of plunking down $400. If you track backwards from the wholesale price — which is about 40 percent less than the MRSP — you finally end up at the factory. Meanwhile, raw material flows in one factory door while the workers file in another. Money leaves the factory to pay for this. The power bill arrives and must be paid. Taxes and other expenses are required. As you watch the process in action — and I’ve seen it overseas and here in the US — it is really rather amazing that you get as good a product as you do for the price you pay. Rule two, then, is: Value.

When you combine Choice and Value, you end up with a: Marketplace.

Want something to just pull trains? You can buy brand new cheapie HO locomotives for only $14.00 at the discounters. Of course you get what you pay for, and if you choose something of so little value, you can hold down the costs. From that point upward, you can find product at just about every price point, and the value goes up with the price.

I hear guys say they don’t make ‘em like they used to. Yes, they do! Check out the Bowsers. The same chunky locomotive kits which pulled so well are still available from Bowser Manufacturing (www.bowser-trains.com). The model railroad marketplace is filled with choice and value in scales from Z to G. As much as it may be “Buyer Beware” it is also “Buyer Be Aware.”

Be aware that some products are produced in short runs. You may be able to sit around and pick one off after a few months, at a discount price, but then again, all of them may come in and go right out. Most models are built by the batch, anyway; get used to it. It takes a lot of faith to build a large batch of anything. Be aware that short batches force each unit to assume a larger portion of tooling and run-up costs.

Batch size may be limited by scale. HO is the largest seller, scalewise, and that can translate into big sales, even for a product that is fairly common, like an F7. N scale is probably the next best seller. O scale isn’t a scale so much as a suite of specifications ranging from On30 to pure 1:48 O scale to 1:43 tinplate O gauge. All of these together account for the third scale size. Large Scale, despite being fragmented into six scales from 1:32 to 1:20.3, has very robust sales, and tiny Z scale has its own niche, as does 1:64 S scale. Thus, a model that would justify a build of 50,000 copies in HO scale might see half that many in N scale, 10,000 in O scale, 8,000 in one of the Large Scales, and perhaps 5,000 in Z or S.

If you go around the industry and ask enough questions, the best you get are inklings; nobody wants to talk about exact production numbers. I hear doom and gloom around, that companies have huge surpluses of unsold items and that this golden age of model railroading doesn’t have that much longer to last. I really don’t know about that; there are a lot of items that are also sold out, so this may be less a case of bad economics and more a bad choice of prototypes. So is the Golden Age on its way out?

Companies that produce products which the market cannot or will not absorb will suffer. Manufacturers who guess right will do well. With the upturn of the stock market and a bit more prosperity, economists tell us that hobby spending will actually slack off; hobbies were very popular during the Great Depression. So the economy is improving? Just our luck!
— John Sipple
To respond to this month's Editorial, send comments to: Editorial@modelrailroadnews.com